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)

MONDAY, JANUARY 24, 1977

Afternoon Sitting

[ Page

251 ]

CONTENTS

Routine proceedings

Liquor Distribution Amendment Act, 1977 (Bill 13) Hon. Mr. Mair.

Introduction and first reading — 252

Pollution Control

(1967) Amendment Act, 1977 (Bill 5) Hon. Mr. Nielsen.

Introduction and first reading — 252

Oral questions

Federal subsidies to ferries. Mr. Lockstead — 252

Kitimat oil pipeline. Mr. Gibson — 253

UBCM housing committee hearings. Hon. Mr. Curtis answers — 253

B.C. Tel rates. Mr. Wallace — 254

Oyster River marina development. Ms. Sanford — 254

Assessment Act inequities. Mr. Lea — 254

Status of Egg Marketing Board. Mrs. Wallace — 255

Budget address. Hon. Mr. Wolfe — 255

Corporation Capital Tax Amendment Act, 1977 (Bill 8) Hon. Mr. Wolfe.

Introduction and first reading — 267

British Columbia Payment to Canada of Federal Income Tax on Behalf of Natural

Gas Producers Repeal Act (Bill 10) Hon. Mr. Wolfe.

Introduction and first reading — 267

Gift Tax Repeal Act (Bill 11) Hon. Mr. Wolfe.

Introduction and first reading — 267

Succession Duty Repeal Act (Bill 12) Hon. Mr. Wolfe.

Introduction and first reading — 268

MONDAY, JANUARY 24, 1977

The House met at 2 p.m.

Prayers.

HON. K.R. MAIR (Minister of Consumer and Corporate Affairs):

In the Speaker's gallery today is my daughter Cindy, accompanied by her

friend and my good friend, Mr. Gerry Bridge. I ask the House to make

them welcome.

MR. G.H. KERSTER (Coquitlam): Mr. Speaker, I have many

distinguished guests from my constituency in the gallery today: the

newly elected chairman of the Greater Vancouver Regional District,

Mayor Jack Campbell of Port Coquitlam, and Mrs. Campbell; Mayor Jim

Tonn of Coquitlam, and Mrs. Tonn; the mayor of Port Moody, Norm

Patterson; Mrs. Verna Barrett, director of electoral area B; Mr. Brian

Corbould, chairman of the Eagle Ridge Hospital Society; Mr. Lloyd

O'Toole, hospital administrator; Mr. Bert Smith, hospital board member.

Last, but most certainly not least, I have a group of students from

Mary Hill Junior Secondary School in Port Coquitlam. They are touring

the buildings and visiting the House today with their teacher, Mr. Kirk

Templeton. I would ask the House to join me in making these guests

welcome.

HON. G.M. McCARTHY (Provincial Secretary): Mr. Speaker, this

is the first opportunity this legislative parliament has had to greet a

former Premier on the floor of this House. Even though in the last

budget debate he was seated in this assembly on the floor of the House

as a guest, there was not an opportunity at that time to welcome him. I

would like at this time to ask all members of the House to pay tribute

to a gentleman who led this province for over 20 years as the

outstanding Premier of this province, a gentleman who brought more

social reform to British Columbians than anyone in history so far.

Mr. Speaker, I would like to say to you that we would like, in this

government and in this assembly, to rival that record. It will be

difficult, and I ask all members of this House to greet an outstanding

member of this House, the former Premier, the Hon. W.A.C. Bennett.

MR. D. BARRETT (Leader of the Opposition): Mr. Speaker, I'm

only sorry that the former Premier wasn't in the House to hear the

words of the Provincial Secretary. I would like to express my personal

appreciation of the fact that the former Premier is in good health and

with us and still interested in the affairs of British Columbia.

MR. G.F. GIBSON (North Vancouver-Capilano): As the current

leader of a party that has in the past had some agreements and some

disagreements with the former Premier, I would like to share the words

of the Leader of the Opposition and the Hon. Provincial Secretary in

complimenting the former Premier on a wonderful appearance here today.

We're glad to see him.

MR. G.S. WALLACE (Oak Bay): Mr. Speaker, I might say that the

Liberal leader stole some of my words about disagreements, but I would

like to add my personal welcome to the former Premier and I'm

particularly pleased that he's fully recovered from his heart attack. I

think that his ongoing interest in the province and his close interest

which I'm sure he has in today's budget is something that we should all

commend. I very much welcome him on behalf of our party.

MR. H.J. LLOYD (Fort George): I'd ask the House to join me in welcoming two of my young friends from Prince George, Lorrelle and Liard Ongman, to the House.

MR. D.G. COCKE (New Westminster): Mr. Speaker, a point of

order on behalf of the official opposition. We suggest, with leave of

the House, that we dispense with question period today, because it is

budget day.

Interjections.

MR. COCKE: I'm asking for leave of the House.

MR. SPEAKER: Order, please.

The question is that leave of the House be granted to suspend question period today.

Interjection.

AN HON. MEMBER: There's no debate.

MR. SPEAKER: It's not debatable. I believe I must ask....

Interjection.

AN HON. MEMBER: Order!

MR. SPEAKER: Order, please! It's not a debatable point but it

is one that has not come before the House before in this manner. I'm

prepared to listen to a statement by the Premier.

Interjections.

MR. SPEAKER: Order!

[ Page 252 ]

HON. W.R. BENNETT (Premier): Mr. Speaker

lnterjections.

MR. SPEAKER: Order, please. It seems that there was a slight

change in the rule when I allowed the hon. member for New Westminster

to get up on a point of order. Now I will listen to the Premier.

HON. MR. BENNETT: Mr. Speaker, it was suggested earlier last

week in the meeting of the Whips that, as was the tradition the only

other time we had a Monday budget, question period be suspended. At the

meeting of the Whips this was turned down by the opposition, so we have

re-scheduled today to allow the full opposition the courtesy that they

asked for — that question period proceed. So the government is not

prepared to deal with the motion, but is prepared to allow question

period to proceed as that party demanded last week in the meeting of

the Whips.

MR. BARRETT: Mr. Speaker, if I may be out of order as well....

AN HON. MEMBER: You always are!

MR. SPEAKER: It would seem, hon. member, that there is a consistency in the out-of-order today. (Laughter.)

MR. BARRETT: Thank you very much. Your ruling will be one

that I'm sure will be a precedent, Mr. Speaker, and we expect you to

understand that it was the decision of the Whips that's outside of this

House, and for the Premier to say that it's on the Whips' decision....

As a matter of courtesy, it was our decision to ask leave to dispense

with the question period today. That question must be put. If it is not

granted by the House, then we go on with the period. But this debate is

completely out of order and the request must be put.

lnterjections.

MR. SPEAKER: Order, please. The question is: shall leave be granted to suspend question period for today?

Leave not granted.

MR. BARRETT: That's fine. Very good.

Introduction of bills.

LIQUOR DISTRIBUTION

AMENDMENT ACT, 1977

On a motion by Hon. Mr. Mair, Bill 13, Liquor Distribution Amendment

Act, 1977, introduced, read a first time and ordered to be placed on

orders of the day for second reading at the next sitting of the House

after today.

POLLUTION CONTROL

(1967) AMENDMENT ACT, 1977

Hon. Mr. Nielsen presents a message from His Honour the Lieutenant-Governor:

a bill intituled Pollution Control

(1967) Amendment Act, 1977.

Bill 5 introduced, read a first time and ordered to be placed on

orders of the day for second reading at the next sitting of the House

after today.

HON. MR. BENNETT: Mr. Speaker, I ask leave to table correspondence from the Prime Minister of Canada concerning the Constitution.

Leave granted.

Oral questions.

FEDERAL SUBSIDIES TO FERRIES

MR. D.F. LOCKSTEAD (Mackenzie): Mr. Speaker, a question to

the Minister of Energy, Transport and Communications: would the

minister please advise this House of what progress was made at the

meeting or meetings held Friday, January 21, between members of his

staff and members of the staff of the federal government regarding

granting of federal subsidies to B.C. Ferries and coastal shipping

facilities in British Columbia?

HON. J. DAVIS (Minister of Energy, Transport and Communications):

Mr. Speaker, meetings were held between the officials of the provincial

government and the federal government concerning ferry subsidies on the

west coast. The federal staff has reported back to the federal

minister, and we expect to hear from the federal government in due

course.

MR. LOCKSTEAD: A short supplemental, Mr. Speaker: would the

minister please advise, in the course of these meetings with the

federal government, if the province has, or will, indicate that it is

prepared to pay part of the subsidy to private companies operating

vessels on the coast?

HON. MR. DAVIS: Mr. Speaker, the discussions have centred

around public transportation and the share of the subsidy to public

transport provided by the two levels of government, and are not

concerned with payments to any private corporation or agency.

[ Page 253 ]

KITIMAT OIL PIPELINE

MR. GIBSON: Mr. Speaker, a question to the same minister:

last summer the minister was quoted as saying that the government of

British Columbia essentially backs the Kitimat oil pipeline. I wonder

if the minister could tell us if that remains the position of his

government.

HON. MR. DAVIS: Mr. Speaker, that isn't a correct quotation.

As the hon. member knows, the Kitimat pipeline proposal is one that is

now before the National Energy Board. It's a matter for the federal

government's disposition. Of course, the provincial concern about it

will be expressed during the course of the hearings of the National

Energy Board.

MR. GIBSON: Mr. Speaker, it would seem to me that the

minister's statements were pretty clear. In any event, could the

minister undertake to this House and to the province that, before

making representations as the official stand of the provincial

government to the National Energy Board, the provincial government will

hold hearings within the province to give all affected and concerned

groups the right to make their opinions known?

HON. MR. DAVIS: Mr. Speaker, I can't give that commitment at

the present time. As an individual minister I certainly couldn't give

that commitment. It's a commitment for the government if it, in fact,

chooses to make it.,

MR. BARRETT: A supplementary, Mr. Speaker. Recognizing what

the minister has said, that ultimately the decision is the National

Energy Board's, and also recognizing that the provincial government, of

course, will be requested to put some input in before that decision is

made, could the minister tell us — at this point — what is the

provincial government's position? Is it for the pipeline or against the

pipeline?

HON. MR. DAVIS: Mr. Speaker, this is a very important matter.

The project is under careful scrutiny and the province's position will

be known at the time of the National Energy Board hearings.

MR. BARRETT: If the National Energy Board is able to do its

work properly, we'll need to know now. So I ask the minister, even if

it is tentative: What is the provincial government's position,

tentatively? For the pipeline or against the pipeline?

MR. SPEAKER: Order, please. That's a repetition of the same question you had just asked.

UBCM HOUSING COMMITTEE HEARINGS

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

In a question period last week, the member for Alberni (Mr. Skelly)

made several enquiries with respect to the joint committee study on

housing in British Columbia. The first question was: "In what centres

were meetings held?" The answer is Victoria, Vancouver, Prince George

and Vernon. "Were briefs submitted privately or by invitation?" To the

best of my knowledge, Mr. Speaker, they were submitted by invitation.

The invitations went to representatives of financial institutions,

municipalities, regional districts, planners, engineers,

representatives of building trades and companies, developers,

architects, two other ministries at least — Environment and Highways,

as well as the ministry for which I'm responsible, Municipal Affairs

and Housing. The meetings were, I assume, on the decision of the

committee, represented by members of the government caucus and the

Union of B.C. Municipalities. There was no direction from me in this

regard. The meetings were determined to be held in private, and they

were so held.

MR. R.E. SKELLY (Alberni): A supplementary, Mr. Speaker. I understand that the legislative Hansard staff and equipment accompanied that committee. I wonder who authorized the use of Hansard staff and equipment and under what vote their expenses were paid. Will the minister undertake to table the Hansard transcripts so that we can compare them with the Bawlf report?

HON. MR. CURTIS: Mr. Speaker, I'll take the latter part of the question as notice. To the best of my recollection, the use of Hansard

staff was introduced as the committee proceeded, not for the first

meetings but as it became apparent that there were voluminous materials

to be presented. I believe, again, to the best of my recollection, it

was checked with the Speaker's office and will be charged to the

Ministry of Municipal Affairs and Housing.

MR. GIBSON: To the same minister: since this was not a

legislative committee and no members of the opposition were serving on

it, I would ask under what conceivable authority this could make the

use of legislative facilities....

HON. MR. CURTIS: Mr. Speaker, the question poses its own

answer. And the question of conceivable authority; I indicated already

that the costs relating to Hansard

facilities to assist the committee in its work — and I emphasize for

the hon. member it was a joint committee involving representatives of

municipalities in British

[ Page 254 ]

Columbia....

SOME HON. MEMBERS: Oh, oh! Come on.

MR. COCKE: What authority?

HON. MR. CURTIS: I wonder if the hon. member who has asked the question would indicate if he indicated a desire to serve on the committee.

SOME HON. MEMBERS: Oh, oh!

MR. GIBSON: If I might make a supplementary answer to the

minister's question, I certainly have, on many occasions around this

province, said it was a disgrace that there were no opposition members

on that committee.

B.C. TEL RATES

MR. WALLACE: To the Minister of Energy, Transport and

Communications: In the light of a proposal by the B.C. Telephone Co. to

raise its rates, and particularly in light of the fact that the average

proposed increase is well outside the guidelines, have the minister and

his department developed any policy and had any communication with B.C.

Telephone to discuss this matter?

HON. MR. DAVIS: There have been communications with the

regulatory authorities in Ottawa — as the hon. member knows, B.C.

Telephone is a federal corporation and under federal regulation —

requesting information and also requesting a delay in the hearings so

that the province would be in a better position to intervene on behalf

of customers in this province.

MR. WALLACE: A supplementary, Mr. Speaker. Can the minister

tell the House if, in fact, his department will be intervening in the

hearings, regardless of the date on which they are held?

HON. MR. DAVIS: The answer is yes.

OYSTER RIVER MARINA DEVELOPMENT

MS. K.E. SANFORD (Comox): My question is addressed to the

Minister of Environment: Now that the government has announced that it

has no objection to Pacific Playground's application to dredge in the

estuary area of the Oyster River for the purposes of access to a

marina, I wonder if the minister will release the Bentley LeBaron

report, which was a sociological-impact study.

HON. J.A. NIELSEN (Minister of Environment): To the member:

There are a number of documents and reports associated with the Oyster

River development and, if that is a request, we will certainly take

your request into consideration for the release of such documents. I'll

respond to you directly on whether all of the documents will be

released, including the LeBaron report.

MS. SANFORD: A supplementary question, Mr. Speaker. When the

minister replies, I wonder if he would also indicate whether or not he

is prepared to call a public hearing into the matter, since it is of

great interest to the residents of the area as well as the elected

municipal officials of the area.

HON. MR. NIELSEN: I'll take that question as notice, in that it is involved with the earlier question, but I'll respond to you in total.

ASSESSMENT ACT INEQUITIES

MR. G.R. LEA (Prince Rupert): To the Minister of Finance:

Last Thursday, in answer to my question about the Assessment Appeal

Board's decision, which cost the city of Prince Rupert more than

three-quarters of a million property-tax dollars as a result of the

board's

interpretation of

section 24 of the Assessment Act, the

minister said he would not interfere with the board's procedures. Yet

the same day the minister tabled in this House the board's annual

report that, on page 2, said the board had asked the minister to repeal

six aspects of

section 24 due to inequities in assessment which magnify

themselves each year. I ask the minister again: In view not only of the

terrible hardship visited on Prince Rupert — the same hardships now

face other northern and interior communities — but also in view of the

strong recommendations of his own appointees to the Assessment Appeal

Board, will the minister not take steps now to relieve the municipal

taxpayers around this province of the inequitable hardships this

legislation can create for them?

HON. E.M. WOLFE (Minister of Finance): Mr. Speaker, is the

member through with his speech yet? I think I answered that last

Thursday by indicating that the government would not interfere with the

appeal decisions of the appeal board. Now this report to which you

referred has been tabled in the House. I recognize the recommendations

to which you refer. These are under review by the government and some

of these will be presented for consideration by the Legislature.

MR. LEA: Mr. Speaker, is the minister informing this House

that these inequities, under

section 24 of the Assessment Act, will be

changed this session? Is that what he's saying?

[ Page 255 ]

HON. MR. WOLFE: Mr. Speaker, this is a matter of government policy, and I think the member heard my first answer.

MR. LEA: Is the minister...?

MR. SPEAKER: Order, please. I would draw to the hon. member's

attention that it is irregular to multiply, with slight variation, a

similar question on the same point, or to ask for another answer to a

question which has already been answered or in which the question has

not been answered.

MR. LEA: Mr. Speaker, I know of no other way to get around an

evasive answer. Is the minister aware that this is a dangerous

precedent that every company in this province can take advantage of?

Maybe this is the sharing programme you talked about in the throne

speech.

MR. SPEAKER: Order, please. The hon. member is now out of order.

MR. LEA: You're going to....

MR. SPEAKER: That was out of order, hon. member.

MR. LEA: Sorry.

STATUS OF EGG MARKETING BOARD

MRS. B.B. WALLACE (Cowichan-Malahat): My question is for the Minister of Agriculture, Mr. Speaker.

I would like to ask the minister whether or not he is aware that

since August of last year the egg producers on Vancouver Island and in

the interior of this province have been without representation or voice

in handling their own product, and if he is aware that an appointed

board is contrary to the regulations under the B.C. marketing

legislation. Finally, does he intend to return to the egg producers

their democratic right to conduct their own business?

HON. J.J. HEWITT (Minister of Agriculture): Mr. Speaker, to

the hon. member for Cowichan-Malahat: I am aware that the board that is

in existence at the present time is an interim board. I believe their

appointment is up either March 1 or March 31 of this year. I will be

meeting with the interim egg board — I believe it's on February 1 - and

there will be recommendations coming forward from that board, which was

part of their terms of reference, I believe, when they were appointed.

We will be dealing with representation matters at that time.

MR. SPEAKER: Hon. members, in order to facilitate some of the

people who would like to watch and listen to the delivery of the hon.

Minister of Finance when he brings in the budget — I understand some

were delayed and are now present and would like to be seated on the

floor — I would therefore call a short recess, but be prepared to

return to the chamber at the call of the division bell.

The House took recess at 2:35 p.m.

The House resumed at 3:02 p.m.

Orders of the day.

HON. E.M. WOLFE (Minister of Finance): Mr. Speaker, I move

that the public accounts for the fiscal year 1975-76 be referred to the

Select Standing Committee on Public Accounts and Economic Affairs.

Motion approved.

HON. MR. WOLFE: Mr. Speaker, I have the pleasure to present

the report of the comptroller-general, pursuant to the provisions of

the Audit Act,

chapter 22, RSBC (1960) .

ESTIMATES OF SUMS REQUIRED

FOR THE SERVICE OF THE PROVINCE

Hon. Mr. Wolfe presents a message from His Honour the Lieutenant-Governor:

a bill intituled Estimates of Sums Required for the Service of the Province

for the fiscal year ending March 31, 1978, including

Schedule A, sums required

by Her Majesty to make good certain sums expended for the public service for

the period ended March 31, 1977, and to indemnify the several officers and persons

for making such expenditures, and recommends the same to the Legislative Assembly.

Hon. Mr. Wolfe moves that the said message and the estimates accompanying the same be referred to the Committee of Supply.

Motion approved.

HON. MR. WOLFE: Mr. Speaker, I move that Mr. Speaker do now leave the chair for the House to go into Committee of Supply.

BUDGET ADDRESS

HON. MR. WOLFE: Mr. Speaker, barely 10 months ago I stood in

this House to deliver the first budget of our new government. Today it

is my privilege and pleasure to present the second.

In the last 10 months much has been done by this

[ Page 256 ]

government to restore the balance to the British

Columbia economy. We have brought government spending under control and

provided a new level of accountability with the introduction of

quarterly financial statements. At the same time, we are maintaining

and improving government services.

Our government has accomplished a substantial deceleration in the

annual growth rate in provincial government spending in the 1976-77

budget. Despite this, tax increases were required during the last

budget year. We did not relish imposing higher taxes and fees but, in

our view, such action was a necessity to avoid the long-term burden of

debt repayment.

As a result of our efforts we are able to propose additional

services to people in the budget being presented here today. At the

same time we are able also to

schedule the elimination of two taxes and

a reduction in others.

This past year has been one of restraint in public spending in

British Columbia. We hope to end this fiscal year on March 31 with a

modest surplus — and all signs point to that happening.

Additional millions of dollars will be spent in the 1977-78 budget,

but restraint will remain a byword and, again, a balanced budget is

proposed.

Much time and effort was expended by this government during the year

to plan and realign spending priorities to give full value for each tax

dollar received and spent. Two examples come readily to mind. The new

British Columbia Buildings Corporation will, for the first time, charge

all government ministries rent for premises each occupies. Similarly,

with the announcement of our intention to establish the British

Columbia Systems Corporation, all government ministries will be billed

for computer time. Neither measure will provide additional tax dollars,

but each will save some in focusing attention on public spending in the

area of rents and computer use.

Mr. Speaker, while we will continue to hold government spending

within income, no doubt some theorists will continue to press for

deficit financing in government, as they have in the past. This

government does not subscribe to deficit financing to underwrite its

current operations. We are at present paying interest on sizeable

borrowings required to compensate for ambitious spending programmes of

the past, and further deficit financing would only add more debt cost

to the expense of government. I suggest we cannot borrow our way to

prosperity.

The United States firm of Morgan Guaranty Trust reports that Canada

was the largest borrower in international markets in 1976. Canada now

has a greater external debt in relation to its gross national product

than Britain — and you know of the economic problems now facing

Britain. What is disturbing is the suggestion that an increasing

portion of the borrowing is to refinance maturing external debt. This

extension of debt increases the amount paid to lenders outside this

country.

Over a 20-year repayment period at 10 per cent interest payable

semi-annually, the amount repaid is 2.3 times the original borrowing,

and over a 40-year repayment period it is almost five times. It is

obvious from this that borrowings, and particularly foreign borrowings,

by government for current operations, by business or individuals have a

high cash drain on the resources of the country. We believe a high

level of Canadian dependence upon foreign capital is dangerous for

future generations.

The slow recovery of the economies of our trading partners has

continued to be a major factor in the economic performance of this

province during the past year, far more so than the tough budgetary

measures needed to recoup our position and raise the money used to pay

government bills: for income support programmes, payments to hospitals

and doctors caring for British Columbia residents, the support of local

education and municipal governments, and for many other programmes. The

dollars spent for those services, of course, had their own impact on

the economy of the province.

We all know that British Columbia is dependent on world markets for

both the sale of a major part of its production and as a source of much

of its consumables. Under these circumstances the demand of other

countries for our products, and our ability to supply those products at

competitive prices, determines in great measure the strength of our

economy.

Mr. Speaker, I am sorry to say that it is apparent from figures I

will soon quote that the province has lost ground in the fight to stay

competitive. When this happens, industrial capacity is under-utilized,

product costs rise, and unemployment increases.

What this province's economy needs is stimulation so it can generate

additional revenues to pay for the services which government provides.

We can create this stimulus by bringing our costs into alignment with

those of our competitors, or we can pause for them to catch up with us.

We won't stimulate the economy by borrowing money to provide services

today for which future generations will have to pay.

Mr. Speaker, the days when governments of this province can increase

spending by 25 per cent or more each year are over. Governments, like

people, have to restrain spending and demands to bring down the

inflation rate to manageable levels. For this government, the increase

in spending in its first budget was 12.2 per cent over the previous

year's budget, and the budget I present today proposes an increase of

5.9 per cent in expenditures for the coming year.

Ten months ago I described this government's first budget as a

"recovery budget." That budget was intended to bring government

spending under control

[ Page

257 ]

and to encourage confidence and activity within the provincial

economy. We are managing the money better, as our financial results

show. But, as your Finance minister, I am concerned at the lack of

capital investment in this province which, in turn, would stimulate

employment. The government is developing job programmes where it can,

but the real stimulus to employment must come from the private sector.

We must move now to encourage capital to remain where it is in

British Columbia, or to come to British Columbia. This budget is aimed,

then, at continuing to manage tax dollars properly while further

encouraging capital to stay as well as invest in the province and, in

the process, provide employment for our people and additional revenue

for our programme.

There is a growing debate on Canada's record on productivity and

unit labour costs compared with the United States and other countries.

The results are clear enough. Between 1970 and 1975 Canada's share of

world exports dropped by one-third to 3.8 per cent in 1975 from 5.4 per

cent in 1970. In the same period imports, as a percentage of spending

on goods in Canada, rose to 32.9 per cent from 26.1 percent. The

Vancouver housewife shopping in Bellingham for groceries is a symptom

of a declining preference for Canadian products by foreigners and

Canadians alike.

Being competitive means being able to maintain or expand your market

share. By this definition Canada has not been meeting the market test.

For British Columbians this trend has more immediate consequences than

for Canadians as a whole. Approximately 55 per cent of the annual

provincial commodity output is marketed in other countries and possibly

an equal proportion of provincial income originates from commodity

sales and related activities in external markets.

Within the forest industry the need to halt the cost escalation and

let our competitors catch up with us is well documented by the Pearse

royal commission report and other commentaries. Between 1961 and 1972

Canada's share of world exports in forest products dropped from 22.6

per cent to 19.3 per cent. At present, American imports are claiming 23

per cent of the Canadian market for soft-wood plywood. As late at 1971

the percentage was 1 per cent.

We cannot go on in this manner and hope to maintain our standard of living.

The dilemma of continuing inflation, industrial sluggishness and high unemployment

can be resolved by coping with our declining competitiveness. Wages and profits

should relate to productivity and not to union bargaining strength or monopoly

power, If we become strongly competitive, our industries will produce to capacity,

investment will occur and unemployment will be reduced. It is the only effective

long-term solution to inflation, unemployment and underproduction.

The performance of the economy this year depends heavily on the

successful settlement of collective agreements in many provincial

industries. This is bargaining year in British Columbia. Agreements

covering approximately 65 per cent of the province's organized work

force expire in 1977.

New agreements must be negotiated in the wood products sector for

about 58,000 employees; in the construction industry for another

45,000; in the public service of British Columbia for about 37,000

people; in transportation, including the British Columbia Railway, for

22,000 workers; in health services for another 21,000; and in the

food and beverage industry for about 16,000. Other areas of activity

are also involved. If the contract issues in these industries are

resolved without further work stoppage this will influence favourably

our total economic performance, job creation and employment.

This government cannot emphasize too strongly the importance of

continuing restraint. Restraint must be practised by everyone so that

the wage increases won by our citizens are below nationally established

guidelines. That is the only way we can combat inflation and become

productive.

Restraint and increased productivity depend on a shared effort by

management, labour, capital and government. Management cannot expect to

shift costs of doing business onto government. Various tax and subsidy

schemes of government over the years have not yielded the desired

results. Business must improve its cost control and resource management

and practise reasonable pricing if it is to recover its competitive

position in export markets.

Labour must recognize that times have changed. Previously held

conceptions of what the system could provide in material benefits have

proven to be misconceptions. Working people, just like everyone else,

must assume individual responsibility to help solve the economic

problems that confront the province. They must come to expect less,

demand less, and produce more. We must compete with people who are

working hard in other countries or inflation, social unrest and

unemployment will continue.

Capital must play its part and receive a fair return. Unfortunately,

in some areas capital has demanded more than other sectors of our

society for the last several years and the high interest rates that

have existed have done more than anything else to injure our economic

performance. It is scandalous that our people cannot borrow money at

interest rates they can afford in order to shelter themselves properly.

There is a limit to what our citizens can pay for money, and our

financial institutions must show some responsibility to the provincial

and national effort by delivering capital at reasonable cost. This

[ Page 258 ]

government has sought to have a say in appointments to the board of

governors of the Bank of Canada. We do so with good reason. The

preamble to the Bank of Canada Act states that the central bank is

established to regulate credit and currency "in the best interests of

the economic life of the nation." This government believes the policies

of the bank at the present time encourage high money costs and are

detrimental to Canada, and particularly to British Columbia.

Mr. Speaker, professionals also have a role to play in this battle

against inflation. Professionals are generally a hard-working group and

are entitled, like everyone else, to higher incomes on the basis of

productivity increases. This government must say now, however, that it

will not tolerate unjustified increases in professional fee income.

The role of government is to keep down the cost of the public

service so big government does not result and intrude into people's

lives. No hand at the table can expect to grasp more than its share,

and this applies as much to government as to any of the productive

sectors of the economy.

The British Columbia government joined the national government's

anti-inflation programme in 1976 and proposes to remain in that

programme. A cabinet committee, of which I am chairman, is carefully

monitoring all developments in the continuing battle against inflation.

We consider that, while the rate of inflation has been reduced, it is

still too high. Inflation has to be brought back to a manageable level

so it will not destroy our productive effort.

This government challenges every citizen to practise restraint on a

voluntary basis until this crisis is over. Short-term personal interest

will not be allowed to come ahead of the good of the province.

Mr. Speaker, it is obvious that in a free society we cannot have

controls forever. These controls are temporary, but necessary. They

could easily become permanent, however, if we do not restrain our

demands. We should all make restraint a habit so when controls are

lifted we will know that moderation by all individuals and groups will

keep our economy sound in the long run.

Now turning to the British Columbia economy for 1976: British

Columbia's economic performance in 1976 shows a marked improvement over

1975, with prospects for continued improvement in 1977. Inflation has

moderated and external demand for the province's major exports has

strengthened. The real growth in gross provincial product in 1976 was

5.1 per cent and this should, be exceeded in 1977. However

labour-management disputes continued to retard economic progress.

The consumer price index for Vancouver advanced 9.7 per cent in

1976, down from an 11.1 per cent increase in 1975. Much of the

improvement in price performance was related to a slower rate of food

price increases. However, productivity improvements must be realized in

non-food areas or it will be difficult to reach the Anti-Inflation

Board target of 6 per cent inflation in 1977.

Private and public investment in the province rose an estimated 10.8

per cent in 1976, to $6.4 billion. The most significant gain occurred

in housing, where construction activity was maintained at a high level.

Building permit values in 1976 were 10 per cent higher than in 1975,

while housing starts were up 15 per cent.

British Columbia manufacturing shipments climbed from $7.2 billion

in 1975 to $8.6 billion, mainly because of increased shipments of

forest products. The value of wood products shipped increased to $2.3

billion from $1.6 billion, while pulp and paper industry shipments were

worth $1.7 billion, compared with $1.4 billion in 1975. Improved

economic conditions in export markets, particularly the United States,

accounted for these gains.

The estimated value of mineral production in 1976 reached $1.49

billion — $122.1 million higher than in 1975. Copper was our most

important mineral, accounting for 60 per cent of the value of all

metals produced in British Columbia. Copper's average price advanced 13

per cent while volume rose 6 per cent. Silver, gold, zinc and iron

concentrates declined in price. However, in the case of silver,

increased volume resulted in a higher value of production. Lead and

molybdenum showed price and volume increases in 1976.

Coal and natural gas production declined in 1976 due, in the case of

coal, to strikes. Crude oil production increased marginally.

Exploration activity in 1976 increased in response to improved metal

demand, a new income-based tax which replaced royalties and higher

prices to natural gas producers. As evidence of this, the footage

drilled for oil and gas wells in 1976 increased 120 per cent over 1975.

Mr. Speaker, the number of wells completed increased over 230 per cent,

and mineral exploration nearly tripled.

British Columbia's fishing industry experienced more buoyant

conditions in 1976, with the wholesale value of products rising to $250

million from $167 million in 1975. Improved salmon catches, higher

prices and strong market demand were factors in this advance.

The tourist and travel industry in 1976 experienced a slowdown with

only a 3 per cent advance in estimated dollar value of expenditure.

Poor weather, competition from the Olympics and the Bicentennial

celebrations in the United States, plus higher prices in Canada,

combined to retard growth in this sector. However — and please note

this, Mr. Speaker — the 15 per cent increase in the province's revenue

in 1976 from the hotel and motel

[ Page

259 ]

room tax is in excess of the inflation rate.

The 1976 recovery was not sufficient to absorb fully the growth in

the provincial labour force, and the unemployment rate changed

marginally from the 1975 level of 8.5 per cent in 1976. The labour

force in 1976 grew by 32,000 to 1,135,000, while employment increased 29,000 to 1,038,000.

Now, Mr. Speaker, when the 1976 budget was presented in the

Legislature last March, expenditures of $3.615 billion were forecast

for the 1976-77 year. The budget was forecast to be in balance with

revenues, after including amounts available in certain recaptured

special-purpose funds.

Present indications are that our first budget will achieve a

break-even result, or perhaps show a small surplus. Mr. Speaker, both

revenues and expenditures are now forecast to be about 1 per cent less

than originally estimated.

The government's objective of controlling expenditures and

eliminating unnecessary spending has been responded to in encouraging

fashion by the ministries. The operation of the British Columbia

ferries within the provincial service for a longer period this fiscal

year than earlier anticipated, and additional requirements for the Farm

Income Assurance Programme increased budgetary expenditures, but cost

savings in a number of other ministries affect these increases.

Mr. Speaker, when I introduced the 1976-77 budget, I expressed our

commitment to a policy of balanced budgets. We expect the outcome of

the first budget of this administration to show that to date we have

fulfilled that commitment, despite a difficult year for the province.

Economic prospects for British Columbia favour a modest increase in

the pace of economic recovery during 1977. Gross provincial product is

expected to increase 5 to 6 per cent in real terms. The comparative

real gain for Canada's gross national product in 1977 is estimated to

be 4 to 5 per cent.

Improving economic conditions in the United States, Japan and most

of western Europe are expected to foster increased exports of British

Columbia resource products. Price rises in Middle East crude oil

recently announced by the OPEC countries are not expected to have a

serious impact in 1977, although world balance-of-payment problems and

inflationary pressures will increase.

Our forest products industry should show continued improvement,

particularly in lumber exports to the United States, where housing

starts are expected to rise from a level of 1.5 million units in 1976

to 1.6 million to 1.8 million in 1977. Although the pulp and paper

market is expected to remain soft during the first half of 1977 because

of excessive world inventories, improvement is expected in the second

half of the year.

Construction will make real gains in 1977 with increased business

investment and the continued high level of housing construction.

Recent reports indicate the tourist and travel industry expects 1977 to be a better year than 1976.

Increased Japanese demand for British Columbia mineral production,

particularly copper and coal, is forecast. Coal should have volume and

value increases of more than 20 per cent in 1977. The value of

petroleum products is likely to increase because of anticipated

increases in prices.

Other sectors with favourable prospects include retail trade and

fishing. However, all of these predictions depend, as I said earlier,

on the productive effort of all of our people.

Now I'd like to turn to some comments on the importance of the

negotiations that have recently transpired to federal-provincial

relations. Several important meetings were held this past year between

the provinces and between the federal and provincial governments on

financial relations with the federal government. As I indicated in my

budget address 10 months ago, these discussions covered the financial

arrangements to replace those expiring March 31, 1977, affecting such

important issues as income tax sharing, the guarantee of provincial

income taxes from the effect of federal income tax changes, the

continued financing of post-secondary education and the national

equalization programme, as well as alternative financing arrangements

for hospital and medical care. These discussions culminated in

mid-December at a meeting of the Prime Minister of Canada and

provincial Premiers.

British Columbia argued throughout these discussions that the

federal government should compensate the provinces fully for the

effects federal income tax budgetary measures have had upon provincial

income tax yields since 1971. Only at the conclusion of the First

Ministers' meeting did British Columbia yield on this point, and then

only to safeguard the national income tax collection system.

A unique achievement was realized by the provinces through these

discussions. At a meeting of provincial Premiers in August, 1976, in

Edmonton, following a June meeting with the Prime Minister of Canada at

which the original federal position on the new arrangements was

presented, a decision was made to explore the possibility of developing

a provincial consensus on the appropriate arrangements. This was

achieved and is represented in a brief presented by the hon. Merv

Leitch, Provincial Treasurer of Alberta, on behalf of all provincial

Ministers of Finance and Treasurers, to the federal Minister of Finance

at their meeting on December 6 and 7, 1976. This brief is included as an

appendix to my printed budget speech.

In taking this approach, the provinces saw a means of developing a

rational solution to a thorny issue, given the diverse concerns the

individual 10 provinces have over the matters affected by the federal

[ Page 260 ]

proposals. Through this process, many of the provincial differences

on individual issues were modified, thus assisting in an earlier and

better agreement than might otherwise have been possible.

I should stress that the provincial consensus was not arrived at

without accommodations being made by each of the provincial

governments. But in the process, this resulted in the best proposal in

the national interest, in view of the national significance of these

government services.

The discussions encompassed the Federal-Provincial Fiscal

Arrangements Act that expires March 31, 1977, and that provides for

provincial revenue equalization, stabilization and tax revenue

guarantee payments, tax collection agreement, and post-secondary

education adjustment payments. Also included in the discussions were

the federal shared-cost paymbnt provisions under the Hospital Insurance

and Diagnostic Services Act and Medical Care Act. While interested in

all aspects of the discussions, British Columbia's principal concern

was over the financing changes for hospital and medical care and

post-secondary education, replacement of the revenue guarantee

provision, and the revenue equalization payments.

When the three shared-cost programmes now considered to be

established — hospital care, medical care and post-secondary education

— were introduced by the federal government, a 50-50 sharing principle

was embodied in the federal legislation. Post-secondary education was

shared equally on the basis of actual expenditures of a province;

hospital-care sharing was a composite of actual expenditures of a

province and the average of all provinces' expenditures; and

medical-care sharing was based on the average cost of all provinces'

expenditures.

However, in 1972 in the case of the post-secondary education

cost-sharing programme and in 1976 for the medicare programme, the

federal government unilaterally imposed limits upon the annual increase

in its total contributions to these programmes, which cut their share

of programme costs and increased the provinces' share. Provisions in

the agreements entered into between the provinces and the federal

government on hospital cost-sharing prevented capping of the federal

contribution to this programme. But the federal Minister of Health and

Welfare gave notice on July 15, 1975, of the federal government's

intention to terminate the agreements on July 15, 1980.

The federal government's action in limiting its share of these very

important social programmes abrogates the government's initial 50-50

commitment to these programmes. This federal financial commitment

encouraged provincial participation in the arrangements for the sharing

of costs of these major provincial programmes. For some provinces, it

meant new programmes; but for all, it resulted in an expansion of

services — in a number of cases beyond requirements.

The increasing cost of these major programmes is of concern to all

provincial governments. However, the solution to the problem hardly

lies in the federal government turning away from an equitable sharing

of the increased costs which it encouraged.

And now, Mr. Speaker, the following "package" agreement was reached

to replace the existing federal contribution towards the financing of

these shared-cost programmes:

(1) On the basis of 1975-76 shared expenditures, the initial

federal contribution will be approximately one-half in cash and the other half

in additional taxing authority for the province.

(2) This additional taxing authority will amount to 12½ points

of personal income tax and one point of corporate income tax, and includes the

present income tax abatement for post-secondary education of 4.357 points of

personal income tax and one point of corporate income tax, which is no gain

for the province.

(3) Since one tax point raises unequal dollar amounts in each

province, the taxing authority is equalized on the basis of the national-average-per-capita yield.

(4) Federal cash payments are to be escalated by a three-year

moving average of the gross national expenditure.

(5) The federal contribution to each province will be brought

up to the national-average-per-capita level over three years or down to the

national average per capita over five years.

(6) Transition payments will be made to safeguard provinces against

a cash loss during the changeover period.

(7) Termination of the hospital cost-sharing agreement will be

effective April 1, 1977, which was a condition of the federal offer.

The federal government made a commitment to participate in financing lower-cost alternative health care facilities.

Now, Mr. Speaker, throughout the period of federal-provincial fiscal

arrangements, the provincial share of income taxes has been expressed

as a factor of the federal income tax payable. The federal government

carefully protected the provinces' income tax yield from the impact of

any changes in federal income tax laws.

In 1972, with the introduction of tax reform, British Columbia,

along with other provinces, pressed the federal government on the

inadequacy of the new standard personal income tax rate given the

provinces of 30.5 points of the federal basic tax, which raises as much

revenue for them as their 28 points would under the pre-tax reform law.

To satisfy the provinces' concern, the revenue

[ Page 261 ]

guarantee was included in the 1972 federal legislation with the

understanding that, after a period during which the revenue performance

of the new income tax law could be compared with that of the old income

tax law, an adjustment in the respective tax rates could be made, if

necessary. The inadequacy of the revenue yield of the 1972 tax law at

30.5 points of personal income tax is indicated by the growing amounts

of revenue guarantee being received by British Columbia — from $2.3

million for the 1972 taxation year to an estimated $87.9 million for

1976, or a total, over the five-year period, of $223.5 million. Over

the same period, the total of the corporation income tax revenue

guarantee is an estimated $30.6 million.

The major portion of this revenue guarantee results from federal tax

law changes subsequent to '72, except for indexation of the personal

income tax, which is not protected by the revenue guarantee. This is

the first time in the history of federal-provincial fiscal arrangements

that federal tax changes have affected the provincial tax base and

thereby the revenue yield.

Mr. Speaker, if there is any merit for a unified income tax

collection system between the federal and provincial governments, the

importance of this revenue source, which is over 36 per cent of total

revenues for British Columbia, as a means of financing provincial

government services, demands the provincial tax base be held safe from

any federal budgetary action. Any further erosion of this revenue

source may jeopardize the continuation of our collection agreement with

Canada.

In the provincial consensus the provinces sought an additional four

points of personal income tax to restore the productivity of that field

for the provinces. The offer from the federal government finally

accepted by the provinces was for one point of personal income tax and

the equivalent of one additional tax point as cash, escalated annually

as under the established programme's arrangements. While our revenue

yield suffers in comparison with the current arrangements, the

settlement is higher than the original federal offer which was for no

compensation beyond the current arrangements.

Upon my return from the December meeting of Ministers of Finance, I

reported that had the federal government continued the revenue

guarantee after 1976 as we expected them to, British Columbia would

have had an estimated $68 million more in its fiscal year 1977-78

revenue budget for provincial spending programmes.

While British Columbia does not receive any payment under the

revenue equalization provision of the Federal-Provincial Fiscal

Arrangements Act, we are concerned about its concepts.

The present formula compensates provinces for a revenue capacity deficiency

related to a national average level of utilization of revenue sources. British

Columbia has contended for over 10 years now that the general equalization formula

should recognize the fact that the level of provincial taxation can be a factor

of the cost of providing provincial government services. Our rapidly growing

population in the post-war period, rugged terrain, high consumer and labour

costs, and distance from central Canada are a few of the factors which affect

the costs of providing government services in British Columbia relative to other

regions of Canada.

But more importantly, we believe the revenue equalization programme

of the federal government has not achieved the objective of reducing

the income disparity between regions. The criticism we have of the

revenue equalization programme is that the payments flow as

unconditional payments to governments. There are no strings attached

that require the revenue be spent on raising the incomes of people in

those regions.

This system has spawned a multiplicity of programmes and created a number of undesirable effects:

(1) Administrative costs have become extremely high in comparison

with benefits paid. During 1974, the last year for which results are available,

all levels of government in Canada spent a total of $23.3 billion on some of

the most obvious income distribution schemes, such as federal old-age security,

guaranteed income supplement, family allowance, unemployment insurance, Canada

Pension programmes and the comprehensive provincial GAIN programme. This is

equal to the total output of the three prairie provinces combined, or one and

a half times the production of the entire British Columbia economy. However,

the disturbing thing is thatoout of every $100 paid out in benefits, another

$25 must be paid out in administration.

(2) The multitude of programmes has made it impossible for governments

to tell people what money is being redistributed and in what amounts. For example,

the Unemployment Insurance Commission was originally set up to help people who

became unemployed. However, unemployment insurance has become a mechanism for

income redistribution.

(3) Various income redistribution schemes are not effective in

meeting the income redistribution objective. A number of recent studies have

shown that the extremely costly redistribution programmes are not achieving

equality among income groups.

(4) Existing income redistribution measures are largely self-defeating

because they remove the incentive for recipients to climb above the welfare

system.

This government believes that existing welfare schemes of all

government must be integrated into one guaranteed-income plan that will

place the tax money of the country devoted to income support

[ Page 262 ]

schemes in the hands of the people who need it and not in the hands of a growing bureaucracy.

Mr. Speaker, a guaranteed-income plan is essentially a system which

government employs to ensure that the income of any defined family unit

does not fall below a certain minimum.

The most generally regarded type of guaranteed annual income is the

so-called "negative income tax." This is simply a government subsidy

administered through the tax system to all families and individuals

whose incomes are below the minimum level.

A negative income tax would make the income redistribution system

more efficient. It would provide people with adequate income to live

decently, because we all know that under the hodge-podge of existing

programmes some individuals do very well while others do poorly. It

would reduce administrative costs since existing schemes would be

eliminated or drastically reduced. Benefits would be accounted for

clearly so Canadians could see exactly where their tax dollars go.

High-income Canadians who now receive such things as family allowances

would not receive welfare payments any longer, so a negative income tax

would be more effective at redistributing income.

A guaranteed annual-income plan would be compatible with this

government's commitment to a strong federal system and strong regional

governments. Replacement of existing programmes with something like the

negative income tax would put our collective tax dollars into the

regions where the people need them

Now, Mr. Speaker, to our expenditure proposals for the coming year.

In preparing the 1977-78 fiscal year budget care has been taken to

ensure the government's limited financial resources will be used to

maximum benefit. All ministries have reviewed their priorities and

programmes. The reorganization of government programmes, the creation

of the office of the auditor-general and the expansion of Treasury

Board staff all reflect this government's concern that every budget

dollar is effectively used.

Mr. Speaker, the budget I am introducing today on behalf of the

government calls for total expenditures of $3.83 billion in the fiscal

year 1977-78. This is only a 5.9 per cent increase over the current

year's budget. I might say that I am told that this is the lowest level

of increase over a previous year since the year 1962-63.

Within this limited increase we have redirected expenditures to

allow for substantial increases in health care, education and

employment programmes. In my budget speech I present the table of

expenditures for each department, comparative budget estimate for last

year and the net budget for the upcoming year.

As I said earlier, ministries for the first time are being charged

rent for the government building space they occupy and for the

operation and maintenance costs associated with that space. The charge

for publicly owned space will be comparable to the charge for privately

owned space. Similarly, government use of computer services is being

established on a more businesslike basis with each ministry being

charged according to use. Thus, for the first time, ministry estimates

will reflect the total cost of delivering a programme. These steps will

improve cost control and use of resources.

Expenditures for the ministries in 1977-1978 are increased a total

of $33 million for the rental charge upon government-owned buildings.

This appears for the first time in next year's budget.

From the estimates of expenditure which will be tabled in the House

this afternoon, members will note the ministries are presented to

reflect the reorganized structures introduced by the government last

fall, including the change in designation of departments to ministries.

Also, ministries have been grouped in three categories: general

government, resource-related and services to people.

There is again this year a deduction from the amount voted for each

ministry entitled "staff reduction salary savings." The total saving,

which results from constraints on the hiring level of the

permanently-established public service, amounts to $36 million.

The appropriation for the operation of the Legislative Assembly,

which covers the salaries and expenses of members, officers and staff,

increases by $300,000 to $3.6 million. Appropriations for the offices

of the opposition are increased $28,672, or by 12.3 per cent, next year.

A budget of $119 million is submitted to cover the Ministry of

Finance expenditures in 1977-1978. This appropriation includes sums for

interest costs on the provincial debt, payment of natural gas producers

federal income tax on deemed income, and salary contingencies and

management benefits for public service employees. For the first time,

funds are provided for Treasury Board staff, including staff

transferred from the Public Service Commission and forming the

Government Employee Relations Bureau.

The comptroller-general has certified the 1975-1976 deficit under

the British Columbia Deficit Repayment Act, 1975-1976 is $261,447,790.

Expenditures under the executive council are estimated at $714,000 in 1977-1978, which is up $77,000 over this year.

The appropriation for the Ministry of the Provincial Secretary and

Travel Industry is raised $10.7 million to $107.7 million, an increase

of 11 per cent over 1976-1977.

Postal branch expenditures will rise $1 million to $4.5 million

because of general increases in postal rates announced by the federal

government. For first-class mail, the increase will total 50 per cent

[ Page 263 ]

between September, 1976 and March, 1977, and approximately 20 per

cent for many other classes of mail. An amount of $100,000 is provided

in the grants and special services and events vote for Captain Cook's

bicentennial celebrations. The provincial and resource museums' vote is

increased to $3.7 million to maintain existing programmes. The travel

industry branch will require $6 million in the coming year to promote

tourism in the province.

MR. WALLACE: Why don't you just bring down the ferry fares?

HON. MR. WOLFE: Government employee benefits require

additional money next year: $1.8 million more for a total of $13.2

million for unemployment insurance and workers' compensation charges;

and $4.9 million more, to a total of $58.4 million, for pensions and

retirement benefits.

The Ministry of the Attorney-General spending estimates for

1977-1978 total $147.1 million compared with $117.6 million in

1976-1977, an increase of $29.5 million.

RCMP costs are up $2.6 million under the contract with the federal

government. The steady increase in offences and complexity of cases has

resulted in an increase of $7.2 million in the costs of courts, Crown

counsel and corrections.

A number of the regulatory activities long associated with the

Attorney-General ministry have been transferred to the Ministry of

Consumer and Corporate Affairs.

The budget for the Ministry of Economic Development is increased

18.5 per cent to $7.1 million for 1977-1978 from $6 million in the

previous year. Major emphasis from the increase will be expansion of

export development activities to further stimulate the creation of

new jobs and export sales income, the strengthening of the statistical

data compilation capacity, and establishment of a tariff analysis unit

to make recommendations on British Columbia's position for tariff

reform. In addition, the ministry will continue to co-ordinate

large-scale resource development in the province with a view to

diversifying economic activity on both a sectoral and regional basis. A

primary example of this is the planning and co-ordination involved in

the development of British Columbia's northeast coal resources.

The appropriation of $45.5 million for the Ministry of Environment

in 1977-1978 allows the continuation of the many programmes designed to

ensure the preservation of our precious environment.

The budget for the Ministry of Agriculture of $64.6 million in

1977-1978, a one-year increase of 9.8 per cent, shows the determination

of the government to maintain a viable food and agriculture industry in

this province. Expanded resource activity will be encouraged, with

emphasis on the development and demonstration of range reseeding

equipment. Priority will be given to increased development of

biological controls for certain serious insect pests. Variety

improvement work with fruits and vegetables will assist in adapting

production to market demand. Continued support for promotion of British

Columbia food products is also indicated. The ministry will participate

with the federal government in a major farm development programme for

British Columbia Indian farmers.

The total appropriation for the Ministry of Energy, Transport and

Communications is reduced 37 per cent to $64.3 million next year. Of

the $37.4 million decrease, $29.2 million results from the

establishment of the British Columbia Ferry Corporation, effective from

January 1, 1977. The province transferred ships and terminals to a value

of $260 million to the corporation for a nominal sum and will own all

its shares. The budget includes $25 million for the payment of the

annual highway-equivalent subsidy to the Ferry Corporation. Apart from

the provincial government subsidy, the corporation is expected to meet

operating costs and capital costs of maintenance of the fleet and

terminals from ferry revenues derived from the user of the ferries.

Responsibility for the automobile insurance refund programme has been

transferred to the Insurance Corporation of British Columbia.

The Ministry of Mines and Petroleum Resources is allocated $8.6

million next year. Increased support is given to the prospectors'

assistance programme, and control of coal mine development and

operations is to be strengthened.

Expenditures of the Ministry of Forests are increased to $104

million in 1977-1978 and include $2 million more to control serious

major outbreaks of insects and $700,000 more for an intensified

range-management programme. The British Columbia Research Board has now

been established as a co-ordinating agency within the ministry's

research programme to service the four agencies practising forest

research in the province — the federal and provincial governments,

forest industry and universities. Greater emphasis is being placed on

construction and upgrading of existing primary forest access roads for

the present and future management of Crown forests and other resources

and for public access.

The appropriation for the Ministry of Highways and Public Works for

1977-1978 is $336 million, up $61.5 million from $274.5 million in

1976-1977. A greatly expanded construction programme to upgrade and

extend the province's highway system is planned as part of the

government's overall job creation effort. The appropriation for highway

construction, therefore, is increased by over $70 million to $179.9

million.

[ Page 264 ]

Education continues to be a high priority of this government. The

budget for the Ministry of Education for 1977-1978 is $947.7 million,

which is up 10.9 per cent, from $854.3 million in 1976-1977.

As in previous years, the largest single expense in the ministry's

budget will be for the public schools system in the amount of $563.7

million. There is provision in this budget for $191.9 million for the

universities, up from $172 million in 1976-77. Funding of community

colleges is increased to $118.6 million, from $107 million in 1976-77.

The largest single expenditure in next year's budget is for health

care under the Ministry of Health. The province's comprehensive

health-care programme requires an estimated $981.2 million, an increase

of $100.7 million or 11.4 per cent over 1976-77. This budget amount

represents more than one-quarter of the total 1977-78 budget. Of the

increase, $62.4 million relates to the increased cost of hospital

programmes, and $14.8 million to increased costs under the Medical

Services Plan. The emergency health services appropriation is increased

$3.1 million, to allow for the improvement in the air ambulance

service, increased production of ambulances and expansion of the

ambulance crew training programme.

Expenditures for the Ministry of Human Resources in 1977-78 are

estimated at $569.8 million. Services for senior citizens and

handicapped persons will cost $167 million, of which $108.9 million

represents the GAIN programme for seniors and handicapped persons. The

adult-care programme, that provides care in boarding and rest homes for

the elderly in need, accounts for another $41.7 million.

A total of $194 million is allocated to the income assistance

programme. This programme provides income maintenance, special needs,

educational upgrading, vocational training, and work incentives to

persons in need. The full-year cost of benefits extended this fiscal

year to qualifying persons, in the 55-to-59 age group and to

single-parent families, is $34 million and $17 million more is provided

for this in next year's budget.

Family and children's service expenditures are estimated at $60.3

million in 1977-78. The Pharmacare programme will now provide

assistance in the purchase of prescription drugs for everyone in

British Columbia, and $26 million is provided next year. Special

programmes for the retarded will cost an estimated $39.4 million in

1977-78.

Mr. Speaker, expenditures under the Ministry of Human Resources for

1977-78 are one of the three largest allocations in the budget.

Total expenditure for the Ministry of Municipal Affairs and Housing

for 1977-78 is $223 million. Financial assistance to local governments

and regional districts has been provided to the extent of $140.7

million for next year, an 11.7 per cent increase.

Assistance to enable as many residents of the province to own their

own homes, and also to ensure an adequate supply of affordable rental

accommodation for all types of families, remains a commitment of this

government. A total of $71.8 million is budgeted for these purposes in

1977-78.

The provincial homeowner grant programme is being expanded this year

for homeowners 65 years and over. Legislation will be introduced, Mr.

Speaker, increasing the maximum property tax grant for this group by

$50 to $430. The additional money for this increase is also included in

the budget for the Ministry of Education.

The estimates of expenditure for the Ministry of Labour for 1977-78

total $35.5 million, an increase of 80.3 per cent over 1976-77. This

substantial increase reflects the ministry's responsibility for

development and administration of job-skills training and employment-opportunities programmes for the government. The budget

incorporates $15 million for job-creation programmes, particularly

youth seasonal employment activities.

Estimates for 1977-78 are intended to allow the ministry to

increase activity in the apprenticeship-training programme areas and

develop new initiatives for training in industry. Mr. Speaker, in the

apprenticeship-training programmes over 450,000 training days are

provided in the ministry's estimates, as well as funds for

training-on-the-job programmes.

The conduct of labour-management relations is a primary

responsibility of this ministry, and the continued high level of

funding for these programmes next year represents this government's

commitment to assist and improve the collective bargaining process. The

services provided in this area are extensive — including mediation,

arbitration and the activities of the British Columbia Labour Relations

Board.

Of considerable importance to the government are the ministry's

programmes and expenditures in the areas of employment standards,

occupational environment and related inspectional activities and human

rights. Funds are also provided to enable the ministry to continue with

its functions of co-ordination of government programmes for British

Columbia's native Indian population.

Establishment of the Ministry of Consumer and Corporate Affairs

reflects a broader commitment of the government to the promotion of

fair dealing in the marketplace and protection of the public as

consumers, investors and borrowers.

In addition to the former Department of Consumer Service and the

corporate, financial and regulatory divisions from the Department of

the Attorney-General, the new ministry is responsible to the

Legislature for the rentalsman's office and the Rent Review Commission,

as well as for the control

[ Page 265 ]

and distribution of liquor in the province.

The 1977-78 budget for this ministry is $8.6 million, compared with $7.4 million in 1976-77, an increase of 16.9 per cent.

The Ministry of Recreation and Conservation has responsibility for

the government's recreational activity programmes and for conserving

our archaeological and historic sites. In the latter capacity the

ministry will be working with communities to recognize the heritage

development potential of British Columbia. Expenditures of $54.9

million in 1977-78, compared with $44.5 million in 1976-77, show an

increase of $10.4 million or 23.4 per cent. An $8 million appropriation

for community recreational facility development is the major part of

this increase.

Now, Mr. Speaker, I'd like to turn to the financing of our Crown

corporations. Fund requirements of the provincial Crown corporations

and agencies for capital projects and working capital advances are

supplied from provincial trusteed accounts, the Canada Pension Fund and

market borrowings.

In fiscal year 1976-77 to date, the province has provided $1.04

billion in investment funds to the Crown corporations. Of this amount,

provincial trusteed funds have supplied $182 million, Canada Pension

Fund $185 million, and market borrowings $675 million.

I include a table demonstrating a list of the Crown corporations,

the extent to which they borrow under provincial trust funds, Canada

Pension Fund and market borrowings. During the fiscal year to date, the

British Columbia Hydro and Power Authority obtained $675 million from

two market borrowings. These two issues were made in the United States

because of the availability of funds at significantly lower interest

rates than could be obtained in Canada.

In July, 1976, $500 million in U.S. funds was raised through the

private placement of 20-year sinking fund bonds with an interest coupon

of 9-5/8 per cent. In December, 1976, a public issue of $175 million

was also made in the United States. These sinking fund bonds have a

25-year term and an interest coupon of 8-5/8 per cent. Both were sold

at par. The Authority also borrowed $50 million from provincial

trusteed funds.

I have introduced legislation in the House to increase the borrowing

power of the Authority from $3.5 billion to $4.15 billion. This

increase is needed to allow the Authority to borrow funds up to this

amount to meet its capital construction requirements.

In this fiscal year to date the British Columbia Railway Company has

received $140 million in investment funds — $105 million from

provincial trusteed funds and $35 million from the Canada Pension Fund.

During the year the $25 million balance outstanding of Series R and RR

parity development bonds was retired.

The British Columbia Regional Hospital Districts Financing Authority

has provided $65.6 million during 1976-1977 to date to regional

hospital districts for hospital construction. The British Columbia

School Districts Capital Financing Authority has made available $99.8

million for school construction to school districts in the same period.

The newly established British Columbia Buildings Corporation borrowed

$12 million in October, 1976, to finance its government building

programme.

For the balance of the current fiscal year the requirements of the Crown corporations are estimated to be $64 million.

The Crown corporations are estimated to require $1.3 billion in

investment funds in fiscal year 1977-1978. This amount includes $733

million for British Columbia Hydro, $203 million for British Columbia

Railway, $108 million for hospital construction, and $120 million for

school districts. Three Crown corporations which this administration

formed will be borrowing for their capital requirements in 1977-1978:

$80 million for British Columbia Buildings Corporation to meet the

capital cost of government buildings; $15 million for British Columbia

Ferry Corporation; and $30 million for British Columbia Educational

Institutions Capital Financing Authority for construction at the

universities and British Columbia Institute of Technology. Urban

transit capital requirements are estimated at $11 million.

Pension, trustee accounts, and sinking funds administered by the

government and the Canada Pension Fund are estimated to yield

approximately $700 million next year toward these requirements.

Now, Mr. Speaker, I turn to the revenue measures for 1977-1978. As I

indicated earlier, this government believes in financing the province's

operating expenditures from ordinary revenue sources whenever possible.

This philosophy places a fiscal responsibility upon the administration

and ensures an early accountability of its actions. In periods of

slower economic growth, as is being experienced around the world today,

the growth in government revenues also slows. Under our financial

philosophy this encourages government to make the most effective and

efficient use of the revenue it does receive.

The expenditure programme I have just outlined for the next fiscal

year requires an increase in revenues of $243 million over fiscal year

1976-1977 estimated ordinary revenues, or an increase of 6.8 per cent.

In my earlier discussion of federal-provincial relations, I

mentioned the measures which will replace the existing

Federal-Provincial Fiscal Arrangements Act after March 3 1, 1977.

The principle of the new measures agreed to between the federal

government and the provinces provides a reduction in the personal

income-tax rates

[ Page 266 ]

levied by the federal government. This reduction will be matched by

a corresponding increase in the provincial income-tax rate to help the

provinces meet the cost of certain shared-cost programmes that will no

longer be financed by transfers from the federal government.

These changes only affect the allocation of personal income-tax

revenues between the federal and provincial governments. The individual

taxpayer will find the increase in provincial tax is equal to the

decrease in the federal tax. The adjustment required to the British

Columbia personal income-tax rate to yield the revenue to be given up

by Ottawa has not been finally established. The exact financial

arrangements are expected to be worked out when federal-provincial

Finance ministers meet in Ottawa in early February. As soon as the rate

can be confirmed, this government will proceed with the necessary

amendments to provincial income-tax legislation to be effective from

January 1, 1977.

Although the margin available for reducing taxes, Mr. Speaker, is

small, the government proposes to make the following tax changes:

(1) The Succession Duty Act will not apply to new estates after

midnight tonight. This change is made to encourage the retention and accumulation

of capital by residents of British Columbia.

Mr. Speaker, it would be inconsistent for any government to

encourage investment in the province by individuals and private

entrepreneurs and, at the same time, maintain taxation policies which

discriminate against private investment. It would be hypocritical to

wring our hands over the extent to which outsiders are buying existing

family businesses or farms, when the government's actions have forced

people into a situation where they must sell those businesses to pay

succession duties. It is far better to allow investments built up

within the province over a lifetime to remain without confiscation than

to have the government force the unnecessary disposal of those assets.

Through an equitable tax system applying to current income earned in

the province, a reasonable contribution is obtained for the support of

government services from private investments. It would be shortsighted

to give up that permanent source of tax revenue for the sake of a

temporary boost to government income. Further, we must foster economic

growth if we are to provide work for those unemployed members of the

labour force anxious to contribute to the province's productive output

and for our young people as they enter the work force. A major part of

the provincial budget is expended on the education of our young people

and the only way we recapture some of that investment is by their

gainful employment within the province.

It would be illogical to complain of the unemployment rate among young people,

educated at considerable expense to the province, if we did not take actions

designed to encourage investment to give them permanent employment here. It

would be foolish to speak of encouraging residents to invest their capital and

build up their assets in British Columbia while the government was continuing

to levy a tax which would increase the probability that those assets would be

sold to outsiders.

There are five other provinces in Canada where no succession duties

are levied, including our neighbouring province of Alberta. If we are

to attract people to reside and invest here, we must not place any

unnecessary obstacles in their way. There are many alternatives open

for those looking for investment opportunities. Recent statistics show

an increase in the trend towards direct investment to other countries

by Canadians. To reverse this trend we must provide an investment

climate which is favourable to investment here.

Let me dispel the illusion that the revenues raised through

succession duties, or in any other manner, can be used by government to

create permanent jobs in a way which is as effective as private

investment. This government recognizes that continued investment by

private business is much preferred to investment by governments.

Governments frequently demonstrate their greatest inefficiency in

attempting to create jobs in areas previously considered to be the

responsibility of the private sector. Termination of the succession

duty will reduce our revenues by an estimated $13 million in 1977-78

because of the time-lag which occurs in collecting the duty. Revenue

from the imposition of succession duties in a full year averages about

$15 million.

Accordingly, I will recommend to the House that the Succession Duty Act be amended to effect this change.

(2) The Gift Tax Act will not apply to gifts made after midnight

tonight. The main purpose of this Act was to prevent people from avoiding tax

due under the Succession Duty Act. The yield from the tax in a full year is

approximately $500,000. There will be a recommendation to the House that the

Gift Tax be amended to effect this change,

(3) The social services tax regulations have been amended to

reduce the amount of tax levied on a mobile home to be used for residential

purposes. This change is effective at midnight tonight. The amendment will reduce

the application of the tax to the value of materials used in the fabrication

of a mobile home used for residential purposes, the same as for a conventional

house. There will be a significant reduction in cost to purchasers of these

homes, with the average saving estimated at over $500 per home. The consequent

reduction in revenue to the province will be about $4 million in a full year.

(4) Regulations have been made changing the

[ Page 267 ]

taxation of propane used for residential heating purposes from

the Social Services Tax Act to the Fuel Oil Tax Act, effective midnight tonight.

Propane is used primarily in areas of the province where householders do not

have access to conventional fuels such as natural gas. In heat equivalents propane

is less efficient and is generally priced higher than other fuels. A change

from an ad valorem to a volumetric base for the taxation of propane will establish

a more equitable taxation relationship with fuel oil.

Changing the taxation of propane used for residential heating

purposes to the Fuel Oil Tax Act will reduce the tax payable from 7 per

cent on price to 0.5 cents per gallon. For the average residential

propane user the annual amount of tax paid will drop from $40.32 to $6.

A full-year revenue loss to the province is estimated to be $600,000.

(5) Lastly, an amendment will be recommended to the Corporation

Capital Tax Act to allow mining exploration companies greater flexibility in

writing off their exploration expenses and thus reducing their capital subject

to tax. This change is to be effective January 1, 1977.

Mr. Speaker, I now include a table of revenues for the current year

and the budget year — the next year coming up — including all

provincial revenues.

Mr. Speaker, in conclusion, it should be evident from this budget

statement that we in British Columbia are still working our way out of

the financial and economic difficulties that we inherited. An economic

recovery would have been easy under the strong world economic

conditions that marked the first part of this decade. Under today's

conditions, the development we seek is going to take longer than anyone

anticipated. However, we have taken the necessary steps to place this

province and its people in a position to benefit from the economic

up-turn as it develops. We have restored the affairs of this province

to a sound financial footing and improved the management of the

people's money.

This budget reflects further this government's determination to

govern for the welfare of all groups in our society, those who are able

to contribute and those who are unable — the elderly, the sick, the

underprivileged, the handicapped and the unemployable; to follow

policies that will encourage economic activity; and to spend tax money

judiciously, and not in larger amounts than are received.

It is through such policies, this government believes, that we can

move back to being a free, vigorous and productive society in which

everyone can share the benefits.

Mr. Speaker, we urge all sectors of the British Columbia community to restrain their demands.

MR. BARRETT: The millionaires' budget.

HON. MR. WOLFE: This government is demonstrating its

commitment to this objective by presenting a budget which calls for a

restrained spending programme.

MR. BARRETT: A giveaway to the millionaires.

HON. MR. WOLFE: Such restraint is necessary if we are to

regain our competitive trading position and strengthen investor

confidence in doing business in British Columbia.

Mr. Speaker, a short-term easing of everyone's growing expectations

could bring greater benefits over a longer term. The challenge is there

for us all. The degree of the response will determine just how much

wealth can be realized for the advantage of all British Columbians.

Mr. Speaker, I move that Mr. Speaker do now leave the chair for the House to go into Committee of Supply.

Mr. Stupich moves adjournment of the debate.

Motion approved.

The House took recess at 4:46 p.m.

The House resumed at 4:53 p.m.

CORPORATION CAPITAL TAX

AMENDMENT ACT, 1977

Hon. Mr. Wolfe presents a message from His Honour the Lieutenant-Governor:

a bill intituled Corporation Capital Tax Amendment Act, 1977.

Bill 8 introduced, read a first time and ordered to be placed on

orders of the day for second reading at the next sitting of the House

after today.

BRITISH COLUMBIA PAYMENT TO

CANADA OF FEDERAL INCOME TAX

ON BEHALF OF NATURAL GAS PRODUCERS

REPEAL ACT

Hon. Mr. Wolfe presents a message from His Honour the Lieutenant-Governor:

a bill intituled British Columbia Payment to Canada of Federal Income Tax on

Behalf of Natural Gas Producers Repeal Act.

Bill 10 introduced, read a first time and ordered to be placed on

orders of the day for second reading at the next sitting of the House

after today,

GIFT TAX REPEAL ACT

Hon. Mr. Wolfe presents a message from His

[ Page 268 ]

Honour the Lieutenant-Governor: a bill intituled Gift Tax Repeal Act.

Bill 11 introduced, read a first time and ordered to be placed on

orders of the day for second reading at the next sitting of the House

after today.

SUCCESSION DUTY REPEAL ACT

Hon. Mr. Wolfe presents a message from His Honour the Lieutenant-Governor:

a bill intituled Succession Duty Repeal Act.

Bill 12 introduced, read a first time and ordered to be placed on orders of

the day for second reading at the next sitting of the House after today.

Hon. Mr. Wolfe presents the return submitted in accordance with

section 85(4) of the Taxation Act, remissions and refunds made under

the authority of

section 85(1), (2) and (3) of the Taxation Act, RSBC,

1960, during the calendar year 1976.

Hon. Mr. Gardom moves adjournment of the House.

Motion approved.

The House adjourned at 4:59 p.m.

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