March 17,

HOUSE OF ASSEMBLY PROCEEDINGS Vol.

XLII No. 14

The House met at 2:00 p.m.

SERGEANT-AT-ARMS: All rise.

MR. SPEAKER (Dicks): Order, please!

The hon. the Minister of Finance.

SOME HON. MEMBERS: Hear, Hear!

MR. BAKER: Mr. Speaker, I move that the House resolve

itself into a Committee of Ways and Means and that the Speaker do now leave the

Chair.

MR. SPEAKER: The motion is that the House resolve itself

into a Committee of Ways and Means and that I do now leave the Chair.

The hon. the Minister of Finance.

MR. BAKER: Mr. Speaker, this Budget is a report on the

comprehensive strategy that this Government has been pursuing to strengthen the

foundation upon which the economic, fiscal and social future of Newfoundland and

Labrador will be built. This strategy has three components: the Strategic

Economic Plan already in the process of implementation, the responsible fiscal

plan that we have pursued consistently over our mandate, and the Strategic

Social Plan which is now in the process of preparation.

Throughout our mandate, we have stressed the need for

long-term strategies to address important public policy issues. We have

presented the people of Newfoundland and Labrador with the facts, and then

engaged in open consultation. They are familiar with our economic situation.

They are aware of our fiscal position. They accept that this is a time when

tough choices have to be made, and the right decisions have to be taken.

The rapid pace of national and international change makes

economic development one of our crucial objectives. Without economic development

there will not be the wealth or jobs needed to sustain this Province. Because

competition for economic development has become extremely keen, we are becoming

more competitive to enhance our economics prospects. This is essential for the

Province to develop a more solid economic foundation.

To borrow a phrase from the recent Throne Speech, "economic

diversification is not only an objective, but an imperative." An imperative, Mr.

Speaker. Something that must be done. And it must be done with a sense of

urgency.

Let me review the imperatives we must address in this

Province today. Economic development. Not just jobs, but meaningful, productive

jobs. Retraining. Fishery restructuring. Sound resource management. Educational

reform. Affordable health care. Sound financial management. These are the issues

that affect every resident of this Province. These are the issues that

Government is addressing.

To address these issues, we will advance each component of

our comprehensive strategy over the coming year. The objective of this Budget is

to strengthen the financial foundation which will allow us to pursue our

strategy for the future of this Province.

Mr. Speaker, our fiscal plan is simple. Live within our

means. As a Government, we have the responsibility to provide an acceptable

standard of public services, and a responsibility to ensure those public

services are affordable, not only for this year, and for the next year, but for

every year thereafter.

We must not make commitments today that will place an

unmanageable financial burden on the taxpayers of tomorrow. We can no longer

mortgage our children's future for short-term political gain today. That was the

way of the past. Our approach has been and will continue to be, to plan for the

future. In this Budget, we are planning ahead, to have a balanced current

account in 1995-96, and a current account surplus commencing in 1996-97.

The 1993 Budget outlined our fiscal and economic strategy. In

our fiscal plan for 1993-94, we committed to achieve a reduced current account

deficit, and a further reduction in our total budgetary requirement.

In 1993, slower than expected economic growth, both

provincially and nationally, resulted in lower revenues from our major tax

sources, as well as lower equalization payments. Increased tobacco and alcohol

smuggling further reduced our revenues. The economic situation also caused

social assistance payments to increase and created the need for emergency job

creation expenditures.

As a result, Mr. Speaker, the revised current account deficit

for 1993-94 is $70.9 million. Although our budget forecast was $51.0 million,

the difference was more than offset by achieving net capital account savings of

$20.6 million.

Our fiscal plan for 1993-94 targeted an overall budgetary

requirement on current and capital account combined of $223.3 million, that was

the lowest level in four years, the lowest projected level in four years. The

revised estimate is $222.6 million. Mr. Speaker, we have achieved our target.

In 1994, Canadian economic growth is expected to improve over

1993. While our efforts to promote business investment are showing promising

signs for the future, in the short term Newfoundland economic growth is expected

to under perform the national economy, due primarily to the problems in the

fishery. This economic outlook, coupled with federal transfer restraint, will

keep our revenue growth low.

In this economic and fiscal situation, we must continue to

adhere to the commitment made in last year's Budget to achieve a consistently

balanced current account. Adhering to this strategy in our Budget for 1994-95

means a further reduction in our borrowing from last year, for both current

account spending and for overall budgetary requirement.

Meeting our fiscal targets for 1994-95, while moving forward

at the same time with high priority economic and social initiatives, requires

some modest revenue and expenditure actions. Our initial projections indicated,

if we were to take no action back in November when we started this process, that

our current account deficit would exceed $120 million. Mr. Speaker, this was

totally unacceptable.

In taking the decisions needed to achieve an acceptable

current account position, we were guided by a desire to share the task of

deficit reduction in a fair and equitable manner. This Budget proposes a

balanced approach for achieving our target. Modest reductions of a little over 3

per cent in our total compensation costs, to generate savings of $50 million.

Modest reductions from current service levels in program spending, to generate a

further $30 million. And modest revenue initiatives, to provide the remaining

$20 million.

These actions allow us to achieve a financial position that

is consistent with our long-term fiscal objectives. For 1994-95, our deficit on

current account will be $24.6 million, less than half the amount budgeted for

last year, and the lowest level in five years. Our budgetary requirement on

current and capital account combined will be under $200 million for the first

time since 1989-90.

Mr. Speaker, we have a prudent plan that will continue to

show tangible results.

The revenue measures contained in this Budget reflect

Government's desire not to add significantly to the tax burden.

The cost of a driver's licence will be increased by $5 a

year. Registration for motor vehicles of up to 3000 kilograms, which includes

passenger vehicles and light trucks, will increase to $120 per year. These

increases will apply to renewals commencing April 1994. There will be no

increase for classes over 3000 kilograms, which are predominantly commercial

vehicles.

Commencing this year, we will be placing identification

photographs on driver's licences. As well as assisting in enforcement,

photographs will reduce demand for Newfoundland Liquor Corporation ID cards and

will provide identification for retailers in complying with the new age

restrictions on the sale of tobacco products.

Also, we are adopting a policy of equalized fuel tax rates.

Effective midnight tonight, the gasoline tax rate will increase by eight-tenths

of a cent, while the diesel rate will decrease by l.l cents, equalizing both

rates at 16.5 cents per litre.

Finally, the Atlantic Lottery Corporation will be instructed

to reduce commissions paid to establishments in this Province where video

lottery machines are located. This change will be effective April 1994.

Mr. Speaker, the cost of providing health care continues to

rise, and presently consumes one dollar out of every four we spend.

To meet our fiscal objectives, we are continuing to become

more efficient in providing health care services. We are increasing the

efficiency of administration. We are moving towards more short stay units in our

hospitals, and same day admission programs. As well, we are expanding less

costly ambulatory care, outpatient surgery, and home care programs, and putting

more emphasis on health promotion and illness prevention.

Health care delivery in the Province is being rationalized

through the restructuring of the existing system by establishing a network of

institutional and community health care boards at the regional level. The result

will be a significant reduction in the number of institutional health care

boards and more streamlined and coordinated services in these areas.

Although there will be some job losses and bed closures, we

are confident that the decisions taken will enhance patient care where it is

needed most. Our approach to ensuring affordable health care will allow us to

maintain a high level of patient care over the longer-term planning horizon.

Mr. Speaker, our spending on education rivals health care at

nearly one-quarter of the total budget. Government has already made known it

plan for educational reform, and we are proceeding to implement that plan.

One of our objectives in this Budget is to increase the

amount of funding available to students. The provincial component of student aid

will be converted from a grant program to a loan-based program, with a remission

of a portion of the loan upon graduation. By making these changes, we anticipate

being able to increase the annual amount of assistance provided, addressing the

concerns of students that the current assistance levels are too low for the

costs they incur.

Mr. Speaker, Government has had to augment the funding

allocated to social services, as a result of the growth in caseload. Funding is

also provided in addition, Mr. Speaker, for an additional thirty-three front

line positions, to provide better service to social service recipients and to

relieve the caseload on our existing staff.

Mr. Speaker, our approach to fiscal management is amongst the

firmest and the most consistent in the country. We are the only Province to have

reduced our total budgetary deficit in each of the last three years. The only

Province. We are reducing it again in 1994-1995 and, adhering to plan, we will

reduce it further in 1995-1996.

Our progress in deficit reduction has been accomplished

through an unwavering commitment to enhancing the fiscal flexibility of the

Province in the longer term. Throughout our mandate we have raised taxes when

necessary, but the key to the success of our fiscal plan has been controlling

our expenditures. Revenue growth in the foreseeable future will be limited,

particularly in comparison to the inflation driven growth in recent decades, and

particularly the 1980s. The successful continuation of our fiscal plan will

require that our expenditure growth remain below the rate of increase in our

revenues.

Adhering to this approach will allow us to achieve a balanced

current account in 1995-1996. In subsequent years, this approach, aided by

further reforms to program delivery, will result in current account surpluses,

and hence, greater flexibility.

Our plan is to put these future fiscal dividends to good use.

A portion will be used to make instalments towards Government's share of the

unfunded liability in our public sector pension plans. A further portion will

address other public sector compensation needs. The balance will be used to

reduce our borrowing for capital account and to reduce our tax burden.

We must continue to pursue this course. To do otherwise would

be totally irresponsible. The task of reducing deficits is difficult, but

through perseverance we will see the rewards for our efforts.

Mr. Speaker, our plan to move the Province forward depends

upon building and enhancing cooperative partnerships. Partnerships with the

Federal Government. Partnerships between the people and those who provide their

services. Partnerships with the business community.

Existing partnerships with the Federal Government are being

strengthened and new ones are emerging.

We are encouraged by the recent renewal of the Equalization

Program for a further five years. An equitable transfer partnership with the

Federal Government, however, requires an enhanced commitment to fiscal equality

among provinces, including the incorporation of expenditure needs, in the basis

of determining payments.

The Federal Government has confirmed its intentions to reform

the other major transfer programs, Established Programs Financing and the Canada

Assistance Plan for the 1996-97 fiscal year, linked to its review of major

social programs. This provides the opportunity to strengthen the partnership so

that all Canadians are treated fairly. We will be seeking reforms which ensure

that the distribution of transfers is made, not on the basis of ability to

spend, but on the basis of need.

Predictable and equitable federal transfer payments play an

important role in our plan, and these are a reasonable expectation of the

Federal Government by residents of this Province and by its government.

The Province also welcomes increased cooperation with the

as well as efforts to improve the efficiency of our taxation systems. We are

participating in efforts to reform and harmonize taxation policies, to reduce

compliance and administrative costs and to enhance the business tax climate. We

are cooperating in efforts to increase enforcement to combat tobacco and alcohol

smuggling, and to reduce tax evasion by the underground economy.

The partnership between the people and those of us who

provide their services, in the hospitals, in the schools, in government

departments and agencies is also crucial to our plan. The public service

consists of dedicated individuals striving to provide the best services possible

within the ability of the people to pay.

Over recent years, budgetary limitations have necessitated

constraints on public sector compensation. The decision to impose these

constraints was not taken lightly. The people of the Province simply could

afford no more.

Government and the people of the Province recognize that

public employees already have made a substantial contribution to deficit

reduction. We must also recognize that in order to continue to provide the

quality service that Newfoundlanders and Labradorians deserve, we must find a

way, in the future, to extricate ourselves from the wage freeze and

concessionary atmosphere which surrounds public service collective bargaining.

As soon as our fiscal circumstances allow, we must be prepared to provide the

people who deliver our services with reasonable increases in pay to at least

keep pace with increasing costs that we know all families are experiencing. To

achieve a basis for this in the future, within the limits of the ability of the

people to pay, is the challenge of the current round of collective bargaining.

There also is an urgent need for us to examine, in

partnership with our public sector unions, ways in which we can jointly address

the unfunded liability in our public sector pension plans. Over the years,

pension commitments have been made, with insufficient or no provision for

discharging the obligation. Prior to 1980, pension contributions were directed

into general revenues. Now these funds must be replaced, with accumulated

interest. Government will meet its commitment in this important area. With the

public sector unions, we must jointly ensure that the pension plans become fully

funded to protect current and future pensioners.

To achieve our economic development objectives, it is

imperative that we enhance our partnership with the business community. To

accomplish this objective, the Throne Speech announced our intention to

introduce new legislation entitled "A Bill to Promote Business Investment in the

Province of Newfoundland and Labrador".

Creating a better business climate in this Province requires

the involvement of all the partners in the provincial economy. Each level of

government. The business community. Labour. Each and every person capable of

making a contribution.

Either we participate together in creating new viable

economic opportunities, or we will be victims of the much tougher economic world

of the 1990s and the next century. We must act together and we must act now.

This Government has the plan. We have the will. We have the commitment, and Mr.

Speaker, we are imbued with a sense of urgency to succeed.

In January, the Premier released a status report on the

progress made in implementing the Strategic Economic Plan. The report indicates

that each of the 134 action items is being addressed, and confirms that

Government is firmly committed to the vision the Plan sets forth.

In 1993, we implemented the corporate income tax rate

reductions outlined in the Strategic Economic Plan. In January 1995, we will be

further reducing corporate income tax rates, sending a clear message to the

business community that we want profitable businesses operating successfully in

this Province.

The provincial tax rate for manufacturing and processing

income will decrease from 7.5 per cent to 5 per cent, the lowest rate in the

country. The general rate will be reduced from 16 to 14 per cent.

For 30 years this Province had among the highest corporate

income tax rates in the country. To anyone who asks if we were perhaps reluctant

to reduce business taxes at a time when restraint measures are imposed, let me

answer this question now. No! Mr. Speaker, Newfoundland and Labrador is open for

business!

SOME HON. MEMBERS: Hear, hear!

MR. BAKER: To quote briefly from the Throne Speech: "...

the private sector must be the engine of growth. The role of government is to

create the economic climate in which private sector investment can occur and be

successful. Government will be proposing specific new measures over the coming

months to significantly improve the attractiveness of the Province as a place to

do business and to invest."

Well, Mr. Speaker, I would add to that, making some slight

changes, that the corporate income tax rate reductions just announced are "... a

further tangible expression of Government's determination to accelerate its

efforts in promoting and developing a stronger and more effective private sector

in this Province".

Economic development and diversification means new wealth and

new jobs. Government must fulfill its role by building on our existing strengths

to facilitate new business investment and job creation in the private sector.

While our traditional resource industries remain very, very

important, if we are to diversify our economy, we must become competitive in

attracting new business ventures. Government is moving ahead with several

important policy initiatives to address this responsibility.

While we await more comprehensive reform to our retail sales

tax system, we are undertaking one step today. To support manufacturing in the

Province our sales tax system provides an exemption for productive capital

equipment. We are extending this exemption to include pollution control

equipment that is part of the manufacturing process. This will be a significant

benefit to industries fulfilling their environmental responsibilities.

One of the major concerns always brought forward to us by the

business community and many outside the business community, is the burden of

government regulations. Complying with the regulatory burden of three levels of

government diverts business time and resources from creating wealth and jobs. It

is the nature of government to generate regulation and once a regulatory regime

is in place it tends to become perpetual and unchallenged. This may have been

true in the past, but it is not going to be true of this Government, and of this

Province, in our future.

The Budget provides funding for an independent commission to

review all existing regulations with the objective of retaining only those that

are absolutely essential, and those will be streamlined to minimize their burden

on businesses and on individuals.

The process of economic diversification and the emergence of

a more entrepreneurial culture is already underway. The private sector in the

Province is moving ahead with more success than is generally well known. There

are many Newfoundland and Labrador businesses, in the manufacturing sector, in

the high technology sector and in our traditional resource industries, that are

providing world class products and services to the world market. Our business

community is competing successfully, and enhancing the image of Newfoundland and

Labrador in the global economy. No one underestimates the task ahead of us, but

there is proof that many can succeed. It is up to each one of us to prove that

we can all succeed.

Mr. Speaker, this Budget is about strengthening the

foundations upon which the economic, fiscal and social future of Newfoundland

and Labrador will be built.

We are proceeding with our plan to develop and diversify the

economy by enhancing our partnerships, building on our existing strengths and

attracting new investment to provide the wealth and jobs that will ensure a

viable and prosperous future for the Province.

We are pursuing a fiscal plan that will enhance our financial

flexibility and generate dividends to address our most pressing needs and

obligations in the future. We are pursuing actions to enhance the quality and

efficiency of our major social programs.

Mr. Speaker, the combined elements of our comprehensive plan

present a course of action that embodies our vision for the future of

Newfoundland and Labrador. We must channel our energies and our strengths into

new practices, new pursuits, new partnerships. That, Mr. Speaker, is our plan

for the future.

SOME HON. MEMBERS: Hear, hear!

MR. SPEAKER: The hon. the Minister of Finance.

MR. BAKER: Mr. Speaker, I move that the debate be

adjourned until tomorrow.

On motion, debate adjourned until tomorrow at 9:00 a.m.,

carried.

MR. SPEAKER: The hon. the Minister of Finance.

MR. BAKER: Mr. Speaker, I wish to inform the House that I

have received a message from His Honour, the Lieutenant-Governor.

MR. SPEAKER: All rise.

The message is addressed to the hon. the Minister of Finance:

"I, the Lieutenant-Governor of the Province of Newfoundland

transmit estimates required for the public service of the Province for the year

ending March 31, 1995, in the amount of $2,897,265,900, and in accordance with

the provisions of the Constitution Act, 1867, I recommend these estimates to the

House of Assembly."

Signed: ____________________________

Frederick W. Russell, Lieutenant-Governor

We will take a few moments to distribute copies to members.

Order, please!

The hon. the Minister of Finance.

MR. BAKER: Thank you, Mr. Speaker.

Mr. Speaker, I move that the Message, together with the

Estimates, be referred to a Committee of Supply.

On motion, that the House resolve itself in Committee of

Supply to consider the Message from His Honour the Lieutenant-Governor, together

with the Estimates, Mr. Speaker left the Chair.

Committee of the Whole

MR. CHAIRMAN (Snow): Order, please!

The hon. the Government House Leader.

MR. ROBERTS: Mr. Chairman, now that we are in Supply, I

move that the Committee rise, report progress and ask leave to sit again.

On motion, that the Committee rise, report progress and ask

leave to sit again, Mr. Speaker returned to the Chair.

MR. SPEAKER: The hon. the Member for Trinity - Bay de

Verde.

MR. L. SNOW: Mr. Speaker, the Committee of Supply have

considered the matters to them referred, have directed me to report progress and

ask leave to sit again.

On motion, report received and adopted, Committee ordered to

sit again on tomorrow.

Notices of Motion

MR. SPEAKER: The hon. the Minister of Finance.

MR. BAKER: Thank you, Mr. Speaker.

Mr. Speaker, I give notice that I will on tomorrow ask leave

to introduce a bill entitled, "An Act To Amend The Income Tax Act," and I give

notice that I will on tomorrow move that the House resolve itself into Committee

of the Whole to consider certain resolutions relating to the imposition of the

tax on gasoline.

MR. SPEAKER: The hon. the Government House Leader.

MR. ROBERTS: Mr. Speaker, in moving the adjournment of

the House, may I remind members that tomorrow morning we shall return to the

Committee debate on the Hydro Privatization Bill, and the Budget Debate will

continue on Monday afternoon, after the regular Orders of the Day. With that

said, Your Honour, I move the House do now adjourn until tomorrow at 9:00

o'clock.

On motion, the House at its rising adjourned until tomorrow,

Friday at 9:00 a.m.