Orders of the Day

Hon. M. Farnworth: In this chamber, I call the estimates of the Ministry of Finance for debate. In Section A, the Douglas Fir Room, I call continued debate on the estimates of the Ministry of Education. In Section C, the Birch Room, I call the estimates of the Ministry of Social Development and Poverty Reduction and, when they are completed, to be followed by the estimates debate for the Ministry of Agriculture.

Committee of Supply

ESTIMATES: MINISTRY OF FINANCE

The House in Committee of Supply (Section B); R. Chouhan in the chair.

The committee met at 2:35 p.m.

On Vote 25: ministry operations, $265,327,000.

Hon. C. James: I will be having a variety of staff, as we look at the various areas in the ministry, coming in to provide support. I want to express my appreciation to the staff who always, during the year as well as estimates, provide good support. I’m looking forward to the discussion and the questions and the areas that we’ll canvass over these estimates.

S. Bond: Good afternoon to the minister and her staff. We also appreciate the work that the ministry staff do too, not just at this period of time, although I know we’ll be spending a lot of quality time together over the next few days. This is our opportunity, as the opposition, to raise issues of concern about the budget and the fiscal future of British Columbia. It’s also a chance for us to raise specific issues that we have heard from constituents and British Columbians who want to have some answers on some very specific issues.

In order to facilitate the flow of the estimates process, we’re going to begin today with having several MLAs raise issues. I should point out to the minister that, in some cases, some of the critics were actually sent here to ask questions on behalf of some of the Finance Minister’s colleagues. So we’re going to begin with a number of MLAs asking those questions. We’ll have a few more throughout the course of the next couple of days as the MLAs bring specific concerns, which we always encourage them to do.

With that, we’re going to begin with one of my colleagues and some very specific questions on clean energy.

P. Milobar: I’m glad to be here to ask a few follow-up questions of the Minister of Finance in relation to CleanBC and a couple of calculations in the budget from the minister’s numbers that don’t seem to quite match up with what’s going on with CleanBC. So I’ll jump right in.

At $30 a tonne back in the 2017-2018 fiscal year, the province took in $1.248 billion of carbon taxation, and in ’18-19, the last year, under the former government’s climate strategy, the province took in, at $35 a tonne, $1.488 billion. I raise that because those equate to 41.6 megatonnes of emissions that the tax was paid under $30 and 41.7 megatonnes under $35 a tonne.

Moving forward, as we progress with CleanBC and the march to $40, $45 and $50 a tonne of carbon, we actually see the budget is based on an ever-increasing tonnage, megatonnes, of emissions. So this year, at $40 a tonne, we go from 41.7 megatonnes of emissions to 42.8 megatonnes of emissions. The next year we go to 43.75 megatonnes’ worth of emissions that tax is being calculated on, and in the final year at $50 in the budget book, it’s based on 44 megatonnes at $2.2 billion at $50 a tonne.

[2:40 p.m.]

The question I would have for the minister is…. There seems to be a disconnect between CleanBC’s stated goal to reduce emissions within the province of British Columbia and the Minister of Finance actually calculating and predicating financial figures based on an ever-increasing — actually, a faster increasing — rate of emissions than the two static years, the last two years, that we had under the old plan around our climate action.

With CleanBC being implemented, what we’re actually seeing is an increase of the megatonnes, a taxation level at a higher level of megatonnes. In fact, if we were able to hold the emissions to about the last year under the old plan’s emission targets, it would result in about a $270 million loss of revenue to the provincial government based on these next three years of budget. In fact, if CleanBC was actually delivering what its stated goal is, to actually drive down emissions, let’s say, by one megatonne a year, to be actually not even that aggressive with the numbers, it results in a $550 million shortfall in the provincial budget over the next three years.

Could the minister explain why, if CleanBC is supposed to be driving down emissions, the Finance Minister has decided to have an ever-increasing, and, actually, an accelerated rate of emissions for taxation purposes to get to the $2.2 billion, but more specifically, even an extra megatonne in this particular year as well?

Hon. C. James: There are a couple of pieces that I think are important to note when it comes to the revenue coming in from carbon tax: the revenue that’s booked into the budget. I think the biggest piece that hasn’t been taken into account, if you simply look at the emissions and the reduction of emissions, of course, is economic growth and adjustments that happened there. Carbon tax revenues are forecasted to increase due to, yes, the annual carbon tax increase, as the member has identified. Also, diesel volumes are expected to rise by 2 percent — that gets accounted within these dollars — and then other fuel volumes, again, rising based on GDP projections, which is economic growth.

That would be everything…. Natural gas would be the largest piece. I’d refer the member to the assumptions table that’s in the budget. Table A5, page 119, actually identifies each of these areas and the increase that we built into the budget that will account for the dollar difference that I think the member is referring to.

[2:45 p.m.]

I think the other piece that’s important to note is that the CleanBC initiatives, many of them, don’t take place…. The impacts of the reduction in emissions, if you look at the CleanBC plan, don’t take place within the first year or the second year of the fiscal plan. Again, there are adjustments that will be made as that program is implemented as well.

P. Milobar: Well, that’s a little confusing, given that there are several CleanBC initiatives which are supposed to be bringing down emissions that are funded in this year. Notably, the electric vehicle program is 100 percent funded in just year one, with no other funding in the next years and no other dollars identified whatsoever. The low-income tax credit is also another one that is responsible for about 10 percent of the overall emission reduction within the current CleanBC plan. CEV is about 7 percent, so there’s about 17 percent that should be driving immediate results, one would think, for people and our environment.

I guess again to the minister, then. To get clear, is the Finance Minister saying that although CleanBC was supposed to be driving down emissions, it doesn’t look like they’re budgeting to drive emissions down with any of these measures within Clean BC? Or is the growth rate of the GDP, and everything else that went into that calculation, going to be higher than any of the tangible reductions that CleanBC is shooting for? Are we still looking at a net increase of emissions based on the CleanBC document, then, given the answer that the minister had just provided, that you have to look at other factors to see…?

I took from that answer the minister saying that the growth would have been worse if it was not for CleanBC, but it’s still growing. The overall objective of CleanBC is supposed to actually see a reduction — not a slower increase but an actual reduction. This still shows a very clear and, actually, much faster-growing increase.

When I look at the ’17-18 year versus the ’18-19, the economy was still moving along very well. GDP was growing, and we only saw a 0.1 megatonne increase in emissions under the old climate strategy. Under CleanBC, we see that jump by over a megatonne, by 1.1 megatonnes. Then it jumps another megatonne; then it jumps again. It seems to be actually increasing at a much faster rate than under the old plan.

Can we get some reconciliation in the answer here as to how it is possible that a plan that is supposed to be driving down emissions is actually being used as a calculation for revenue purposes to make sure that the books balance and that there’s a surplus?

Hon. C. James: I’ll just come back, again, with a reminder for the member. Again, I think it’s important to note that these assumptions are all listed in the budget as assumptions. The amount of money coming in around the carbon tax rate, around diesel volumes and around natural gas is all listed in the budget.

Remember, we are talking about a three-year fiscal plan versus a ten-year-plus climate action plan. So when you’re taking a look at the strategies, as the member will know….

[2:50 p.m.]

I know he had a very thorough discussion with the Minister of Environment around the CleanBC plan and around the time frame for the CleanBC plan and the time frame it takes both to change behaviour as well as to see the significant changes. I know the member has canvassed all of those timelines, but that’s obviously different than the three-year fiscal plan.

As I said, the carbon tax increase has been built into the budget to 2021. Diesel volumes, again, rising. Other volumes, including natural gas, because of GDP growth and because of growth, also rising, and those are listed in the table.

P. Milobar: I’ll take from that answer, then, that the real plan for CleanBC is to let emissions continue to grow over the next three years to then try to get them driven down even that much further in the last seven years of the plan. That’s what I’m hearing. We can add an extra few megatonnes a year to the emission profile, and instead of then trying to achieve 18.9 megatonnes of reductions, we will now have a new starting point where we need to find 20.9 or 22.9 megatonnes instead of the 18.9, plus the missing 6.1 megatonnes out of the CleanBC plan as it stands.

Moving on to the low-income payment part of CleanBC, and that’s $223 million over this next three-year fiscal plan, can the minister confirm…? The Environment Minister, when I questioned him on this, alluded to that this year it was a new program, which I was sure that it was not. Last year in estimates, he alluded to that, actually, now with this new way of doing the credit, 53 percent of the population would be eligible for the low-income credit.

When I’ve been doing my research, what I have found is that at $300, the climate action tax credit was available to people at a $30 carbon tonne. When it went to $35, it went from $300 to $350. Now it’s at $40, and it’s moved to $400 for an eligible household. It seems to be moving every time there’s a $5 increment. It moves as it did previously, under the previous government.

When I went on line last week to the government website and pulled off the information for the climate action tax credit, it actually shows the payment schedule, starting back in 2014 all the way up to 2018. It shows what the income thresholds are. There’s a methodical movement. It does not seem to have changed anything there.

Can the minister confirm that, in fact, this is just a continuation of what existing programs were in place for low-income people, low-income families — that the income thresholds remain the same, except for those inflationary adjustments that happen every year, and that there’s not been a broadening of the eligibility for this program and that, in fact, it is not a new program?

When we hear talk of a $400 program, last year it was actually $350. That has moved to $400 this year. As the chart shows, next year, when it goes to $45, it’ll go to $450. But it is not brand-new money, not at $400. There has not been expanded eligibility, and in fact, people would already need to be qualifying for that rebate cheque to be able to qualify for the extra few dollars this year.

[2:55 p.m.]

Hon. C. James: The member is correct. There was an existing low-income credit that was in place for the carbon tax. As the member has stated, we have increased the credit — to increase each year, based on the increase in the carbon tax as well.

With that maximum that increases each time the carbon tax is increased, that means that the phase-out happens at a higher income level. When the phase-out happens at a higher income level, that means that more British Columbians receive the credit. So 57 percent is the estimate of British Columbians who will receive the credit in ’19-20. It will, as I said, increase each year as the carbon tax increases, until we reach the $50 a tonne that we’ve committed to.

P. Milobar: But to be clear, then, it’s…. I recognize government is trying to always make the best sales pitch possible. But I think the perception that was given by a budget presentation — and subsequent answers by various ministers and various speeches given in this House — was that this was a new $400. In fact, the leader of the Green Party, in his budget commentary, alluded to that, as well, and sounded surprised that it wasn’t brand-new — $400 per household.

Why I’m asking this and why it’s important is…. Yes, there may be the phase-out. The phase-out, to my understanding, is 2 percent of the benefit as you clip over the minimum threshold. The minimum threshold is $41,000, a qualification of $41,000 household income, approximately, for a family of four. That’s the only way you hit the maximum of $400. If you’re a family of three, depending what your makeup is, you start to lose $5.50 a child, $19.50 an adult. You can have the one dependent child be qualified as an adult to help that boost a bit.

[3:00 p.m.]

There are not going to be a lot of people that qualify 100 percent as a family of four. If they do, that’s great. I think they do need the supports. That’s why we put this program in place in the first place. So we’re not quibbling with that.

I think it’s trying to get a better handle on the marketing. It’s not 53 percent or 57 percent of the public that will be seeing a $400 increase to a subsidized tax credit or tax break. In fact, if you’re at the higher income level, even at the $400, it’s a few dollars you might now qualify for, not the $400.

Has there been a calculation as to what that actually means in terms of the extra people that will now qualify? How much would they actually qualify for out of that $400? Is it $10 a year? Is it $15 a year? There must be something that went into the calculation of that $223 million — just so that the public can get a better understanding that they’re not actually going to be receiving a $400 tax credit now. They may actually, previously, not have qualified, and they now go from a $350 cutoff to a $400 cutoff, and they qualify for $16.95.

Hon. C. James: The member knows full well how income-tested programs work and that there will be a variety of families, a variety of makeup of families, a variety of individuals. So it will depend, for a family, on the number of children they have, on their net income, and as I said, on the makeup of their family. That’s going to vary from person to person. And $400 is the amount, the new amount this year, for someone who qualifies for the full amount. Then, again, it tapers, depending on the makeup of the family and depending on the income level, and the income levels are listed on page 126.

P. Milobar: I’ll move on…. Just to clarify, it’s not for a person to qualify for $400. It’s for a family of four earning $41,000 or less as a household income that would qualify for $400. An individual would qualify for much less. It’s in the $154.50 range, I believe, for an individual, and they would have to make $35,000 or less to qualify for that.

Moving on, then, to the clean vehicle program, the ZEV program — a couple quick questions. I just want to make sure that when we get to the Energy and Mines Ministry at the end of the week and heading into next week that the answer back isn’t that I should have asked here, so I want to make sure we cover this off on a progression.

Last year…. Well, starting in the September 2017 budget update and moving through to the end of fiscal ’18-19, there was $57 million added to the rebate program.

[3:05 p.m.]

Again, we started the rebate program. We’re not opposed to this happening. But that was a very substantial chunk of money needed to go into the program to make sure that it ran through to the end of fiscal.

Today as I was sitting here…. You can go on line. They have a real-time tracker. They’re at under $3.9 million left in the fund before it’s fully exhausted. I’m sure they’re waiting for the next tranche of this $42 million that’s in this year’s budget, under CleanBC programming, to come forward to top up that $3.8 million. I would imagine that with the matching federal program kicking in May 1, that $3.8 million probably dropped very quickly in the last couple days and will continue to over the next few weeks.

When I asked in the Ministry of Environment estimates around this, the answer back seemed to be why there was only money for CleanBC for year 1 at $42 million, which based on the $57 million would seem that there’s not enough money to even hit the end of this year’s fiscal without the program running dry. The answer back was: waiting to see what the feds were going to do or not do and making sure that programs could sync together or not and what types of resources may come to bear there.

The concern is we have a piece of legislation in front of the House that would essentially say: “It’s no longer the government’s worry about how you get into a clean energy vehicle. We have a piece of law with million-dollar fines telling you that you better figure out how to sell somebody a car they might not want right now or you’re going to pay us a fine.”

There’s not enough money to even fund the first year of this three-year budget book, let alone the subsequent two years. I was able to establish that based on the expected dollar values needed to help offset industry’s costs within CleanBC, the initial $168 million will probably be topped up significantly from the $299 million in CleanBC that’s sitting in contingencies. And as best as we could work around, that left about $100 million in contingencies within the CleanBC document.

So there’s $300 million in contingencies now dropped to a $100 million with an unfunded program of this magnitude.

Doing the math of what it actually takes for a subsidy of roughly $4,000 a car — because not every car gets the full $5,000, at least to this point — what we’ve been seeing is that to get to 2030 goals within CleanBC, you would need close to $1.6 billion at the end of this $42 million to get you there.

Talking to the auto industry, they say the tipping point of pricing…. They’re not sure where government is getting that from because they do not feel that it’s anytime soon on the horizon. In fact, when Ontario stopped their subsidization program, the sales ceased immediately.

I guess the question is: why is there only $42 million in the first year in CleanBC for the clean energy vehicle program when even in…? As this year’s budget was being created, it would have become very apparent, as $30 million needed to go into supplemental budgets with the Ministry of Energy and Mines to fund the car program to get to the end of the fiscal…. Why was there a shortfall of funding to even get through this year’s fiscal within CleanBC within this year’s budget? Let alone, where is the subsequent year’s money for this program?

[3:10 p.m.]

Hon. C. James: I think the member rightly talked about the work being done in EMPR with the federal program. So we’re waiting for the federal program to come into place to see whether any adjustments would need to be made over this next year with our provincial program as well. I think it’s important to note that for CleanBC, just for this fiscal year, there’s $37.3 million in contingencies in this area. A large portion of that, we expect, will be allocated towards the electric vehicle program.

Then as for the second year and third year, I think, as the member knows well, each year you take a look at the program. You take a look at the structure of the program. You take a look at the success and the challenges of the program, whether you need to make any changes. Those decisions will be made in the upcoming budget for the following year.

P. Milobar: Well, that’s a little concerning. The language around the contingencies funding within CleanBC in the budget book very much makes it seem like this is for new types of programs and initiatives that would come on stream and as of yet have been defined. Based on that answer, a large portion of this year’s contingencies is now going to go to a program that exists and that just didn’t get proper funding in the first place, even though the budget book was being created at the same time as supplemental requests were being made, and press releases were being issued to fund that same program.

We also know that out of the $299 million, the better part of $280 million is going to go to help heavy industry offset their tax burden. That means that we’re down to, even just with this year, about $60 million left out of a $300 million contingency fund over three years, which is worded in such a way that there was much excitement that this would help spur on innovation and new programming within the province. Instead, that doesn’t seem to be the case. Again, is the minister then saying that the ZEV program continuation hinges solely on a federal government program running or not running?

There are no dollars indicated in years 2 or 3. There was no federal program indicated when this budget book was brought out in the first place. Again, why was there no ZEV money for years 2 and 3 in this budget, if in fact the intention is to continue it on? There is a great worry out in the manufacturers and the sales world, with the legislation coming and the way the budget book reads, that the hammer for the government to make the shift for people and sales will be legislative, not with the existing rebates that are available.

As I say, we see what happened in Ontario — that resulted because of a change in government — the rebate program disappeared, and so did the sales. We have a federal election coming up in October. If there’s a change in government or a change in direction, you could have the same thing. Is the province saying that we’re only going to go as the federal government goes? Or is CleanBC a document that is properly funded? If so, where is the funding for CleanBC, for this program, in years 2 and 3 in this budget?

Hon. C. James: I expect the member to continue to hold us to account each budget year. That’s the purpose of going through estimates. It’s so the member has the opportunity to be able to raise those questions — and other members, as well. As I said, it’s important to make sure that the program is put in place in coordination with other programs that are out there.

[3:15 p.m.]

That’s why, as the member heard clearly from EMPR, they were taking a look at the federal program, to take a look at how to coordinate. That’s why dollars were put in contingencies, to be able to provide for that support. Then, as we go into the budget process, this, obviously, is a clear commitment both in CleanBC as well as for our government. We’ll take a look at the amount that will be needed to be able to fund the program.

P. Milobar: Well, again, there’s not enough money in contingencies to actually fund the program, based on last year as it is and based on other commitments for those contingencies that were conveyed in estimates with Environment.

One last area I would like to just touch on again to make sure…. I’m wondering if the minister could enlighten me on any modelling within the ministry on the extra per-litre cost to the consumers’ gasoline at the pump and diesel that has been done on the new fuel standard that is mandated by CleanBC. So they’re going to a higher mix. It doesn’t currently exist. It doesn’t exist in Alberta. It will be somewhat of, I guess, an artisanal blend for British Columbia that will get made.

One would have to assume that if the oil companies could produce that cheaper right now, they would be. Most companies tend to put to market whatever they can produce and that would have acceptance at the lowest cost possible. So there must be an increased cost per litre of gas and per litre of diesel with this new fuel blend. This new fuel blend will result, under CleanBC, about…. It accounts for almost 22 percent of CleanBC’s emission reduction targets. So it’s a very significant piece of the whole CleanBC plan, or that falls apart. Let alone the missing 25 percent; you’d be almost missing 50 percent of CleanBC, if this fuel does not hit the market.

What modelling has been done, and what is the expected increase of the per-litre cost that this fuel mixture will cost British Columbians — the travelling public, industry, everybody — to be able to use this new fuel blend that needs to be made specifically for the B.C. market?

Hon. C. James: EMPR is working with industry right now to develop a plan around the new fuel standard, and certainly, Finance will be there at the table as they have those discussions and work through that process. EMPR may have a little more to say in their estimates as well, but that’s the process that they’re going through, and we’ll be part of that process.

J. Thornthwaite: I have a couple of questions to do with — actually, closer to three, I think — the speculation tax.

I have a couple of constituents that have written me. They live in Indian Arm. We’ve heard lots in this House about Belcarra. In fact, one of the responses that my constituency got, the staff from the ministry actually incorrectly referred to her as living in Belcarra. They don’t. They live on the other side of Indian Arm, and they are only accessible by water.

[3:20 p.m.]

She notes in her letter to me: “Islands that are accessible only by air or water are not part of the taxable regions.”

She goes on to say: “Our secondary property is a recreational home located in Indian Arm, Orlomah Beach, which has no road to the home. It is not an island, however. It is boat access only. I would like to request exemption from the speculation and vacancy tax based on the same criteria as the islands that are accessible only by air or water. My recreational home is only accessible by water, and I respectfully request fair and equitable application of the exemption based on access to the property.”

That’s my first constituent. The other one, I think, lives in the same area. He didn’t give me his exact address, but he is up there. Certainly, he’s up in Indian Arm, and he says the same thing: “We do not have hydroelectricity, city water or phone service. Even the cell service is intermittent. The parking and access in the Deep Cove area does not lend itself to long-term or even short-term rentals — i.e., request to rentals. Emergency services are not readily available up Indian Arm should a tenant become injured, and access, again, is by water only.” His question is: “How is it that Johnson Bay residents, which are directly across the inlet from me, are exempt and we are not?”

I think that my question is all about equity and why my constituents, even though they are only accessible in the upper Indian Arm, on the district of North Vancouver side of Indian Arm…? You can’t get to it, except by water, like an island. Why aren’t they exempt as well?

Hon. C. James: Thank you to the member for bringing forward the constituency concerns. As I think the member knows, we’ve often canvassed the speculation tax in question period. I won’t be, as Finance Minister, giving individual, specific tax information or advice to individuals. As we have learned, many of these are very complex situations. It’s important that accurate information be given and that we receive that accurate information. So I’m happy to take information from all members, if their constituents feel they haven’t had their questions answered. I’m happy to pass those along to the people in our help area to be able to look at those issues and get back to them.

The broader question around the specifics that the member raised…. As the member knows, I’ll be having a meeting with the mayors of the impacted areas. They’ll certainly be bringing their issues. By the time we have that meeting, we hope, as well, to have more specific information around the speculation tax. So we’ll be able to put all of the data on the table and have those conversations based on the facts that we have been able to gather.

I do think it’s important, when we begin to have the discussion around the speculation and vacancy tax, to note that we are talking about people’s second homes or third homes or fourth homes. This not people’s principal residence. Those are exempt. The fact is that 99 percent of British Columbians are exempt from paying this tax. I just think it’s important to set the context of the fact that we are bringing forward this tax to deal with speculation and the vacancy challenges that we’re facing in communities, the affordability crisis for people, and to address it on behalf of individuals and workers.

J. Thornthwaite: The point is that these are not speculators. Yes, they do have a second home, but it’s equivalent to an island. They just happen to be up Indian Arm. Why are they essentially discriminated against because they live on the mainland, even though, if they were on an island, they would be exempt? You still have to get to them in the same way.

I will take the minister up on her offer. I will make sure that my constituents pass on their information to the minister. I hope, for sure, that she will consider the district of North Van. It’s not Belcarra. One of the responses that one of them did get from the ministry said that they were from Belcarra. They’re not. They’re on the other side of Indian Arm.

My next question, as well…. I had another constituent who purchased a condominium in the year 2010 in the north Nanaimo area. He had planned that this was going to be his future retirement home. He was going to move there on a full-time basis once his wife retires. He’s retired, but she’s not quite yet. She’s just finishing her career in North Vancouver. They purchased this property in Nanaimo under the intent that they would be moving there to retire.

[3:25 p.m.]

I’ll quote what he says: “The sole objective for purchasing this unit in Nanaimo was for our own use and not for speculative reasons. The Nanaimo unit is not currently rented as we are personally using it once or twice per month, as our son and his wife also live in Nanaimo and we travel there to visit our three grandchildren.”

I’m going to quote what he said: “Truthfully, this additional tax will be a huge burden to us. We strongly believe that as Canadian citizens, we should not be penalized for our hard work and success. I hope that the current government will further review the speculation tax once again and only penalize those who are benefiting from these types of speculation, instead of senior citizens who are not speculating, who had no inkling of the added tax burden that government has implemented at such short notice.”

Plus, the fact is, as I said, that they bought their property in 2010. They’re very worried, and they think that they might have to sell, and they bought it for their retirement.

Again, I ask the minister: could you please take into consideration the senior citizens that are obviously not speculators? I have no problem sending this letter directly to the minister if the ministry would consider an exemption in this case. I know the letter that I did get from my constituents…. They were essentially pleading with me to plead to the minister.

Again, my question is to the minister. Is there going to be any opportunity for my constituent here, in this case, to get an exemption?

Hon. C. James: I’d be happy to take the information. I’m not going to give individual tax advice to individuals. That’s something that, as I said, is important to be done with people who can look at all of the information that’s there and make sure all the information is accurate.

I do think it’s important to note, though, that that increase in housing prices over 2010 to today is a large increase that people who own second or third or fourth homes have benefited from. While I appreciate the member’s comments, and I appreciate the challenges for seniors, let’s remember as well that there are a large majority of people, of many seniors in this province, who are struggling to find housing, who aren’t able to find a primary residence, never mind looking at a second home or a third home.

Those are the individuals, the kind of crisis we’re facing…. It’s why we are here in the first place. People can’t afford to be able to find a single home. They can’t afford to be able to rent a place because the vacancy rate is almost zero in communities.

You’ve continued to see that in the areas that have been chosen for the speculator and vacancy tax. They’re the least unaffordable. They have the lowest vacancy rates, and they have the most challenges — challenges for businesses in finding workers, challenges for recruitment and retention. In fact, the businesses came forward, as I’ve talked about often in the development of this tax, to say we had to do something about the affordability crisis.

We have taken into account, as the member knows, many exemptions, in fact, for special circumstances for individuals — if a person is ill or someone goes into long-term care or they’re working somewhere else. In fact, there are individual exemptions within this tax bill to be able to take into account a number of considerations.

I’m happy to take the member’s information, but I think it is important to note that the increase in housing prices has provided a benefit to people over the years. Looking at affordability is something that will benefit all British Columbians, which is critical if you’re looking at housing being used as a place to live. That’s the goal, and that’s part of what we’re working on with the speculation and vacancy tax.

J. Thornthwaite: We do know that these particular cases, and the thousands of others that are similar, have nothing to do with providing housing stock or rental stock for individuals. It’s not putting a dent in that issue. These poor individuals that are essentially getting punished because they have a second home are not helping the housing crisis in this issue.

I want to have one more scenario, just to bring it to the attention of the minister. I know this isn’t specifically…. I mean, it does obviously affect the spec tax. I just wanted to give a scenario to the minister about how it just seems so counterproductive in this particular case.

[3:30 p.m.]

There’s a student who is in the same school as my daughter. Her parents are foreign, but they purchased a condominium for their daughter to live in while she goes to school — so the four years and maybe beyond. They actually purchased this property.

Well, obviously they’re getting charged the speculation tax. But the issue is what they’ve been forced to do. This is how preposterous this thing is for them.

[J. Isaacs in the chair.]

Now they have to rent that property to a foreigner — or to another person, foreign to them, not necessarily a foreigner — and then get another rental property for their own child because they’re not allowed to rent the property for their own child.

I just don’t get that. I just think that it’s maybe an unintended consequence — that you can’t even rent out to your own child. You have to rent out to a foreigner or a different person, and then you have to get that housing for your own child somewhere else to rent off of someone else. I’m just wondering if the minister had thought about those scenarios with regards to the spec tax.

Hon. C. James: Again, as I’ll state to the member, I’m not going to speak about individual tax information, because it’s obvious, with the information that the member is providing, that there can be a misunderstanding. There can be a lack of information provided.

If you are a B.C. resident and you have bought, for example, a condo for your child who is going to university — you live in one of the areas where the speculation tax applies, and they’re living in a condo going to university — you do not pay the speculation tax. They are considered a non-arm’s-length individual. They do not pay the speculation tax. They don’t. If you’re a B.C. resident, you get a $400,000 credit on your second home. That’s also available.

Again, it’s part of the reason…. I think the member has raised a perfect example of why it’s important not to be making decisions based on information that’s passed along, because sometimes not all of the information is passed along or the individual may not have shared it all.

I’m happy to take a look at the specific information to pass it on to staff to be able to review. But again, I think it’s important to note there is an exemption, a non-arm’s-length exemption. If the individual has bought a condo for their daughter or son who is going to university or is living in it as their primary residence, they will not pay the tax.

J. Thornthwaite: Again, I will take the minister up on her offer and provide her with the details in an email, so thank you very much.

S. Thomson: I appreciate the opportunity to ask a couple of questions. Welcome to the minister and her staff.

I expect I’ll get the same…. They’re some speculation tax questions. I’ve got one other issue, as well, that I want to canvass, but the first couple of questions will be around the speculation tax. I expect I’m going to get the same answer that the minister just provided to my colleague from North Vancouver–Seymour.

It does bother me, in terms of putting the questions forward, around the response from the minister, that even though it’s clear in these examples that people are not speculating and the properties aren’t vacant — so it’s not speculation and it’s not vacancy, both the apparent tenets of the legislation — it’s okay if the rules happen to be such that they have to pay the speculation tax because they don’t quite fit one of those exemptions and it’s okay that you’re paying the speculation tax simply because you’ve had an increase in value in your property over time.

[3:35 p.m.]

You should, then, apparently just suck it up and be happy to pay the tax because you’ve had this increase in value, when clearly you’re not speculating — you’re not in that category — and the properties aren’t vacant. I’ll use the example here, which is one of the ones I wanted to raise. It has gone, specifically, to the minister’s office, and they have received a response.

The situation here is the person…. It’s a couple. They have a residence in Kelowna. The husband lives in Kelowna. It’s his principal residence, and qualifies for principal residency. He’s paying taxes in Kelowna. The title is in both his and his wife’s name.

His wife lives, and continues to live, in Alberta and has to stay there because of medical reasons. They have a home in Alberta, which they intend on selling as soon as the medical requirements for her to stay in Alberta are complete. So they’ve purchased this home. He lives here. She lives there. Now they’re being assessed the 50 percent of the speculation tax impact because she is on title, even though the property here is a principal residence, even though it is not vacant, not available for rental or anything like that.

She has had to stay in Alberta because of critical medical rationale, and they’ve been told, “No, sorry, you don’t qualify for the medical exemption,” because of the criteria of the medical exemption. It’s just an example.

It points, to me, to one of the reasons why — and we’ve raised this before during debate on the legislation — there needs to be an independent appeal process in some way where those legitimate cases like that can be appealed and some consideration given, because when it goes into the property tax branch, they’re going by the very strict rules that are in the legislation and are not qualifying for those exemptions.

This is a specific example and one that the minister’s office has dealt with. I just wanted to bring it forward here again, because it is one that points out the impacts of this legislation when it is clearly having these unintended consequences on a couple who are now having to pay speculation tax when, clearly, this isn’t about speculation, and the house is fully occupied and not vacant and not eligible for rental or any other way to avoid the impact of the speculation tax.

I wonder if the minister could comment on whether she feels that that situation is something that the speculation tax should apply to.

Hon. C. James: I would expect the member, as the previous member did, to bring forward the issues on behalf of their constituency. That’s their job. I expect those to come forward. As the member has said, we received some of those in the office as well.

Again, the member is quite right. I’m going to give the same response, which is not to speak about a specific tax case. I think it’s important, again, whether people pay taxes in British Columbia or pay taxes in Alberta. There are a number of different factors that come into account when it comes to the tax. I think, again, full information is critical in making those determinations, and that’s important.

I appreciate the member raising the issue. As the member knows well, we will have an opportunity to hear from the mayors, as well, of the communities that are impacted by the speculation tax. We’ll be holding an opportunity for them to present their issues. Their community will have the data from the speculation tax as well, which will give us a good opportunity to be able to do a full review. That will occur each year. As well, there is another review built in, so there are opportunities along the way to address any unintended issues that may arise.

S. Thomson: I’ll just, then, make a point around two other files. I know I will get the same response, so I’ll just mention the files here. They are in the minister’s office. Maybe if she could undertake to have a look at them…. People are waiting for specific responses on them.

[3:40 p.m.]

One is a file under the name of Fedak. The situation there is that…. It’s a couple living in Kelowna, previously married, divorced. She and her new husband have purchased a home, and it’s their principal residence. Both filled out the speculation tax on it. She remains on title on her former husband’s home, and she has a situation where there has not been cooperation in getting her name removed from that title and mortgage on her other home. She’s fighting that battle. She has limited legal resources in order to be able to do that and now is finding herself impacted by the speculation tax.

To the credit of the staff, I understand that they have been provided some accommodation for the first year of the application but have been told, unless she can get this straightened out, she’s going to be impacted in the next year on it. Again, it’s a clear situation where there is no speculation involved. Both homes are fully occupied, so neither of them are vacant. Both are principal residences and, again, being impacted by the tax.

Again, I go back to my point previously around there needing to be a better appeal mechanism, maybe something sort of separate and independent, that would look at these cases where, clearly, the impact of the legislation is not what was intended. You’re having these unintended consequences of the implementation of a rushed piece of legislation. I’ll just raise that one.

Another one is very complicated, had quite a bit of back-and-forth on it. It’s called the Truswell file. It involves an old piece of property that the current owner inherited from his family through the passing of his wife.

He has a life estate on it. Property title is in the ownership of the children. The children don’t live here. One lives in White Rock. Two live in the States. They spend significant amounts of time in the house, but it’s not their principal residence. He, as the life estate holder, also doesn’t spend all his time…. He also lives in the States for periods of time.

It’s very, very, very complicated, and it gets caught up in the legal side of what the definition of an owner is around life estate and life tenancy and all those sorts of things. So we’ve been working back and forth on this one with your staff. But I’ll just flag it as one that needs some continued attention, because at this point, they are being advised that they will still have to pay the speculation tax. All four of them will have to pay their share of it.

This is a piece of property that has an official community plan process over it with the city of Kelowna, which has designated it as future park property. They don’t have the ability to sell it. It’s right on the edge of Mission Creek in my riding. It’s just another one that I’ll flag to the minister that needs some continued attention. I’m not expecting a response to that.

My final question. I’ll just switch gears a little bit. I want to just ask a question about the employers health tax and the application of the employers health tax. This comes from a submission. A letter has been written by the B.C. Cherry Growers Association to the minister’s office. The letter was sent in, in January. They still haven’t had a response to that letter.

It involves the application of the employers health tax around the seasonal agriculture worker program.

As the minister may know, under that program, the contractual arrangement between the parties, between Canada and Mexico and B.C. in terms of that program, the farmer who is utilizing the seasonal agriculture worker program is required to pay private medical insurance for all of the employees that are brought in under the program. That’s part of the contractual requirement.

[3:45 p.m.]

They’re not eligible for medical services premium coverage, yet they are being assessed an employers health tax as the replacement tax for MSP. It’s getting built into their…. Their payroll for all of that is being assessed the employers health tax.

It seems to me that, first of all, it’s creating a very significant impact on the agricultural industry, particularly, in this case, the cherry growers, who are major users of the program. Given the nature of the industry, the growth of the industry, the tremendous opportunities in the export market…. And we’re seeing real growth in the sector. I’m wondering if the minister could clarify or comment on her views of the application of this tax on agricultural operations, farmers and ranchers in British Columbia who are utilizing that program and, as part of that program, having to pay a prescribed private health premium for health coverage for those employees and now getting hit with this tax.

I see two potential things that should be considered. They should just be exempt from it, given the nature of it, or consideration should be given that those temporary workers under the seasonal agriculture worker program should be eligible for MSP coverage. Then you’d have some fairness and some equity in terms of how things are being treated. In this case, they’re having to pay the private insurance, and they’re being assessed the employers health tax at the same time, and it’s having a very significant impact on agricultural operations.

I know the members opposite and the government want to support the agricultural industry and want to see that growth, yet you’ve got a situation now here where you’re negatively impacting those operations.

Hon. C. James: I want to start off by apologizing. I’m not sure where the correspondence has gone, if it came in, in January. But I’m happy to make sure we follow up so that a clear response goes back to the Cherry Growers Association as well.

I think the first piece to note on the employers health tax and the move to the employers health tax is that, as the member will know, it was to get rid of a regressive tax around MSP premiums. It’s not a tax — nor were the MSP premiums only there — that was directly linked to spending that people may make on health care or the use of the health care system, which would happen if you were linking it to a seasonal workers program. There’s a link there to the use of the health care system. In fact, that’s not the direct link. It’s a general application tax, just as it is in other provinces. It’s tied for the lowest rate, as the member knows, but not directly linked to the use of the health care system by individuals.

[3:50 p.m.]

I think it’s also important to note that the support for moving away from medical services premiums and moving to an employer health tax is of benefit to everyone. A strong health care system is a plus for everyone. The member quite rightly points out the challenges for agriculture in finding workers and being able to have workers to be able to address the work that they need doing. Again, addressing some of the challenges in this province, whether it’s affordability or otherwise or it’s medical service premiums or otherwise…. Making ourselves more competitive as a province is going to be a help to everyone.

I recognize it doesn’t give the member or the cherry growers association the specific answer they want, which is to look at an exemption. This is a general application tax. It applies to all employers across B.C. Payrolls of below $500,000 don’t pay. So again, the vast majority of businesses are, in fact, not paying the employer health tax. Then it’s graduated for $500,000 to $1 million, and $1.5 million and above, which will be paying the full tax.

Again, I think it’s just important to note that it’s not directly linked — one of the examples the member raised. It’s not directly linked to, in fact, the use of the health care system.

T. Redies: We weren’t sure how many questions the member from Kelowna was going to be asking.

Minister, again, thank you for the opportunity for us to ask questions with respect to the budget and the forecasts going out three years. I’d like to thank the staff, again, for giving us that opportunity and, in advance, for responding to our questions.

We’re going start first with the fiscal 2018-19 actuals and then proceed from there into sort of the three-year forecast, if that gives you, again, some help in terms of anticipating where we’re going.

Hon. C. James: I just wanted to point out that ’18-19 actuals come in public accounts, so that’s still to come. I just don’t want the member to feel that she’s asking questions that we won’t have responses for because they, in fact, come in public accounts.

T. Redies: Thank you for that. I appreciate that. I think this is mostly public information that’s already in the budget, but if there is anything that has to be deferred, then we’ll go from there.

The original fiscal 2018-19 plan forecasts spending at $53.6 billion, but actual spending came in at $55.7 billion. Can the minister explain why the government spent $2 billion more of the taxpayers’ money than it originally planned?

[3:55 p.m.]

Hon. C. James: Thank you for the question. A few pieces just to point out in those changes that occurred. I think the biggest one will be no surprise to anyone, which would be the fire, the challenges we faced when it came to fire management costs — a $551 million difference, which is a very large number that we had to deal with — as well as flood. Again, the irony — the fire management and the flood costs, which were $308 million.

Student loan interest elimination, $217 million. Refundable tax credits, $372 million — a large portion of that was related to film tax credits. That’s, again, past years coming back. That made a big difference in that piece. Health authorities, $312 million.

Those are the big…. I can walk through all the minor areas, but those are the large areas that made the difference. And then supplementary estimates, of course, which was $375 million. I know the members have had their opportunity to ask those questions as well.

T. Redies: Thank you, Minister, for the answer. That was helpful, actually, because I did have the numbers for FLNRO and the $308 million for public safety, but I wasn’t 100 percent sure what that was. So it was the floods.

I think what you’re clarifying is that of the $269 million additional spending in the Finance budget versus what actually happened, $217 million was in the student loan administration. Am I correct in that? If so, what is the balance that was spent additionally in Finance in fiscal 2018-19?

[4:00 p.m.]

Hon. C. James: My apologies to the member. It’s, again, looking at the ’18-19 numbers and bringing them into this year’s budget and the challenges there. The member is right. Student loans is the largest portion of that, 217. Then the other portion is affordable housing.

[4:05 p.m.]

We have the housing initiative fund in the Ministry of Finance, as the member may know, and there were grants to increase affordability in the existing housing units that were accounted for. Those are the two big pieces that made the difference in the budget.

T. Redies: Thank you to the minister for that answer. Would the minister categorize this, dare I say, excess spending all on forecastable events?

Hon. C. James: Both of these issues, I think as the member knows well, are key parts of our government’s platform around affordability. If we’re talking about the student loans — the member asked whether these were planned ap­proaches — student loans was a piece that certainly we have been taking a look at. The second piece, of course, was the housing initiative fund and again looking at how we can create more affordable housing.

Both these programs were in fact programs that were reviewed, that were analyzed, that went through the usual process that they would to determine the costs that were there and then allocated within the budget.

T. Redies: The minister is focusing on, I guess, what should have been forecastable events given that they were platform promises that were made. I have another question, but since she has raised this particular issue, I would like to ask her: why, then, was it an unbudgeted item?

Hon. C. James: I think it’s important just to take a few minutes to talk about the setting of priorities and the determination of what goes into the budget and what doesn’t go into the budget. It isn’t a plan to determine these are the pieces that are going into the budget without looking at all of the…. I know we’ll have lots of conversation around assumptions and around economic forecasts. It is important that all of those pieces be taken into account.

As I often say, as Minister of Finance, it is rare that something crosses my desk that isn’t worth, from somebody’s perspective, looking at for funding. It isn’t possible to be able to fund everything. It isn’t possible to be able to include it all.

Therefore, part of the decision-making process that occurs through the fall and in setting priorities is to determine what priorities government is going to go ahead with, what gets built into the budget, what the economic circumstances are of the province, what the second- and third-quarter reports come forward with.

All of those pieces are critical in making decisions around where the priorities are, when you determine something goes ahead, when you determine that you can balance the fiscal needs of the province and responsibility to build in prudence and to make sure that we have a strong economic base and the investments in people that are going to help you continue to grow the economy. That’s exactly the process that we’ve used in every budget that we’ve developed.

T. Redies: I think the minister has established that these were not planned expenditures, but as soon as they saw room for it, they decided to go ahead with the expenditures.

I guess my question is also with respect to the other items that were essentially overspending vis-à-vis the original 2018 budget. Again, does the minister see those as actually events that could have been forecast or events that were not forecastable?

[4:10 p.m.]

Hon. C. James: I think there are a couple of areas the member is talking about. One would be statutory expenditures, and perhaps the other one is supplementary estimates and the process for supplementary estimates.

Just so I’m clear, I want to speak about statutory. If we speak about the statutory expenditures, there are a few key areas, as the member knows well. There are opportunities for statutory expenditures where you spend what you have to — fires and floods obviously being one of those. As the member knows, we have increased the fire budget for this coming year, for ’19-20, but we also recognize, again, that that goes up and down. The fire seasons go up and down. Rather than leave money stranded in an area, you provide for the statutory expenditure, which is: you spend what you need to, to be able to fight the fire.

I don’t agree with the member’s characterization around overspending at all. In fact, there are, as I said, key areas built in for exactly these kinds of purposes, and that’s what we utilize them for.

T. Redies: Thank you, Minister, for the answer.

Actually, where we’re going with this is that, again, we have made numerous…. Well, there’s lots of evidence that this government is spending at a breakneck pace and is potentially spending beyond the capacity of the economy and, with unforecastable events like forestry fires and flooding, is not actually being prudent in its spending. My colleague is going to canvass a couple of questions which are going to address this even further.

Obviously, the government has to spend for fires and floods, but the point is that if the government has its pedal to the metal on spending and is not being prudent with respect to the management of its budget or its finances, then that could put the province into a deficit situation.

[4:15 p.m.]

I’m going to talk now about the refundable tax credit transfers, which the minister really hasn’t addressed. These were $372 million over the original February budget of fiscal ’18-19. Why is that, Minister?

Hon. C. James: As I mentioned earlier when I talked about refundable tax credits, the vast majority of the $372 million is film tax credits. These are years that come in from past work that’s been done, so filming that’s already occurred.

I think it’s important to note that there was an industry reassessment that occurred in 2017. That industry reassessment changed, obviously, the numbers that were coming in around the refundable tax credit. That, again, two- and three-year lag that occurs creates the kinds of numbers that you’re seeing here.

We’ve been working, as the member may know — I think we talked a little bit about this in last year’s estimates — with the film industry to look at how we could provide more stability and predictability in the numbers. We’ve had some very good conversations with the industry to talk about things like pre-certification, so we could have a pre-certification done on the project so that we would have a better sense of what was coming when it came to tax credits.

That’s one of the areas that we’re exploring with the industry. They’re very supportive as well. That’s something that we’re looking at to be able to address some of the change that you see, year to year.

T. Redies: Thank you, Minister, for the answer. I mean, it’s great that we have a film industry that is very buoyant.

[4:20 p.m.]

I guess my question is: given that the actual tax credits came in 30 percent above what was forecast for fiscal ’18-19 and given that the changes occurred in 2017 — notwithstanding the conversations that the minister has been speaking about, with the film credit industry — is the minister comfortable that her forecasting process around these film credits is sufficiently robust, that British Columbians can rely on the forecasted numbers going forward? Again, a $372 million difference that represents a 30 percent increase is a significant variance. I guess what I’m looking for is assurance from the minister that we won’t see that type of issue again.

Hon. C. James: I think what the member describes is exactly the part of the discussion that we’ve had with the industry. It’s to talk together, to work together to look at how we can continue the kind of growth that we’re seeing and continue the strong economic activity in our province but also to be able to forecast the kinds of numbers.

I think it’s important to note, though, that when you’re forecasting refundable tax credits, for example, or tax information coming back from CRA, it’s often a 12-to-24 month lag before those numbers come in. The member will remember that from one of our first budgets, when the numbers shifted on the corporate income tax and then shifted the other way. You had a down, and then you had an up the following quarter.

There’s always some volatility that is there, but I certainly feel very comfortable about the work that we did with the industry. We’ve increased the amount that we expect to come in, in outer years. I think that will take into account the pieces that are here. As I said, the precertification piece, I believe, will make a big difference when it comes to being able to forecast what’s coming and being able to make those kinds of calls when it comes to building into the budget.

I think the other interesting piece, of course, with the film industry…. I think, certainly, that this province has tried, as other provinces have, to get rid of the “let’s play off each other” as we look at how we attract the industry and how we, instead, build a base for stable, long-term growth in our province. Other outside factors take into account the kinds of numbers that we’re looking at as well. The dollar makes a big difference. Has some jurisdiction offered a huge tax break that then attracts industry that would have been here in that time period? That’s the kind of volatility that I expect could continue, but I certainly feel comfortable with the work that we’ve done and the look at the precertification for these numbers.

T. Redies: Thank you, Minister, for the answer. Again, a 30 percent swing in unforecasted numbers is a significant variance. That’s what concerns us going forward, because if we continue to see swings like that, then obviously that will eat into the ability of the ministry to balance budgets.

[4:25 p.m.]

The minister…. I may have heard her incorrectly, so I apologize if I did. I think she said that they were increasing the tax credits. In fact, my numbers here…. Again, I could be wrong. It’s been a week or so since I looked at them. What I have is that in fiscal 2019-20, these credits are actually forecast to come down to $1.489 billion. Am I correct? Why are they coming down? Again, is the minister sufficiently comfortable that we are not going to see a significant swing upwards in these tax credits going forward?

Hon. C. James: I can understand…. The piece that’s important to note in the ’18-19 year is that it included a prior-year adjustment, which was a one-time adjustment. That’s about $174 million, so that has to be taken into account. I think the other piece to note is that the rates were adjusted in 2016, so the rates were lowered in 2016. That was a negotiated agreement with the previous government and the industry to lower the rates. Existing films, work that was going on, were grandparented in. That, again, caused the blip that you saw in 2017 and the increase that came up in 2018, when you’re talking about, again, the lag that came in.

We expect when you take off the one-time accounting and when you take a look at the rate adjustment flowing through now from 2016 — because now you’ve had those 24 months, and that’s when we often get the information — you’ll see that there’s a drop in 2019-20, taking into account those two pieces and then an increase in the outer years.

[4:30 p.m.]

T. Redies: Thank you, Minister. I guess I’m still not following, if there was a known one-time adjustment, why that was not built into the original budget.

Hon. C. James: In fact, I think what the member is asking is, basically, the crux of the challenge that we’ve been working on with the industry. It was expected — I’m speaking for previous governments — after the rates were adjusted in 2016 that there would be lower activity. With the rate adjustment that happened in 2016, that was built into the 2017 budget, but instead, you saw an increase. That’s what’s occurred.

[R. Chouhan in the chair.]

That’s why you see the changes, and that’s why it was so important to us to sit down and look at prior assessments, because, in fact, there isn’t a good analysis, and there hasn’t been a good analysis in this province around what productions are out there, what’s coming up and what might be anticipated.

As part of our looking at how we do a better job of taking a look at these numbers, that’s why we’ve had the discussion with industry. In fact, it is exactly the crux of the challenge that we faced as government coming in and looking at these numbers.

T. Redies: Thank you, Minister, for that answer. Just looking at the SUCH sector now, in 2018-19 it was $549 million higher than the original budget. Why is that? What caused those overages? Can the minister take us through what controls she has in place to prevent runaway spending in these areas?

[4:35 p.m.]

Hon. C. James: Just to speak about the SUCH sector — the health authority’s post-secondary school districts, hospitals, etc. — a portion of the dollars in that budget come from grants from the ministry. So that’s obviously something we control — whether we give those grants or don’t give those grants. That’s about $200 of the amount that the member was looking at.

Then the rest of the spending in this is own-source revenue. Again, that would be spending controlled by the individual sectors, so they would control that spending and how they determine to spend that. They obviously have to follow rules around balanced budgets, etc., but they have the authority to spend their own revenue, and a large portion of that would probably be…. They don’t list specifics, but international student fees for universities would probably be a large portion of the own-source revenue.

T. Redies: Thank you for the answer. That’s a lot of international student fees, if that’s actually what is happening. I mean, the reason why we’re asking these questions, I think the minister can appreciate, is that spending under this government is going up by $10 billion from the time they took office to the end of this fiscal year.

[4:40 p.m.]

It’s really important that British Columbian hardworking taxpayers know that this money is being spent wisely and is also being spent prudently. I think we, on this side of the House, have some real concerns that the pace of spending is unsustainable.

Minister, just with respect to the forest fires that we’ve been speaking about, the minister mentioned that the government has increased the budget to, I believe, about $117 million this year. But we know in the last two years, the government has spent almost $1 billion fighting forest fires. Is $117 million budgeted for forest fires really realistic, given that we are actually expecting one of the hottest summers coming up and given past experience?

Hon. C. James: I think, as the member knows, the forest fire budget that we had the last two years, being the worst we’ve seen…. Before that, again, the budget really fluctuated. That’s been a common process over the last number of years.

Yes. I do feel comfortable with the number we have built in, at $101 million. But I also think the other pieces to put in context to support that are the prevention and resiliency dollars we added again. We had money in the ’18-19 budget, but we also added on top of that another $60 million for the prevention work. That’s a critical piece of work that has been occurring, to be able look at everything from clearing to the prevention work that is there.

[4:45 p.m.]

Then I think the other piece to note…. The member has mentioned prudence in a number of different places. I would agree that prudence is critical in a budget. In fact, it’s something that I have spoken very strongly about as I’ve delivered the budgets that I’ve delivered as Finance Minister.

If you take into account the three-year fiscal plan, we have $2.65 billion over three years built in the forecast allowance and contingencies. In fact, in this year, forecast allowance and contingencies at $1.25 billion is the highest level ever built in — ever — in a budget, for contingencies and forecast allowance. I think that’s critical, and I think that’s being recognized. If you take a look at the rating agencies and their ratings for British Columbia, if you take a look at the comments that are made, the recognition of prudence being built into the budget is there and is, I believe, an important factor to build in. I think we’ve shown that in our numbers.

S. Bond: I know that the minister is comfortable with that number when it comes to fires in British Columbia, but I’m sure she’s also aware that we’ve got fires in British Columbia today, and they are starting earlier than anticipated. They’re going to continue to be an issue. So we will continue to monitor the fact that, at some point, we actually have to embrace assumptions in the budget that mirror, sadly, more of what is realistically happening on the ground. I certainly can…. We have certainly lived that fear in my constituency and across northern British Columbia and other parts of the province. We’ll continue to look at that particular line item.

I think my colleague has always done an excellent job of sort of looking at the math behind the budget. We have significant concerns about the sustainability of spending that this government is doing. In fact, when you look at debt…. Yes, the minister is correct that bond rating agencies have, at this point, been fairly positive. But let’s be clear. This government inherited a triple-A credit rating and very sound financial practice. There were also some warnings contained in the latest triple-A credit rating which talked about policy decisions. Those are the kinds of things that we’re going to be monitoring very carefully.

In fact, for British Columbians, I think it’s always helpful to look at…. When we talk about numbers — billions — British Columbians often glaze over, but from a pragmatic perspective, when you look at the three-year plan that this minister and the NDP have tabled, their plan is to increase the total provincial debt in British Columbia at a rate of…. When you do the math, it actually works out to about $403 million a month that will be increasing in British Columbia. So we have some significant concerns.

Maybe we can start with the minister. Can the minister confirm for us that the federal government provided a $1.6 billion federal transfer? Could she outline for us the reason that British Columbia got that transfer and perhaps indicate whether or not she anticipates that that would be something that would be repeated by the federal government?

[4:50 p.m.]

Hon. C. James: I just want to make sure I respond to the member’s actual question. Could the member let us know where she’s referred to the $1.6 billion federal transfer, where that number is in the budget that she’s referring to?

S. Bond: Well, I think that’s precisely the point. I’m sure the minister can confirm that they received a one-time federal payment of $1.6 billion based on a robust economy in 2017. Is that not the case?

[4:55 p.m.]

Hon. C. James: I think what the member is referring to are the personal income tax and corporate income tax prior-year adjustments that come forward every year.

I think it’s important to note that these aren’t federal contributions. These aren’t federal transfers. These, in fact, are provincial income taxes that are owed to our province. These are our income taxes. The federal government, through CRA, manages that. They record those, and those amounts come to our province. So they’re not federal contributions or transfers. I think that’s just important to recognize.

With their administering of our personal income tax and our corporate income tax, they record it, and then they provide us with prior-year settlement payments consistent with that agreement.

Some years, as the member will know well — and certainly from work on Public Accounts as well — some adjustments during the year go up and some go down. We received a loss in the first budget, in 2017, when we came into government. So those numbers are up and down.

The $1.6 billion that came in 2018 from 2017 — again, the prior year — is not accounted for. We don’t account for that number.

We base our provincial income tax, personal and corporate, on the kinds of assumptions that we use for building the budget — the growth projections, what the numbers look like, what the recommendations are from the Economic Forecast Council. We, again, build that in prudently, as the member will know — lower forecasts than the Economic Forecast Council. That determines the amounts that we put in for our personal and corporate income tax.

S. Bond: Well, thank you to the minister. In fact, she’s virtually made my point. There is no guarantee what that annual return to British Columbia will be. In fact, it can go down.

When you look at the math that we just walked through and look at the spending of this government, when we look at the amount of money that was in essence an overage…. We walked through exactly what the numbers were. The total was about $2 billion. When you think about the revenue side, this government got — however the minister wants to characterize it — a cheque from the federal government for $1.6 billion. That was based on a 2017 robust economy, which we also can’t guarantee. In fact, we’re very concerned about global risk and looking at the numbers related to that.

When we look at the spending pattern of the government and the fact that it got a $1.6 billion cheque from the federal government, would it be fair to say that this government would have actually been facing a deficit in 2018-19 if they hadn’t received their federal transfer, their federal cheque based on 2017?

Hon. C. James: I think the simple, straightforward answer is no. The member is wrong in her assumption. I think the member knows well the process that one goes through in creating a budget and in determining what the money is that is available to spend — what prudence can be built into the budget, what the growth projections are — and builds a budget based on that.

We, again, take that process very seriously. We have gone through that process in the budgets that we have put together.

[5:00 p.m.]

On top of that, to ensure that we have been prudent, we have built in, as I said earlier, the largest contingency and forecast allowance in this year’s budget that has happened. In fact, it’s $2.65 billion over the three years.

I think it’s important to note that that prudence has been built into the budget. One makes decisions based on all of the information that one has each and every year. I think the member knows that well.

S. Bond: Well, thank you to the Minister. This isn’t a gotcha moment; this is, basically, the math. So we should be clear. This minister and the government received a cheque one time from the federal government. At the same time, we’ve just gone through a complete list of areas where the government spent more than it said it was going to. That’s overspending, from a budget perspective.

The only thing that provided the room necessary to deal with that was the fact that the federal government, based on 2017…. I’m sure that the minister can’t, today, tell me what that cheque will be moving forward, because she can’t. The fact of the matter is that there is a spending pattern this government has created. They overspent against the budget that they created, and then, based on 2017, they got a cheque from the federal government.

Let’s just look at…. The minister needed room to deal with fires and floods and film tax credits, and if you look at this from a pragmatic mathematical perspective, I think it’s actually a fairer observation to say that perhaps this minister would have been dealing with a deficit budget without the additional money that was returned to British Columbia, to use her own words. Can the minister note that that may well be a correct assumption?

Hon. C. James: I’ll give the same response I gave previously: no, it is not a correct assumption. Again, I could run through the budgeting process, but I think the member has heard the response to the question.

I think it is important to note, if we’re going to talk about spending and if we’re going to talk about challenges in creating a budget, the mess left us that, in fact, we did have to find resources to be able to fix up. ICBC, I’ll begin with, and the over $1 billion at ICBC — the mess left us. The challenges that we face at Hydro in trying to address the challenges that are remaining there…

Interjections.

Deputy Speaker: Members. Let’s have one answer, please.

Hon. C. James: …and the affordability issues.

The member can put the comments ahead around the budget, but in fact, I think the budgets speak for themselves. The budgets have been balanced. The budgets continue to be balanced. The budgets continue to have large prudence built in that has been recognized by both rating agencies as well as others. And we’ve been able to invest in the people of this province who for 16 years did not see investments.

T. Redies: Well, again, I think the minister is deflecting here. There is $1.3 billion in essentially unforecastable events. It was the $900 million in floods or fires and then another $317 million, for whatever reason, in tax credits that the ministry, for whatever reason, couldn’t forecast. And then there’s been another $600 million on top of that in baked-in spending. Again, the minister saw some opportunities and then baked in another roughly $600 million or $700 million going forward with the health authorities, the student loans.

All we’re saying here is that that was enabled by a $1.6 billion federal transfer that may or may not be in the offing going forward. And our concern remains that the government continues to spend at a breakneck pace, looking for every avenue to spend money when a lot of the revenue that they’ve had in the past may or may not be there going forward, because the 2018-2019 economies are a lot weaker than 2017.

[5:05 p.m.]

This is what my colleague is trying to discuss with the Finance Minister: that, again, the path that they’re taking us on is one that could result in significant deficits for this province and would have at least accounted for probably a $1.3 billion to $1.6 billion deficit this year if the government had not received that one-time federal transfer.

Again, going forward, I mean, does the minister take this into consideration? She’s baking in spending. She has lots of potential risks out there with fires and floods. We know they’ve only got $117 million baked into the budget for that. Does the minister not understand where we’re coming from, in that she seems to be allowing a significant buildup in spending while relying on revenues that may or may not be there?

Hon. C. James: In response to the question around the $1.6 billion readjustment of our tax resources, that is not a federal transfer. I want to make that clear again. Those are our resources. The question was asked whether those are built in. No. We did not build in those amounts of money. We build in, based on growth and based on the economy, the kinds of resources that we’re going to see in British Columbia.

I think that it’s important to note, again, prudence built into the budget. I hear the members talking about prudence and the worries about what may be coming in the economy. I think it is important to build in the prudence. That’s why, again, our growth projections are below the Economic Forecast Council’s projections. That’s why we’ve built in contingencies and forecast allowance. That’s why we continue to have a surplus — $2.65 billion across the three years; $1.25 billion, the largest prudency that you’ve seen built into a budget, for this fiscal year.

The members should not just take my word for it or government’s word for it. Moody’s came out with a triple-A rating for us in British Columbia today. In their release, Moody’s highlighted — and I’ll just read these for the members — “B.C.’s strong debt affordability, strong liquidity and strong fiscal management. Moody’s further stated that B.C.’s continued fiscal surpluses and strong economic growth that will exceed the national average…protects the province from specific sector-based shocks.”

Again, recognizing the work that we have continued to do in the budget, building in that prudence and building in the kinds of protections for outside factors that may influence British Columbia’s economy is critical, and that’s what we’ve done in our three years.

S. Bond: Certainly, I appreciate being read the quote from Moody’s. The minister knows full well that that didn’t happen overnight or in two years. In fact, I would recall the very first budget update that she gave. I don’t have the quote, specifically, with me, so I’ll just paraphrase it.

At the time, she pointed out that she was one very lucky Finance Minister compared to the majority of Finance Ministers in the country, and that’s because she inherited a province with a triple-A credit rating, the top economy in the country and the number-one-performing job creator in the country. So that’s what this minister inherited. Thank goodness that it continues to be reflected today, because we are very concerned about whether that will continue or not. We’ll see.

I can remember, in 2001, when we inherited the government. Then we were talking about inheriting a mess, because British Columbia had gone from first to worst in the country. So let’s at least have the minister be magnanimous enough to recognize that she inherited the top performing economy in Canada, and it’s her job to make sure that it stays there. It’s our job to make sure that we point out some of the challenges.

Let’s be clear. The spending exceeded the revenue. What happened was that a cheque came based on 2017 — before this minister took over the reins. In essence, if you start looking at the actual technical pieces of putting a budget together, it was the $1.6 billion that allowed this minister to balance her budget.

I will proceed with another question. Can the minister tell us: when did the departments get approval to spend the extra money in 2018-2019 — for example, Finance, Public Safety, Sol. Gen, SUCH sector? When were they given approval to spend in excess of the budget targets?

[5:10 p.m.]

Hon. C. James: I’m presuming that the member is talking about supplementary estimates. Permission to spend was based upon royal assent.

S. Bond: Does the minister not feel any concern about the balance between spending and looking at a potential shock that British Columbia might face? We’ve seen that happen last year. We will continue to see it.

When you start to look at a combination of things for British Columbia — lack of competitiveness…. We’re adding regulation. We’re seeing the forest sector as being, basically, under siege. When we look at a combination of those impacts and we candidly see very little on the revenue-generation side from the government…. One of the hallmarks of this minister’s time as Finance Minister is certainly the spending rate. There is no doubt about it. It is going up, as I pointed out, by a rate of $403 million a month, over the next number of years.

So when you think about the cheque arriving in the mail, of $1.6 billion from the federal government, did the minister stop to think about whether or not all of that should be applied to spending? You know, the minister talks about prudence. We’re very concerned about the protection that British Columbians require. Can the minister talk about whether or not she has actually thought about the contrast between rapid spending, ongoing spending, and whether or not it’s actually sustainable for British Columbia?

Hon. C. James: I think, to boil it down, the member asked about prudence — what kinds of considerations are given to revenue coming in and spending on the other side.

[5:15 p.m.]

I’m sure I’m no different than any other Finance Minister, who obviously has to take those issues into account every year as we build the budget, take them into account every month as you take a look at the fiscal forecast each month and take a look at them every time the Bank of Canada or an agency comes out with a growth projection. That’s part of the job — to take a look at those numbers.

I think, again, the budget numbers speak for themselves. They have built-in prudence, in fact, to make sure of the outside factors. I think I’ve often said that it doesn’t matter which economist you talk to, people will presume that a slowdown in the economy is going to come. You can probably get ten economists who will give you ten different versions of when that may happen. It may happen in two months. It may happen in five years.

From my perspective as a Finance Minister, and our government’s perspective, it is important to build in that prudence, and that’s exactly what we have done. We have built that prudence into the budget. We have balanced the budget. We have provided the support, as I said, to have lower-than-projected growth. We have built in forecast allowances and we built in contingencies to ensure that that support is built in there.

I also think that the member is quite conveniently leaving out the fact that a number of the additional spending processes that occurred and pieces that occurred are one-time spending. That, again, gets accounted for in the year and is not ongoing spending that occurs. Again, that’s part of taking a look at making those tough decisions around what you’re able to fund and what you aren’t able to fund based on the economic situation that we’re in.

I think that it’s also important to acknowledge, again, as much as the members don’t like to hear it, the over $1 billion that we ended up having to put into ICBC to try and dig them out of the mess that was left. That’s, again, another amount that had to be found in the budget, that had to be accounted for.

S. Bond: The minister raises the issue of ICBC. We fully intend to canvass some of her comments and reflections on that during estimates. We have some significant concerns about the way it’s been reflected in this budget — the miraculous revenue generation that we expect to see, going from negative to positive. So we’ll have lots of time to discuss ICBC.

Let me just finish that section off by saying that this isn’t a matter of conveniently leaving out anything. It’s a matter of asking significant questions. When you do the math and look at putting a budget together, it’s actually our job to ask the questions about exactly those kinds of issues.

This budget, this government is spending at a rate that we believe is simply not sustainable in British Columbia. We need to be paying attention to that and so does the minister. We’re going to continue to have a series of those questions as we move forward.

Let me switch topics before my colleague begins to walk through the forecast section. When we’re talking about revenue, there’s another area where revenue was reported drastically lower than was forecast in the 2018 budget. That is revenue from cannabis. Can the minister explain how the cannabis revenue is drastically lower than was forecast in Budget 2018?

[5:20 p.m.]

Hon. C. James: I think there were two factors that really played into the cannabis revenue issue. These were areas that have impacted every province. Everyone has run into these challenges.

The first one was the later-than-anticipated legalization date. The member will know that the federal government changed the legalization date. They couldn’t move it as quickly as they wanted for July 1. That, obviously, impacted revenue because that was more time.

Then the other piece has been the slower-than-expected ramp-up of stores and available product and stores opening. As the member may know, there’s a process to go through for stores to open. Part of that process is a provincial process, and part of that process is a municipal process. In the midst of this, we also had a municipal election, which meant, for a period of time, that we didn’t have municipal councils in place to be able to look at approving licences or approving zoning or approving the kinds of things that needed to occur.

Both of those pieces, together, impacted the revenue for cannabis. That was recognized in our first quarterly report. We dropped our revenue expectations in the first quarterly report. We’ve continued those lower numbers, as the member knows, in the budget.

S. Bond: Can the minister describe how she will ensure that there are accurate cannabis revenue projections in the future? What process does the ministry have underway to ensure that we have a better sense, as British Columbians do, of what the anticipated revenue targets are?

[5:25 p.m.]

Hon. C. James: As we all know, this is a very new sector, and a new sector when it comes to being able to anticipate what kinds of sales, what kinds of stores are going to open, what kind of work is going to be done in this particular area and how municipalities react. They have the ability, again, to be able to look at reducing down. They have the ability to say no to stores in their community as well. That’s information that we’ll continue to monitor over the year. We’ll continue to then have the ability to be able to have a track record to look at.

I think it’s important to note, again, with such a new sector and with pieces still to be addressed, like edibles…. That’s a piece that the federal government still has to make their decisions on. The determination around how that occurs and when that occurs is still an outside factor that we’re going to have to watch and track as it goes along, to see what input that’s going to have. We have not accounted for revenue from edibles, for example, but that has a potential to make an adjustment to the revenue — I would expect up — an adjustment that could occur from an outside factor as well.

S. Bond: Can the minister confirm that the split, in terms of the revenue split with the federal government, is 75-25?

Hon. C. James: That’s correct.

S. Bond: Is the minister prepared to acknowledge that municipalities across British Columbia are already struggling with significant issues related to public safety and the opioid crisis, for example? They’re now being asked to deal with costs that are related to the legalization of cannabis. There has been a significant concern expressed, not just in British Columbia but across the country, that the provinces have now been given the discretion about what percentage of the 75 percent will be returned to municipalities.

I know this minister has had a significant number of requests from the Union of B.C. Municipalities and others. She said that she was willing to consider the allocation for municipalities. Can the minister tell us if that decision has made and, if not, when she’ll make it?

Hon. C. James: Thank you very much to the member. I’ve had some very good discussions with both UBCM as well as individual municipalities. One of the important factors that we’re working on right now is to look at: who is responsible for what, and what are the actual costs that are coming forward? There are also savings from moving an illegal business into a legal business.

There are costs, certainly, to municipalities around zoning, but we want to have a clear idea. It’s important for the municipalities, as well, to have a clear idea of who is responsible for what. Who is going to take on what area, and what are the costs associated with that? Those are ongoing discussions, still, with UBCM and the group that they’ve put together to deal with this issue.

S. Bond: I think it would be safe to say that most municipalities have made it pretty clear that they are experiencing costs, and they will. The minister has already articulated zoning, training, all of those kinds of things. It’s a pretty important issue for municipalities, making sure that they get their fair share when, in fact, the province is going to receive 75 percent of that revenue.

I would certainly encourage the minister…. We have heard a lot of concern being expressed about what municipalities are already managing on the ground when it comes to public safety, when it comes to dealing with meth and the opioid situation. This matters. This is one more thing that municipalities are being asked to take on.

[5:30 p.m.]

I’m wondering if the minister…. She’s having conversations. At what point will there be a decision where municipalities will have some sense of certainty, not just for the short term but for the longer term? There have been suggestions that there needs to be a fixed amount and that it needs to be indexed so that communities can actually deal with what is now being handed to them to manage.

Hon. C. James: Those are ongoing discussions. We’re having some very good discussions. As I said, there are a range of different municipalities that have taken things on. The member talks about costs to municipalities. Many municipalities have not yet gotten into opening stores and are not yet at that stage, so this is an ongoing process for those municipalities to be able to determine what their costs are and what their costs may not be.

[J. Isaacs in the chair.]

That’s still a process that’s ongoing. I think it’s important to recognize, as well, from the government’s perspective, as we said from the start, that this is not something where we expect to see huge amounts of dollars coming into the budget. We expect, again, that there are a number of upfront costs that we’ve already had to incur as a government. That’s, again, information that we’ll work on with UBCM, and we’ll continue those dialogues.

T. Redies: I’d now like to turn to the forecast for the next three years, if that’s all right with the minister. The minister had talked about the fact that the ministry relies on the Economic Forecast Council and generally budgets, as per tradition, under what the consensus is for the Economic Forecast Council.

Last year…. Let me put it this way. The forecasts of the budget are based on the Economic Forecast Council’s forecast from the fall of last year. Since then, Canadian growth numbers have been much weaker. There is general consensus that global growth will be more muted in 2019. In fact, in B.C., the housing market is extremely slow. The 2019 numbers are already coming in at about 40 percent lower than what they were in 2018, which, again, by the year end, were about 40 percent below what they had been previously.

Those numbers themselves have caused, for example, TD, one of the members of the forecast council, to dramatically reduce their forecasts for B.C. in 2019 and 2020, to 1.4 percent and 2 percent respectively. Central 1 Credit Union has also reduced its growth predictions, based on the weak housing market, to 2.1 percent in 2019 and 2.4 percent in 2020-2021. On the other hand, the Finance Ministry actually raised their growth rates from the previous budget year, which were 2.4 and 2.3 percent, from 2 percent the previous year. You actually raised the GDP growth forecast.

Now we have a number of respected participants on the council, because of the housing market, suggesting that those forecasts are going to be much lower. So I guess…. Based on all this information, does the minister still believe that her forecasts for the fiscal year and ensuing years are still valid in light of the rapidly changing economic circumstances, particularly around the housing market and the TD and Central 1 forecast?

[5:35 p.m.]

Hon. C. James: I think the first piece just to mention…. The member talked about receiving the Economic Forecast Council numbers in the fall. We actually receive them in December, preliminary, and then they come again in January. They have a chance to be able to update them to January. So we base it on those numbers as close as we can to the budget coming out in February.

Those numbers for 2019 from the Economic Forecast Council, the average, were 2.5 percent for 2019 and 2.6 percent for 2020. Then, again, as the members have heard me say, we build prudence into our forecast. We had, in fact, forecasted 2.4 percent for 2019 and 2.3 percent for 2020. So we again had built in lower than projected by the Economic Forecast Council.

But the member is quite right. Canadian growth has slowed down. Canadian growth is having an impact on the forecast council and the work that they do around forecasting Canadian growth, which is going to impact the provinces. We expect to see that number adjust.

We monitor that as we’re going along, and we make sure we take a look at all of the factors, including these growth projections. Then if we need to make an adjustment, we’ll make an adjustment in the first quarterly report. That’s where we take into account the first changes.

The member mentioned TD and the report from TD. I just think it’s important to take a look at the balance, I guess I would describe it, in the slowdown of the economy. Despite the projected numbers that are lower by some of the forecast council, they are still predicting British Columbia to lead the country in growth for the next two years, for 2019 and for 2020.

There are a number of reasons they describe. The TD report talks about: “In light of healthy investment intentions, strong labour markets and decent public finances, growth in the province should remain above the national average for the next two years…. British Columbia’s labour markets are undisputedly the strongest in the country…. Construction on the LNG Canada terminal should deliver a substantive boost to growth, with the bulk expected in 2020 and 2021.” Finally: “Meanwhile, B.C.’s government finances still lead the country.”

Again, I think it’s important to recognize. Are we monitoring the slowdown? No question. I think that’s critical for us to do, and we’ll continue to do that. If we need to make adjustments, that’ll occur in first quarterly.

T. Redies: I appreciate what the minister is saying. I guess, again, just because everybody is going down in terms of growth…. Particularly when you look south of the border, which had first-quarter growth of 3.2 percent, everybody sliding in Canada is not a great testament, even though B.C. will seem to do better than other provinces.

[5:40 p.m.]

That’s actually not the question I was remarking on. My question, I guess, is: if the provincial growth falls as dramatically as TD is projecting, what happens to the government budget? What happens if growth is actually 1.4 or 1.6 percent instead of 2.4 percent?

How does that impact the government’s budget and, in particular, program spending, a lot of which is already built in?

Hon. C. James: Page 54 of the budget identifies the impact of a 1-percentage-point change in the growth, in the GDP, and that would be about $150 million to $250 million. I think that if you take a look at what some of the Economic Forecast Council are projecting right now, they’re looking at about a half-a-percentage-point change. So you could account $100 million, for example. But each of those, again, is well within the prudence built into the budget and well within the forecast allowance and contingencies that we built into the budget.

T. Redies: It seems a relatively low number for a full 1-percentage-point drop in GDP to only impact the government’s revenues by $150 million, but I’ll take the minister’s word at that.

Just looking again at the real estate market, which is driving a lot of the concerns, whether it’s TD or Central 1, as I mentioned, sales were down remarkably in 2018. I believe it was about 25 percent for B.C. overall, which was about $22 billion in economic activity that actually didn’t happen. This year the sales numbers for just the greater Vancouver area are trending at about 40 percent lower than what they did in 2018. So we are looking at a very, very bad year for housing sales in this province.

The government’s revenues in 2018 were down about $400 million, I think, from what they originally forecast, based on this very dramatically slowing housing market. Again, is the minister not at all concerned about what the current situation is with the housing market and how that’s going to impact government revenues?

[5:45 p.m.]

Hon. C. James: The member was speaking about housing and the impact of housing on the economy. There is no question that there is an impact. But I think — I know the member will have heard me say this often — that from my perspective, coming in to government, the risks of a speculative real estate market and the risks for the kinds of spikes we were seeing were more of a risk to our economy, more of a risk for long-term sustainable growth and more of a risk for continuing our growth when it came to being able to recruit and retain employees.

Again, with the best labour market in the country, with the lowest unemployment numbers in the last 20 months, we know that recruitment and retention is one of the most critical pieces we need to do when it comes to continuing to see our economy grow. Housing is a critical part of that.

When businesses tell you that they can’t recruit and retain, that people take a look at the real estate page and go somewhere else, we know we have a crisis in British Columbia. So addressing the real estate market, from our perspective and from my perspective, is certainly, in fact, building a stronger long-term sustainable economy.

Are we seeing changes in the market? Yes, we are. We are starting to see some moderation. Again, I’m going to say cautiously optimistic, because I think most British Columbians would not say we’re looking at affordability in the market. But we continue to see housing starts well above historic levels — in fact, higher than the previous government’s numbers that were built into the budget. The housing starts are well above those levels.

You’re continuing to see a rise in non-residential permits. That’s continuing to rise. We built in, with the property transfer tax, prudent assumptions into this budget. Again, we dropped it by over $300 million. That’s built into this budget as well.

[5:50 p.m.]

This is a piece, again, as the member has heard me say often, that we are going to continue to monitor. We are going to continue to pay attention. Government doesn’t control all of the levers when it comes to the real estate market. As we know, interest rates, growth in the economy, etc., have a lot to do with that as well. That makes it even more important for us to be monitoring it very closely.

T. Redies: With all due respect to the minister, I wasn’t asking her about her philosophical viewpoints with respect to housing and the housing market. What I was asking is if there is a significant and continued decline in housing sales in the province, which is what is happening — a 40 percent drop even from the 2018 numbers, which were about 40 percent down as well — is that going to impact her revenues for property tax?

Last year we saw them over forecast property revenues by $400 million, based on the housing sales that happened. This year, housing sales are down 40 percent. The minister, in view of this market…. It’s very interesting to me that her ministry has forecast $1.9 billion in property transfer tax revenues for the next three years. Meanwhile, we have a declining market.

So again, my question is: are they not anticipating a significant decline in forecasted property tax revenues just as happened last year, based on where the market is as of today, April 2019?

Hon. C. James: I think I mentioned this, but I’ll mention it again for the member. We did in fact drop the property transfer tax assumption. That was dropped in ’18-19, down $325 million. That’s continued in the budget. That drop is continued. We have not anticipated to see a rise, even though the Economic Forecast Council was actually projecting that you would start seeing that climb back up again. We have not projected that. We, in fact, have flatlined the amount coming in. I think that is important to note.

Again, these are things that get monitored. They get adjusted as you come into the quarterly reports. We will continue to monitor where things are going and where things are headed, and if adjustments need to be made, they get made in the first quarterly report. But, in fact, those pieces are built in and, as I said, prudent compared to the Economic Forecast Council, which projected you would actually see an increase.

S. Bond: Well, we’re looking at and expressing concern about the revenue forecast side, so let’s talk a little bit about the spending forecast. This government has a clear path, and it is going straight up when it comes to spending.

[5:55 p.m.]

When the previous government was…. Its last spending plan, when we look at $48.7 billion in 2016-2017…. That was our last year in government. It’s moving up to $58.2 billion in fiscal 2019-20. That is an increase of $9½ billion, almost 20 percent. And as we walked through the earlier stages of estimates, we have pointed out that this is a government that spent an additional $2 billion in expenditures in 2018 and 2019 alone. That is far above the rate of inflation.

We’ve heard a lot, in our conversations and consultations, about the concerns that people have about the spending rates of this government. Can the minister explain to us how she and her government believe that that pace of spending growth, especially with some of the revenue discussions we’ve had…? How on earth does the minister believe that that spending rate is sustainable?

[6:00 p.m.]

Hon. C. James: I think it’s important to take a look at annual growth over the fiscal plan. The member can find this in the budget as well, but average growth is 3.4 percent over the three-year plan. Average revenue growth with the three-year plan is 3.3 percent. So the budget, in fact, is tracking the economy, if you take a look at spending as a percentage of nominal GDP. It, again, has remained consistent over the last number of years. It is expected to be 18.9 percent in ’19-20; 18.5 in ’20-21; and in ’21-22, 18.4.

Just as an example, the previous government, in ’16-17, had an annual growth spending as percentage of nominal GDP of 18.5. So again, that’s remained constant and pretty consistent across the board.

S. Bond: Well, it doesn’t stop there, because in fact, when you look at program spending, it’s going to rise another $1.2 billion in ’20-21 and $2.2 billion following that. In total, that is $13.4 billion since this government will have taken office. That is an increase of almost 30 percent in spending.

We should remember that spending has been growing and is expected to grow at a compounded annual growth rate of almost 5 percent. That is well above the rate of inflation. So if provincial growth rates are lower than what is forecast, what will the minister do in terms of cutting back spending, or will she contemplate running a deficit?

Hon. C. James: I think we had the conversation at the beginning of estimates, but I’ll repeat it again.

Each year as government — as Finance Minister, but each year as government — we take a look at the growth projections, we take a look at the economic assumptions, and we take a look at the good work that’s done by staff when it comes to Treasury Board, when it comes to the analysis that is needed. We take a look at our priorities as government and the public’s priorities, and we make a determination.

We make a determination around what programs and supports are in place, what new initiatives may be looked at, and what is fiscally possible within the province. I think, as I’ve talked about and as the members have seen in the three budgets that I have tabled, we balance off the importance of economic growth, the importance of prudence in our budget.

Again, let’s remember that we have more prudence built into this budget in this particular year, for example, than has happened in the history of British Columbia. We continue to have prudence built into the upcoming years. And we make those decisions as they need to be made. As the member knows, I’ve balanced the budget, and that is the expectation.

S. Bond: Thank you. We’re going to respectfully agree to disagree. There are many British Columbians who today are very concerned about the spending patterns of this government. Frankly, we’ve seen this movie before. So I think that anyone who simply reiterates the fact that “we’re going to be prudent….” We are looking at a spending growth rate of almost 5 percent. That is well above the rate of inflation. That is naturally something that we’re concerned about, and I know British Columbians are as well.

[6:05 p.m.]

Let’s ask the minister this, then. We’ve heard about the prudence, and in fact, we are concerned about spending, about the projections on the revenue side. We’re concerned about the global economy.

Let’s ask the minister this. What kind of flexibility has she built into her plan? Set aside the prudence answer. If there is poor economic performance in British Columbia, then, as anticipated…? We’re seeing all kinds of signs. Investors are looking at other places. People are contemplating where they’re going to do business other than in British Columbia. What plan does this minister have in place? What kind of flexibility is she looking at that would actually…? If there is a reduction in revenue and a concern about the economic performance of British Columbia, what kind of flexibility has she built into her plan?

Hon. C. James: I want to start, I guess, with the important recognition around making sure…. I know the member said she doesn’t want to hear about prudence. But it is a strong tool you have to build into a budget, which is prudence. In fact, that is built in. We do believe it’s important to make sure that those supports and protections are in place, and that has been recognized. That has been recognized by our balanced budget that comes out and has been verified through public accounts. That is recognized by the rating agencies, who all talk about prudence in the budget.

This isn’t our government saying this. This is outside groups — organizations, agencies and economic forecast councils — who recognize that. I think it is important to make sure that those pieces are built into the budget. But I am also optimistic about British Columbia’s future. I am also optimistic about the opportunities to continue to see the kind of strong growth that we have in British Columbia.

I recognize that it doesn’t fit the member’s views around the budget in British Columbia and the decisions that we are making as a government around that. But in fact, when you take a look at the fact that British Columbia continues to lead when it comes to the lowest unemployment, 20 months in a row; when you look at the GDP growth and the strengths of our economy; when you continue to look at the debt-to-GDP ratios; we continue, as an economy and as a province, to see strength. But we have some challenges. We have challenges that needed to be addressed.

The member mentioned that she had spoken with a number of British Columbians who were concerned about spending. Well, I can tell the member that there are a number of British Columbians who have had enough of being ignored and their issues being ignored, which, in fact, causes challenges when it comes to strong economic growth. The housing crisis is the example of that, and child care as well. The fact that we have seen progress when it comes to supporting families with the drop in child care fees makes a huge difference to not only our economy, but, in fact, to the families who have been ignored for all those years.

[6:10 p.m.]

How do we deal with…? How will I, as Finance Minister, and we as a government, deal with a slowdown in the economy? We deal with it as you do each year when it comes to the budget. You take a look at the economic indicators. You take a look at the growth. You take a look at what spending room there is. You take a look at your priorities, and you make the tough decisions.

That’s exactly the kind of process that has occurred. We were left with a lot of tough decisions that had to be made, and we’ve had to make those as well. We will continue to look at how you provide a budget that is both balanced in its approach and balanced economically.

T. Redies: To the minister: the $13½ billion of spending has not been made possible just because of the economy. It has been made possible because this minister and this government have decided to tax British Columbians to the tune of about $11 billion or $12 billion in new taxes. That’s what’s enabling this. The fact that the minister doesn’t even talk about that, that this is actually her spending on the backs of hard-working taxpayers in this province, really astounds me.

I’m now going to move to another area of concern for us — again, as to whether or not it is sustainable. That’s with respect to taxpayer-supported debt. Taxpayer-supported debt is rising from about $3.6 billion under the last year of the previous government to $6.9 billion by the end of this plan period, which is a growth of almost 100 percent or a CAGR, a compound annual growth rate, of 13.56 percent. Does the minister really believe that growing the taxpayer-supported capital spending by 13.6 percent a year is sustainable?

Hon. C. James: Yes, I do believe that, in fact, our taxpayer-supported debt to GDP is affordable. As the member knows, it was estimated to be 15.5 in Budget 2018, and the year-end estimate on March 31, 2019, is 14.9 — so, in fact, more affordable.

[6:15 p.m.]

I think that has been acknowledged and recognized by the rating agencies when they look at debt-to-affordability — again, one of the lowest taxpayer-supported debt-to-GDP ratios across the country.

T. Redies: We’ll talk about debt-to-revenue and debt-to-GDP in a minute or so. Hopefully we have time.

The fact is that under this government, total debt is going up from about $65.2 billion in 2017 to $82.4 billion by the end of the plan period — again, about a 5 percent CAGR a year. To put that into perspective, essentially, the government is increasing provincial debt by $403 million per month over the plan period.

Again, Minister, honestly, do you really believe that increasing the debt load that British Columbians will be expected to pay back by that significant amount of growth is truly a prudent and a sustainable thing to do?

Hon. C. James: I think what the member has done is included the total debt, so included self-supporting debt. Let’s remember that’s considered self-supporting, not taxpayer-supported debt.

Taxpayer-supported debt, in fact, goes up by $10 billion over the three years, which we believe, yes, is manageable; yes, is recognized by the rating agencies; and yes, in fact, helps continue to build the strong economy that we see in British Columbia, whether we’re talking about roads and bridges, hospitals or schools. This is critical capital building to be able to support the kind of economic growth we’re seeing and the kind of work that needs to be done in communities.

T. Redies: Just so the minister is clear, I knew exactly what I was speaking about, with respect to the total debt. Taxpayer-supported debt is going up by 5.4 percent, actually. It’s a faster rate than the total debt. But anyhow, there you go.

Minister, by the end of the plan period, the debt-to-revenue — which, of course, is a ratio that is looked upon by credit rating agencies as a very important ratio — is going to rise to almost 90 percent, which is about the time when the credit rating agencies start to get a bit twitchy.

We’ve also been talking, over the last couple of hours, about the significant risks to the plan — whether it’s the housing market dropping by perhaps another 40 percent, year over year; the forestry industry being in trouble; or some of our mining industries having challenges this year. That debt-to-revenue could spike suddenly because government revenues fall due to recession, etc.

[6:20 p.m.]

I guess my question is — again, I probably know the answer: is it really prudent to drive the debt-to-revenue ratios so close to where the credit rating agencies get a bit concerned, and not build a bit more prudence into the whole debt plan?

Hon. C. James: Yes, as the member had said, she will get the same response, which is yes, I do believe that we are continuing to be prudent and continuing to be affordable when it comes to building capital. Again, the largest percentage is transportation, and I’ve certainly heard the members on the other side, over the last number of months and now almost two years, talk about the importance of many of those projects that we’re bringing forward as capital bills. I’ve heard many members talk about the importance of the school projects that we’re building and the hospital projects that we’re building.

These are important infrastructure pieces for keeping both goods and services moving, for providing support for a growing economy and providing support for communities. So yes, we do believe that these continue to be important pieces to do.

With that, I move that the committee rise, report progress and ask leave to sit again.

Motion approved.

The committee rose at 6:22 p.m.

The House resumed; Mr. Speaker in the chair.

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

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

Committee of Supply (Section C), having reported resolution and progress, was granted leave to sit again.

Hon. M. Farnworth moved adjournment of the House.

Motion approved.

Mr. Speaker: This House stands adjourned until 10 a.m. tomorrow morning.

The House adjourned at 6:24 p.m.