1986 Legislative Session: 4th Session, 33rd 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)

THURSDAY, MARCH 20, 1986

Afternoon Sitting

[ Page

7437 ]

CONTENTS

Tabling Documents –– 7437

Budget Address. Hon. Mr. Curtis –– 7437

Mr. Stupich

Education Excellence Appropriation Act (Bill 4). Hon. Mr. Curtis

Introduction and first reading –– 7449

Health Improvement Appropriation Act (Bill 5). Hon. Mr. Curtis

Introduction and first reading –– 7450

Assessment Amendment Act, 1986 (Bill 7). Hon. Mr. Curtis

Introduction and first reading –– 7450

Income Tax Amendment Act, 1986 (Bill 8). Hon. Mr. Curtis

Introduction and first reading –– 7450

Motor Fuel Tax Amendment Act, 1986 (Bill 9). Hon. Mr. Curtis

Introduction and first reading –– 7450

Insurance Premium Tax Amendment Act, 1986 (Bill 10). Hon. Mr. Curtis

Introduction and first reading –– 7450

Taxation Statutes Amendment Act, 1986 (Bill 11). Hon. Mr. Curtis

Introduction and first reading –– 7450

Forest Stand Management Fund Act (Bill 6). Hon. Mr. Heinrich

Introduction and first reading –– 7450

THURSDAY, MARCH 20, 1986

The House met at 3:05 p.m.

Prayers.

HON. MR. NIELSEN:

Mr. Speaker, on behalf of the government and members of the assembly,

may I welcome the many distinguished guests in the House today,

representatives from industry, labour, the investment sector and

governments. Many of our visitors come from outside of the province and

many from outside the country. I would like to welcome them all.

MR. HOWARD:

Her Majesty's Loyal Opposition joins the government in welcoming the

guests today. I hope that they go away pleased and contented.

HON. MR. NIELSEN:

Mr. Speaker, I would like to advise the House that by agreement,

question period today will be deferred until tomorrow morning.

MR. HOWARD: I rise on a point of order. The point relates to the televising of the proceedings today.

is a custom for the budget presentation of the Minister of Finance to

be televised. There was a select standing committee of this House that

unanimously reported to the House and recommended, or thought that it

was a good idea, that the proceedings of the House should be televised

to the whole of the province. That hasn't yet come to be, but I submit

that we can make a move in that direction by, as again is the custom,

Your Honour's putting the question to the House as to the possibility

of televising the address tomorrow of my colleague the member for

Nanaimo (Mr. Stupich), who will make the first response to the budget.

If your Honour would do that, and we could test the House in that

regard, I am sure we would go a great deal in the direction of bringing

the proceedings of this House to all of British Columbia.

MR. SPEAKER:

As the Chair has advised the member on previous days and in a previous

manner, such a motion cannot be put at this particular time and

certainly not in the guise of standing on a point of order; and if it

is the wish of the House to undertake that kind of coverage, the Chair

is more than pleased to so do. But hon. members cannot do so without

the proper steps being taken, and hon. members are aware of the steps

that must be taken in so doing.

MR. HOWARD: I put that to you to test the sense of the House.

MR. SPEAKER:

Order, please, hon. member. As the member is fully aware, there is a

time and a method for a motion of that kind to be put, this being

neither the time nor the place; but I'm sure it can be addressed in the

proper theatre.

MR. HOWARD: Your Honour, you're

doing exactly the opposite to what you did on July 8, 1983. On that day

you put that question to the House. You asked the House for leave to

televise the remarks of the member for Nanaimo.

Interjections.

MR. SPEAKER: One moment, please.

Hon.

members, notwithstanding the reference by the hon. member to actions in

1983, the Chair may have inadvertently or inappropriately put such a

motion to the House, but in view of what has happened in the last

little while and the motions that have been put forward, this is not

the time for such a motion to be put to the House. Members are aware of

the rules that guide us in this House, this motion being no different

from any other that would be so put and so refused by the Chair.

Orders of the Day

HON. MR. NIELSEN: Mr. Speaker, the budget debate.

HON. MR. CURTIS:

Mr. Speaker, I move that the House at its next sitting resolve itself

for this session into a committee to consider supply to be granted to

Her Majesty.

Motion approved.

Hon. Mr. Curtis

tabled the public accounts of British Columbia for the fiscal year

ended March 31, 1985 in accordance with

section 8 (3) of the Financial

Administration Act.

HON. MR. CURTIS: Mr. Speaker, I

move that the public accounts for the fiscal year 1984-85 be referred

to the Select Standing Committee on Public Accounts and Economic

Affairs.

Motion approved.

Hon. Mr. Curtis tabled the comptroller-general's interim financial statement for the ten months ended January 31, 1986.

ESTIMATES OF SUMS REQUIRED

FOR THE SERVICE OF THE PROVINCE

Hon. Mr. Curtis presented 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, 1987, recommending the same to the Legislative

Assembly.

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

Motion approved.

HON. MR. CURTIS:

I move, seconded by the hon. Minister of Human Resources (Hon. Mr.

Nielsen), that Mr. Speaker do now leave the chair for the House to go

into Committee of Supply.

BUDGET ADDRESS

HON. MR. CURTIS:

Mr. Speaker, I'm honoured to present the 1986-87 budget for the

province of British Columbia in Victoria on this beautiful first day of

spring.

[ Page 7438 ]

this Social Credit administration enters its second decade in office,

we can look back with pride on our accomplishments during a turbulent

and difficult period in the world economy. Through decisive actions

over the past four years, we have put into place a strategy to move

British Columbia forward with confidence towards the challenges of the

twenty-first century.

[3:15]

have chosen to build a strong economic structure that will stand the

test of time. It has taken patience and hard work, and at first some

questioned our approach. We built a solid foundation by getting our

financial affairs in order at a time when the deficits of other

governments were galloping out of control. At the same time we began

the critical process of bringing down the cost of doing business and

providing public services, to restore the competitive position of our

economy. Last year in this House we established the basic structure of

economic renewal with a major tax reform and important public

investments. Just over one year ago I presented to the Legislative

Assembly a comprehensive set of initiatives, including: major tax cuts

to make business more competitive and important tax incentives to

stimulate new investment; industrial development programs to assist new

and expanding businesses; and investments in the natural resource base

and in major construction projects to provide jobs now and in the

future.

In the months that followed, we added more elements

to that economic renewal program: the Provincial-Municipal Partnership

Act, special industrial electricity discounts, the commissioner of

critical industries, the public sector purchasing policy, and the

Special Enterprise Zone and Tax Relief Act, among others. Our program

has helped British Columbia join the ranks of the leaders in the

worldwide race for new investments and jobs.

Today I shall announce further measures to strengthen and diversify

the provincial economy, building on that framework which was created

last year. I shall focus particularly on one element needed to make our

structure strong and secure: that is, people — skilled, educated,

adaptable people; optimistic and healthy people. To this end, I can

announce today new multi-year funding packages for health and for

education. These will not only provide additional funding but will also

tap the energy and the creativity of our educators and those who

provide our health care services to assist in determining priorities.

We believe this year of Expo 86 represents for British

Columbians not only the successful culmination of many years of

planning and hard work but also the beginning of a new period of growth

and prosperity, an era marked by an expanded world role for this

province. The talent and initiative of our people, supported by dynamic

and creative government policy, will, I believe, give us the future we

all seek.

The economic environment remains challenging. In

1985 we faced highly competitive international markets, generally

declining commodity prices, moderate worldwide economic growth and a

very modest increase in the value of international trade, the same

challenges we have faced since the international recession of 1981-82.

Despite tough competition, 1985 saw the strongest period of economic

performance since that recession began.

It's encouraging to

see that our ability to meet and overcome these challenges is growing.

We've witnessed, in the last year, excellent cooperation among all

groups in our economy: employers, workers, municipalities and the

provincial government. This unprecedented spirit of partnership was

demonstrated in very many ways.

Employers and workers are

cooperating by entering into flexible compensation packages that are

responsive to market conditions. These agreements place a higher value

on preserving employment and improving output than on propping up

outdated work practices.

To date, Mr. Speaker, 111

municipalities have entered into partnership agreements with the

provincial government and many more are pending. Municipal property tax

reductions, accompanied by provincial government assistance, have been

granted to industrial firms throughout the province. These actions have

already created many new jobs.

The commissioner of critical

industries, Mr. Speaker, in only 11 months has saved or restored at

least 1,500 jobs by bringing people together. Mines, sawmills and

plywood plants that would have otherwise gone out of business are

operating successfully. Plants threatened with closure have been kept

running and closed operations reopened by showing people ways in which

to cooperate. Concessions have been made by every person concerned:

employees have given up wage increases, often in exchange for a share

of profits; municipalities and the provincial government have forgone

property taxes; financial institutions have deferred loan repayments

and reduced interest charges; and British Columbia Hydro has lowered

electricity rates.

The commissioner's efforts have paid off

not only in jobs, but also in output. In addition to the 1,500 people

who are working today in communities throughout the province, these

plants are doing over $200 million in business annually, and their

continued operation will contribute over $10 million a year to

provincial revenues. None of this would have happened without

cooperation and flexibility.

This flexibility is essential,

Mr. Speaker, if we are to improve our standard of living in a world

economy subject to rapid change. This province has undergone a

permanent transformation over the past four years. Our export

industries have succeeded in adapting to tougher world markets by

boosting productivity and lowering costs. But success must not be taken

for granted. We must continue to adapt if we want to maintain and

further advance our competitive position.

There are some

favourable signs beyond our borders as well. Last year, after several

years of unprecedented strength, the United States dollar, and with it

the Canadian dollar, began a sharp decline against the Japanese and

western European currencies. This foreign exchange correction has

markedly improved the competitive position of British Columbia

producers in our overseas markets. In Japan, our most important

offshore market, the increase in the foreign currency value of the yen

has reduced the effective cost of our commodity exports more than 30

percent in the two years up to February 1986.

Another

favourable sign is the growing interest among Canadians in removing

international trade barriers. This province shipped international

exports worth approximately $12 billion in 1985, directly supporting

hundreds of thousands of jobs. We in B.C. have much to gain from trade

liberalization, and much to lose if protectionist attitudes prevail and

trade barriers are erected.

[ Page

7439 ]

British Columbia's position on trade negotiations is very clear. We favour

multilateral negotiations to address the new types of barriers and new trade

issues that have arisen since the last round of talks under GATT. We also support

the federal initiative to negotiate a bilateral trade agreement with the United

States to secure access to Canada's largest foreign market. The two goals

are not inconsistent, Mr. Speaker. It is reasonable and appropriate, within

the context of GATT, to have a special agreement covering Canada-United States

trade, the largest international trading relationship in the world. Many issues

arise in such an intensive relationship that are too complex or too specific

perhaps to be dealt with effectively in multilateral talks. Our other trading

partners, who collectively take more of British Columbia's products than

the United States, may rest assured that a Canada-United States agreement will

not reduce our commitment to multilateral talks or to overseas trade.

Trade

negotiations are always difficult. Canada's negotiators must take a

strong position and must represent all regions. While the federal

government must speak for Canada, provincial participation is essential

to reflect regional interests and to ensure comment on matters under

provincial jurisdiction. British Columbia will seek security of access

for our lumber and other resource products, as well as greater

opportunities to sell our newer products, such as electronic equipment.

shall also look for reduced barriers to trade in services such as

engineering and business consulting, which have the potential to grow

rapidly and create thousands of high-quality jobs for British

Columbians.

Finally, while we are committed to more open

trade, we recognize that some sectors of our economy may find it

difficult to adjust to a more open trading environment. We shall, in

this government, be working with Ottawa to develop appropriate measures

to assist those affected during that adjustment period.

would also like to offer cautions concerning several threats to our

improving prospects. First, and it is no news, international financial

markets continue to be volatile due to large imbalances in

international payments and the massive debt loads of many less

developed countries. The resulting gyrations in interest and exchange

rates could inhibit investment and disrupt our export markets.

Second,

the recent sharp decline in oil prices, while welcome in many respects,

could be disruptive. Reasonable stability in price and supply of this

vital commodity is essential to the industrial world. Continued

weakness in oil prices could negatively affect markets for other energy

sources, including natural gas, electricity and coal.

Third,

we remain concerned about the size of the federal deficit and the

measures taken to bring it under control. The massive tax increases

announced in the May 1985 budget and the February 1986 budget will slow

the growth of the national economy, increase the inflation rate and

damage the competitive position of our producers.

Let me be clear about this. We recognize the federal deficit as a national

problem, the result of 15 or 20 years of fiscal mismanagement, and we have agreed

to cooperate in bringing it down. Accordingly we have accepted the recently

imposed reduction in the rate of increase of federal contributions to health

and post-secondary education. Having put our own house in order, we are able

to accept funding limitations and still increase our own spending on these programs.

We have also offered to work with the federal government to eliminate duplication

of activities between the two levels of government and identify areas where

we can work jointly to reduce the cost of providing public services.

is my hope that the federal government will rely increasingly on these

and other cost reduction measures, rather than tax increases, to bring

down its deficit. Make no mistake, if the current federal government

does not succeed, the future impact on all taxpayers and the threat to

social services will be far greater than the burden of current federal

tax increases and expenditure limitations.

Mr. Speaker, I

want to touch briefly on British Columbia's economic performance during

the past year and our outlook for 1986. In 1985 the provincial economy

experiebnced its est year since 1981, with estimated real growth of 3

percent. Improved performance in British Columbia and Canada was

achieved despite weaker growth experienced by our major trading

partners. The United States economy grew only 2.3 percent in 1985, well

below the rate of the previous year. In the industrial world as a

whole, economic growth slowed to less than 3 percent from 5 percent the

year before. This slowdown contributed to weaker markets for our

natural resource products. Canadian dollar prices of our major

commodity exports fell an average 2.8 percent for the year.

Despite

the lower prices, British Columbia's sales volumes were high, and the

total value of commodity exports appears to have increased slightly.

Cost control, higher productivity and lower taxes have enabled the

mining and forest industries to retain their markets in the face of a

general worldwide oversupply.

The lumber industry is a good

example of how exporters have coped. Although prices for lumber in 1985

were 5 percent higher than in 1984, they were still considerably below

the levels of 983. The industry has overcome the burden of the price

decline over the past two years through greater productivity,

increasing its production volume by 7 percent. Several of our major

commodities experienced export price declines in 1985, with wood pulp

down by 16 percent, natural gas 16 percent and coal 4 percent. Some

other commodity prices improved last year. In addition to the increase

for lumber which I have noted, copper recorded an increase in price of

9 percent, following several years of low prices, and newsprint rose by

10 percent.

Mr. Speaker, the brightest spot in our exports

during 1985 was the demand for electricity. British Columbia Hydro

earned $283 million from these exports to the United States last year.

That compares with $123 million in 1984.

[3:30]

Several indicators demonstrate the growing confidence among

consumers in British Columbia. Retail sales increased 8.8 percent in

1985 and personal income approximately 6 percent. Housing starts rose

by 11.1 percent to almost 18,000 units. Employment is also on a steady

uptrend. Last year there was an average increase of 26,000 jobs in the

province, equal to growth of 2.2 percent in employment. Although

moderate by comparison with the 1960s and 1970s, this was the largest

increase in employment since 1981 in this province. Job creation has

continued into 1986, and in February there were 50,000 more people at

work in this province than one year earlier — an increase of more than 4

percent. The unemployment rate in February was down a full 2 percent

from last year.

[ Page 7440 ]

Despite

this good news, we are still not satisfied. Creating more jobs remains

our number one priority, but there are no shortcuts, either through

handouts or make-work programs. The only permanent way to increase

employment is through investment: investment in people, by offering

them the opportunity to acquire the training and skills needed in a

complex and dynamic society, and investment in productive plant and

equipment.

The financial position of our natural resource

industries remains weaker than it was five years ago, and current

commodity prices are too low to justify significant expansions.

Nevertheless, investment is now more diverse, and the outlook has been

improving, reflecting the success of our multi-year program to

strengthen British Columbia's economy through cost-containment, tax

reductions, incentives and key public investments in resources and

infrastructure. As these benefits of past initiatives gather momentum,

and as the initiatives I shall propose today take effect, 1986 will see

further increases in both business investment and housing construction.

recent months there has been renewed optimism about the economic

prospects for Canada. Most forecasters now predict that despite federal

budgetary measures, economic growth will remain relatively strong for

the next few years and inflation will remain low.

British

Columbia's economic growth is expected to increase again in 1986 to the

highest level in five years. There are many reasons to expect this

performance. The economies of the U.S. and western Europe are forecast

to improve, and growth in Japan should decline only slightly. So

increased activity among these major trading partners will raise demand

for our products. The decline of the Canadian dollar against the

currencies of those countries will aid our competitive position.

Indicators for retail sales, housing starts and manufacturing shipments

show well-established uptrends. Measures taken by this government over

the past three years to strengthen the long-term competitiveness of our

producers are having a significant and positive effect. Inflation in

British Columbia is expected to remain at a low level.

Mr.

Speaker, Expo 86 and the millions of visitors it will bring to British

Columbia will provide a major stimulus in 1986 and firmly establish our

province as a desirable location for tourism and investment in the

years ahead.

We expect the rate of growth in provincial

gross domestic product to be 4 percent in 1986. Employment is expected

to increase by 3.4 percent, or an average of 42,000 new jobs,

significantly more than in 1985. This should result in a further

decline in our average unemployment rate to 12.9 percent from 14.2

percent in 1985, despite an expected increase in the province's labour

force as people respond to employment opportunities connected with Expo

and a generally expanding economy.

Although there was a

small net outflow of people to other provinces in 1985, British

Columbia's population continued to grow. Between 1983 and 1985 our

population increased by more than the overall increase in the other

three western provinces combined. This growth will be compounded by

renewed inward movement in 1986 and future years, adding more people to

the labour force and making growth and job creation all the more

essential.

With respect to the fiscal plan, the cornerstone

of the government's fiscal policy over the past four years has been the

effort to provide affordable government and avoid imposing major tax

increases on the people of this province. The major structural shift in

commodities markets which accompanied the 1981-82 recession caused a

sharp downturn in provincial government revenue, creating a threatening

deficit and requiring urgent corrective action.

We had two choices: cut spending or raise taxes. The wiser course — restraining spending — was

the one that we chose. After rising above $1 billion in 1983-84, the

deficit has been reduced in each of the following two years, and the

trend downward will continue in 1986-87.

Our actions have

been designed to ease the transition from the inflationary boom

conditions of the late 1970s to the stable, perhaps even deflationary,

conditions of today. Let me review the record briefly. Members will

recall that we did act swiftly and decisively with the introduction of

a comprehensive restraint-in-government program in February 1982. With

the clear support of the people of British Columbia, we carried this

process of reducing the size and the scope of government through 1983

and 1984.

Our plan was straightforward: stringent control

of spending to reduce waste and increase efficiency; modest increases

in a few taxes and fees; limits on program expansion; elimination or

scaling-down of many inessential programs; reduction in staffing

levels; and control of public sector wages and salaries. This

stabilization program was opposed by some, especially those

special-interest groups who refused to recognize that the public sector

could not expand indefinitely while others were bearing the brunt of

the world recession. Fortunately, most British Columbians recognized

the need to build this foundation for recovery.

Cost

control was balanced by investment in key public projects such as Expo,

SkyTrain, the Annacis crossing, the Coquihalla highway and smaller

highway and social service projects throughout the province. These

investments provided jobs to carry us through the most difficult part

of the economic cycle and created valuable public facilities which will

serve individuals and businesses in this province for many years to

come.

Last year the benefits of that fiscal discipline were

translated into a major tax reform that will reduce business costs by

almost $1 billion in three years. In this, the second year of the

program, taxes on business in the province will decline by more than

$350 million from the level that would have prevailed without tax

reform. These efforts also permitted us to introduce a broad range of

other business incentives, as well as new investments in our basic

resources and our public facilities.

Our economic renewal

initiatives provide stimulus now and will pay handsome dividends for

years to come. As a result, the jobs of British Columbians now working

are more secure, and the employment prospects of those not yet working

are substantially brighter in the province.

For the future,

we remain committed to the goal of reducing and eliminating the

deficit. This year's expenditure initiatives, as well as the continuing

highway construction and expansion program and a second year of tax

reductions, can be accommodated within the framework of continuing

deficit-reduction. At a time — and this is the essence of my remarks today — when other governments in Canada are forced to retrench by cutting programs and increasing taxes,

[ Page 7441 ]

our

vital programs are secure and our taxes are being reduced. This would

not have been possible without the solid fiscal foundation we began

building four years ago.

We've also helped both individuals

and industry by stabilizing or reducing the cost of services provided

by government agencies, and any increases in charges over the next few

years will be generally below the rate of inflation. For example, as we

know, the Insurance Corporation of British Columbia this year reduced

automobile insurance rates for most British Columbia residents and

businesses by an average of 6 percent. I say that not to distress those

who have come from other parts of Canada, but automobile insurance

rates have been reduced in this province. Electricity rates charged by

British Columbia Hydro will be stabilized this year, and increases over

the next few years should be below the general rate of inflation.

The

Workers' Compensation Board has lowered the assessment rates charged to

most employers. At the same time, benefits for injured workers have

increased as a result of automatic indexing, not matched in most other

provinces. Most strikingly, this has been achieved during a period in

which the board has almost eliminated its unfunded liability. Only two

years ago, this shortfall exceeded $500 million and threatened the

financial stability of the board. Over the next few years, we expect

that the WCB will be able to further reduce employer assessments while

continuing to index benefits to inflation and raise the maximum benefit

level.

The British Columbia Ferry Corporation was able to

hold its major fares unchanged for this year, and will provide at the

same time more frequent service on main routes to accommodate visitors

to Expo. The British Columbia Railway Company is also operating

successfully, and reported record profits of $42 million in 1985,

following excellent results in 1984. The volume of freight carried by

the railway in 1985 was the highest in its history. The new Tumbler

Ridge line to the northeast coalfields is now a major contributor to

the railway's results, generating revenue sufficient to meet all direct

costs incurred on the line as well as to make a contribution to the

railway's operating profit.

Last year we concluded that the

railway could operate profitably on a commercial basis, and we removed

its historic exemption from sales tax, increasing government revenues

by an estimated $12 million annually. The board of directors is

confident that the railway can continue to operate profitably over the

medium term and has therefore decided to pay an annual dividend to the

shareholders, the people of the province. We expect the first dividend,

amounting to approximately $10 million, to be paid to the government

within the next one or two months.

[3:45]

Let

me turn now to the fiscal outlook for the year just ending and the new

year beginning next month. The deficit for the current year, 1985-86,

is now forecast at $948 million, $58 million more than originally

budgeted, but $46 million below the level of the previous year. The

increase from the original budget was caused mainly by higher spending

for forest fire suppression and additional authorized spending on

highway capital construction, as we accelerated projects originally

planned for next year in order to create additional employment. These

pressures, however, were partially offset by significant savings in

interest costs achieved by borrowing later in the year than was

originally expected. In addition, expenditures under the economic and

regional development agreement were lower because subsidiary agreements

with the federal government were concluded a little later than expected.

Mr. Speaker, in setting budgetary policy for next year I had five goals: firstly,

continuation of the economic renewal program started last year in order to strengthen

our economic base and to make British Columbia more competitive in attracting

investments and jobs; secondly, maintenance of essential social programs; thirdly,

provision for new programs to meet education and training needs as our economy

evolves and to enhance health care services; fourthly, further reduction in

the deficit to limit the annual debt service charges whose growth threatens

to take taxpayers' money away from public services; and fifthly, maintenance

of our low tax burden and further reductions where possible.

Designing

a budget to meet all of those goals was challenging. Although economic

growth will provide a boost, three major factors will curtail growth in

the government's revenue next year. Firstly, we must accommodate the

second year impact of last year's tax reform. This will reduce revenue

by a further $104 million in fiscal 1986-87. These tax cuts also

require a provincial government expenditure of $85 million in 1986-87

to compensate school districts for forgone property tax revenues. These

impacts, Mr. Speaker, are of course on top of the $165 million in tax

cuts which are carried forward from the fiscal year just ending.

Secondly,

as I said a moment ago, the decline in oil prices will have a severe

impact on government revenue. Oil and natural gas royalties, bonus bids

for Crown exploration rights and motor fuel taxes will drop by almost

$50 million from this year's level. I'm confident that in time lower

oil prices will stimulate economic growth, increase world trade and

raise demand for our other commodity exports. Although this will

eventually generate additional government revenue, this immediate

revenue shortfall must be accommodated in our budget plan.

Thirdly,

as I mentioned earlier the federal government has amended the

established programs financing formula under which contributions are

made to the provinces for health and post-secondary education. A

reduction in the annual escalation factor by 2 percentage points will

cost British Columbia $36 million in fiscal 1986-87 and an estimated

$650 million over the next five years. Since we intend to maintain and

enhance our health and post-secondary education programs, we shall have

to find offsetting funds within our budget.

The provincial

government's revenue for 1986-87 is estimated at $8.768 billion, an

increase of 7.3 percent over the revised forecast for 1985-86. The

expenditure budget maintains the basic funding levels for most

government programs and provides major new allocations for education

and for health care. Highway spending will continue at a high level,

and forestry funding will be increased to provide jobs now as well as

in the future. Total expenditure for fiscal 1986-87 is budgeted at

$9.643 billion, an increase of 5.7 percent over the revised forecast

for the fiscal year just ending.

The deficit, Mr. Speaker,

is forecast to decline again in 1986-87 to $875 million. I indicated

that this will be the third consecutive reduction in the deficit,

marking yet another step toward our goal of a balanced budget. I

reiterate that a lower deficit has been achieved despite the impact of

tax reductions and new expenditure initiatives amounting to

approximately $500 million in 1986-87.

[ Page 7442 ]

One

measure of our success is the reduction in the deficit from 2.2 percent

of gross domestic product in 1982-83 to an estimated 1.5 percent in the

coming year, a dramatic decline in the deficit burden on our economy.

Let me assure this House, however, that our satisfaction with this

achievement does not mean that we are complacent. Although the deficit

is declining, we shall have to borrow $800 million for government

purposes next year, increasing the debt to over $4 billion. Interest

payments on this debt are estimated at $448 million, equal to 4.6

percent of our expenditure. As the economy continues to strengthen, we

must work diligently to eliminate this burden on our taxpayers.

The

rate of growth of indirect debt has also been reduced. We expect the

outstanding debt of Crown corporations and agencies to show an increase

of just over I percent at the end of the current fiscal year, compared

to one year ago. By the end of next year this debt is forecast to

decline from current levels. Our total outstanding debt, both direct

and guaranteed, is also forecast to decline as a percentage of

provincial gross domestic product in both this fiscal year and next.

part of the effort to control and reduce debt servicing costs, I shall

certainly continue to look for innovative but prudent financing

methods. In the past these have included arrangements for sale and

leaseback of Crown corporation assets. We enter into these

negotiations, however, only if they provide lower financing costs than

the alternatives available. Our goal has been, and continues to be,

lower costs for the taxpayer.

Mr. Speaker, the compensation

stabilization program, now entering its fifth year, has been a major

element in controlling expenditure. Almost 3,000 collective agreements

have been negotiated under the guidelines. Not once has there been a

need to resort to the compulsory regulations. Wage and benefit

increases in the public sector have been brought down to reasonable

levels, closely following those in the private sector. In 1985 there

was a difference of only one tenth of I percent between public and

private sector settlements in this province. I think that demonstrates

the equity that we have been able to achieve.

Last week the

executive council approved amendments to the program that will broaden

the settlement criteria and increase the flexibility for parties

negotiating collective agreements in the public sector. A new job

security guideline has been added to give employers and employees the

option of accepting fixed rates of increase in compensation and having

the commissioner approve an employment plan to provide job security for

the employees. In addition, the existing guideline, now called the

labour market guideline, has been broadened. To the existing criteria

of productivity increases and public sector settlement patterns, we've

added three new factors which may be taken into account in determining

whether a compensation plan complies with the guideline. These are

private sector settlement patterns, competition in recruiting employees

with critical skills, and a correction over time of disparities in

compensation levels.

Legislative amendments were also

introduced last week, Mr. Speaker. I will not speak of them at length,

because the bill is before the House. They empower the commissioner to

do certain things.

It must be clear that the paramount consideration in the guidelines remains the employer's — the taxpayers' — ability

to pay. Let me also emphasize that the government intends to use any

additional funding available to improve public services and create

jobs, not to increase compensation for those already employed.

Last

week's amendments will increase the flexibility of a program which is

already highly flexible and the most successful of its type ever

developed in this nation. Through this innovative program, B.C. has

found a way to maintain much broader collective bargaining rights in

the public sector than in many other provinces, while ensuring the

fiscal discipline necessary to protect our public services and the

taxpayer.

I want to speak about economic initiatives, Mr.

Speaker. The world knows B.C. Is a great storehouse of natural

resources. Our forests, mines, farmlands and marine resources have

always been the main sources of wealth for our citizens. In recent

years we've taken steps to diversify our economy and reduce our

reliance on these resources. Some have argued that we should go even

further, even suggesting that forestry and mining are sunset

industries, unlikely to contribute to our long-term prosperity.

Let

me make our view very clear. As British Columbia's population grows,

and as we approach the limits of the resource base, we shall have to

find new sources of wealth. But I emphasize that our basic resource

industries will be the backbone of the provincial economy for many

years to come and will always be particularly important in the

non-metropolitan areas of our province.

Speaking of

resource industries, the decade of the eighties has been difficult for

all regions of the world dependent on resource industries. The impacts

in British Columbia were all too evident: jobs were lost, plants

closed, incomes fell, and communities and families were shaken. This

period of adjustment has meant very real difficulty for many British

Columbians. But fortunately we have turned the corner. While some

resource-dependent regions still have adjustments ahead of them,

markets for most of our resource products appear to have stabilized,

and indeed, there are signs of an upswing.

Last year we

moved to assist the resource industries by making major tax reductions,

freezing water rental rates, introducing special electricity discounts

and appointing the commissioner of critical industries. These actions

have helped already, and will help even more in years to come. Most

resource companies stopped losing money in 1985 and, indeed, moved into

modest profit positions. Nonetheless, to ensure that the resource

industries continue to provide jobs in the future, we need to invest

more now in the resource base itself.

Last May this

government signed with Ottawa a $300 million, five-year forest

resources development agreement, which will provide for major

investment in the forest base. A prime goal will be to restore large

areas of logged land that have not been adequately replanted. We have

made a clear commitment to replant those lands for the benefit of

future generations of British Columbians; and this year we shall do

even more. The base budget for the Ministry of Forests for fiscal

1986-87 will be increased by $57.8 million, or 21.5 percent, to

accommodate the forest agreement, and also to provide full funding for

the ministry's five-year forest and range resource program. We are

aiming to plant 200 million seedlings by 1987-88. That's enough

seedlings each year to cover 162,000 hectares with productive forest.

And it is 2.7 times the rate of planting in 1975-76 — a huge increase, Mr. Speaker, that clearly demonstrates the commitment we are making to our most important natural resource.

[ Page 7443 ]

protect our reforestation investment, my colleague the Minister of

Forests (Hon. Mr. Heinrich) will shortly present legislation to

establish a special forest stand management fund. Now that we're on the

road to our goal of 200 million seedlings a year, we must increase

emphasis on managing the young forests, to ensure that they grow

rapidly into marketable timber. Weeding and thinning of replanted

areas, and other silviculture treatments, are essential to getting the

maximum return on our investment in reforestation. The government will

commit $20 million to the forest stand management fund for this

purpose, and my colleague will seek matching contributions of $20

million each from the federal government and the industry, and $5

million each from municipalities and the forest sector trade unions.

All of these parties have indicated a strong interest in making this

investment, to help ensure the future of the forest industry and the

livelihood of the communities that depend on the forests. The minister,

my colleague, will propose to the industry that its contribution to the

fund will be provided through a special silviculture levy.

Minerals

are currently selling at low price levels, but they will be in greater

demand in the future. To ensure that mining remains a vital part of our

industrial structure, the government will provide $5 million to

encourage mineral exploration and development. The design of specific

programs will be the subject of consultation between the Minister of

Energy, Mines and Petroleum Resources (Hon. Mr. Brummet) and mining

industry representatives. These funds, I point out, are in addition to

the $2.35 million allocated in 1986-87 for the Canada-British Columbia

mineral development subsidiary agreement.

[4:00]

[Mr. Strachan in the chair.]

I mentioned earlier, last year B.C. Hydro earned $283 million through

electricity exports to the United States. Potential sales, especially

in California, are even greater. A major boost could come with the

proposed pre-building of the Site C development on the Peace River. By

advancing construction and selling the resulting power under contract

to California utilities, we can accelerate creation of 2,000 jobs and

pay for the project. We will need it soon, in any case, to meet our own

needs. I stress, though, that before starting any construction, we

shall require firm, long-term export contracts. The sale price must

provide an adequate return to the people of B.C. We are eager to

proceed with the project in order to provide jobs, especially for those

who have a lifetime of experience in designing and building dams in

this province. Nonetheless, we will not be rushed into an agreement.

The general interests of all British Columbians must remain paramount.

With

a broad range of measures in place to strengthen our basic resource

industries, we can now turn more attention to economic diversification.

New industries are needed to create jobs for our growing workforce. But

if we wish to broaden our economy, we must be alert to our own natural

advantages and to opportunities presented by the world economy, and we

must have policies and programs ready to prepare our people and

businesses for those new challenges.

We have

identified several key areas in which B.C. can expand and be

competitive internationally. Tourism is already our number two

industry, and it will blossom with Expo 86. Our province offers scenic

beauty, great recreational opportunities, exciting communities and

vibrant cultural resources. It's a combination rarely matched. This

year we have a once-in-a- lifetime chance to welcome visitors from

around the world so that they will return in the future and will

encourage others to come. Many of them will also come back as investors.

The

government has recently undertaken new initiatives which are directed

toward enhancing tourism potential during and after Expo. These include

the Partners in Tourism program, under which the government shares

equally in regional marketing projects with nine private sector

associations.

This government is also taking steps to

promote the growth and development of the film industry. The province

is already viewed, as we know, as a choice location due to reasonable

costs, qualified and experienced crews, and a diverse range of climate,

natural scenery and urban settings. We're now working toward

establishment of a major studio to move ourselves toward the next level

of that development.

Financial and business services

represent a major opportunity for British Columbia. Our commercial and

cultural links to the Asia-Pacific region, and our position as a

gateway for North America, make Vancouver a natural location for an

international commercial and financial centre. During the past year

I've consulted, as have others, with leaders of the financial community

in Vancouver, and we have found a great deal of interest in this

concept. More recently — and I was very pleased to note it — the

federal government has announced that it will assist us to establish an

international banking centre in Vancouver. We will be working closely

with Ottawa to bring this proposal to fruition as a key element in the

much broader concept of Vancouver as an international financial centre.

complementary initiative, the British Columbia Equity Investment Plan,

will provide an incentive for individuals to put their savings to work

through the capital markets to finance investment and job creation.

Our

new network of trade and convention centres will play a major role in

promoting British Columbia as a centre for international business. To

focus this effort we have given British Columbia Place full

responsibility for managing the Pier B-C convention centre and the

Whistler conference centre. A new organization, Conventions B.C., will

be responsible for promoting convention centres throughout the

province. Just last month the province signed an agreement with the

federal government for the joint funding of a new convention centre

here in the capital city of Victoria. It's a project in which I have

special pride. Under this agreement the two governments will each

contribute $7.275 million toward the $25.8 million facility which will

be owned and operated by the city of Victoria.

We shall be

working also in the coming year with the federal government to improve

the management of our basic transportation infrastructure, particularly

the Vancouver International Airport and the Port of Vancouver. We shall

also be designing programs to encourage the development of exports by

the service sector, and we've allocated $2.5 million for this purpose.

The government will seek the advice of service industry representatives

on the best way to provide this assistance.

Light manufacturing industries, particularly those based on advanced technology, are a rapidly growing part of our

[ Page 7444 ]

economy.

For example, the electronics industry is now number five, and

specialized industrial products are growing rapidly. New businesses are

started every week, and many have the potential to become major

employers.

The province's discovery enterprise program

assists in this growth. To date the program has helped launch more than

25 high-technology businesses by providing them with startup equity and

loan financing. The Discovery Foundation will be provided with an

additional $8 million to continue this program in 1986-87.

The

small business venture capital program has also been successful in

establishing 17 new venture capital corporations, which will make

significant investments in the province's manufacturing and processing,

tourism, aquaculture, and research and development sectors.

Mr.

Speaker, I want to touch on that for a moment. One particularly

exciting new industry in B.C. Is aquaculture, which is expected to grow

rapidly in the coming years. In the next decade, aquaculture revenues

are predicted to increase from $3 million to $150 million, and direct

and indirect employment is predicted to expand from 500 to 3,500

permanent jobs. Recognizing the growth potential of this sector, the

provincial government will provide an additional $700,000 for

productivity enhancement projects and market development, over and

above the $3.9 million in annual financial assistance now provided.

Mr.

Speaker, the list I have touched on in these few minutes is. not

exhaustive, but it does indicate the range of potential new

opportunities in our province. We cannot, however, assume that we shall

easily succeed in all of these areas. We must work together to maintain

the spirit and drive necessary to succeed in an ever-tougher world

marketplace. A word of caution again. There are many others seeking the

same business as we, and they're willing to fight hard to get it. In

order to win we must want it more, and we must work harder. I know that

British Columbians are equal to that challenge.

I'd like to

speak now about education. One of our greatest strengths in this

competition which I have touched on in these few minutes will be our

people and their knowledge and skills. In this, our educational

institutions will play a key role. We announced last month the creation

of a new fund to finance improvements in our schools, colleges,

universities and institutes over a three-year period. This long-term

framework will assist these institutions in planning to meet the

challenges ahead.

The Fund for Excellence in Education will

provide a total of $110 million in 1986-87 and a minimum of $600

million over three years. If economic circumstances improve

sufficiently, more will be provided in the second and third years. This

money will be used to place computers in classrooms, to upgrade

teaching skills, to support college programming related to economic

development. We expect to see universities, government and private

business cooperating in setting up centres of excellence. Many other

measures will be funded, and we today invite the institutions to be

bold and creative.

My colleagues the Ministers of Education

and of Post-Secondary Education have already consulted broadly and are

inviting proposals. Initial draws on the fund totalling $35 million for

next fiscal year have been announced by the ministers to meet cost

pressures and certain other commitments. The remainder will be

available for allocation on the basis of merit. I am advised by my

colleagues, in this context, that submissions are already coming in and

that there will be very strong competition,

Mr. Speaker, I

believe all members will agree that our investments in development

represent an impressive program of renewal. In the past year we have

introduced a tremendous array of measures to support and to strengthen

our traditional resource industry base, as well as to attract and

support new industries. That program will accelerate in the coming year

through the initiatives I have already announced today, and the tax

measures I shall outline in just a few minutes.

We also

bring together this year the elements of an integrated plan for

developing and promoting British Columbia. Expo 86 has served as a

catalyst for completion of SkyTrain, Canada Place, the Coquihalla

Highway and Annacis crossing and will lead to future opportunities in

trade, tourism and investments. Developments will quickly follow on the

Expo site and other key lands assigned to British Columbia Place in

greater Vancouver and here in greater Victoria. With Expo 86 as the

centrepiece, both to celebrate our achievements and to open the door to

rich business prospects, this year will stand as a turning point in

British Columbia's history.

I want to take a few minutes

now to review the expenditure budget for 1986-87. The estimates

presented to the Chair today provide for total expenditure of $9.643

billion, an increase of 5.7 percent from the most recent forecast of

spending for '85-86. This represents a somewhat larger increase than in

the past few years, to accommodate the economic initiatives that I have

just described. Nevertheless, we shall continue to hold a tight rein on

government operating expenditure in order to maintain fiscal discipline

and to build upon the efficiency gains of the past few years.

provision has been made in this budget for salary increases for

employees of the government or agencies funded by the government,

except for increases already granted. To the extent that additional

funds are available, they are being used to promote job creation and to

provide services for British Columbians, not to increase the salaries

of those now working,

I discussed a little while ago the

crucial role to be played by education in the economic renewal

strategy. With the addition of the 1986-87 allocation of $110 million

from the fund for excellence in education, the total budgets for the

Ministries of Education and Post-Secondary Education are up $151.7

million, or 8.6 percent, a clear demonstration of our commitment to

making schools and post-secondary institutions major contributors to

the province's economic and social well-being.

One of the

aims of this government is to enable all students who would profit from

a higher education to pursue that goal if they so choose and to

encourage the best students to make that choice. Reflecting that

commitment, my colleague the Minister of Post-Secondary Education has

announced that $10.9 million will be budgeted for student aid in

1986-87; that's up from a projected expenditure of $6.8 million in this

fiscal year.

Students may receive loans on generous terms

to finance their education and are eligible for partial remission of

the loans upon graduation. In addition, the top 30 percent of students

can win scholarships to assist them with their education. The increased

funding will also permit the government to include trade schools in the

expanded student aid program,

[ Page 7445 ]

as well as to increase scholarship amounts to keep pace with tuition fee increases.

The

Ministry of Labour also has a major responsibility in developing human

potential through coordination of job training and employment programs

provided by provincial ministries and by the federal government.

Discussions are now underway in the context of the Canadian job

strategy to develop new federal-provincial initiatives aimed at

providing long-term employment for British Columbians. We'll also be

seeking through these discussions to ensure adequate federal funding

for apprenticeship and other training programs through British

Columbia's colleges and institutes.

My colleague the

Minister of Labour will be expanding programs to assist young people in

obtaining permanent employment. The province will provide $10 million

for Challenge '86, a continuing federal-provincial program that has

provided valuable work experience during the spring and summer months

to students and to our youth. This program will also provide assistance

to employers to train students and youth for work at Expo 86, and

funding will again be provided for the successful student venture loan

program to enable young people in our province to develop

entrepreneurial skills while earning incomes to support their education.

The

Ministry of Labour has been allocated $600,000 for the operation of the

Youth Advisory Council and the youth grants program to promote the

independence of young British Columbians and their involvement in the

economic and social development of our communities. The government is

also providing a new allocation of $10 million to fund new programs

developed for the specific purpose of assisting unemployed British

Columbians to enter the labour market and to meet the changing needs of

employers.

[4:15]

A further $5

million will fund programs targeted to students, recent graduates and

youth whose lack of work experience is a barrier to permanent

employment. So these two programs complement existing provincial and

federal initiatives and further demonstrate the government's commitment

to provide training and employment opportunities for employable GAIN

recipients and other unemployed persons.

Thousands of jobs

will also be created across the province through the highway

construction program and the new forest stand management fund. The

Ministry of Human Resources will receive a budget in the coming fiscal

year of $877 million for the GAIN income assistance program. That's

down $11 million from the revised estimate for 1985-86. This reduction

reflects the success of our economic renewal plan in creating jobs, as

well as the expected impact of the employment programs for GAIN

recipients which I just mentioned. My colleague the Minister of Human

Resources (Hon. Mr. Nielsen) will shortly announce details of an

enhanced earnings exemption policy to assist GAIN recipients and ease

the transition to employment.

British Columbia's Pharmacare

program, which has been allocated an additional $20 million in 1986-87,

remains one of the most generous in this country. One hundred percent

coverage of prescription drug costs is provided for our senior

citizens, and universal Pharmacare coverage is available to all British

Columbians who are faced with excessive annual prescription costs.

The

Ministry of Human Resources very recently announced the appointment of

a full-time superintendent of family and child services to address the

problems and needs of abused children and their families. An additional

$2.3 million is being provided in 1986-87 to address the growing need

for special care and services for these children.

The

Ministry of Health continues to have the largest allocation of any

ministry, with a total of $2.755 billion or 28.6 percent of the total

provincial budget. The health care system still faces difficult

pressures in adapting to population shifts, changing expectations, and

new medical technology. To provide a framework for addressing these

pressures, I will present legislation to establish a three-year health

improvement fund. The fund will provide a total of $120 million for

1986-87, and at least $720 million over three years. Again, the fund

may be increased in the second or third year if and as economic

circumstances permit.

My colleague the Minister of Health

will consult with the health care community to solicit proposals and

establish priorities for the use of this fund. Obviously we shall not

be able to fulfill every single wish in the health care system, so we

will have to make choices. The views of the health care professions and

of the public we all serve will be crucial in this exercise. We hope to

be able, however, to support such priorities as organ transplants, new

drugs, advanced cancer treatment and AIDS therapy, as well as new

hospital beds. Ideas that will reduce pressure on the hospital system

through preventive measures and outpatient services will be especially

encouraged. To emphasize, our preference is to increase service levels

rather than the incomes of those who are providing the services.

Hospitals

and related facilities remain vitally important to our health care

system. Over the past few months we have announced new capital

commitments of more than $140 million to meet the needs of our people.

We are providing extended-care beds in communities all over the

province, as well as expansion of acute-care services. This building

program reflects a continuing commitment to meet the needs of an aging

population.

The Ministry of Attorney-General will receive

an increase of $20 million in the fiscal year about to start, largely

to accommodate the increasing costs imposed by the federal government

for RCMP services here, the cost of implementing the Young Offenders

Act, and costs for recently completed court and corrections facilities.

The ministry is also proceeding with the construction of new

correctional facilities in Kamloops, Prince George and Logan Lake to

meet program requirements and to replace existing facilities. Projects

announced recently by my colleague the Attorney-General provide for

almost $40 million to be spent over the next three years.

The

Ministry of Agriculture and Food will receive $115.3 million in

1986-87. That's an increase of 2.1 percent. A drought assistance

program is provided for grain farmers in the Peace River area, and a

new loan guarantee program will be introduced for tree-fruit growers in

the Okanagan.

Mr. Speaker, early in the new fiscal year my

good friend the Minister of Transportation and Highways will

participate in the opening of phase I of the new Coquihalla Highway.

This historic event — and it is a historic event — will

mark the completion of the first new route between the lower mainland

and the interior in 37 years. Work will continue on phase 2 of the

highway from Merritt to Kamloops, and will commence on the Okanagan

connector. With traffic flowing

[ Page 7446 ]

on phase 1, the government will begin collecting tolls amounting to an estimated $16 million in 1986-87.

The

coming year will also mark the opening of the initial stage of the

Annacis crossing system. Time also moves along. That's the first major

structure to span the Fraser River, in the lower mainland at least,

since the completion of the Port Mann Bridge in 1964. A total highway

construction and capital maintenance budget of $581.4 million for

1986-87 will provide for continuation of these two major projects as

well as a large number of smaller projects throughout all the province.

The Ministry of Transportation and Highways will also provide $14.5

million to the British Columbia Railway for the operating and capital

requirements of the passenger system and the Fort Nelson extension.

We're making this contribution in particular because these services are

essential to many communities, as you would well know, Mr. Speaker,

even though they are not presently commercially viable.

The

operating subsidy for the British Columbia Ferry Corporation will be

increased by $17 million to $57 million. This increase reflects two

developments, essentially. First, in October 1985 the corporation

assumed responsibility for operating the saltwater ferry fleet of the

Ministry of Transportation and Highways, purchasing those assets from

the government for $55 million. Funding of $10 million is provided to

assist the corporation in meeting the costs of operating 14 additional

vessels on 10 routes. Secondly, the corporation, as many of us already

know — and I'm very pleased that it is occurring — will

run an extended

schedule on its main routes during Expo 86 to encourage

Expo tourists to extend their visits to greater Victoria and to all of

Vancouver Island. Service will also be enhanced....

Interjection.

HON. MR. CURTIS:

Wait for it, my friend. Service will also be enhanced on the Gulf

Islands, Sunshine Coast and Comox-Powell River routes. An additional $7

million is provided for these services.

Payments to British

Columbia Transit for the operation of public transportation services

throughout the province will increase to $162.1 million in '86-'87 from

$74.3 million in the current year, this reflecting the funding

arrangements for SkyTrain. And under the formula for sharing transit

costs among the provincial government, municipalities and riders, the

provincial government will contribute $121 million for SkyTrain and for

SeaBus, as well as for conventional and custom bus services around the

province. In addition, the provincial government will directly fund

$275 million of the capital cost of SkyTrain, equivalent to 50 percent

of the cost of building the guideway. Debt servicing costs for this,

incidentally, will require an estimated $41.1 million in '86-'87.

Funding

of $6.5 million will be provided for the official visits program, which

will bring government, business and professional leaders from around

the world to attend Expo 86, and expose them to the promise of British

Columbia. We expect many new business arrangements to result from that

activity.

The government has established a $30 million Expo

legacy fund to aid communities which wish to build and develop their

own Expo commemorative projects, which may include convention,

community and cultural centres, recreational facilities and parks, and

so on. To date, legacy fund assistance totalling $14 million has been

announced for several projects across the province, with total project

costs of $47 million.

The municipal revenue sharing program

will shortly begin its ninth year, standing the test as an innovative

and effective means of giving local governments access to the broader

provincial revenue base. For '86-'87 there will be a total of $227

million available for distribution to municipalities. That's an

increase of $19 million, and a further $3.9 million will be added to

the stabilization account for distribution in future years.

These

are just a few highlights of the government's expenditure plans for

1986-87, the year commencing in about 10 or 11 days, and my colleagues

in government will have an opportunity to outline their budgets in much

greater detail in this House and in Committee of Supply.

[4:30]

[Mr. Speaker in the chair.]

turn now to the subject of taxation. In the coming fiscal year taxation

measures introduced in my last budget will provide increasing economic

stimulus. Members will recall, I'm sure, that many of these measures

are being phased in over three years to accommodate them within our

fiscal framework. Let me now reaffirm the commitment I made in this

House a year ago. All of the tax measures in that program for economic

renewal are proceeding as planned.

Before touching on these

additional measures, I shall take a few moments to remind the House of

what we achieved with the 1985 budget. Long before the budget the

Ministry of Finance conducted thorough research into the impact of

taxation on economic development, comparing taxes on British Columbia

firms with those in other jurisdictions. After publishing the results

of this research in the fall of 1984 I undertook a series of public

meetings around the province at which I heard the views, the comments,

the suggestions of literally hundreds of British Columbians. I'm

particularly pleased with what resulted from that process: a set of tax

reductions and reforms to stimulate business, to secure employment and

to put British Columbia on a strong, definite path of renewal and new

job creation.

A key measure was the small business

employment tax credit. For two taxation years beginning after March 31,

1985, small businesses in B.C. will receive a tax credit equivalent to

about $300 per employee. Those businesses not in a taxable position can

receive the credit in cash, and this measure is costing about $150

million in stimulus — important stimulus, I might say — to small business over these two taxation years.

The

second measure is the phase-out of property tax on machinery and

equipment. In 1985 school tax rates on machinery and equipment were

reduced by one-third; this year the rates will be further reduced, and

beginning in 1987 that tax will be eliminated altogether. To provide a

particular incentive for investment, new machinery and equipment

installed since September 30, 1984, was immediately exempted from

property tax. In 1986-87 this measure will reduce taxes by about $126

million.

On a related point I should mention that the

government last week approved an order-in-council establishing the

property tax rates for other than municipal and school purposes. At

that time I announced a deferral until 1987 of any phase-out of

property tax on machinery and equipment for non-

[ Page 7447 ]

school

purposes. This is a relatively small component of the total tax on

machinery and equipment, very small indeed, And for a variety of

technical reasons, the Union of British Columbia Municipalities has

asked that I defer action to remove it for one year. I am pleased to

accept that recommendation. I emphasize, however, and it must not be

misunderstood: the original deadline remains. Machinery and equipment

will not be assessed nor taxed for 1987 and subsequent years.

third measure from last year's program is the reduction in industrial

and commercial school property tax rates. Industrial rates have been

reduced from 3.4 times the residential rate to 3 times the residential

rate in 1985, and this year will be reduced to 2.45 times the

residential rate, the same level as the commercial tax rate. This will

reduce these taxes by about $41 million in 1986-87, and in 1987 both

commercial and industrial rates will be reduced to twice the

residential rate.

These school tax rate reductions,

together with the elimination of property taxes on machinery and

equipment, in the government's view, remove a serious impediment to new

investment in British Columbia and further enhance the competitive

position of existing British Columbia businesses.

A fourth

measure was the reduction in fuel tax rates for off-road uses to 7

percent of the pre-tax selling price. Providing $55 million in tax

relief in 1986-87, this measure brought the taxation of these fuels

into line with the general social service tax rate.

A fifth

measure, and one of which we are especially proud, is the phase-out of

the corporation capital tax. In the fiscal year about to start, the

exemption level under this tax increases from $5 million to $10

million, reducing taxes by $40 million and completely exempting a

further 1,400 businesses, in addition to the 5,600 exempted as a result

of the change last year.

Effective April 1, 1987, the tax

will be eliminated except for large banks with offices outside of

British Columbia. The corporation capital tax was an especially

burdensome tax in difficult economic times, and it was a deterrent to

economic renewal.

A sixth major measure was the small

business venture capital tax credit. A credit against British Columbia

personal income tax of 30 percent of the amount invested is now

available to individuals investing in venture capital corporations

which then make investments in eligible small businesses. To date, 15

private and two public venture capital corporations have been

registered with approved equity totalling $13 million. About $1 million

has already been channelled to eligible small businesses. These venture

capital firms will certainly be an important source of equity capital

for small businesses in manufacturing and processing, tourism and

aquaculture industries and for those in research and development. In a

moment, I will announce an important extension to that program.

Finally,

looking back on 1985's budget, Mr. Speaker, we implemented a five-year

freeze on water rental fees for the generation of hydroelectricity. As

a result of this freeze, we shall forgo about $28 million in revenue in

the 1986-87 year and approximately $300 million over five years to the

benefit of industrial, commercial and residential electricity users.

Mr.

Speaker, as I mentioned earlier, I am introducing further tax measures

today to support economic renewal. These have been very carefully

designed to extend the broad tax relief granted through the measures

now in effect, to provide specific relief to industries which are put

at a disadvantage by the current tax system and to encourage industries

which are expected to grow and contribute to the diversification of our

economy.

Firstly, the general corporation income tax rate

will be reduced in two stages to 15 percent effective January 1, 1987,

and to 14 percent effective January 1, 1988. Firms considering

investment in our province have often cited the current corporation tax

rate of 16 percent, which is equal to the highest rate in other

provinces, as an impediment. It is also viewed by some as a penalty

imposed on the successful. Tax relief estimated at $2 million in

1986-87, $32 million in 1987-88 and $64 million in 1988-89 will be

provided to some 2,000 medium and large businesses throughout British

Columbia. This measure addresses the last major anomaly in this

province's tax structure. Personal income taxes are already the

second-lowest in Canada, and the provincial income tax rate for small

businesses is lower in only two other provinces. The major fixed taxes

on businesses were reduced in the 1985 budget. So with this change

British Columbia's corporation income tax rate will be lower than the

rate in six other provinces. This measure, as I indicated, completes

the program of major adjustments to the business tax system which

started last year. Thanks to these actions, the total tax burden on

businesses in British Columbia will now compare very favourably with

that in all other provinces. British Columbia firms can now be more

competitive, and the province is considerably more attractive for

employment generating investment.

Secondly, I am

introducing a new structure of property taxation for private forest

land to provide an incentive for better forest management. Forest

stocks on Crown lands will be enhanced through the reforestation and

silviculture program announced earlier. But to enhance stocks on the

three million acres of private forests in the province, much of which

is highly productive land, I am reducing property taxes on these lands

and restructuring tax rates to encourage intensive forest management.

Property taxes collected from private forest land will be reduced by an

estimated $3 million a year as a result of this change, beginning in

the 1988 taxation year.

Thirdly, several technical changes

will be made to simplify property assessment and taxation. The

assessment of utilities will be simplified, and a new, clearer

definition of improvements will be introduced. Current industrial

assessment methods are a frequent source of disagreement and very

expensive litigation, and can lead to uncertainty in the preparation of

municipal budgets. They will be reviewed by a panel of experts who will

seek a simpler, more acceptable method of determining market value for

industrial properties that will provide a more stable basis for

municipal taxation. It's obvious to all, I think: complexity is costly

to both business and government. The simplification that we seek in

this context will be of mutual benefit. The changes will have little if

any impact on revenue but will allow firms to devote their valuable

management and professional resources to far more productive activities.

Fourth,

the small business venture capital program will be broadened to include

export-oriented service corporations as eligible investments of venture

capital corporations. One of the difficulties often encountered by

potential service exporters is a lack of sufficient working capital to

enable

[ Page 7448 ]

them

to enter the world market. Often the firms, as I understand them, have

no tangible property against which working capital can be borrowed,

because the product that is being sold is an intangible, such as

engineering expertise or another form of intellectual property. Risk

capital supplied by venture capital corporations will help fill this

gap. My colleague the Minister of Industry and Small Business

Development will present legislation shortly to authorize this change.

And the minister will also be exploring other possible changes to the

program and will be developing a new employee venture capital program

to take advantage of a federal credit introduced last year.

Finally,

Mr. Speaker, effective January 1, 1987, the insurance premium tax will

be eliminated on insurance sold by companies with head offices in

British Columbia. This measure must be seen as part of our broader

effort to bolster the financial sector. The insurance industry has

encountered financial difficulties not only in Canada but worldwide, At

this time of adjustment in the insurance industry, the government is

demonstrating its commitment to those companies with headquarters here

in British Columbia and its willingness to welcome new or existing

companies that may choose to locate here. This change will reduce

revenue by $700,000 in 1986-87, and $4 million in a full fiscal year.

the coming months we shall be studying other initiatives which might be

taken to assist the development of Vancouver as an international

financial centre.

In addition to economic renewal measures,

I am today announcing a package of other measures to improve the

fairness of the tax system. In January of this year I responded to

expressions of public concern by announcing a review to determine

whether, in light of falling world oil prices, British Columbia's

system of ad valorem fuel taxation remained appropriate. That review

has now been completed. It shows that British Columbia's gasoline tax

is among the lowest in Canada and is not a significant factor in

gasoline price increases. Mr. Speaker, since October 1, 1981, when fuel

tax indexing was introduced in this province, the provincial gasoline

tax has increased by less than 3 cents per litre. In comparison,

gasoline pump prices have increased by 18.4 cents per litre. Federal

tax increases, oil price increases and industry pricing policy account

for most of this change. I also point out that the federal sales tax

increase announced in the February 26 federal budget and another

scheduled federal fuel tax increase on January 1, 1987 will further

increase the federal share of gasoline prices. Provincial fuel taxation

accounts for less than one-sixth of the increase in price since 1981,

and less than one-fifth of the total price of gasoline. Furthermore, as

general oil price decreases work through to gasoline prices, the

provincial tax will decline automatically as a result of the indexing

formula.

[4:45]

Although there is no statutory connection between fuel taxes and

highway expenditures, it is interesting to compare the figures. In

1985-86, the provincial government will have collected an estimated

$356 million from taxation of on-road use of fuels, while spending more

than $1 billion on highway construction and maintenance. Indeed,

highway expenditures in British Columbia have exceeded fuel tax revenue

in each of the last ten years. By contrast, the federal government

collects $250 million to $300 million per year from taxation of on-road

fuel users in this province, and spends virtually nothing on highways

in this province. Those who feel that fuel taxes should support highway

costs have absolutely no quarrel with this provincial government.

Another

concern that has been suggested to me is that high gasoline prices may

deter tourists from coming to our province, and thus have a negative

effect on Expo. Our analysis suggests that this is not a significant

problem. United States visitors to B.C. Increased 8 percent in 1985;

that's the best record in Canada. And while American tourists will find

gasoline prices somewhat higher than at home, the difference amounts to

only $10 to $15 in U.S. currency for a 1,000 mile trip. All things

considered, the total price of a vacation in British Columbia compares

very favourably with one in the United States.

summarize, provincial fuel taxes are not, as some have suggested,

preventing gasoline prices from declining along with world oil prices;

nor are they unreasonably high compared to highway spending. The one

argument which I do find compelling is that fuel taxes should not

increase under the ad valorem system when gasoline prices are declining.

Because

it takes time for us to collect the price data, the tax rate is

adjusted each quarter on the basis of prices some six to eight weeks

earlier. It now appears that the April 1, 1986 adjustment would yield

us a very small tax increase, despite the decline in gasoline prices in

recent weeks. Based on current price forecasts the tax rate will

decline significantly as of July 1, 1986, but to prevent the increase

next month, I am making the following change to the fuel tax formula.

Effective

for the full 1986-87 fiscal year, tax rates for fuel under the Motor

Fuel Tax Act will not be permitted to exceed the level established

January 1, 1986. Any decreases generated by the indexing formula will,

of course, proceed as usual. Can't go up; can go down. This change

addresses, I think, the one legitimate concern arising from our review

of fuel taxes by capping the tax while world oil prices decline and

work through to the gasoline pump.

I want to announce two

measures being introduced to improve the fairness of taxation for the

handicapped. Effective for the 1986 property taxation year, homeowners

with resident handicapped relatives will be eligible to claim the

additional homeowner grant now available to handicapped homeowners.

Further, effective at midnight tonight, the eligibility criteria for

the fuel tax rebate program for handicapped drivers will be extended to

cover all handicapped individuals suffering a permanent impairment of

locomotion who have a doctor's certificate stating that public

transportation use would be hazardous.

In both cases, some

individuals who clearly fit the spirit of the programs were being

excluded. The homeowner grant is intended to defray the additional

costs of equipping a home for a handicapped individual. These costs can

be burdensome, as we know, whether or not the individual happens to be

an owner of the home. The fuel tax rebate program is intended to help

handicapped individuals who must drive their own vehicles. However, not

all of those people qualify under the current regulations. This change

will broaden the program without removing benefits from anyone

currently eligible.

I'm also introducing — and I will not take time with them now — a

number of important administrative measures to improve equity in the

tax system. These are summarized in the appendices to the document, and

I commend them to all members of this House.

[ Page 7449 ]

Effective

for the 1987 property taxation year, a supplementary assessment of

property may be made when a mobile home is relocated between September

30 and December 31 of any year. Effective for the 1987 property

taxation year, newly leased Crown land will not be assessed for the

property taxation year in which the lease begins.

Effective

April 1, 1986, just 11 days from now, interest charged on the land tax

deferment program for senior citizens will be changed from a compound

interest rate to a simple interest rate applied only to the principal

amount outstanding, not including accumulated interest. The interest

rate at all times will remain well below market rates and will

initially continue at the current rate of 8 percent per annum.

I've

said before in this chamber that I firmly believe that I have a

responsibility, in this portfolio, to constantly attempt to improve the

fairness and the consistency of treatment afforded taxpayers under

provincial legislation. These measures are just the latest in a series

of administrative and legislative improvements which have been made

over the last few years.

Mr. Speaker, I appreciate that my

time has moved along this afternoon. I want to report briefly on the

consumer taxation amnesty program which I announced in last year's

budget — the

first of its kind, certainly in this part of the continent. The program

provided businesses and individuals with an opportunity to voluntarily

disclose and pay taxes which were due, without payment of penalty. The

program was introduced to strengthen the integrity of the tax system by

encouraging the small number of persons who do not comply to pay and

remit taxes due. The amnesty was very successful. Over the period of

the program, March 14 to July 15 of last year, 120 businesses and

individuals made voluntary remittances amounting to $1,583,000. I

indicated earlier that the program was followed by stricter penalties,

to ensure a fair and rational tax system for all British Columbians.

I indicated earlier, today's budget marks another crucial step in this

government's strategy for economic renewal. In the past four years we

have taken giant strides to overcome obstacles that seemed truly

insurmountable. We are firmly on a course towards a better future.

These years have been hard for British Columbians. The easy growth and

the prosperity which we took for granted were just swept away by events

'in the larger world. Suddenly we found ourselves in a struggle to

compete just to retain what we had, let alone build for the future. I

think we can now look around with pride in the fact that British

Columbians have proven equal to this challenge.

With

leadership from this government, we've put our fiscal house in order

and we've assembled a partnership for economic renewal. Employees,

businesses, municipalities and the provincial government are already

working together as never before to make British Columbia what we know

it can be — a dynamic and enlightened province on the forefront of economic and social development.

This

year we are inviting new members to the team, to make our educational

institutions an integral part of economic renewal and to get health

professionals working together to improve our quality of life. Jobs are

being created in British Columbia, not as fast as we would like, but at

the best rate in years. Policies are in place now to provide the

foundation for growth and diversification to meet the challenges and

opportunities of the emerging world economy.

I know that

other governments are looking with envy at what we have accomplished.

We have done what they have yet to do, reducing the cost of government

and preparing ourselves for the competitive race ahead.

just a very few weeks the Premier of this province and all of us will

open our doors to the world to celebrate our achievements in the

century since a ribbon of steel was pushed through our rugged mountains

to a shoreline far removed from the then centres of civilization. Expo

86 will show our visitors what we can do, and how we have grown as a

society in one of the most beautiful and richly endowed places on this

earth.

[5:00]

MR. SPEAKER: If hon. members will allow us a few minutes to distribute the appropriate documents, we will continue with events.

MR. STUPICH:

Just very briefly, Mr. Speaker, may I say that with this document

presented today the government has shown once again that it has

completely broken trust with the people of British Columbia, and I say

that more in sorrow than in anger. This minister in particular has

shown that he is quite capable of serving the political needs of the

Social Credit Party, and will go to any length to do that in presenting

what should be an accurate estimate of what will be the revenue and

expenditures in the province of British Columbia.

reminds me of one other year, 1982, when on April 5 the same minister

presented a similar budget, and the actual figures were not made known

to the people of British Columbia until two months after the next

provincial election. They didn't dare show those figures. That budget

in April 1982 predicted a break-even position; it predicted that

revenues of $7.2 billion would be matched exactly by expenditures of

$7.2 billion. Speaking the next day, I said that the minister was at

least half a billion dollars out and that there would be, indeed, the

first deficit in the history of British Columbia for 30-odd years.

Mr.

Speaker, I make that same prediction today, without fear of being

wrong. In his prediction today the minister, again, is at least half a

billion dollars out. His figures of revenue are completely

unattainable, in light of the economic conditions of today.

Mr.

Speaker, my staff and I will be up all evening. Starting tomorrow

morning I'll produce the details to prove to you that everything I've

said is correct, and to prove to anyone else who will listen that the

deficit, instead of the $800-odd million figure predicted by the

minister, will prove to be, after the next election when we see the

figures, closer to a billion and a half.

Mr. Speaker, I move adjournment of this debate until the next sitting.

Motion approved.

Introduction of Bills

EDUCATION EXCELLENCE APPROPRIATION ACT

Hon. Mr. Curtis presented a message from His Honour the Lieutenant-Governor:

a bill intituled Education Excellence Appropriation Act.

[ Page 7450 ]

HON. MR. CURTIS:

Mr. Speaker, I might make the brief observation that several message

bills to be introduced in the next few moments relate directly to those

thrusts contained in the budget speech this afternoon and to some which

have been announced earlier. I will not take the time of the House to

go into first reading comment, except in an extraordinary circumstance,

and look forward to second reading debate.

Bill 4

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.

HEALTH IMPROVEMENT APPROPRIATION ACT

Hon. Mr. Curtis presented a message from His Honour the Lieutenant-Governor:

a bill intituled Health Improvement Appropriation Act.

HON. MR. CURTIS:

Mr. Speaker, this, along with the bill just previously dealt with, are

extremely important thrusts in terms of the government's commitments

with respect to the two areas.

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.

ASSESSMENT AMENDMENT ACT, 1986

Hon. Mr. Curtis presented a message from His Honour the Lieutenant-Governor:

a bill intituled Assessment Amendment Act, 1986.

Bill

7 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.

INCOME TAX AMENDMENT ACT, 1986

Hon. Mr. Curtis presented a message from His Honour the Lieutenant-Governor:

a bill intituled Income Tax Amendment Act, 1986.

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.

MOTOR FUEL TAX AMENDMENT ACT, 1986

Hon. Mr. Curtis presented a message from His Honour the Lieutenant-Governor:

a bill intituled Motor Fuel Tax Amendment Act, 1986.

HON. MR. CURTIS:

Mr. Speaker, I move that the bill be introduced and read a first time

now. Earlier this afternoon, I indicated the capping of any possible

increase in motor fuel tax on April 1. Without this, that would

automatically occur. This will ensure that it does not.

Bill

9 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.

INSURANCE PREMIUM TAX AMENDMENT ACT, 1986

Hon. Mr. Curtis presented a message from His Honour the Lieutenant-Governor:

a bill intituled Insurance Premium Tax Amendment Act, 1986.

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.

TAXATION STATUTES AMENDMENT ACT, 1986

Hon. Mr. Curtis presented a message from His Honour the Lieutenant-Governor:

a bill intituled Taxation Statutes Amendment Act, 1986.

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.

FOREST STAND MANAGEMENT FUND ACT

Hon. Mr. Heinrich presented a message from His Honour the Lieutenant-Governor:

a bill intituled Forest Stand Management Fund Act.

Bill

6 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. Nielsen moved adjournment of the House.

Motion approved.

The House adjourned at 5:15 p.m.

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