1977 Legislative Session: 2nd Session, 31st Parliament

HANSARD

The following electronic version is for informational purposes only.

The printed version remains the official version.

Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

WEDNESDAY, FEBRUARY 16, 1977

Afternoon Sitting

[ Page

985 ]

CONTENTS

Routine proceedings

Oral questions

Management of BCR. Mr. Barber — 985

Burrard Inlet ferry bicycle accommodation. Mr. Gibson — 987

Arsenic content in chickens. Mr. Wallace — 987

Committee of Supply: Ministry of Finance estimates.

On vote 2.

Hon. Mr. Wolfe — 988

Mr. Stupich — 991

Mr. Gibson — 995

Hon. Mr. Wolfe — 1000

Mr. Wallace — 1005

Hon. Mr. Wolfe — 1007

Mr. D'Arcy — 1011

Hon. Mr. Wolfe — 1015

Mr. Barrett — 1016

Hon. Mr. Wolfe — 1019

WEDNESDAY, FEBRUARY 16, 1977

The House met at 2 p.m.

Prayers.

MR. G.H. KERSTER (Coquitlam): In the House today is a group

of parent-teacher council members from School District 43, with their

president, Mrs. Ona Mae Roy, several teachers and three school trustees

— board chairman Gwen Schute and trustees Marg Smith and Bev Le

Francois — along with a former Coquitlam alderman, Jack Gilmour. I

would ask the House to give this group a warm welcome.

This is not a speech. It is a very brief introduction. Participating

in the Crown Zellerbach-sponsored annual visit to Victoria for students

are 10 students who have been selected to represent the secondary

schools in Coquitlam. Accompanying them are two teachers from Mary Hill

Junior Secondary School, Mr. Philip Wright and Mr. Andre la Liberte.

Would the House join me in making them welcome?

HON. P.L. McGEER (Minister of Education): It isn't just

Coquitlam Day in the Legislature. You'll notice many of the members

sporting these very attractive buttons that represent the B.C. Home and

School Federation. The executive is here today as are many delegates

from different ridings in British Columbia. They are — here for

parents' day and I'd like the members to bid them welcome.

HON. D.G. COCKE (New Westminster): On behalf of the official

opposition we would also like to extend greetings to the executive and

to the members of the Home and School Association who are visiting us.

They visited with us this morning and we had a very fine talk with

them. I would like particularly to introduce Nancy Puri, president of

New Westminster Home and School Association, and 17 members of the New

Westminster organization. To them all we extend our greetings.

HON. J.J. HEWITT (Minister of Agriculture): In the gallery

today is the constituency secretary for the great riding of

Boundary-Similkameen, Mrs. Crystal Drossos. I would ask the House to

welcome her.

MR. A.B. MACDONALD (Vancouver East): I want to introduce in

the gallery Mr. Soren Kierkegaard, following the glorious victory of

the Social Democratic Party in yesterday's elections in social

democratic Denmark, a land of high productivity, social equality and

individual fulfilment.

MR. C.S. ROGERS (Vancouver South): Mr. Speaker, notwithstanding the remarks of the Minister of Education and the hon. member for New Westminster,

I have the pleasure of introducing five ladies who are here today from

the constituency of Vancouver South — Mrs. Minishka, Mrs. Carr, Mrs.

Lee, Mrs. Berg and Mrs. Greenwell. They're with the parent-teacher

group from Sexsmith Community School, which is in the heart of

Vancouver South. It's a school where 70 per cent of the students do not

students are unbelievably exceptional. I ask the House to make a

special welcome for them.

Oral questions.

MANAGEMENT OF BCR

MR. C. BARBER (Victoria): Mr. Speaker, my question concerns

the frequent claim by this government that they would never dream of

interfering politically in the management of the B.C. Rail.

MR. SPEAKER: Now will you state your question?

MR. BARBER: My question is to the Premier: did the Premier

meet with a Mr. Jerry Neben, engineer for the firm of DeLeuw Cather, in

the summer of 1976 and discuss with him in his office the morale and

administration of B.C. Rail, and, indeed, offer to Mr. Neben a senior

management position in the organization of B.C. Rail?

HON. W.R. BENNETT (Premier): Mr. Speaker, I did have a

meeting with Mr. Neben, who was a consultant to the B.C. Railway. He

was brought to my office to discuss some of the problems of the railway

at a time when we were looking for a new directorate. All of your first

assumptions are correct — I met with him. The last one is not correct —

I didn't offer anyone a position.

MR. BARBER: Mr. Speaker, I understand the Premier to say that he personally did not offer such a position.

Interjections.

MR. BARBER: I want to make sure that I understand the answer, that the Premier personally did not offer the position.

As a supplementary, Mr. Speaker, did the Premier on the same topic

and, indeed, in the same meetings meet with a lawyer by the name of

Charles Maclean? Did he discuss the administration, the operations and

the morale of the B.C. Railway?

HON. MR. BENNETT: Yes, Mr. Speaker. Mr. Neben was introduced to my office through Mr. Maclean.

[ Page 986 ]

MR. BARBER: A further supplementary, Mr. Speaker.

MR. SPEAKER: Proceed.

MR. BARBER: Did you discuss with Mr. Maclean the MEL Paving case, its possible settlement and other details concerning that matter?

HON. MR. BENNETT: Not that I can recall, Mr. Speaker. We

discussed the broad aspects of the railway. The introduction of Mr.

Neben was made as someone who was advising the railway. The reason he

was brought to my office was because of the first-hand knowledge that

he had of a lot of the problems that would have to be, solved by the

present management and by a future board of directors whom we're

interested in appointing to run the railway.

MR. BARBER: A further and final supplementary, Mr. Speaker,

on the same topic to the Minister of Economic Development. Did the

Minister of Economic Development attend these meetings with the

Premier, Mr. Maclean and Mr. Neben? If so, can the minister confirm

that a position in senior management in the B.C. Rail was offered to

Mr. Jerry Neben?

HON. D.M. PHILLIPS (Minister of Economic Development): In answer to the member's question, yes, I met Mr. Neben in the Premier's office. What was your second question?

MR. G.S. WALLACE (Oak Bay): You've got a short attention span, Don.

MR. BARBER: My second question was whether or not the

minister or, I may extend it briefly, anyone acting on his authority

offered a position to Mr. Jerry Neben in the senior management of the

B.C. Rail.

HON. MR. PHILLIPS: Mr. Speaker, in answer to the member's

question, the member knows that during that period of time we were

looking for a board of directors and/or a president, and I had many

meetings with many people.

MR. D. BARRETT (Leader of the Opposition): Would the Premier inform the House as to whom initiated the meetings with Mr. Neben?

HON. MR. BENNETT: Well, just a moment ago I answered that question when I said he was introduced to my office by Mr. Maclean.

MR. BARRETT: Yes, I appreciate the introduction. My

supplementary is: who initiated, who arranged for the meeting? Was it

the minister or was it Mr. Maclean?

HON. MR. BENNETT: Yes, as I said, the meeting was arranged by Mr. Maclean.

MR. BARRETT: A supplementary. You said that you were introduced. The whole thing was arranged by Mr. Maclean. Is that what you're saying?

HON. MR. BENNETT: One more time so that we can make it clear

to the Leader of the Opposition: Mr. Maclean contacted my office some

time after we defeated the last government, and in his concern for the

British Columbia Railway, as he was acting for it, he said that in the

course of his work on a case for the railway he had engaged experts

whom he thought had information that would be helpful to ourselves in

our pursuit of new directors and in selecting new management. He felt

that we should hold discussions with a number of people he suggested,

one of whom was a Mr. Neben. I then said we were interested in

discussing the future of the railway.

As we all know here now, and knew then, the railway has had some

difficult times. Also, this government was already planning the

northern transportation system in which that railway would play a great

part. So I asked Mr. Maclean to bring Mr. Neben, and other names that I

can't recall offhand, to my office in my capacity as the Premier on

behalf of the government of the people of this province to see if we

could do something about getting people to make the railway work. As

such, Mr. Maclean very kindly set up a meeting with Mr. Neben, and he

may have set up meetings with others. All of them were given an

opportunity to give this to the Premier's office, and some of them also

were in consultation with the minister responsible, who was a director.

From all of these discussions, the railway in September was able to

appoint a new independent board of directors, all of whom, I'm sure, we

have great confidence in, who have not only brought some stability to

the railway but have brought some labour harmony and boosted morale

between management and labour. As such, the background of these

discussions initiated by Mr. Maclean with Mr. Neben and others was of

great value to the government in the type of people we look for to act

as directors on the railway.

One of the items we discussed in all the meetings I was at was not

only directors but restructuring the management and whether there would

be a new president at some time. I'm sure these new directors, from

interviews that were held before and interviews that they're holding,

eventually will appoint a new president of the B.C. Railway.

[ Page 987 ]

MR. BARRETT: Mr. Speaker, I want to thank the Premier for a very thorough answer.

Supplementary to that, you mentioned all meetings where you were

present. Did Mr. Maclean at that meeting, or any meeting, discuss with

you the MEL case?

HON. MR. BENNETT: Not that I can recall. I don't remember discussing it with him, but he may have passed his opinion to me.

MR. BARRETT: The Premier has stated to the House that he

cannot recall discussing it with Mr. Maclean. Did he discuss it with

anyone else at that time?

HON. MR. BENNETT: I think at various times I've discussed all

aspects of the railway and our concern for it — the Keen settlement,

KRM, and MEL — in my capacity as Premier, but at no time have I ever

given any direction on what to do with any of those cases, nor have I

involved myself in the settlement of any of those cases, if that is

where your question is leading.

MR. BARRETT: That's not where I'm leading; that's where you're answering.

MR. SPEAKER: Order, please.

MR. BARRETT: On a supplementary, Mr. Speaker, in last year's

budget an item of $12 million was put in for contingencies related to

the BCR. Was that contingency, to the Premier, as a member of the

Treasury Board, to include any possible out-of-court settlement on the

MEL case?

HON. MR. BENNETT: No.

BURRARD INLET

FERRY BICYCLE ACCOMMODATION

MR. G.F. GIBSON (North Vancouver–Capilano): Mr. Speaker, I

have a question for the Minister of Municipal Affairs and Housing. I

was happy to read this morning in Norman Hacking's column of the

arrival in Vancouver of the two new Burrard Inlet ferries, but I was

very startled to see the statement that there is no accommodation for

bicycles. That is not in accordance with my understanding of the

minister's policy — or what many of us have fought for in this House.

I'd like some reassurance from him that bicycles will be permitted to

extend the usefulness of this transportation system.

HON. H.A. CURTIS (Minister of Municipal Affairs and Housing):

Mr. Speaker, I appreciate the member's interest in, and support of, the

service. The ferries did arrive yesterday in Burrard Inlet and we're

very happy to have them there and look forward to an early start of the

service. With respect to bicycles, as I've indicated to the member in

conversations we've had, I am frankly, at this point, fighting the

technicians. This is very much a subway-car type of vessel, and it has

to be seen to fully appreciate that, with automatic doors, with

passengers boarding from one side and leaving from the other with a

rapid turn-around.

I've indicated quite clearly and definitely that I want the people

responsible for the planning of the service to address themselves to

the problems relative to bicycles, and as soon as the service

commences, if not before, I hope that the problem can be solved. But it

is not without some difficulty in view of the rapid-transit nature of

the system.

MR. GIBSON: On a supplementary, Mr. Speaker, I take it from

what the minister said that he definitely wants bicycles on those

ferries. I would ask if he would welcome representations from possible

members of the public who might take bicycles across there to encourage

his technicians on their way.

HON. MR. CURTIS: Mr. Speaker, yes, that would be helpful. I

also expect that in line with the democratic procedure the elected

representative wins the argument in the final analysis.

ARSENIC CONTENT IN CHICKENS

MR. WALLACE: Mr. Speaker, this might be dubbed the "arsenic and old chicken" question.

AN HON. MEMBER: That's terrible!

HON. MR. BENNETT: No wonder you're all alone. (Laughter.)

MR. WALLACE: Well, I wasn't elected to be a comedian anyway.

To serious matters, Mr. Speaker: could I ask the Minister of

Agriculture if, as a result of Mr. McAninch, chairman of the broiler

board, taking two dead chickens to the provincial lab to be tested for

arsenic and the content being 1.3 parts per million, he could confirm

that the inter-agency committee of federal and government officials was

unaware that the federal government had raised the safety level to two

parts per million, and that they then issued a statement or confirmed

the fact that people eating these chickens might be subjecting

themselves to some danger?

HON. MR. HEWITT: Mr. Speaker, I'm sorry, but the discussion

that the hon. member brought up, I wasn't quite sure what his question

was. Will you repeat it?

[ Page 988 ]

MR. WALLACE: The inter-agency committee of federal and

provincial health and agriculture — people was unaware that the federal

government had raised the safe maximum level for arsenic content in

chickens from one part per million to two parts per million. But

statements have appeared in the press, causing some concern to the

public, to the effect that the 1.3 p.p.m. level in chickens, which

Super Valu have proceeded to sell despite the legal hassle, would be a

danger to the health of those consuming these particular chickens.

Did the interprovincial and federal committee not know that the health regulations by the federal government had been changed?

HON. MR. HEWITT: Mr. Speaker, I'll have to take that question

on notice. I don't know whether they were aware of the fact that it had

been raised to two parts per million or whether it was still the one

part per million. From the information I have and the news reporting,

it was one part per million.

MR. WALLACE: A supplementary question: I appreciate the

minister's willingness to research that in detail. But could I ask the

minister if, in the light of this present controversy, he plans to take

any steps to determine whether, in fact, testing and the whole measure

of supervision of imported meat — particularly chickens — is adequate

to protect the public safety, because this particular arsenic scares

people to death and if they eat too much.... (Laughter.)

AN HON. MEMBER: You're getting better, Scotty!

MR. WALLACE: Perhaps I should quit at that point.

HON. MR. HEWITT: Mr. Speaker, the hon. member is quite a

comedian today. I would say that both the Ministry of Health and my

department would be concerned to ensure that chicken that is safe to

consume is the only chicken that is brought into B.C.

Orders of the day.

The House in Committee of Supply; Mr. Schroeder in the chair.

ESTIMATES: MINISTRY OF FINANCE

On vote 2: minister's office, $95,034.

HON. E.M. WOLFE (Minister of Finance): Today we are launching

into the first one-seventh of our time period for the Ministry of

Finance. I thought that since it's not likely there will be very many

questions raised in this period, I might be offered an opportunity to

make a comment or two on a number of significant changes that have been

made in this ministry, largely in the effort to improve financial

recording and control procedures during the past year.

I think the first example of this new policy has been the operation

of our Treasury Board. Mr. Chairman, Treasury Board is the main

government instrument to effectively control the day-to-day approval of

expenditures by government. In the past year Treasury Board has been

meeting on a regular basis and giving careful scrutiny on all requests

for expenditures. Also, I might say that a group of budget analysts is

now being recruited to provide staff and advisory services to Treasury

Board and to report to the board on the managerial efficiency of all

ministries in the delivery of services and the management of programme

analysis of a variety of departments and will also be actively involved

in the development of our annual budget.

Now as a result of amendments to the Public Service Act passed last

spring, a new special branch of Treasury Board known as the Government

Employee Relations Bureau is in operation to keep a closer control on

financial implications of union contracts, to advise on job

classifications for the government service and to control the number of

positions in the service. This new bureau emanated from the Higgins

report in a prior period. The new director of the bureau is Mr. Ted

Stanley.

The new British Columbia quarterly financial report was also stated

as a part of our government's policy to improve government disclosure

and accountability. With this publication, residents of British

Columbia, similar to those in Ontario, receive the most up-to-date

report in all of Canada on their government's finances. This report

also includes quarterly up-to-date information on all of the major

Crown corporations within the responsibility of the provincial

government. I might also say that this document provides an excellent

internal discipline to all of our personnel in terms of our yearly

progress on a quarterly basis.

Also, Mr. Chairman, a cash manager, Mr. Patrick O'Neill, has been

appointed. His sole function in co-ordination with the Crown

corporations is to manage the government's overall cash on a daily

basis so that we can maximize the proper use of our cash flow with the

object of developing the most interest income possible. I would like to

just offer a few examples of what Mr. O'Neill has instituted in the way

of cash management procedures, for instance, a review of banking and

investing procedures, which is still in progress; secondly, he's

installing an effective zero-balance banking for government bank

accounts; thirdly, implementation of a twice-daily deposit

[ Page 989 ]

system. It isn't too long ago that in many cases

within government circles — for instance, government agencies —

depositing on a weekly basis was considered satisfactory. Today we are

moving in the direction of twice-daily automatic depositing. To mention

just one more item, we have established a bond trading account to take

advantage of market fluctuations.

Mr. Chairman, also under the heading of my department are the 51

government agencies which are the responsibility of the Ministry of

Finance. We have taken steps to familiarize all ministries with the

services offered by our government agency offices. Our policy is to

establish the original concept of a government agency system throughout

the province, and I have advised all departments to use the services of

these agencies. We want to encourage every department to make more use

of government agents as an economic measure rather than employing

separate offices for each department at additional expense.

During the year we have brought in additional research and

analytical expertise to co-ordinate activities in cost-sharing and

other federal-provincial matters. Mr. Alan Eastwood, John Robertson,

Doug Hyndman and, more recently, Mike Butler and Larry Pistell, have

been acquisitions within the Finance ministry within the last year or

two. This should improve our ability to provide better research and

forecasting in the province's interest.

For the first time, all government ministries will now be billed

separately for data processing costs and building rental costs. This is

being done so a true cost of functions and programmes will be shown

against all ministries and functions for better control purposes.

During the past year we have been reviewing the activities of the

Purchasing Commission. The former chairman, Mr. Vardy, retired and Mr.

Arthur Charlton was appointed chairman on January 20, 1977. I have

reason to believe that our Purchasing Commission compares very

favourably with those of other provinces in Canada not only in

efficiency in making economical purchases but also in giving preference

to B.C. Suppliers. And I might mention that during the course of the

past year the Purchasing Commission processed some 49,000 purchase

orders for a total value of $109 million.

Due to the expiration on March 31 of this year of the present financial arrangements

with the federal government for shared-cost programmes, together with my finance

staff I have atte Mr. McAninch, chairman of the broiler boardnded some six federal-provincial meetings involving very complicated

and technical negotiations with the federal government. Major changes were proposed

for the taxation powers of their respective governments that involved vast sums

of money. Negotiations with the federal Minister of Finance (Hon. Mr. Macdonald)

are still going on to arrive at new terms for financing the established shared-cost

programmes.

In this connection, I would like to indicate my appreciation for the

tremendous job being done by my deputy, Mr. Bryson, and my associate

deputy minister, Hugh Ferguson, who were required to develop a great

deal of material in support of these meetings and negotiations.

One outstanding item which is most important — still unresolved as a

result of the recent bill introduced by the federal government — is, of

course, the finalization of the medical plan in terms of the transfer

of the tax points to the provinces. We are still unsatisfied with the

prospect that is proposed — that the medical plan payments would be cut

off on a cash basis, in that way not recognizing any outstanding

medical bills unsubmitted for services already rendered prior to March

MR. WALLACE: As of April 1?

HON. MR. WOLFE: As of April 1. We are advocating to the

federal government, and have done so repeatedly since our last meeting

in February, that this cutoff by the federal government should take

into account the outstanding and unpaid bills at that point.

And finally a word about our control and audit department. I think

we have made considerable strides in streamlining the flow of

information for more accurate budgeting and in the direction of more

up-to-date financial reporting. I know this has placed considerable

demand on the acting comptroller-general, Mr. Keith Lightbody, since

this ministry and our government have a tremendous appetite for

financial information. I certainly appreciate the activities of Mr.

Lightbody and his staff for fulfilling this demand.

An example of this improvement is shown in the fact that our current

year's budget for 1976-77 gives every indication of being right on

target. Our current estimates indicate both revenues and expenditures

will be within 1 per cent of original forecast.

These are just a few of the activities of my ministry during this

first year in office, and I can assure the hon. members that I will be

continuing to try to update and improve wherever possible the financial

recording and control procedures of all ministries.

Before taking my seat, Mr. Chairman, I'd like to say just a word or

two about the current debate involving the anti-inflation programme. I

say these words on behalf of the cabinet committee of this government

that has been considering this matter leading up to our signing of an

agreement with Ottawa as of last June and has followed the original

installation of the anti-inflation programme in October of 1975 until

its present moment. I want to

[ Page 990 ]

say at the outset that this government disagrees

with the proposition that this programme should be decontrolled or

dismantled at an early date.

British Columbia's position on the timing of decontrol this is,

removing the wage and price controls reflects both the requirements of

the provincial economy and the view of the current economic management

needs of Canada. Inflation has hurt the provincial economy by weakening

the competitive position of the export sector and by eroding the

purchasing power of British Columbia consumers.

The importance of healthy export industries arises from the very

substantial amount of income and employment generated by firms selling

predominantly in foreign markets. Because British Columbia is more

heavily oriented to export markets than Canada as a whole, rapidly

inflating costs and prices will tend to result in a proportionately

greater loss of employment and income in this province.

As a general matter, this province does not support the kind of

massive intervention in the marketplace represented by the

anti-inflation programme. However, at the time controls were

introduced, there was a clear need for strong actions to bring

inflation under control and to break the pervasive expectation among

Canadians that double-digit inflation was here to stay. The province

has, therefore, supported the anti-inflation programme as a desirable

interim measure that, if taken in conjunction with appropriately

restrictive fiscal measures, would play a useful role in the fight

against inflation.

The debate has now opened on the subject of decontrol — when and

how. It is becoming increasingly apparent that the federal government

will terminate the controls programme this year, perhaps even as early

as July. Although most provinces do not support earlier withdrawal from

controls, the government of Ontario has made clear their support for

such a move and made available a paper arguing this position.

Mr. Chairman, it is British Columbia's view, however, that the

control programme should be retained until the end of 1978. The

province's support for the programme in the first place was based on

the need for controls to combat double-digit inflation and its impact

on our export economy. If prices and wages continue escalating during

such a period, there will be a shortfall of demand — particularly for

labour — and the result could be substantial unemployment.

By holding down wage and price gains, labour services and goods will

be less costly to purchase and fewer jobs will be lost. In addition,

British Columbia feels very strongly that the federal government has

not yet shown adequate restraint in its own spending. Federal spending

in the first nine months of 1976, for example was up 14 per cent over

the same period a year earlier. This is hardly restraint. In fact, as

the Economic Council of Canada has pointed out:

"It is clear that the federal government has been the

principal benefactor from the rising inflation of recent years, through

unanticipated transfers of real income from businesses and individuals.

It has gained, in real terms, through the built-in progressivity of

personal income taxes, through the cost and inventory accounting

required in the corporate tax regulations, and through its situation as

a net debtor."

Rather than practise restraint or, better yet, reduce taxes to

individuals and corporations, the federal government has simply

increased its own spending. Indeed, it has increased spending so fast

that when its inflated revenues dropped off to more normal levels in

1975 and 1976 it has been necessary to borrow to finance huge spending

deficits and this has put severe strains on financial markets in Canada.

British Columbia's position is that controls were an acceptable way

of easing the inflationary pressures. There is still some distance to

go before the restraint is adequately stringent. The controls, now that

they are on, should be maintained until price and wage expectations

have moderated to the level set out at the start of the guideline

programme. Should controls be lifted now, there is little doubt that a

period of catch-up wage demands would quickly follow. In British

Columbia, this is a crucial year for wage negotiations and a sharp wage

escalation at this time could have extremely serious consequences for

unemployment. The province's major industries are already experiencing

serious cost-competitive difficulties and are faced with the

possibility of further erosion of export market shares.

In short, British Columbia will continue to urge the federal

government to maintain controls and publicly commit itself to continue

the programme through 1978. These measures are necessary for a

successful transition to lower rates of inflation and ultimately

increased economic activity in the private sector.

Mr. Chairman, our government says that this intended action of the

federal government is premature. It is too soon a turnaround from their

indications of some two months ago. We think that they're just halfway

through a programme that was well designed in the original instance and

has been receiving some modest degree of success. It would be fallacy

to discontinue at this stage.

Now I always like to be of service, Mr. Chairman, to my customers. I

notice that the opposition in the last two or three days have been

running out of adjectives to describe the minister whose estimates are

under review. So I intend to offer a list of superlatives and other

descriptions to the opposition leaders — for instance, things to call

the minister:

[ Page 991 ]

incompetent, irresponsible...

MR. CHAIRMAN: Hon. minister, is this under vote 2?

HON. MR. WOLFE: Yes. ...confused, weak, unavailable, lazy and

sick, sick, sick. So I'll offer these to the opposition. You don't need

to refer to the term, just to 1, 2, 3, 4, 5.... So with your

permission, Mr. Chairman, I'll offer this list of superlatives.

MR. D.D. STUPICH (Nanaimo): Mr. Chairman, I am not sure

whether the minister was trying to prove that the last one in

particular was particularly appropriate at this time or not. However,

while his opening remarks were interesting and were important, I cannot

help but think that the members of the Home and School Association, who

are in the gallery today — and I would like to join with the other

members in welcoming them, particularly the delegation from my own

constituency — must have found it pretty heady stuff coming here in the

expectation, I would think, that they could have been getting in on

something to do with education.

I will associate this with vote 2, Mr. Chairman. In particular, in

the three years that the NDP were in government we made a point of

having the Minister of Education's estimates under discussion on Home

and School Day. I think it's unfortunate from the point of view of

these people, who are paying a lot more to travel to Victoria now than

they used to when the NDP was in power, that the Minister of Education

(Hon. Mr. McGeer) could spare them only 20 minutes.

MR. COCKE: Where is he? He's not here.

MR. STUPICH: Well, he was late arriving and early leaving,

but yesterday evening he had time to travel to Nanaimo to address a

Social Credit Party membership meeting. He has no time for the people

who came here to hear something about home and school and education

matters, but he has time to travel to Nanaimo. He has no time to be

here today when we might talk, for example, about the MeMath report,

and property taxation, and the costs of education, and the fact that

B.C. — according to the McMath report — has the most antiquated

education financing system in the whole of Canada. That is certainly in

line with vote 2, isn't it, Mr. Chairman — education financing,

property taxation?

MR. CHAIRMAN: I think that perhaps we ought to clarify a matter immediately, before we get involved.

MR. STUPICH: Is this on my time or yours?

MR. CHAIRMAN: We will hold the time for you, sir.

Perhaps we should clarify immediately the question of relevance

under these various votes. It cannot be construed that under the

Minister of Finance's vote we can discuss matters which would more

properly be discussed under the various ministries, even though finance

is involved. I think the hon. member who presently has the floor

appreciates this more than anyone else, having been the Finance

minister previously.

This is just a little caution, and perhaps I'll try to keep you on track.

MR. STUPICH: I thank you for your assistance, Mr. Chairman. I

would just say that there was a property taxation bill introduced in

the House this session by the Minister of Finance that has been passed.

I think we got as close to a promise as we could possibly get, and as

they can possibly give at this time, that there will be a further bill.

The understanding, I believe, was that that, too, would be coming from

the Minister of Finance. It hasn't come yet, so I think it is proper to

discuss at this time the cost of education, the concern of our citizens

about the financing of education, and the fact that the MeMath report

was handed to the government in August and was not made public until

five minutes after the official opposition spokesman on the budget

stood up to speak in the budget debate. Now that is a coincidence, I am

sure, that that was the time it should be made public.

Nevertheless, Mr. Chairman, I don't really want to get into the

details of that. There will be legislation, and I am prepared to wait

for that, but I do think that we could have had something more from an

education point of view in this particular part of our discussion.

If I could, I will move to the budget and you can help me make sure

that we do keep in line, Mr. Chairman. I don't have a copy of the

minister's prepared notes to go on, but I know he made some reference

to quarterly statements, and he certainl y did in the budget speech. If I may quote from the budget speech: "We have brought government spending under control and provided a new level of accountability with the introduction of quarterly financial statements."

Well, Mr. Chairman, they have. We did have the first quarterly

statement that was dated June 30 — that's three months, the first

quarter. It was released on August 6 — a period of 37 days. I think

that's pretty good for the first quarterly statement — the first one

ever. I notice — I think it is either in the budget speech or somewhere

else — something to the effect that Ontario is the only other province

that has this kind of programme of public information. To have produced

the very first one in a period of 37

[ Page 992 ]

days I think is commendable.

The second one, Mr. Chairman, dated September 30, was actually

printed and made public so it had to be completed I am not sure just

how long before that. From my personal experience with the difficulties

under which the Queen's Printer operates, I think it would have to have

been prepared several days before that. But, Mr. Chairman, that report

was made public on October 11 — just 11 full days, including

weekends, after the date of the report. A report that was telling us

what had happened up to September 30 was printed and made public on

October 11. Not only that, but we were told in advance that it was

going to be a good one. So even before the figures were in, it was

apparently known by some legerdemain that it was going to be a good one.

The third one? Well, today is February 16, so we have gone some 47

days already. We have exceeded the 37 by four. How many more days are

we going to go before we get the third quarterly report?

The first report that was offered to us was a pessimistic one, and

an honest one too, I think, in its pessimism. It showed some concerns

about the rate at which revenue was falling below expectations and the

fact that expenditures were a little higher than expectations. That's

all reasonable, all well detailed in here. The forecast for the future

looked as though we were heading into a budget deficit of something

like $130 million to $150 million. I recall the Minister of Finance

warning us at the time that unless there was some marked upturn in the

economy or a drastic cutback on expenditures — a withdrawal of

government services — we were heading for a substantial deficit. He did

not want to go that route, so he was hoping for an upturn in the

economy or was determined to cut back drastically on government

expenditures.

There were some interesting comments that the minister made at the

time. One was to the effect that there had been a growth in revenue of

3.5 per cent in the first quarter. The news release that first came out

said that at that rate there would be 12 to 14 per cent growth in four

quarters. Now that's great mathematics, Mr. Chairman. I notice you

smiling, so I don't think I'll go any further into that. I believe the

minister, or his speech writers, or somebody or other did some

recalculating on that and realized the.... Well, I won't say that liars

sometimes figure. I might be called to order if I do. In any case,

there was certainly some problem with that growth of 3.5 per cent in

three months and multiplying it by four to get 14 per cent.

But there were the other aspects of it. When he admitted that

revenues were falling short of expectations, saying that he was

counting on a spurt in the economy as one of the possibilities.... He

mentioned that as the first one, I believe, in his speech at the time.

Gambling that the economy would recover is something perhaps just a

little bit irresponsible when we're that far into a fiscal period —

gambling that there's going to be recovery to the extent needed to meet

a budget deficit of $130 million, as determined as he seemed to be to

meet it at that time.

I'm quoting from one particular news story here that says: "What is

happening to the economy, however, is not Wolfe's fault. It is a

national problem" and this is the interesting part, Mr. Chairman "and

here in British Columbia it appears to be worse than in some other

parts of the country." That particular columnist was more kindly

towards the government than any of the others I've read, because they

all said that B.C. was doing worse in comparison to all areas of the

country, rather than just some of them. But I went into that material

to some extent when I spoke during the budget debate, and I don't

intend to go further into it now.

The next thing is the second quarterly report, the one, as I say,

where we were told ahead of time and the stage was set. The Premier was

going to deliver this.... We weren't told specifically that it would be

the second quarterly report, but simply that there would be a

state-of-the-province message. By coincidence, I suppose, it was

Thanksgiving Day, as was the Prime Minister's speech a year ago — a

significant day for this kind of thing.

However, as I pointed out, Mr. Chairman, we knew in advance that it

was going to be a good report; we were told to expect a good report. It

was prepared some time ahead of October 11. I can't even guess at the

length of time, but to have prepared this kind of material, to have it

printed up and delivered by October 11, I think, is nothing short of

miraculous — not only that, but to have known it was going to be good

and not to have explained why it was so good.

How did this situation turn around so much in the second quarter?

There's no real explanation of that in these figures. There was no

spurt in the economy; there has been no spurt in the B.C. Economy that

would justify that much of a change in our economic forecast. To the

best of my knowledge, there's been one minister in particular — and to

avoid incurring your concern I won't mention him — who boasts about

saving money by not spending it on the handicapped.

Interjection.

MR. STUPICH: No, I wasn't going to mention his name. But he

has boasted about saving money. Even by saving the amount of money that

that particular minister is saving — and he's the only one, to my

knowledge, who has said anything about saving money — with no spurt in

the economy, how is it that we turned, in a short period of three

months, from a projected deficit of $130 million to a

[ Page 993 ]

break-even position?

There were some other interesting things, not so much in the

financial report, but in the Premier's remarks. One was the fact that

one department was going to spend an extra $120 million. The government

has authorized the Department of Highways to embark on a highway

programme of an additional $120 million, which will create jobs this

winter. Now of course, we didn't really have a winter down here in

Victoria, so I suppose they're out on that one. Not only was there no

spurt in the economy, no talked-about cutback in expenditures, but he's

talking about an additional expenditure of $120 million and still going

to break even. If the Minister of Finance can give us any understanding

or explanation as to how things turned around in that second three

months, I'm sure the House would be very interested in hearing about it.

In the budget speech we have references to the fact that, on the

basis of what they know so far this time, the year as a whole would

likely break even or there might even be a modest surplus, which is in

line with the six-month report. But apparently, Mr. Chairman, the

nine-month report — the third quarterly report — is not yet available,

or else it's being held back deliberately until we are finished with

the estimates of the Minister of Finance. Since we're spending so much

longer in getting this one ready, I'm led to believe, for lack of

evidence to the contrary, that the Minister of Finance is deliberately

withholding the third quarterly report.

That leaves me to ask why. What is there in the budget speech that

is not in line with the third quarterly report that he is holding back?

Certainly, Mr. Chairman, if the material in the budget speech is in

line with the material in the third quarterly report, if one can

logically follow from the third quarterly report to the budget speech

the projections of revenue and expenditures for the fiscal year we're

now in and the one ahead, well then, all the more reason to have that

third quarterly report made public. We're already beyond the period

that it took to produce the very first one as much beyond the period

that it took to produce the second one.

I'll ask the Minister of Finance if he has any other answer other

than the one that I've given him. He suggested earlier he would give me

some questions. Well, I'm giving him one now. Does he have any answer

other than the one I've suggested — and that is that it's being held

back deliberately because it will be politically and economically

embarrassing for this government to release the third quarterly report?

Interjection.

MR. STUPICH: I don't read these rule books. There are all

kinds of experts around here, and, of course, you're one as well. There

may be a rule in there that does allow me to move a motion postponing

the vote, but I'm not aware of it. The member who raised it may spend

the next few minutes looking it up — I think I have something like 13

minutes left of my time — and in the meantime, perhaps, he can move

that kind of a vote.

I'd like to comment just a little bit about the remarks in the

budget about deficit financing. This government does not subscribe to

deficit financing to underwrite its current operations. Of course there

is no definition of "current operations." "We are at present paying

interest on sizeable borrowings required to compensate for ambitious

spending programmes of the past." It's all very interesting. Yes, I'm

getting all kinds of suggestions from around the House as to what some

of these ambitious borrowing programmes were of the past.

I'd like to know, Mr. Chairman, for example — and I believe this

would have to come under the Minister of Finance because it would have

to be approved by him — if there have been any borrowings to date by

one of the new corporations, B.C. Ferries Corporation.

The Public Buildings Corporation. I know the Minister of Finance has

signed an order-in-council approving the borrowing of $25 million, but

I believe the order-in-council referred to following a previous

authorization. I wonder what borrowing has been approved to date on

behalf of the public Buildings Corporation. These are all new things

that are coming in — not direct debt but new borrowings.

We've taken some of these items out of public accounts to make it

easier to come up with a balanced statement, although I still question

how it can possibly be done. The budget for 1976 had, for example,

construction of public buildings, $40 million for capital alone in

construction of public buildings. There was $20 million for the B.C.

Ferries, and there was another fund available for that purpose.

Straight out of public accounts — $60 million in the estimates for

1976. Nothing in this year. Well, that makes it $60 million easier,

leaving aside inflation, to balance the budget.

Deficit financing. Well, there is a reference in the budget speech.

Although we talk on page 6 about not being in favour of deficit

financing, on pages 30 and 31 we talk about the extent to which the

province is quite prepared to borrow. There is no harm in that. The

only harm in it is when the government pretends that it doesn't really

happen. On page 31 in particular we notice that the total contingent

liability — money for which we as citizens of the province of British

Columbia are responsible — is in excess of $5 billion — almost

$5,300,000,000. They give an estimate of population as well: 2,406,000

for 1976. At that rate it works out to something in excess of $2,200

per capita. Well, there is nothing wrong with that, Mr. Chairman. But

for the Minister of Finance to say that

[ Page

994 ]

we don't believe in borrowing for current

operations and then to say we're going to take out of public accounts

the B.C. Buildings Corporation, we're going to take out of public

accounts B.C. Ferries, we're going to take out of public accounts

Hydro, which has been out all along, and then still to pretend that he

doesn't believe in deficit financing is — and I used the words earlier

— nothing short of economic legerdemain. There are some

definitions of

that you wouldn't accept as parliamentary language and some that you

would, and I'll not worry about that for a moment.

B.C. Ferries is one example we went through to some extent last

year, and there are questions on the order paper to try to get some

more information about that. I'll be very interested in seeing just

what kind of answers we get to that. I do recall that the previous

administration paid a substantial amount of the capital cost of B.C.

Ferries, only to have the incoming administration sell those ferries,

bring the money into current revenue, I presume, and then finance the

ferries over a 20-year period.

Mr. Chairman, speaking about debt and the reference in the budget

speech to the substantial amounts of money required to finance the

expenditures of the past, order-in-council 1221, April 9, 1976,

approved the borrowing by treasury bills of $250 million to be paid

back, incidentally, by March 31, 1977. Fifty million dollars of that

was refinanced by a subsequent order-in-council. I'm interested in

knowing just how much was actually borrowed of the $250 million that

was approved by order-in-council 1221, April 9, 1976. What was the

total amount actually borrowed by selling those treasury bills? How

much is still outstanding, either today or at the nearest date

available?

I asked earlier about the borrowings of B.C. Ferries Corporation and the British Columbia Buildings Corporation.

I'd like to get into another subject, Mr. Chairman, in the time

remaining. That is B.C. Savings and Trust. You may recall, Mr.

Chairman, that I raised this question last year. I can quote from Hansard

on the matter, and at the time I raised it the Minister of Finance said

that he had dealt with it previously. In any case, I asked about the

disposition of the B.C. Savings and Trust report. The minister replied

at the time, April 27, 1976: "The task force report is tremendously

large, about two feet deep." He goes on to say: "I have not read the

report. As recently as last week, I read one

section of it. I cannot

indicate at this stage whether, in fact, we will be prepared to file

the report because I don't know what's contained within the report."

Mr. Chairman, I wonder how far the minister has proceeded with his

reading of this report. I asked that question last year and this was

the answer. I'm asking again: has he proceeded any further with his

reading of the report? Last year I asked him whether he had made a copy

of this report available to his staff, to read it and review it for

him. To the best of my recollection, I received no answer to that

question. I ask again: has he passed this report on to any members of

his staff for them to have an opportunity to read and review the report

and to make recommendations in the B.C. Savings and Trust report?

There is a quotation, to which I would like to refer, in the Vancouver Sun ,

April 21, 1976, by George Froelich, the business editor. He talked

about this same report and he seemed to have some knowledge of it. He

seemed to think that it was, or could be, a very useful report. He

points out that it was handed to the Finance minister, Evan Wolfe, on

January 28, and that it was a very high-powered, very qualified

committee that studied and then produced that report. He pointed out

that although the government of British Columbia up to this time — that

is April 21, 1976 — had apparently evidenced little or no interest in

the report, other governments were interested. He goes on to say, and

this has not been checked to the best of my knowledge.... I would like

to ask the Minister of Finance whether indeed he was approached by the

Commonwealth of Massachusetts and asked for some material from this

report, whether he has been approached by governments of any other

Canadian province or anywhere else, asking for copies, or for

materials, or recommendations from this report. Apparently the report

was very highly thought of in many circles. I wonder whether any other

jurisdictions have asked for copies of that report. I wonder whether

the Minister of Finance has made copies of that report available to

anyone outside the province of British Columbia.

Mr. Chairman, I listened with interest, as the minister was speaking

earlier today, to some of the changes that have been made in the

Ministry of Finance. I wonder whether any of the changes that he

detailed in his opening remarks that have been made in his department

arose out of his reading, or out of his department's reading, of the

B.C. Savings and Trust report. In other words, Mr. Chairman, is any use

being made of the report in British Columbia, or has the report been

made available to anyone else anywhere for their use or their

edification?

Mr. Chairman, I'd like to get into a few questions of revenue. The

Minister of Finance did say that we're likely going to have a modest

surplus. He said that in the budget for the year 1976-77, and the

budget for 1977-78 projects a similar situation — break-even or a

modest surplus. But when I look at the figures, I wonder what the

explanations are for the very low increases in some items in

particular. Sales tax, for example, shows an increase of only 4 per

cent. Mr. Chairman, I wonder how that can be if

[ Page 995 ]

we're expecting real growth in the economy. In the

budget speech, the minister does indicate that he is expecting some

real growth — not growth in terms of current dollars but actual real

growth — and a 4 per cent increase would not even allow us to keep up

with the inflationary rate, let alone anything else.

I did understand from one of the reporters that in answer to this

question he replied that the estimate for last year was particularly

high. That makes me wonder again if some expenditures are up. We do

know that special warrants to the extent of $82.5 million were

approved, so we do know that some expenditures are over budget while

others are under. We're concerned, from reading the first quarterly

report and even the second one, that some revenue items are down. If

sales tax is down and if the actual figures for March 31, 1977,

will be substantially lower than $710 million, then I think we need

some detail or we would certainly like to have some details as to how

they can hope to balance the budget for the current fiscal period if

revenue is down significantly. And if revenue is not down significantly

in that particular area, then how is it that we're projecting a growth

of only 4 per cent? Of course, the obvious answer there is that the

minister is underestimating revenue from social service tax.

Gasoline tax is a peculiar one too. The estimate for this year is

down below what it was last year. We've heard nothing about a change in

gasoline tax rates. We read in the budget that vehicular traffic is

increasing in the province. There are more cars driving more miles and

there is no change in the gasoline tax rate and yet we expect to

collect less money. I wonder if the minister has any explanation for

that.

Motor-vehicle licence fees and permits are down as well. Logging is down 41 per cent.

And yet, Mr. Chairman, we read that the economy is supposed to be

picking up. We read that in the budget; we don't read that in some

other circles. But certainly in the budget we're led to believe the

economy in B.C. Is improving slightly. We don't read that when we look

at the increase in sales tax, perhaps the best barometer of economic

activity in the province. But nevertheless we read in the budget that

we should be cautiously optimistic. Yet we look at the largest industry

in the province and recognize that the projected revenue from that is

going to be down 41 per cent. Of course, we're not surprised that

mineral revenue is down. There are other items of revenue that are very

questionable, but the one that really hits you in the eye so much is

the sales tax. And I think that's the one that the minister should give

us some information about first.

Mr. Chairman, we've heard a great deal about the financial bungling

of the NDP. We've seen different columnists and different economists

take us to task. Here's one headline, for example, saying that as bad

as the NDP were, they were certainly nowhere near as bad as the current

Social Credit administration for the economy of the province of British

Columbia. Of course, that's endorsed by those who say that the economy

of Canada is showing some recovery everywhere except in the province of

British Columbia.

Mr. Chairman, I think I've given him enough questions to start on

for the time being. I'm not sure just how he wants to deal with the

answers, but that's my opening shot anyway.

MR. GIBSON: Mr. Chairman, I'd gladly defer to the minister if he wants to answer the questions of the member for Nanaimo at this point.

HON. MR. WOLFE: Go ahead.

MR. GIBSON: The minister doesn't want to talk at this point, apparently.

I think I can answer the member for Nanaimo's question as to why the

sales tax increase projected for the coming year is so low at only 4

per cent. And I agree with him that it is very low. I think that's very

simple, Mr. Member; I think that's because they overestimated last

year. I don't think they meant it as an overestimate, but it turned out

that way because of the way they managed the economy.

The sales tax, naturally, is something that depends very directly

upon consumer spending. So what did this government do last year? They

took out of the income stream an extra $200 million for ICBC right

away. They raised the sales tax by 2 per cent unexpectedly and took out

another $200 million. Then they hit the tourist trade over the head

with the ferry rate increase. All of this has been estimated as a knock

on the head to consumer spending of something like $500 million. Seven

per cent of $500 million is $35 million, and the shortfall in the sales

tax is probably going to be something like that, Mr. Member.

The projection 1 made at the time of the budget, if the usual trends

continued, was that it was going to be about $685 million revenue.

Maybe the minister would be kind enough to give us his projection,

because, as the member for Nanaimo said, we really should have those

projections, Mr. Chairman, as we're dealing with these estimates. We

should have had them for the budget.

MR. CHAIRMAN: Hon. member, may I just interrupt you long

enough to suggest that technically a discussion on sales tax —

particularly its percentage — would not be in order under this vote?

But we are allowing a reference to it as long as it doesn't develop

into a full-fledged debate. It is a matter that requires legislation

and is ruled out of order by May.

MR. GIBSON: I appreciate that, Mr. Chairman.

[ Page

996 ]

What I'm talking about is the degree to which the minister and his

administrative machinery have successfully or not forecast the amount

of the sales tax. I'm suggesting that in the budget last year they made

their best efforts to forecast the sales tax revenue for that year, but

they reckoned without the economic bungling of the other side of the

operation. That's what led to the shortfall. And I think that answers

the question of the member for Nanaimo. I'll be glad to hear what the

minister says when he stands up.

HON. MR. WOLFE: That's not what you said a year ago.

MR. GIBSON: Oh, no, no! Mr. Chairman, I wish he wouldn't get

me mad! (Laughter.) You see, a year ago I suggested to that minister

that he had underestimated his revenues.

HON. MR. WOLFE: Yes, you did.

MR. GIBSON: And you know what? They came in, he tells us

today, right on target. But you know why? Because they bungled the

economy so badly. That's right! Had you run the economy correctly, Mr.

Minister, and not done that silly thing with the ICBC and not been

quite as rough with the sales tax and the B.C. Ferries, things would

have looked a lot better. You would have had that extra $100 million

that you should have got. This year — we'll see.

I was glad to hear the minister tell us that he's bringing his

department into the 20th century in terms of the new people he has and

the new systems and so on.

I just want to ask him the question I ask him every year. I want to

ask him: within $10 million, how much money do we have in the bank

today? It would be a real help to me if you could just shout it across

the floor right now.

I don't think the minister knows the answer this year either, Mr.

Chairman. Maybe he has to get his computers a little more in line,

because I think we should know on any given day, within $10 million or

so, how much money we have in the bank, particularly if they're making

deposits twice a day now, he says. We should be able to add that up at

least once a day.

MR. WALLACE: Does he even know which bank?

MR. COCKE: Bank of Commerce.

MR. GIBSON: I was amused to hear the minister's comments on

expenditure by other levels of government when his own expenditures

last year went up 12 per cent. He admitted that, of course, in the

budget speech. You recall the budget speech last year, Mr. Chairman,

when he said that his expenditures were going to go up by, I think he

said, either 5.4 or 5.9 — I forget which it was. Lo and behold, when he

stands up in the budget speech this year, he blandly says: "Well,

expenditures went up by 12.2 per cent." Of course, that's what those of

us across the floor were saying last year, but he wasn't prepared to

admit it at that time.

You know, when you really add in all the proper numbers about the

amounts that were transferred out to the ferry system, the ICBC deficit

and so on — when you compare apples and apples — there was a

considerable year-over-year increase, just as there is this year, Mr.

Chairman. He can't say that there's an expenditure increase of under 6

per cent when he doesn't take into account the fact that he's

transferred out the capital spending in the Department of Public Works,

for example, where we hear that the Buildings Corporation is going to

borrow something like $80 million. That would normally be in the

budget. He's transferred it out; and he's comparing apples and oranges

again. The real increase in expenditure, as was calculated by one of

the members of the press gallery, is something like probably 9 or 10

per cent. You know, we should know that, Mr. Minister. You shouldn't

compare apples and oranges. If you're going to put the Department of

Public Works' capital expenditures in one year and not the next year,

then you should net it out of one year and add it into the other to

make that fair comparison. And you know that that item is not there —

it's not. It's the same thing with the ferry system, Mr. Chairman, and

so on.

Now the minister says he has all these extra people. I wonder if

he's yet in a position — and this is a really positive suggestion to

him — whereby he has a computer model of the British Columbia economy,

as many levels of government do. It's not a Mickey Mouse operation

we're running here; it's almost a $4 billion budget and a $20

billion-plus economy. Does he have a computer model of the economy

which allows him to ask what I'd call "tax policy" questions? In other

words, could he go to this computer and say: "Well, now what would

happen if we remove the 7 per cent sales tax from expenditures for the

next couple of years on productive plant and equipment? What would

happen?"

I happen to think the results would be very good, Mr. Chairman. I do

know that the province of Ontario did that for a couple of years and

then the Provincial Treasurer brought down his budget in November,

looked at the results, found them good and extended them. Why can't we

do that kind of thing here? Why don't we have the kind of model of our

economy that allows the minister to try out different tax policies?

Maybe we do, but if we do, all I know is that I wasn't able to get that

information from the department. So if we do have the

[ Page 997 ]

information and an MLA can't get it, that's even worse. I'm asking the minister about that — a model of the economy.

Next I want to ask him if he is going a study into the cost of

public service pensions and the long-range effect of inflation on those

pensions. There is a great deal of concern being expressed in other

jurisdictions in this regard, and I think it ought to be expressed in

British Columbia. We have seen projections, Mr. Chairman, that up to 20

per cent of payroll is ultimately going to be required to fund these

pensions as the full indexation features mature. If that is really our

future here in British Columbia, I think we ought to know. So I'm

asking the minister: does he have such a study underway? If not, will

he commission one? I put that to him as, I think, a very important

suggestion. I'll also say in passing that I think we ought to have as a

policy item more complete funding on all of the pensions that have

anything to do with the public sector, and particularly the Canada

Pension Plan, to the extent that the minister can make that

representation to the powers that be in Ottawa.

Next, Mr. Chairman, I want to support the minister on his stand on

the Anti-Inflation Board. He is absolutely right on. That AIB programme

should not be taken off this year.

AN HON. MEMBER: Hear, hear!

MR. GIBSON: If there is any place in the country where

continuing restraint is essential, it is here in British Columbia,

because we live by exports. I'm trying to think what the figure was the

minister gave in his budget speech, or was it the Premier? I think he

said 55 per cent of our goods produced in this province are exported.

It's an enormous figure, whatever it is. We have simply got to keep our

costs here in British Columbia under control or else we aren't going to

have the continuing jobs that we want. I support the minister 100 per

cent in his quest to keep that AIB programme on. I'll tell you, Mr.

Chairman, there's been too much loose talk about taking it off.

AN HON. MEMBER: Hear, hear!

MR. GIBSON: Because when you start to speculate about things

like this, you immediately start to destabilize the whole

management-labour bargaining climate in this province or anywhere else

that it relates to. I think the people on the management side and the

people on the labour side.... Syd Thompson had some very annoyed things

to say about that kind of loose talk, and I agree with him 100 per

cent. We had a bargaining climate that was going forward reasonably

well in this province for this year. I hope we still have, but it has

been jeopardized by this talk about taking off the anti-inflation

programme. I think that is wrong.

MR. C.A. D'ARCY (Rossland-Trail): Who has been talking about it

in B.C.?

MR. GIBSON: It's been national talk, Mr. Member. That's what I'm criticizing.

MR. D'ARCY: The Premier has been talking about it.

MR. GIBSON: No, no, Mr. Member. In fairness to the Premier of

B.C., he has not been talking about taking it off. He's been saying it

should be kept on.

MR. CHAIRMAN: Let's keep the debate through the Chair, please.

MR. GIBSON: Thank you, Mr. Chairman.

AN HON. MEMBER: Tell them in Ottawa.

MR. GIBSON: We have such an agreeable interchange of opinion

going on today in a quiet House I had hoped you wouldn't mind a little

aside. I want to say to the minister — and this has nothing to do with

the federal anti-inflation programme — that restraint must be

maintained in terms of the public service of British Columbia. I noted

in the House, in response to a question the other day, if I understood

it correctly, he more or less agreed with the characterization by Mr.

Fryer of a 24 per cent settlement over 22 months, which my reading says

is about 13 per cent per annum, which I personally think to be a little

high. But that's not the bad part. The bad

part is the way the ordinary

public servants in British Columbia are going to look at the senior

management plan — the mandarin plan — this 17 per cent per year

retroactive settlement back to 1974.

Mr. Chairman, we were asked in this House, as MLAs, to show some

leadership in terms of the salary that we took. I voted against it at

the time because I thought it was tokenism on the part of the

government, but at least that's the way they were going. Now how can

they ask the ordinary public servant in this province to accept the

relatively smaller increases and compare them against this 17 per cent

figure, which has been made retroactive back to 1974, for the

mandarins? How can the minister justify that? You have to have some

degree of consistency or you can't expect people to go along with you.

The restraint has to apply pretty equally, and sometimes it has to be,

as the head of the federal anti-inflation programme said, maybe a

little bit of rough justice for a year or two. But there has to be that

consistency there, and that 17 per cent, as compared to the 13 per

cent, for people already in

[ Page 998 ]

the higher income brackets doesn't strike me as being right.

I would like the minister to comment a little bit on the situation

related to the revenue guarantee. He went down to Ottawa, of course,

and then the Premier went down to Ottawa, and I think they were asking

for something like $150 million a year on the revenue guarantee. I

think they came back with something a little under half that. But one

of the questions that arose was a matter that's reported in a column

here in the Globe and Mail on February 8. I didn't see it in any local papers. I may have missed it. It suggested here:

"The federal government has compromised with the

provinces by cutting in half the provincial repayment required by the

federal-provincial tax-sharing agreements. Under the new agreements

worked out in December" — those were the ones at the Premiers'

conference — "Ottawa would have turned over 12 months of tax revenue

for programmes that ran only in the last nine months of 1977, and until

last week Ottawa had demanded a repayment of the three-month

difference. This would have meant about $700 million being returned to

Ottawa by the provinces, but Finance minister Donald Macdonald told the

Commons that the cabinet had agreed to cut the repayment in half."

What I want to know, Mr. Chairman, and what I want to ask the

minister: is this the good news I think it is? Does this mean we are

going to get $35 million more this year than he thought? Did you hear

the quote, Mr. Minister?

HON. MR. WOLFE: Go ahead, say it again.

MR. GIBSON: I was quoting here from a Globe and Mail

story that said the federal government was no longer going to require

the repayment of the entire three-month differential in the 1977

agreements, but rather only half of that. Am I right in believing that

this adds to our revenues by $35 million, either in this fiscal period

or in the next one? I am not sure which it would go in. It is a complex

subject and I would appreciate it if the minister would tell me how

much money that is and where it falls.

I would like him to direct his attention a little to some of the

philosophy he espoused in the budget with respect to the question of

equalization. He suggested that the proper route to follow in our

country was to go about equalization in terms of people rather than

governments. I ask him again: will he please say exactly what the

levels are on his negative income tax plan? What would be the poverty

level? What would be the tax-back rate? Would it be 50 per cent, 66 per

cent, 75 per cent? These all make billion-dollar differences in how

this plan would work.

Then would he go on to tell me how he sees an elimination of the

governmental level of equalization plan affecting national unity in

this country? I don't think most British Columbians mind paying

equalization to some of the poorer provinces in the east because the

theory of those payments is that it enables those provincial

governments to maintain government services up to a level that the

richer provinces can in terms of schools and health and so on — that

kind of thing.

As the minister ought to know, if that system is cut out — which is

what he's been advocating — in favour of a negative income tax plan,

then those poorer provinces are going to have to considerably raise

taxes on individuals and on companies in order to maintain those kinds

of services. If they do that, they are going to force individuals and

companies out of those poorer provinces into other parts of the

country. That's not a proper thing to do, quite apart from the fact it

would exacerbate the growth rate problems that British Columbia already

has. So I'd just ask him to give a little philosophical thought to that

before rearranging Confederation quite so quickly, just as the Premier

gratuitously did the other day by amalgamating the Maritime provinces

for which they said: "Thank you very much, but no thanks." I think we'd

be well advised to solve some of our problems at home first — and the

minister has a lot of them here — before giving too much gratuitous

advice to other parts of the country.

Now I want to go on and talk a little bit about the auditor-general

and, first of all, report to the minister that the committee relating

to an auditor-general is working very well, in my opinion. It was

established under a good piece of legislation and it's a real

committee, since there's that requirement of unanimity — lo and behold

— the opinion of every member counts for once. It's a good hard-working

committee doing a job. Let's wait for the day when the auditor-general

comes on the scene. And what kind of information is he going to have? I

suggest, Mr. Chairman, that one thing he should have and one thing that

this House should have is what I would call performance measures of

activity — not just dollar measures, but performance measures. We're

debating now a set of estimates which this minister presents and

prepares. I'm suggesting to the minister that when he puts together the

estimates next year, he should not simply have dollar figures. He

should say, if it's an operation that is, let's say, clearing waterways

of weeds, that it's going to clear so many miles of waterways so that

the next year we can look at that. If it's an operation that is having

to do with, say, reforestation, we could have a performance measurement

that says so many thousands of acres are going to be reforested. If

it's a vote that has

[ Page 999 ]

something to do with health, let's say, then we

should have an objective there that says there are going to be so many

patient days looked after by this particular vote. You can't quantify

everything but you can put a great deal more measurement of performance

on the output on the public service than we traditionally do in this

House, and certainly more than we do in this estimates book. These are

assuredly the kind of measures that any self-respecting treasury board

would want to be developing in terms of assessing governmental

efficiency. I think they should be available to this House and I think

they should be available to the auditor-general as soon as that person

gets on the job.

I want to ask the minister next what, if anything, he did with two

representations I made to him last year, requesting that he carry them

to the federal government at one of the conferences that he attends? I

think that one of the things we all agree we need in British Columbia

is investment, preferably investment by British Columbians or by

Canadians. One of the unquestioned ways of doing that — and it's an

idea that's not new — is the plan advanced by the Investment Dealers

Association of Canada and called the Canada Investment Plan. I've

spoken to the minister of this before. Through it the investments of

ordinary people, up to some limit — I'm not talking about multi tens of

thousands of dollars investment by wealthy people but in the small

thousands of dollars by ordinary people — in Canadian corporations

would receive special tax treatment, such as the kind of tax treatment

accorded to the Registered Retirement Savings Plan, for example. So

this would be an additional vehicle encouraged by the tax system for

capital formation in this country.

That's the first representation I asked him to make. The second was

to ask the federal government to do what is only fair on the capital

side, which they're already doing on the income side, and that is to

provide for the indexation of capital gains in our taxation system. As

the minister knows, this is a strong disincentive to investment. It is

entirely possible for a person to make an investment which has a value

of, let's say, $10,000 today; to see that investment five years hence

having appreciated only to the amount of inflation, whatever that may

be, say to $20,000; and to sell that investment and be taxed on the

$10,000 difference, when really he hasn't made a penny when you take

into account the inflation. So without indexation of capital gains, our

taxation system, of which we're a

part in British Columbia,

discriminates against investment. I asked the minister to carry that

representation to Ottawa. I would ask if he did so.

I'd like to suggest another piece of research to the minister. There

has been a good deal of discussion — from his side of the House and

from this side of the House, because we all, or at least many of us,

think it would be valuable — of the devaluation of the Canadian dollar

and its impact on British Columbia exports. There's no question that —

at least on a one-shot basis — this would help our cost structure. I'd

like the minister to do some research. I'd like him to estimate the

impact of such a devaluation by one cent — or 10 cents or whatever

number he sees fit — on the foreign debt obligations of British

Columbia public authorities. Some of our foreign obligations are

denominated in Canadian dollars and there would b e no impact there.

Others, however, are denominated in U.S. or other foreign dollar terms.

In that case, if we devalued our Canadian dollar by 10 per cent, then,

in effect, we would have to pay 10 per cent more of those cheaper

Canadian dollars to redeem our obligations.

I'd like to ask the minister to do a little research on that, not

just as it relates to provincial government borrowing through all its

agencies, but to municipal and school financing as well. It could be an

important impact on devaluation on this province.

Mr. Chairman, I would make one further representation to the

minister. He is, in many ways, the custodian of what I would call the

financial climate of the province. He very properly argues in his

budgets for the necessity of investment and the relationship of a

profitable enterprise to investment. I would like him to say some

positive public things about the importance of current-value accounting

by British Columbia companies.

A study done in 1974 and 1975 by the national firm of Touche-Ross, I

believe, for Canada as a whole showed these astonishing figures: the

reported net income of corporations in 1974 was $9.2 billion; after

making an adjustment of $4 billion for the paper inventory profits of

that year and $2.7 billion for the fact that depreciation did not

really cover the drop in replacement value that year, the actual

profits after accounting for inflation were $2.5 billion — in other

words, less than 30 per cent of the report figure. The real profits

were only 30 per cent of the nominal profits when adjusted for

inflation. In 1975 the reported figure was $8.3 billion and the net

figure — the adjusted figure — was $3.1 billion.

So what's happening here, Mr. Chairman, is that not only the public,

but in many cases the companies, are being given a completely

misleading picture of their financial ability. So we can have the

incredible case of a British automobile company that was making profits

every year but that, in fact, almost had to go into liquidation. It had

to be bailed out by the government because those so-called profits were

just these false profits, these inventory paper profits. I think that's

an important thing. As I say, I think the minister, in his capacity as

spiritual leader of the financial community of British' Columbia,

should come out against these false profits.

Mr. Chairman, I think those are all the questions I

[ Page 1000 ]

would put to the minister right now. But I do ask

him once again if he could tell us within $10 million how much we have

in the bank.

HON. MR. WOLFE: Mr. Chairman, we're accumulating a

considerable number of questions rapidly. Before we run out of room, I

suppose we should address ourselves to some of them.

Since the member for Nanaimo is still here and he's very interested

in this subject.... I appreciate many of the questions he asked.

Leading off, he referred to the McMath report and the Assessment

Amendment Act, which we passed the other day, and to the fact that

there was a subsequent more comprehensive amendment proposed. I can

answer that question, Mr. Chairman, through you, by saying that this

matter is definitely in the hopper and very actively being pursued. I'm

hopeful that a bill will be coming forward in the very near future.

He referred to quarterly reports; I expected that he would refer to

quarterly reports. Quite honestly, Mr. Chairman, I had hoped that the

third quarterly report would be available by now. I can say that it is

very near to being ready. It has been sort of headed off in being

available because the nine-month information turned out by the

comptroller-general has already been tabled. It was prepared in advance

and contains basically the same information as the quarterly report.

The only thing that it wouldn't contain, of course, would be the

reports of the Crown corporations. Some of those have entered into the

fact that there has been some delay in getting this information

available. Any event that....

AN HON. MEMBER: The forecasts, though.

HON. MR. WOLFE: As the members know, Mr. Chairman, the

nine-month quarterly report was a matter of urgency because of the

budget coming down early this year. This information is before the

House and contains very current information on our revenue and

expenditures for the year.

AN HON. MEMBER: But no forecasts.

HON. MR. WOLFE: He referred to the comments in the first

quarterly report as being pessimistic and in the second quarterly

report, which was through the period ended September, as suddenly

changing.

How did this happen? The fact of the matter is that things have

picked up in that period and since in terms of the provincial economy

generally and the revenues that we depend upon. I'd like to refer to

page 7 in the second quarterly report where we refer to the fact that

the improvement was the result — that is, for the second quarter — of a

$55.3 million gain in revenues over the original budget forecast and a

$52.6 million reduction in expenditures in the same period.

The third item which really contributed to this improvement was the

policy developed of the sale and leaseback of the three ferries. In the

period mentioned, two of these transactions had been consummated to the

total of $31.4 million. So this accounted for the improvement in the

anticipated deficit versus the anticipation of breaking even between

those two quarters.

I might say that in terms of the budget brought down recently, it

might be worthwhile to refer to opinions in the financial community

regarding our efforts to balance this budget and our efforts to

restrain the growth of expenditures. I'd like to read from an economic

report turned out by McLeod, Young, Weir & Co. on January 31 of

this year, just quoting in part:

"British Columbia has just released its budgetary

position at the end of the third quarter. All of the spring budgets

contain measures to raise revenues, and all pledge cuts or restraints

in expenditures. In addition, British Columbia and Ontario stress that

expenditure restraint will be continued in 1977-78, with total

expenditures forecasted to increase by only 5.9 per cent and, in

Ontario, 9.6 per cent respectively,

"The estimated budget deficits of the federal and

Quebec governments for their fiscal year are much higher than

forecasted in the spring, and these increases have flowed through a

substantially larger borrowing requirement. The position of British

Columbia has substantially improved within the fiscal year."

And further on, Mr. Chairman:

"Regarding the 1976-77 performance in British

Columbia, the revenue projections made in the 1976-77 budget were

almost exactly on target. The revised estimate of October, 1976, shows

that revenues will decline by $36 million over the year, only I per

cent below the forecasted value; and at the end of the third quarter,

actual budgetary revenues were $2,520,000,000 compared to the budget

estimate of $2,569,000,000, a difference of $49 million.

"Also, projected expenditures for the current year of

1976-77 at $3.593 million are actually $21 million below the original

budget estimate, less than I per cent forecast error."

I think this has to be viewed as a remarkable achievement.

The member for Nanaimo (Mr. Stupich) referred to deficit financing

and our reference in the budget speech to disagreeing with deficit

financing. He points out that there are the ferries, the B.C. Buildings

Corporation and other Crown corporations which, of course, have

substantial borrowings and which are tabled in the budget speech as

being contingent

[ Page 1001 ]

liabilities. It is true that these corporations

borrow for their operations and derive their revenues to pay off those

expenditures, but our policy clearly announced in this government is

that we do not advocate deficit financing for current operations. I

think we have enough of that already on the books, saddled with the

responsibility of repaying, and we disagree with the continuing growth

of deficit growth to finance current operations. That's the principle

of the statement we are making.

You asked how much the Ferry Corporation has borrowed thus far. The

answer is nil. They were just established as of January 1. Their assets

have been turned over at no cost or at a dollar. There has been no need

for them at this stage to enter into borrowing.

The B.C. Buildings Corporation has an authority to borrow of some

$37 million, I believe, altogether. They have currently borrowed in two

issues $12 million plus $1.5 million, or a total of $13.5 million.

For the information of the House and to throw some light on the

matter of borrowing by other provinces, I'd like to show the results of

a comparison across Canada of total debt, direct and indirect — that

is, total debt by provinces direct and guaranteed. This is dated March

31, 1975. On a per capita basis, Mr. Chairman, British Columbia shows a

debt of $3,803 per capita, compared to Quebec at $8,507 per capita,

Ontario at $13, 378....

Mr. Chairman, I'd like to retract the figures I just gave. Those are

total dollars. I want to refer to another table in which I would

indicate the per capita guaranteed and direct debt. British Columbia,

as of March 31, 1975, is $1,556 total debt per capita as compared to

Alberta — $1,644; Manitoba — $2,141; Ontario — $1,635; New Brunswick —

$1,615 per capita; Nova Scotia — $1,591; Newfoundland — $2,753.

Mr. Chairman, the only two provinces that have a lower debt per

capita in all of Canada than British Columbia are Prince Edward Island

and Saskatchewan. In other words, with the exception of those two

provinces, as of March 31, 1975, we showed the lowest total debt,

direct and indirect, per capita in Canada. I think that's a very

revealing piece of information.

Reference has also been made to the fact that the ferries have been

sold, primarily with the object of removing these expenditures from the

budget. The reason, we should point out, Mr. Chairman, that the

transaction on the lease-back of the ferries has been put together is

that in the process we were able to enjoy an extremely economical and

low rate of interest on the lease-back. Something slightly over 7 per

cent on the investment represented on those ferries is the annual cost

of our lease-rental on those ferries, not taking into consideration the

exposure to repayment or repurchase of those ferries at the end of the

lease period. So the primary motivation is that nowhere else could we

borrow money at something over 7 per cent, and I think it would be

foolish for us to ignore the advisability of a transaction of this

kind, where we can much more economically lease these vehicles than we

could to own them.

The member asks: under our Deficit Repayment Act, what was the

amount borrowed in treasury bills? The total amount originally

borrowed, Mr. Chairman, was $181 million and, at this stage, there is

the sum of S 15 0 million owing. But I would like to advise the House

that we do anticipate that further borrowings will be required in the

near future. We have a total authority, as you know, up to the $261

million authorized under the Act. This anticipated further borrowing,

we believe, will be necessary due to cash-flow requirements and our

view of the estimated expenditures in the next two months.

Moving on to the B.C. Savings and Trust report, this is a matter

that received a lot of attention during last year's debate on estimates.

MR. STUPICH: Have you read the Gordon report?

HON. MR. WOLFE: Yes. Have I passed it on? Yes. And I want to

remind the member that this report was not really accepted until later

during the year 1976. We had it on board for some time before we could

establish the fact that it was ordered on good authority. We could not

establish that any documentation existed anywhere in the ministries

authorizing the purchase of it. I believe the fee charged for the

production of the report was something more than $145,000.

You asked if we have been approached by other areas outside of

British Columbia. I can only recall one instance, which was an approach

made indirectly, and it was not considered possible to adhere to that

request because there were elements of confidentiality, within the

report and our review, that were obtained from other provinces on that

understanding.

You ask, has there been any use made of the report? Definitely yes.

I mentioned the appointment of a cash management department, and Mr.

O'Neill, very early in the year. This was a policy developing prior to

the introduction or the use of the report, I can say, because

considerable change had been underway. But we did make use of

interesting information in that direction.

Now the matter of sales tax. This continues to come up. I believe

the question asked by the member for Nanaimo (Mr. Stupich) was.... He

said it is apparent in the projected forecast for sales taxes at $740

million for the coming year, that this only indicates an increase of 3

to 4 per cent over the current year's original forecast. Actually this

forecast over our projected final sales tax revenues is some 11

[ Page 1002 ]

to 12 per cent.

I might say that I have in front of me a report on retail sales for

the province of British Columbia which I think will be of some surprise

to the members opposite in terms of the retail sales during the current

year, and the possible suggestion that sales taxes had an adverse

impact on these sales. For instance, retail sales overall from March to

December, 1976 — for the 10-month period through December, starting in

March — showed an increase of 12.18 per cent. I could give that by

quarters: first quarter, 13.18 per cent; second quarter, 11.39; third

quarter — that's September through November — 12.16 per cent; and for

the 10-month total, 12.18 per cent. Then turn to retail sales excluding

food. These are obtained from Statistics Canada. In the 10-month

period, there was an increase of 13.0 per cent. That's retail sales

excluding food for the province of British Columbia. Lastly, the retail

sales department stores showed a growth for the 10-month period of

10.83 percent — hardly a disastrous turn of events, Mr. Chairman.

I might say that I hesitate to bring up the subject of motor

vehicles, but here again is a report on retail sales — motor-vehicle

sales, which I think are a barometer of the economy from month to

month. The 10-month dollar increase was 17.39 per cent. Once retail

sales taxes are adjusted to 5 per cent to provide a true comparison,

for the 10 months of the current year, through January, there was a

10-month total increase of 9.1 per cent over the previous year.

[Mr. Veitch in the chair.]

I would have indicated the nine-month total through December which

would have been much higher, but which would have been distorted by the

postal strike of 1975. But you'll notice how clear and honest and

sincere I am by including January so that the adjustment is....

MR. STUPICH: That's not on the list.

HON. MR. WOLFE: No. Okay, I'll give you another page. The

10-month total of sales taxes, adjusted for the 5 per cent, shows an

increase of 9.1 per cent.

MR. GIBSON: That's not near as much as you forecast.

HON. MR. WOLFE: No, it isn't, Mr. Member, but it's not that far out.

I'd like to talk about your percentages a little later on, if you'd

like to do that, so I'm very glad that you brought that up. That's what

I would like to talk about right now. Mr. Member for North

Vancouver–Capilano (Mr. Gibson), you know I am going to mention this

because I couldn't help but mention that a year ago you were

overemphasizing the fact that we had underestimated revenues. You need

to be reminded of what you said on April 27 — and I believe you had

your hands under your suspenders at the time:

Now, Mr. Chairman, the minister in his budget suggested that it

would be 13.7 per cent. I can't believe that he drew that simple line,

because if he drew that line, he would find it 16.7 per cent.

I don't know what line he's talking about, Mr. Chairman.

How in the name of all that is simple, Mr. Chairman, can this

minister tell us that in a year of economic growth of only 10 per cent,

tax revenues grew at 11 per cent — in other words, more than the

economic growth — and yet in a year where the economy grew 14 per cent,

he's predicting the revenues will grow less, by only 13.7 per cent?

Mr. Chairman, these are the words of the member for North Vancouver–Capilano last April.

Mr. Chairman, I suggest to you that that is nonsense. That's why I

suggested in a previous debate that the tax system is going to yield at

least $100 million more next year.

Mr. Member, put your money where your mouth is. What do you say now about next year?

MR. GIBSON: Sit down and I'll tell you about it.

HON. MR. WOLFE: We shouldn't pass by the subject of sales

taxes, and the difference between forecast figures and the way they

actually work out, without mentioning two things. The first is that

forecasts take place sometimes 15 to 18 months before the event is

completed. We then talk about a year which doesn't conclude until the

following March, we forecast in January, and the final figures are not

in until perhaps the following June. It's almost impossible to expect

forecasts which are exactly right on because there are so many

unexpected events which take place in the intervening period. One

further point that has been forgotten is that during the period of the

current year we had a construction strike of some two months duration

which had a very pronounced effect on our revenue from that industry

during the period.

Mr. Member, you asked the same question you asked a year ago: "How

much cash in the bank?" Mr. Chairman, I could provide this figure any

day, but it would be misleading. I have figures on the cash in the bank

but at the same time, there might be $50 million in outstanding

cheques. The cash includes cash held in trust, so we have to deduct

those things very much on an estimated basis.

The second thing that I would refer to is that outstanding cheques

on a Monday might be $30 million, and on a Friday they might be $75

million. They vary a great deal with what takes place from one

[ Page 1003 ]

day to the next. Having said that, I'll answer your

question. The cash as of Monday, taking away an estimated $30 million

only for outstanding cheques, was somewhere between $25 million and $75

million. I have mentioned to you the fact that outstanding cheques can

be a considerable variable and that it includes trust funds. The cash

flow is the biggest determinant, which our cash management man has to

view in terms of the investment of these funds.

One further thing to the member for North Vancouver–Capilano (Mr.

Gibson). He's made reference in this debate and in earlier debates to

the figures that are thrown around about the increase in expenses over

last year. He fails to point out — and I know he realizes this — that

in one instance we, might compare the budget of this year and next

year, and in another instance we might compare the budget of next year

with the actual expenditures of last year. Which way would you rather

have it — as apples or oranges? In this year's budget, on page 16, we

very clearly said this is only a 5.9 per cent increase over the current

year's budget. It is two different things, Mr. Member, to compare the

next year's forecasted expenditures, or the budget, with the previous

year's budget, or to compare next year's budget with last year's total

expenditures.

Interjection.

HON. MR. WOLFE: Well, just read very carefully what we said.

We defined it and took great care to make sure we were not trying to

mislead anybody, and pointing out that it was budget versus budget.

Interjection.

HON. MR. WOLFE: I suggest, Mr. Member, you don't know what you're talking about.

You then ranged on, Mr. Member, into a series of subjects which I

know we both have interest in — the computer model of the economy. I

can say that my department is aware of this. We have been working with

the Department of Economic Development on this subject. It's a new

concept which we are working on and want to develop.

Were we doing anything about a study of the public service pensions

and the effect of inflation on these? The answer is yes, we've already

had work done by the head of our superannuation department, Mr. Howard

Forrest. With regard to that, there are concerns with the effect of

inflation on all pension plans.

One thing that we can be thankful for in British Columbia is that

our pensions are funded. Not so in the case of Ottawa, Mr. Chairman.

Therefore there is a very great concern in the fact that there is going

to be a point in time where the inflow of funds to these pension plans

is not going to be equal to the interest earnings and so on, and

exposure.

Interjection.

HON. MR. WOLFE: That's what I say; there are considerable concerns about all pension plans, not just the public pension plans.

With regard to the Canada Pension Plan, it also is not funded. There

was a discussion at the last meeting of ministers in Ottawa and there

has been ongoing work developed as a result of this. Papers were

presented, One by Ontario would suggest that the Canada Pension Plan

should be put on a funded basis. Well, one of the reasons behind this

proposal is to provide the tremendous inflow of funds that this would

generate as a public body of funds to inject into the economy. The only

thing you have to question is that this would put great power in the

hands of some public body as to where these funds would go. We're

talking about money in the billions.

I think a possible resolution, in our view, of the Canada Pension

Plan debate is that it will come to a point in time — what they call

critical point one or two — where there will have to be adjustments

made in the contributions. But this can only be resolved by a

substantial upgrading in the size of contributions that are now

prevailing.

I'm glad to hear, Mr. Member, that you agreed with the policy

statements regarding the anti-inflation programme. I understand from

news reports in the last few days that the federal minister is still

making a variety of indications as to when the programme might be

discontinued. One day it appears to be 1978 and the next day, 1977. But

we will be saying and will continue to say that we want to have the

programme continue through its original planned period.

You emphasized that restraint should be kept on in the public

sector, and you referred to the recent indication of an increase in the

public service compensation with the union of some 24 per cent in 22

months. I'd like to say that when you describe the increases over the

term of the current BCGEU contract, it's very easy to come up with two

or three different percentage figures. You are laying cost-of-living

increases upon other increases, you're changing the hours of work, and

so you can come up with a variety of figures. All I have said is that

the most recent settlement to resolve the 22-month contract with

retroactivity amounted to something like 1.5 to 2 per cent added on at

the finish of the period.

Now you referred to the federal-provincial transfer of funds and the

conclusion of the shared-cost programmes. You mentioned that it's a

very complicated subject. About the only way I could answer your

question is that one aspect of the wrap-up of the plan is that the

change in tax points is

[ Page 1004 ]

effective January 1,

whereas the change of the

contract is April 1. So the result of this was that the new tax tables

are in effect January 1 and we are therefore overcompensated for three

months. The repayment of this three-month over-payment created a

substantial burden on the fiscal year to come because it would reflect

on our budget in a substantial way.

Now the federal government has just now announced that the amount of

this over-payment is some $700 million and they've said, to resolve the

whole issue, they'll settle for $350 million. Now this means to British

Columbia — instead of having to pay back $90 million, we pay back $45

million. Next year we would pay back $30 million, of which we'll have

$20 million in suspense from this year, getting $10 million net next

year out of our revenue. In other words, of the $45 million that we're

obliged to pay back, two-thirds are required to be paid back in the

coming fiscal year and one-third in the following fiscal year; however,

against that we offset our demand that they, on the other hand, owe us:

for the medical care settlement or cutoff, some $50 million; for a

misunderstanding on the revenue guarantee which should take effect

January 1, there is a dollar figure attached to that; for the fact that

we already had a transfer of points in post-secondary education of

4.13, amounting to $32 million. So we add up the total of those three

items of some $90 million. The effect of this, Mr. Member, through you,

Mr. Chairman, is that we would gain, under the federal proposal of last

week, $45 million, but we lose $90 million unless these other items are

resolved. So in our view, there is a net deficit in this proposal of

the federal government. As I said, it's complicated, and you said it

was complicated and I think if I described it again, it would sound

altogether different.

You mentioned negative income tax and, if you like, I could refer to

that a little later on because I have some useful information here in

which you might be interested. But in the interest of allowing other

members to raise further questions, perhaps we could come back to that

later.

You mentioned the Canada Investment Plan and the indexation of

capital gains. Perhaps we could put those in the same category. So we

can leave it at that for now, Mr. Chairman.

MR. GIBSON: Mr. Chairman, first of all I want to thank the

minister for being very forthcoming on a number of questions that were

raised and I'm particularly grateful that one of the figures he gave

here finally allows us to determine where that missing $100 million

went. Because as I looked at that budget last year, I said to myself,

there is $100 million there and yet, where is it?

Now we find it. We find that the 10-month figures for retail sales

tax receipts, adjusted to the old 5 per cent level, would have only

been up by 9 per cent. Which means, Mr. Chairman, that the retail sales

therefore were only up by 9 per cent — those that are taxed on the

retail sales tax. Right?

AN HON. MEMBER: Plus the other 2 per cent.

MR. GIBSON: Oh, yes — that's the revenue. But I'm talking

about the underlying base, the actual retail sales. They're up 9 per

cent. The taxable retail sales are up 9 per cent. Now what was the

forecast in the budget? Look at page 29 of the budget delivered in

March, 1976.

HON. MR. WOLFE: Seven hundred and ten.

MR. GIBSON: That was the forecast revenue, but I'm talking

about the overall economy. You speak of the expectation of a 14 per

cent growth in the economy. Now, Mr. Chairman....

HON. MR. WOLFE: You said that was too low.

MR. GIBSON: No, no, no. I said your revenue figures based on

that expectation were too low. So what's obviously happened, Mr.

Chairman, is that the minister's forecast for the growth in the economy

has not come about.

HON. MR. WOLFE: It's going to be on the record. You'd better be careful.

MR. GIBSON: You were forecasting 14 per cent and yet we see

here by your own figures today that taxable retail sales were

apparently only up 9 per cent. Right? So there seems to be a shortfall

there because retail sales generally increase at the same level as the

gross provincial product because there is such a large component of it.

That naturally has to happen.

There seems to be a shortfall there — just doing quick arithmetic in

my head — something like 4 per cent on retail sales, less than you

would expect of them. Further evidence for this, of course, is given by

the fact that you had forecast sales tax revenues of $710 million, and

it actually looks like it's going to come in something more like $680

million or $685 million. That would seem to be the case because, again,

you forecast an increase of 11 to 12 per cent of your retail sales tax

estimate this year over the actual receipts that you expect for the

current year.

So all of that says to me, Mr. Chairman, that the economy did not

perform in the way that the minister thought it was going to. Had it

performed in that way, we would have had that extra revenue. Naturally,

that's what my forecast was based on and I say again — and I believe —

that the reason it did not perform quite that well was because of the

tremendous knock on the head the consumer

[ Page 1005 ]

expenditure was given by the actions of this

government on the ICBC and on the sales tax and on the ferry system. Of

course, in this I'm quoting, I think, just about every economist in

this province. If you want to quote a retail sales expert you can just

go and talk to Mr. Woodward, head of Woodward's Stores, who said

exactly the same, too.

Interjection.

MR. GIBSON: Yes, but department store figures weren't up that

much either, were they? They were up, even for the nine-month period,

10 per cent. For the nine-month period they were up 10.8 per cent. You

said yourself that that nine-month period was exaggerated because of

delays in the postal system the year before. Therefore when you bring

in the 10-month period, they'll be up less than that. So it seems

pretty clear to me, from the figures the minister has given us today,

that the economy didn't grow as much as it ought to have done and I

regret that very much. We could have had a surplus, had they run the

economy right.

MR. WALLACE: Mr. Chairman, the whole area of finance is so

widespread and has so much impact on just about everything we do that I

think we should try to perhaps zero in on one or two particular areas.

The area that I personally think must be clarified is the recent

federal-provincial agreement on cost-sharing of health services and

post-secondary education.

First of all, let me say that I join the Liberal leader (Mr. Gibson)

in expressing appreciation of the minister's opening comments and his

willingness to have a debate on this issue rather than a confrontation

such as we had with the Minister of Economic Development (Hon. Mr.

Phillips). I hope that the "Wolfe disease" is catching among the

cabinet.

What I would like to try and clarify once and for all, Mr. Chairman,

is the compromise, I presume you would call it, which was worked out in

relation to the revenue guarantee arrangement which the federal

government had agreed to when they changed the federal income tax act

in 1973, stating that they would reimburse provinces for any loss of

revenue resulting from that unilateral federal action. Over a period

since 1973, calculations have been made for each province as to what,

in fact, they did lose as a result of these federal changes. To the

observer reading the newspapers recently as a result of the

federal-provincial conference, that appears to really be the main

reason that the outcome is so confusing and so difficult to understand.

I would like to take a little bit of time, including the use of the

federal Hansard , to try and get this final financial agreement pinned down, at least so that I can understand it.

The figures say that there will be a transfer of 12.5 points of

federal income tax, I point of corporation tax and $2.5 billion as a

cash settlement. I'm saying that quickly. I can quote you

chapter and

verse from the federal Hansard , if you wish.

HON. MR. WOLFE: What date?

MR. WALLACE: It was December 14, 1976, page 1987 in the federal Hansard . I'm trying to save time, Mr. Minister, through you, Mr. Chairman. We can go back over this.

The cash settlement of $2.5 billion in future, I gather from Mr.

Trudeau, would escalate in relation to what he called the "gross

national expenditure." That's not a term I'm familiar with. I think I

understand what the gross national product is, but he uses the term

"gross national expenditure." As it escalates in years to come, that

cash settlement will be altered accordingly. But the point I'm trying

to lead up to, Mr. Minister, through you, Mr. Chairman, is whether in

the long run we as a province will receive progressively less federal

money to assist us in paying one of the most rapidly increasing

expenditures which provincial governments have very little chance of

avoiding — I'm talking about health care costs.

Although I will shortly be quoting the federal Conservative leader,

I don't mean this to be any kind of a partisan issue. I want to get the

facts and the figures straight.

Prime Minister Trudeau on December 14, 1976; on page 1987 of Hansard ,

says: "I have some figures, Mr. Speaker. It would suffice if I said

that in 1977-78, as a result of the established program me-financing

proposal, the provinces next year will receive $221.2 million more than

if we were to continue with the present schemes." He goes on and

projects figures, but I just want to nail that figure down. He makes

the claim that the provinces will be receiving $221.2 million more than

from the arrangements existing prior to the conference.

I'll omit a lot of what he says next because he's explaining things

that are not quite as relevant to my argument. On page 1976 in the same

debate, Mr. Clark says:

I wonder whether the Prime Minister would like to take the

opportunity to correct an impression I think he left on the record in

his earlier remarks when he suggested there would be a net gain to the

provinces of $630 million as a result of the arrangement when, in fact,

what happens is that the provinces will be receiving in the

neighbourhood of some $270 million less next year than they would have

had if the existing arrangements remained in effect.

Mr. Trudeau responds immediately by saying: "Mr. Speaker, I can say unequivocally

that the Leader of the Opposition is wrong." We're dealing with

[ Page 1006 ]

figures like $680 million or $270 million which, in

the context I've just quoted, represents an actual spread of almost a

billion dollars. Mr. Trudeau says that the provinces' net benefit will

be $630 million better off and the Leader of the Opposition (Mr. Clark)

claims they will be $270 million less better off. Now that's a spread

of almost a billion dollars. How can the taxpayer in Canada understand

a direct across-the-floor discussion between the Prime Minister and the

Leader of the Opposition on cost-sharing arrangements where their

individual perception of the money they're talking about differs by a

billion dollars in one year?

What I would like to know from the Finance minister — and I hope he

understands this a lot better than most people I've talked to — is

this: when Prime Minister Trudeau stated that next year the provinces

will receive more money, was he comparing the money to be received next

year to what was received last year minus the revenue guarantee? If he

deducted the 1976-77 revenue guarantee before he came up with his

conclusion, then of course I can understand why there appears to be

this discrepancy.

That's question No. 1. When he claims that the provinces are getting

$221 million more, he means more than they received last year minus the

revenue guarantee, presumably. That's the only way I can interpret

these crazy figures. In other words, in reaching his conclusion that we

were getting $221 million more, he was just counting it as though the

revenue guarantee didn't exist last year. I really would like

clarification on that.

Later on in this same debate, in a rather condescending way, I might

say, the Prime Minister of Canada goes on to say on page 1991 of Hansard on December 14:

"On the general subject of revenue guarantee, Mr.

Speaker, I did not touch upon it in my opening statement for the very

simple reason that we have always stated in this House and outside that

the revenue guarantee was for a period of five years. The provinces

hoped that this guaranteed programme for five years would be prolonged,

and it was in that sense that the provinces were asking for our tax

points. There had never been any commitment or indication that we would

give that, but naturally the provinces were trying to get it. We took

the view that the revenue guarantee was finished, as we have said it

would be. The provinces had five years to adapt to the tax reform, and

under the system now they are free to modify their taxes and increase

rates as they will."

My second question is: is it true to conclude that since, in

relation to revenue guarantees, the province asked for four points and

got two points, we in fact got half of the revenue guarantee, or the

equivalent of half, in the years ahead that we would have been

receiving last year and previous years?

I realize these are complicated figures, and after any conference

the minister is pressed to interpret exactly what was arranged. But

could the minister explain to me, then, that a figure he quoted soon

after the conference to the effect that our net loss, or at least the

net reduction next year compared to 1976-77, would be of the order of

$60 million? I realize that in the weeks following that conference

other federal proposals have been made, and the minister has already

referred to some of the recalculations that have been done on

overpayments. But putting that aside for the moment, the minister

appeared to conclude that out of all this complicated horse-trading

that went on in Ottawa, we were less well off in federal money in

1977-78 compared to 1976-77 by $60 million.

Now the next question I would like to ask is: is that figure still,

in the minister's calculation, a valid and accurate one, or is it more

or less? Could he please tell the House which part of the

federal-provincial negotiations to bring about the new fiscal

arrangements resulted in the reduction by $60 million? We've got Mr.

Trudeau standing up in the federal House saying that the provinces are

going to be better off by $221 million, and we have our provincial

Minister of Finance making the statement that we'll be $60 million

short.

Now we're all talking about cost sharing as though it was some kind

of rather impersonal shifting around of tax points on a complicated

formula: $100 million here, $220 million somewhere else. But what is so

basic to all this, Mr. Chairman, is that a large part of this money

will be used to provide hospital and other health-care services to the

people of British Columbia.

One of the issues which has caused me a great deal of frustration

and annoyance over the eight years that I've been in this House has

been the stonewalling by this government of any active programme,

despite repetitive promises at elections that they would provide both

insurance coverage to persons requiring intermediate nursing-home care

and a programme of construction of modern facilities. This is one of

the commitments. I won't drag out for the nth time some of the Social

Credit brochures from the last election, but they're all very readily

available.

One of the most repeated reasons why the provincial government of

British Columbia, including the last provincial government — the NDP

government — refrained from implementing their promises was that there

was no federal money. Cost sharing under these complicated formulas

we've discussed applied only to acute-care and extended-care

facilities. If you happened to need anything between these two, chum,

you were just out of luck. You just go into the nursing home and draw

on your savings until you're down to $1,500, or whatever the figure is,

and then you go on welfare. This has to rank as one of the most unjust

and unfair applications of this government's social policies, and

[ Page 1007 ]

the previous government's and the government's

before that. What I'm saying, Mr. Chairman, is that that last barrier,

if I could use that word, to prevent the creation of these urgently

needed facilities and that urgently needed kind of care is gone.

That brings me to my next question, Mr. Chairman: could the minister

confirm...? Again, I can quote from Mr. Trudeau if you wish, but he

makes it pretty clear in that same debate on December 14, 1976, that

now the provincial governments can use this federal funding money, on

the basis of transferred tax points and the cash settlement which will

escalate according to gross national product, virtually without any

the care and portability from province to province. Apart from these

two very general and obviously appropriate conditions, can I get it

clear once and for all that provincial governments can use this funding

in whatever way they choose with regard to hospital and alternative

levels of care?

Let me just quote a quick figure: since 1959 the gross national

product in Canada has quadrupled but the cost of hospital care has gone

up six times. One of the hospital costs, for example, in 1974-75 went

up by almost 25 per cent — 23-point-something. Hospital and medicare

costs for 1976-77 are expected to cost $7.2 billion; by 1977-78 they're

expected to be $8 billion.

While I recognize that the federal government got itself in a box by

having an open-ended 50-50 sharing with the provinces, I see the

pendulum very rapidly swinging over to the other end of the spectrum

whereby, in the next four or five years or maybe even less, the

provinces are going to be loaded with the cost of escalating hospital

and medicare expenses with a proportionately decreasing fraction of

support of the total cost by the federal payments. Because once we've

transferred the tax points, the only other element in the agreement

where we can negotiate with Ottawa is presumably in the cash

settlement, which has been set at $2.5 billion for this year and which

will escalate according to the gross national product.

Apart from anything else, I'm not sure how the calculation on the

cash settlement will be carried out from year to year. Presumably

there'