1996 Legislative Session: 1st Session, 36th 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)

TUESDAY, JULY 30, 1996

Afternoon

Volume 2, Number 9,

Part 2

[ Page 1181 ]

The House resumed at 6:39 p.m.

[The Speaker in the chair.]

Hon. J. MacPhail: First of all, I'd like to advise the House that we will be sitting tomorrow.

In Committee A, I call Committee of Supply. For the information of the House, we'll be debating the estimates of the Ministries of Employment and Investment; Municipal Affairs; and Small Business, Tourism and Culture. If we get through that.... No, I'm just kidding.

In the House, I call Committee of Supply. For the information of the House, we will be debating the estimates of the Ministry of Finance and Corporate Relations and the Minister Responsible for Intergovernmental Relations.

The House in Committee of Supply B; M. Farnworth in the chair.

ESTIMATES: MINISTRY OF FINANCE AND

CORPORATE RELATIONS

AND MINISTRY RESPONSIBLE FOR

INTERGOVERNMENTAL RELATIONS

(continued)

On vote 29: minister's office, $348,000 (continued).

Hon. A. Petter: I thought I'd begin this evening's session by introducing two officials who are with me today in anticipation of questions concerning the Securities Commission. They are Doug Hyndman, chair of the B.C. Securities Commission, and Carol Anne Rolf, director of policy and legislation with the ministry.

B. Penner: Hon. Chair, I'm going to begin tonight by indicating to the minister that I'll be asking questions primarily having to do with the Matkin report, which I believe was released in 1994, and the government's steps in trying to implement that report. Secondly, I'll be asking questions having to do with proposals to establish a coordinated federal system of securities regulation across Canada.

To begin with, I'd like to just open my remarks by commenting on the Matkin report itself, which was released, as indicated, in 1994. That report received plenty of attention, certainly in the media around the province and in the sectors affected at the time of its release. Most of the reports and commentators indicated that the report was quite far-reaching and had many worthwhile proposals. Since that time, many people in the industry and interested observers throughout the province have watched to see what this government was going to do in terms of implementing that report.

Needless to say, some hesitation was initially expressed by certain sectors, particularly in the brokerage area, about certain elements of that report. Nevertheless, I feel that it's important tonight to go at some length through recommendations contained in that report and to find out just what the government intends to do, or has done, in terms of implementing that report.

Perhaps the minister can begin with a fairly general response in terms of his view of Securities Commission regulations in the province and the steps he is undertaking in implementing the general recommendations of the Matkin report.

Hon. A. Petter: I'll give a fairly general response, in part because these issues were extensively canvassed and covered in the past, and in part because I am fairly new to these issues myself. The member will have to forgive me as we find our way to answers together.

[6:45]

The member is no doubt aware that some major changes were undertaken in response to the Matkin report. I believe that response was issued in October of '94 and followed up with legislation in the spring session of '95. That legislation, I can report, was proclaimed and brought into force in January of '96. While the action did not correspond exactly to the recommendations, it was an attempt to try to respond to the basic concerns and recommendations that were brought forward by Mr. Matkin in a way that the government laid out and described at that time.

Some outstanding issues, as I understand it, remain to be addressed, some of which are underway. For example, the securities fraud office pilot project is one issue that remains outstanding, although I think work has been undertaken in that regard. There are issues around the Law Society report on conflict of interest, monitoring the IDA-member regulatory commission proposal, issues around promoters, civil remedies and overall evaluation. I'd be happy to go into some of those if the member has further questions.

B. Penner: We all know that from time to time the Vancouver Stock Exchange is subject to harsh criticism because of certain dealings at the exchange and people associated with it. However, I feel that the Vancouver Stock Exchange does fulfil a very important economic role for the province, in that it helps supply smaller, developmental-stage companies with high-risk capital. Of course, the very term "high risk" leads us to know that there will be some examples where investors are disappointed. That's not to say that regulation doesn't have a strong role to play in all of this.

One of the key recommendations of the Matkin report was to separate some of the functions of the B.C. Securities Commission. One of the critical comments in the Matkin report was that the B.C. Securities Commission held itself out, essentially, as judge, juror and executioner in terms of meting out the penalties and being the enforcer. Therefore, in the report that was released in 1994, one of the recommendations was that a separate body be created to be the enforcer and to free up the board so it could perform more of an administrative and policy-setting role. I was just wondering if the minister could tell us what steps his ministry has taken in that regard.

Hon. A. Petter: Again, I don't want to revisit the issues that were fairly well canvassed at the time, but my understanding is that that was one of the recommendations of the Matkin report that was not embraced by government. The notion of separating adjudication and policy was not embraced by government.

The government rejected the recommendation on the basis that an industry-run structure would compromise the underlying principles of independence of regulators from the regulated industry, was contrary to international trends towards increased regulatory independence and could have had a detrimental effect on regulatory effectiveness and harmonization of securities regulation. I guess the answer is that while Mr. Matkin's report contained many recommendations that were acted upon, this one was not.

However, the government accepted the key finding of the Matkin commission that BCSC required increased resources

[ Page 1182 ]

and financial autonomy, and have brought a range of input into policy formulation, in order to more effectively regulate the junior market. There were a number of announcements that flowed from that. So the notion of separating the adjudicative and policy functions that was part of the report was not accepted by the government and did not form part of the government's commitment in response to Matkin.

B. Penner: The minister just commented about giving the B.C. Securities Commission some increased independence and regulatory authority over its own functioning. There has been some talk, as I understand it, of a proposal to make the B.C. Securities Commission essentially a special operating agency. I wonder if the minister could confirm that and advise us what stage that proposal is at.

Hon. A. Petter: Essentially, that is the current status of the Securities Commission today. The commission operates as a separate corporate entity that is self-financing and, therefore, with a degree of autonomy from the rest of government.

B. Penner: I've had the privilege of sitting on the Public Accounts Committee for the last little while. It's often talked about by this government how it has had some successes in establishing SOAs, or special operating agencies, which, as I understand it, operate quite differently than other levels of government. I appreciate that the B.C. Securities Commission has presently, and for some time now, been operating more independently than other arms of the government. My question to the minister is whether the government is considering taking this one step further and officially making the B.C.

Securities Commission a special operating agency. There are now, as I understand it, four such entities.

Hon. A. Petter: The answer is no, because the commission currently has a higher degree of autonomy than an operating agency. It operates essentially as a corporate entity which has all of the independence and autonomy that an SOA would have, and then some. It's not necessary to use the creation of a special operating agency to achieve the goals of independence and autonomy that the member refers to. They are already incorporated and recognized by the existing operating structure.

B. Penner: I thank the minister for his comments. As I understand it, the B.C. Securities Commission is self-financing, in that it pays for itself and its staff through fees levied on people seeking to file prospectuses and other documents with the commission. I'm wondering if the minister can advise the House what happens with any surplus that the B.C. Securities Commission may encounter on a yearly basis and what happens to that surplus if it starts to accrue year after year.

Hon. A. Petter: To the extent that there are surpluses, they stay with the agency. As I understand it, the agency is trying to build up a small operating reserve at this time in order to assist in its functions. But if it were happily to be the case in years to come that there were ongoing surpluses that exceeded the requirements of the agency, then the agency would have the happy choice of either expanding its services or reducing the fees that it charges.

B. Penner: I suppose there might be one other alternative: a future Finance minister may be tempted to receive a cash donation from the B.C. Securities Commission. Since I'm new to this area, I wonder if the minister could explain the legislative framework or regulations that prevent the government from accessing those funds at the present time. Is it simply an in-house policy or informal agreement, or is something enshrined in legislation which prevents the government from accessing any annual surplus that the B.C. Securities Commission may enjoy?

Hon. A. Petter: It's within the legislation that the agency is to be self-financing and that the funds raised are for the purposes of operating the agency. This was part of the legislative reform which was brought in in response to Mr. Matkin's recommendations. So that is legislatively provided for -- unlike, I might add, in some other provinces, which do use their securities regulation framework as a source of revenue, which is raising some interesting issues around the federal proposal for a national security agency and around issues of compensation.

But in B.C., we moved, through legislation, to this mechanism of the agency being self-financing, having control over its own revenues, and that is provided for in legislation.

B. Penner: Given that the B.C. Securities Commission has some autonomy and independence, particularly with respect to its own finances, I'm wondering if this government has ever considered conducting an efficiency audit to make sure that there is an incentive in place for the commission to run as efficiently as possibly. Presumably, if it were to find itself in a financial crunch, it could always increase the fees that it charges for its services.

I'm just wondering what mechanism is in place in terms of making sure the commission operates in the most efficient way possible and doesn't simply -- not that I'm making this accusation, but if this were to happen in the future -- increase its fees rather than find efficiencies within its own organization. What mechanism is there which would prevent the commission from doing that?

Hon. A. Petter: There are some control mechanisms that enable government and the public to ensure that the commission operates in a frugal and responsible way. As I understand it, the fees that are charged do have to be vetted and approved by government; the agency prepares a business plan. Obviously, those who pay the fees would have something to say if the fees were raised, so there are mechanisms -- audits as well -- that provide, through government and perhaps directly from consumers, some mechanisms and pressures that ensure that the agency operates efficiently in establishing its fees and in ensuring that it maintains those fees at an acceptable level.

B. Penner: An additional question with respect to the B.C. Securities Commission. I wonder if the minister could indicate to us the number of FTEs that the commission presently has, and if he could provide this House with some historical perspective, perhaps going back over the last five years, just generally, so we have some idea whether the commission is growing and, if so, by how much.

Hon. A. Petter: The commission doesn't operate on a traditional FTE system. As I understand it, there are currently about 150 staff. That would be an increase over the past five years from around 110. That increase has taken place in a number of areas, but the major area has been enforcement.

B. Penner: You made some reference just now to the number of staff hired, primarily for enforcement. I wonder if you could bring us up to date with respect to the number of enforcement actions the B.C. Securities Commission has seen

[ Page 1183 ]

fit to pursue in the past year and, again, provide some historical perspective as to whether that's increasing or decreasing over time.

[7:00]

Hon. A. Petter: If the member wants some detailed information, I can certainly undertake to have the commission provide it to him. Just looking at the annual report for the year ended March 31, 1995, in 1995 there were 36 notices-of-hearing issued; in 1994 it was 33; in 1993 it was 39; and in 1992 it was 37. I'm informed as well that the commission had about 30 decisions following hearings in the past year, which is up considerably from previous years. I don't have the 1996 number for notices-of-hearing issued, but we could certainly get that, to date, if you want it.

B. Penner: One of the conclusions of the Matkin report was that the regulatory body -- whatever form it took -- should spend more time on and place greater emphasis on prevention of problems rather than going after the problems after the fact and taking disciplinary action. I'm interested in what actions or initiatives this government has taken to implement the recommendation that a greater emphasis be placed on the prevention of problems, for the benefit of investors.

Hon. A. Petter: Through the changes that were undertaken last year, there has been some tightening up with respect to promotional activities and unregistered advising. I understand that the commission is also planning to undertake initiatives in terms of educating investors and in terms of ways to try to be preventive. Of course, it is difficult to prevent, particularly in an area where people are about to commit fraud, but these kinds of initiatives which are responsive to the Matkin report and its recommendations have been undertaken and are going to continue to be pursued by the commission.

B. Penner: Another comment I came across in the Matkin report was a suggestion that brokerage firms be required to undergo some form of fitness test prior to being permitted to continue underwriting new listings. Presumably this is another proposal that would benefit investors and would-be investors, and offer them some assurance that the Vancouver Stock Exchange is indeed a safe place for them to place their investment. I'm wondering whether this particular recommendation has been pursued by this government.

Hon. A. Petter: I understand that if brokerage firms wish to be registered as underwriters, they now have to go through a form of fitness test on a range of different criteria -- due diligence, etc. -- in order to qualify.

B. Penner: Could the minister advise us on whether that has always been the case or whether new initiatives have been taken to ensure the fitness of brokerage firms, for the protection of the investing public?

Hon. A. Petter: The reference I just made is new this year. Registration and the breaking-out of a separate registry for underwriters is a new requirement and was made in response to the recommendations of the Matkin report.

B. Penner: Has the government given any consideration to the recommendation that legislative changes be made to permit class action suits as one form of remedy when parties are aggrieved by misleading or deceptive practices on the part of brokerage firms or promoters?

Hon. A. Petter: Yes, class action legislation has been introduced in this House, and it certainly can be utilized in this context. Perhaps I should make reference to a related issue, and that is that Mr. Matkin recommended the expansion of statutory civil liabilities -- from misrepresentations made in the prospectus to secondary market documents, such as press releases. This is one of the outstanding issues that I referenced earlier. As I understand, a review of a similar proposal is being undertaken by the Toronto Stock Exchange -- by a committee of the exchange on corporate disclosure.

The report has attracted commentary and a final report is expected in September and October. In order to ensure that we benefit from that consultation and also look at a regime that can operate nationally, we are watching and awaiting the outcome of that initiative from Toronto, and gauging it before we respond to the recommendations Mr. Matkin made in British Columbia.

B. Penner: I commend the minister for closely watching the procedures and developments in Ontario with respect to their securities regulations. Hopefully, we won't simply wait for them to take the lead but will take some action of our own.

I'm going to go back to a topic I raised a little earlier that, again, has to do with the separation of powers between regulating, enforcing and administering. To go back to the Matkin report, one of the specific proposals was that the government help create a new office known as the securities fraud office which would investigate any complaints coming from the investing public. What are the minister's thoughts in respect to that proposal? I note that the suggestion was that the securities fraud office could fund itself through fines collected in the course of its enforcement procedures.

Hon. A. Petter: I think the member may be, in a sense, confusing two issues. One thing Matkin recommended that the government did not act upon, to reiterate what I said earlier, was a breaking-out of the ordinary enforcing, regulatory and administrative functions of the commission. That was explained at the time; I've tried in capsule form to explain it again.

What the security fraud office proposal does is speak to another issue, and that is around prosecutions, which were never the purview of the commission, to try to build into government the capacity to undertake prosecutions in the area of securities in a way that reflects a greater expertise and consistency and that meets the expectations of the public by providing a prosecutorial role with respect to securities regulation. In respect of that recommendation, which is somewhat different than the other issue, there has been a three-year pilot project, funded up to $3 million by the B.C. Securities Commission, to establish a securities fraud office in the commercial crime

section of Crown counsel in Vancouver, plus additional officers to the market manipulation group of the RCMP, Vancouver commercial crime section. That pilot is now underway. The first interim evaluation report to the Minister of Finance and Corporate Relations has reported progress. However, I want to inform the member that there have been some problems in RCMP staffing-up. Another evaluation report is due in September, so we'll be monitoring this closely. But certainly the goal here is to utilize this pilot to try to develop the kind of securities fraud prosecutorial capacity that will be effective in pursuing prosecutions in this area.

B. Penner: I thank the minister for his answer to that question.

I'll just move to a different topic now, still related to securities regulation. It's becoming a favourite topic, I believe,

[ Page 1184 ]

across the country to talk about the harmonization of securities regulation, taking it from the distinct and separate purview of ten different provinces and having a uniform approach across the country. As the minister will probably be aware from his constitutional law classes, the Canadian constitution gives the provinces the right and the responsibility to regulate matters relating to securities.

Obviously, a move to harmonize securities regulation across Canada would require some form of intergovernmental negotiation and cooperation and, finally, agreement to voluntarily transfer or give up, at least temporarily, some of the provinces' constitutional powers with respect to securities regulation. At least, that is my understanding. I'm wondering if the minister could bring us up to date with respect to the province's role or initiatives taken in terms of pursuing the potential harmonization of securities regulation and enforcement in Canada.

[7:15]

Hon. A. Petter: It's something to do with property and civil rights, as I recall.

I think the member is right in saying that the primary constitutional authority over securities regulations falls within the provinces' purview. But obviously there has been, for some time, some interest in pursuing the possibility of a national regulatory regime around securities regulation. I don't think it would require the relinquishment of constitutional authority by the province to achieve that. In fact, I think the proposals that are being looked at would involve some delegation of authority, which, in some ways, is an affirmation of authority but an affirmation that results in that authority being passed on -- in this case, for the purpose of a national regulatory structure.

This is an issue that was discussed at official levels prior to the first ministers' conference in Ottawa in June, and it was discussed there as well. The federal government indicated at that conference a desire to proceed with a national securities regulatory agency on a delegated model, with provinces joining on a voluntary basis. There was interest expressed in that by eight provinces. Quebec indicated that it was not interested at this time. B.C. indicated that it would not commit at this time, but I think that was done for some rather specific reasons.

There is obviously a concern, and the member referred to it earlier, about the unique nature of the Vancouver market and the need for venture capital. If there is to be a national securities regulatory agency, there is a concern that it not be one that -- I'm trying to put it gently; I suppose I won't put it gently -- acts as a suction pump for investment in central Canada or disregards the unique character of the capital markets in British Columbia.

The province, while not committing at this time, has continued to participate in discussions. In July, there was a meeting of officials in Winnipeg, I believe. British Columbia is participating in that process. We are trying to ensure that, if and when this national system gets up and running, it is one that will not be detrimental to B.C.'s interests. Then, in consultation with those in securities markets and others, we would have to make a decision as to whether or not we would join this national plan. For now, we're playing a role in ensuring that the national regime is one that leaves some doors open.

I think there are some reasons why B.C. would be rightly suspicious of a national scheme, particularly one that didn't allow for some recognition of the unique nature of B.C.'s securities market, as well as some autonomy and local presence. By the same token, those are issues that may be addressed. If they are addressed, there is the possibility of British Columbia becoming a participant in such a national securities regime, but not in a way that we would relinquish our constitutional authority.

B. Penner: I would like to clarify my earlier comments. I certainly wasn't suggesting that the province transfer or relinquish on a permanent basis any of its constitutional authority with respect to property and civil rights in the province.

One matter gives me some concern, though. With the position the province has taken by being one of only two provinces in Canada so far indicating a lack of interest in pursuing harmonization of securities regulation, we may be getting left out of the discussions and left in the dark. That may be to our future detriment.

What particularly concerns me is that our neighbouring province of Alberta, which has never been a champion of centralization of powers, at least in my relatively short life, has been actively getting involved in the discussion and negotiation process and in trying to move forward with proposals to bring harmonization of securities regulation across the country, at least to those provinces willing to cooperate with and partake in the plan. I'm wondering what the minister's comments are with respect to that.

I've heard a few rumours about the specifics and about some of the prominent individuals from Alberta who are involved in those negotiations. I'll sit down and listen to the minister's comments.

Hon. A. Petter: I would urge the member not to interpret a lack of prior commitment on the part of the province to join a national securities regulatory regime as a lack of interest. In fact, as I've already indicated to the member, we have an interest. Officials are attending meetings concerning this. We are expressing the concerns we would have about a national scheme if it were one that we were to contemplate joining at some time. I can certainly assure the member that a lack of prior commitment has not brought a lack of attention toward British Columbia's concerns on the part of the federal government. Again, I suspect the situation is rather the opposite.

Interjection.

Hon. A. Petter: No, I don't even think it's a lack of influence. I think the member for Delta South may find that provinces that stand up and speak their concerns publicly and don't just jump when the federal government says to jump get a little additional influence, if anything. Perhaps that's a contribution B.C. can make.

With respect to Alberta, I think there are some competing concerns in Alberta. The Alberta government has indicated an interest in participating in a national scheme, but I know there are some in Alberta who feel differently. I'll be frank with the member: I think that at the end of the day, everyone is looking at competing concerns. They're trying to maintain a regime that reflects the needs of the domestic economy of Alberta or of B.C., and there's the concern that they're competing against each other -- and they do not want to be isolated, either.

I think we're going to have to see how this works its way through. But certainly at this point, given the nature of the B.C. securities market, the nature of the B.C. economy and the historical pattern of national regulatory bodies having been not very favourable to B.C.'s economic interest, if I could put it that way, I feel far more comfortable, particularly in my capacity of Minister Responsible for Intergovernmental Relations, having not made some prior commitment to join some as yet

[ Page 1185 ]

ill-defined or undefined national security scheme, and having said, rather, that until we hear that each and every one of British Columbia's concerns have been addressed, the federal government should not expect to take us for granted or that we would be participants in such a scheme. I think that's a far stronger bargaining position. I also think it's far more reflective of the view of most British Columbians that we should bargain hard and make sure, particularly in the area of provincial constitutional authority, that our interests are not yielded in any way until we're certain that we get in return, in this case, a preferable regulatory regime.

B. Penner: Hon. Chair, I think you would agree with me that the Premier of Alberta has rarely been considered a pushover, particularly when it comes to sticking up for his province's interest. What attracts my attention to this issue is the fact that Alberta apparently has chosen to get in on the ground floor, to have some input and influence in the formative stages of this proposal and to help shape at the very early stages what this national regulatory body will look like.

My concern about the province's present position of sitting on the sidelines is that we may be missing out on the most influential stage of the entire proceedings. I certainly don't want us to miss opportunities to help shape whatever regulatory regime comes into place. If the province decides to go it alone, we would be in the unenviable position of being compared to Quebec, I think, in terms of trying to attract investment to British Columbia. I don't think that would be a positive move on our part. Businesses wishing to list with the various regulatory regimes would have some options.

They could list in Alberta, perhaps, and have access right across the country, save and except for two provinces; or they could list in British Columbia, with all the fees and costs associated with that, and have access to one province in terms of conducting their share offerings here.

Those are my concerns, and I don't think they're frivolous. I think I understand the minister's point that sometimes you can get some extra attention by being the bad boy of Confederation, but I wouldn't recommend taking that position simply for the sake of being that. I think we need to take a case-by-case look at our role, in terms of how we cooperate with the rest of the provinces in Canada.

Certainly my concern here is based on the fact that Alberta -- a province that has historically stood up very strongly for its provincial rights -- has gotten in very early on the ground floor and, according to reports we're hearing, is having tremendous influence in shaping what this commission is going to look like at a federal level.

I'd again call on the minister to perhaps take that message back to the rest of his cabinet colleagues, because I do feel it's important. I don't think British Columbia should miss out on an opportunity like this to have influence at the very earliest stages of the creation of what could be a very exciting and dynamic new regime in terms of securities regulation in Canada.

Hon. A. Petter: As the member may be aware, there are differing views in the industry in British Columbia concerning the relative merits of having a separate or integrated securities regime in Canada for British Columbia. I daresay they correspond, in general terms, to the conflicting concerns I outlined earlier. It's all well and good to be in a national securities regime, but not if that regime is systemically tilted against the interests of your province. I think we have to acknowledge that there are some differences of views.

Then the question comes: how do you best pursue the interest of British Columbia in that context? The view taken by the Premier, and certainly subscribed to by myself, is that one should not assume that influence is a function of prior agreement -- in fact, quite the contrary. I think the fact that British Columbia has indicated that it cannot be taken for granted enhances its influence, if anything.

Some of the proposals the member is referring to that have formed the basis for some of the work to date were put forward jointly by British Columbia and Alberta, working together through the two Securities Commissions. Mr. Hyndman was involved in formulating those positions. B.C. has attended the officials' meetings and attended, and had voice at, the meeting in Winnipeg recently.

I guess it's just a strategic difference between us, hon. member. Perhaps you'd like to go on the record right here and now, so British Columbians can be clear on your position and your party's position. If you're saying that you believe that British Columbia ought to commit now to joining a national securities regime at this stage, even before we know what that regime is and how well it will serve B.C.'s interests, then stand up and say so, and let the people measure you based upon that deposition.

Otherwise, I suggest that the better course is to support this action by this government -- that is, saying: "No, we won't be taken for granted, but we're going to be players." We'll pursue our interests aggressively, we'll put the federal government to the test, and the federal government can demonstrate to us whether they're prepared to put forward a model that will meet B.C.'s interests. If they do, we'll consider it; and if they don't, we won't.

F. Gingell: Hon. Chair, I will certainly stand up on this issue.

Two months ago, this government was in and Alberta's was out. Two months ago, British Columbia was in, and Alberta was out. British Columbia was part of the negotiations that were going on. All of a sudden, over some fish issue, the Premier pulled us out of the negotiations, and we are going to lose our opportunity to make the right negotiations for the right deal. If British Columbia's securities industry isn't part of this national system, it will die. They can get along without us. Anyone who wants to register in British Columbia will be subject to double costs and double registration. We were going along fine, and all of a sudden we got off track.

Our understanding is that the federal government, who have been negotiating in private with Ontario -- and we appreciate that's not the way this should be done -- went to Alberta and said: "What is it that you want to come in on?" Alberta gave them a list, and they said: "Okay, that's done." British Columbia, at that point, who previously had been supportive of this program.... You're well aware of the recommendations. There were substantial recommendations that the British Columbia Securities Commission had been making, the majority of which were being accepted, and British Columbia all of a sudden pulled out.

It seems to me that they haven't pulled out over the issue of securities regulation; they've pulled out for some other purpose and are using this as a chip.

[7:30]

I'm really concerned that this isn't a terribly strong chip. They can get along without us, but we can't get along without them. It isn't a question of British Columbia standing up for its rights; it's a matter of British Columbia thinking through all of the issues about how the securities industry and its regulation will work after there's Canadian securities regulation in place. What would be the consequences to our own industry if British Columbia is not part of it? It isn't a question of

stand-

[ Page 1186 ]

ing up for our rights; it's a question of ensuring that we are part of the group who carefully plans how this is going to happen, to ensure that British Columbia's needs are met. What are our needs? We want there to be a regional office in British Columbia that is independent. We want to ensure that the type of regulatory regime the B.C. Securities Commission has been bringing into play in British Columbia is not denigrated in any way by this nationalization.

My belief is that we don't have to take any position secondary to any other regulatory agency in Canada. We're doing a fine job here, and if you want to look at all the problems that have come about, they've been in Alberta and Toronto. I believe that we have pulled ourselves up by our bootstraps in the last four or five years.

We're in a position to play an important role in how this regulatory regime will come about, and I'm scared that we're going to stand back from it and lose the opportunity to make sure that the things that British Columbians want in order to ensure the continued growth, vigour and vitality of the investment industry in British Columbia are going to be lost to us. In my opinion, they'll sure as heck be lost if we're not part of a national regulatory agency that works from the Rockies east, excluding Quebec.

Hon. A. Petter: Let me go back and start where I did last time. I appreciate the member's forthright statement of his position and his party's position. It's refreshing. But he should know -- and I'm sure he does know -- that within British Columbia, amongst the business community and elsewhere, there are some real questions and concerns around the possibility of being isolated from a national regime but also around the possibility of being compromised by a national regime. Officials have already been influential, through the paper that was produced which the member referred to, through ongoing discussions....

In fact, federal officials were out here as recently as last week, I believe, carrying on discussions.

The member has to understand that B.C. has not pulled out of any process. But that does not mean that B.C. is prepared to roll over for any process, either. Perhaps the trouble with being a provincial Liberal with strong ties to the federal Liberal Party is that one assumes that in order to get anything, you have to roll over first and ask questions later. The fact is that this government is aggressively pursuing B.C.'s interests. That does not mean that we're pursuing an isolationist strategy here or anywhere else.

We've been saying to the federal government that we're not prepared to precommit to a national securities regime until we know what that regime entails, what it means for British Columbia and that B.C.'s interests are protected. We're not going to give any prior assurances or commitments, and that strikes me as an eminently reasonable position for a province that has legitimate concerns, shared by many in the business community, in an area of provincial jurisdiction.

No one should assume that that means that we are disinterested. In fact, all of our activities -- from the papers that have been produced, to the participation in conferences, to the meetings with officials -- suggest that we are very interested. But we are going to bargain from a position of strength, not from a position of weakness. We are going to go into this with B.C.'s interests very clearly front and centre, not assuming ahead of time that we are going to be rolled up and assimilated into some national securities regime that's going to act as a suction pump for the interests of central Canada.

I'm sorry, those days are over. We will participate in good faith on behalf of British Columbia. I regret the fact that the member opposite takes a different position, but I appreciate the fact that he's been so forthright in stating that position.

F. Gingell: There is a memorandum of understanding that provinces are signing onto -- everybody but Quebec and British Columbia. That memorandum of understanding, as I understand it, provides for a task force for transition implementation. Secondly, it provides for an advisory committee, sitting outside, to advise the transition task force on all of these issues. My understanding is that unless we are inside the tent, we will have no influence and no say whatsoever on either the transition implementation task force or the advisory committee to that task force. Is that true?

Hon. A. Petter: The member is getting ahead of himself and of the process. The MOU he's referring to is a draft MOU. Indeed, the very discussions and negotiations that are taking place are around the structure of that MOU, and no one has signed onto that MOU as yet. Indeed, I think the question will be.... Once the MOU has been finalized as a draft MOU, the choice will be made to various provinces as to whether or not to sign on. That's the very issue on which....

We have not made a prior commitment to sign onto an MOU -- until we are fully apprised of what it contains, what its implications are, whether it will serve the interests of British Columbia and whether those in British Columbia support it --

whereas other provinces have been more willing to precommit and state a position.

Far from our being left out of this process, I think we are very much engaged in the discussions around what that MOU might contain and whether what it contains would be sufficiently attractive to British Columbia to make it possible for British Columbians and this government -- and, hopefully, the opposition -- to consider supporting the signing of that MOU. Until we reach that point, we are not prepared to make a prior commitment that would tie our hands or tilt the table.

F. Gingell: Very nice, in that you're a politician and a law professor. I'm a politician and a CA, and neither of us are in the securities industry. I always look for good advice. This government made a point of creating the Securities Policy Advisory Committee, a group of people from the industry, the legal professions and the brokerage industry. If you go through the list of the people on that committee, it's a pretty blue-ribbon group. Has the minister sought the advice of this Securities Policy Advisory Committee on this subject?

Hon. A. Petter: SPAC has been involved in trying to assist government in formulating a position. They've canvassed the business community and others, and have provided their advice. As I understand it, their advice has been: "Definitely no, stay out"; then "Perhaps yes, get in, because we don't want to be isolated"; and then "Gee, we're not quite sure, because other provinces seem to now be reconsidering, and if they are, maybe we don't have to come in"; and ultimately "Whatever you do, stay involved in the process." If I synthesize all of that advice, I think I'm following it.

F. Gingell: Obviously, I get different messages from SPAC than the minister does. My understanding is that under the circumstances that exist at this moment, they are concerned that we should be very careful not to be left out of this exercise. They're concerned that the way we're going at the moment is going to leave us outside this exercise, and we're

[ Page 1187 ]

going to lose our input. We obviously can't spend all evening on this and don't really want to, but perhaps the minister would make available to me any written advice he has received from the Securities Policy Advisory Committee on this subject.

Hon. A. Petter: I don't disagree with the characterization the member has given of the advice to not be left out of the exercise, as opposed to the product of the exercise. In fact, we are very much engaged, as I have been at great pains to say. We are involved, and will stay involved, in the exercise, using the maximum leverage we have at our disposal. I'd be happy to provide the member with any written advice that was provided to me or my predecessor on this matter by SPAC.

F. Gingell: It may, of course, as is so often the case, turn out that we're not that far apart on this issue.

I want to assure you, hon. Chair, that the actions of this government in the last few weeks over the fish issue, and what was said in Ottawa, have caused concern amongst people who are careful, thoughtful students of and experts in this industry and who are concerned about the ongoing role that the British Columbia securities industry will play. They're concerned about remarks that the Premier has made and the rather negative attitude that flowed from them. As long as that isn't the minister's attitude, and if he genuinely wants to ensure that we have influence, that we do play a role, then that is good, and we're all on the same side.

If I may, I will just go back briefly to some of the other issues that were dealt with. The securities fraud office, the $3 million: you mentioned the problems of the RCMP in being able to staff up for their commitment to this. Is a solution being found? Are we going to move forward?

Hon. A. Petter: I'll resist the temptation to respond to the first part of the member's statement before the question, because I don't want to prolong that debate. I will say this: I think most British Columbians feel a lot safer knowing that the Premier is there representing their interests in these and other matters on the national stage. I count myself proudly and enthusiastically among them.

Having said that, yes, I understand that there is work going on, that there have been some additional resources found within the RCMP to staff up and that the Securities Commission is continuing to pursue that. Solutions are being sought.

F. Gingell: One of the most interesting provisions we dealt with when the new Securities Act came in last summer was the issue of disgorgement. I wonder if anyone's coughed up yet?

The Chair: I don't know if the Chair should rule on that remark!

Hon. A. Petter: The term "disgorgement" has certain medieval implications to it.

I understand that this mechanism has not yet been utilized by the commission.

F. Gingell: Is the reason that it hasn't been used yet that no particular set of circumstances had arisen in the provisions of the B.C. Securities Commission? Or have you any concerns about its legality?

[7:45]

Hon. A. Petter: I guess the circumstances for it to be used have not yet presented themselves.

F. Gingell: As the minister probably knows, I was supportive of the decisions your predecessor made as to those portions of the Matkin commission that would be instituted and those that would be left to one side. One of the issues that we had unanimity on amongst politicians was the decision the government made that the chair of the Vancouver Stock Exchange should be a public governor rather than an industry member. It surprised me that I heard more criticism on that particular subject than on any other. A year and a half later, people that I speak to, who I respect, suggest that you made a mistake there.

I was wondering whether the issue has come up sufficiently to the Securities Commission or to the minister, from the VSE and others -- perhaps through the public governors of the VSE, who the minister appoints -- to cause the minister to have a second look at that issue.

Hon. A. Petter: Certainly I have not been approached on this issue in my brief tenure as minister. But I'm informed by staff that while there were concerns expressed at the time and there is still some reiteration of those, there has not been, from staff's point of view, a strong and concerted campaign or effort or message that that decision should now be revisited.

F. Gingell: I think that if you look back, the VSE is now into its second non-industry chair. Perhaps it might be appropriate for the minister or a member of his staff to talk to the first chairman, who I haven't spoken to, to get his opinion.

Clearly, the chair of the VSE plays a dual role. There is the role that he plays as chair of the meetings of the stock exchange, and that, I must admit, is where my focus was in being supportive of the chairman of the Vancouver Stock Exchange not being a player in the market. Evidently, just as important is the role of the chairman in representing the VSE on the boards of Canadian and international organizations. A chairman who is not an industry member brings less experience, less understanding and less knowledge of the issues to those meetings.

I myself would have thought that role could have been played by the president of the exchange, but I'm led to believe that that isn't the case and that this is a subject that's being revisited.

Hon. A. Petter: Being new to this issue and this portfolio, I guess what I'd simply say is this: based on the limited knowledge I have, it strikes me that there are some trade-offs being made here. On the one hand, having a public governor as the VSE chair does provide a certain aura of credibility and independence, which, I think, can stand such an individual in good stead. On the other hand, obviously it can impair the credibility, internally, of that individual and the efficacy of that individual acting as a working chair of the exchange.

What I'd say is that I'd be happy to monitor that situation and hear various views, including the member's, over the course of the next year or two. If there's reason to review this matter, then I'd be happy to do so.

F. Gingell: The Securities Commission finished its first year as an independent body on March 31, 1996. The '96 report hasn't come down yet; at least if it has, I haven't seen it. Can you tell me what the revenues and expenditures are for this year?

Hon. A. Petter: The revenues are $15.6 million and the expenditures are $12.1 million, for a net surplus of $3.5

mil-

[ Page 1188 ]

lion. I'm informed, hon. member, that the report should be available within the next few days, so I'll undertake to table it as soon as I'm able.

F. Gingell: Just one last question, to correct my memory. When the member for Chilliwack was talking about the ability to withdraw excess earnings over and above a contingency fund or whatever.... To my memory, any amounts in excess of $5 million or $8 million would automatically come back to the consolidated revenue fund -- the government took the $8 million that should accumulate up to that point but there was a subsequent ability to withdraw sums that were in excess of your needs.

Hon. A. Petter: I think the member may be mixing up two things. As I understand it, when the commission was created on the new model, there was, in the then account, about $13.5 million, $5.5 million of which was sort of earmarked as a fund or a contingency that could be provided to the commission should it require it, with the $8 million coming back to consolidated revenue, I assume.

Interjection.

Hon. A. Petter: All $13.5 million going back, but with the $8 million knowing it wasn't going to return. There is no mechanism in the legislation -- or so I'm informed, and I'm sure that the chair of the Securities Commission would have no motivation to misinform me about this -- to claw back reserves. The commission is expected to manage its affairs in such a way that the reserves do not become excessive, either by expanding its services or by reducing the fees that it charges.

F. Gingell: Shall we move on to another subject?

Hon. A. Petter: What do you want to do -- the B.C. Utilities Commission?

F. Gingell: Yes.

Hon. A. Petter: Assisting me in this part of the estimates is Mark Jaccard, chair of the B.C. Utilities Commission. I simply introduce him to the House as we proceed into this component of the estimates debate.

F. Gingell: It's nice to see the commissioner again. He briefed me some time ago with respect to one of the most difficult issues ever: whether to put up the rates for poor people in the West End to heat themselves in the winter and cut them in the summer when they don't need any heat. Anyway, we won't deal with that issue.

What I'd like to deal with is the relationship between the Utilities Commission and B.C. Hydro, specifically in relation to special directive No. 2, which is a directive sent to B.C. Hydro -- but the Utilities Commission are subject to its instructions. It requires B.C. Hydro, as I understand it, to pay out 85 percent of its earnings, as calculated. . .a rather complex and difficult calculation, I think, for those of us who are accountants. In this year's budget, the government have proposed that B.C. Hydro will pay a dividend to the government of $214 million. Is $214 million the amount that the B.C.

Utilities Commission has approved as being the appropriate amount payable under special direction No. 2?

Hon. A. Petter: I'm informed that the two special directions that are relevant here are special direction No. 2, to B.C. Hydro, and special direction No. 8, to the Utilities Commission, and that the $214 million is within the amount that is allowed as a result of those directives. It may well be in excess of that, but certainly it is within whatever amount the formula allowed.

[G. Brewin in the chair.]

F. Gingell: I was going to deal with special direction No. 8 secondly. I am going to deal with special direction No. 2 first.

When you look at the results of B.C. Hydro for the nine months ending December 31, 1995 -- that's the most recent information we have, but it may well be that the Utilities Commission has more up-to-date information than we have -- earnings were down by quite an amount. They were down by $39 million on $118 million, fractionally more than one-third. When we look at what happened in prior years, in 1993-94 the government budgeted for a $290 million dividend, and $245 million was paid. In 1994-95, $235 million was budgeted and $98 million was paid.

And in 1995-96, $146 million was budgeted and $125 million was paid. So at no time has B.C. Hydro been able to meet the estimates that were put into the budget.

[8:00]

Now, I appreciate that this statement for the nine months ending in 1995 is for this past year, in which $125 million has been paid. When you look at the trend of B.C. Hydro, I find it hard to understand that they would have earnings available for the purpose of making a dividend payment that's 70 percent greater than was paid last year. Income is going down, but you expect the dividend to go up.

Hon. A. Petter: If the member wants to get into detailed questions around Hydro's operations, the minister, who is in a committee room down the hall, may be better equipped to do that than I am.

In general terms, as I understand it, throughout the industry right now there are major savings being realized in terms of electricity. The expectation is that B.C. Hydro will be able to achieve similar savings, which will help in the contribution towards this dividend.

As with all forecasts and projections, we're going to have to monitor Hydro's activities in order to ensure that they can meet this dividend. If it were to turn out that they could not, we would make the necessary adjustments elsewhere -- hopefully, in increased revenue elsewhere or in cost savings, should there be the need to do so. These projections were made prior to my becoming minister and are now incorporated in the budget, based on the expectation regarding Hydro's ability to achieve savings and also on other expectations regarding Hydro's economic position in the coming year.

F. Gingell: Special direction No. 8 deals with the rate of return that B.C. Hydro can make and is related, as I understand it, to the industry -- and in British Columbia that turns out to be B.C. Gas, basically. The 1994 approved rate of return was 15.23 percent and it was 12.74 percent in 1995. What's the 1996 rate?

Hon. A. Petter: I understand it's adjusted by an automatic formula. We don't have that rate, but I could certainly try to get it and have it communicated to the member.

F. Gingell: The rate is, in fact, known to the B.C. Utilities Commission at this point?

[ Page 1189 ]

Hon. A. Petter: I'm informed that we can find out what it is; it's an automatic rate. It's set, as I think the member suggested, based upon B.C. Gas and long-term bond rates. We don't have it here, apparently, but it's formula-driven. I'd be happy to provide it to the member should he wish to have it.

F. Gingell: I would have thought, honestly, that a number of such consequence would have been burned into the minds of the people who are involved. Have you got a ballpark number? From the 1995 figure of 12-3/4 percent, did it go up or down? It came down by some 2-1/2 percentage points from '94 to '95. Did it continue down, or did it go up? B.C. Gas has just shown record earnings, I see in the newspaper. That may not be relevant, I appreciate.

Hon. A. Petter: I'm trying to find something in the ballpark for the member, but I can't. I guess the best information is that if gas goes down, it goes down; if it goes up, it goes up. I guess we'll have another rate established in November, along with the bond rates, as well. I guess it is not as fixed in the minds of the commission as it is in the mind of the member, but I'd be happy to try to facilitate the communication that needs to take place.

F. Gingell: Hon. Chair, I'm sure that that rate must have been in the mind -- from special direction No. 8, and the requirements of special direction No. 2 and the $214 million dividend -- of the commissioner when his advice was sought on the propriety of this government announcing a rate freeze for B.C. Hydro residential consumers. Can the minister advise us if the commissioner took all these items into account before he advised the Premier on the issue of the rate freeze?

Hon. A. Petter: I'm informed that the commission was in no way involved in the decision to freeze rates; indeed, it would be inappropriate for the commission, as a regulatory body, to do so. That was a commitment made through Hydro. Again, I would suggest that there's another room where people can fire questions regarding Hydro and its policies. This was not a policy of the commission; this was a policy of the government and of B.C. Hydro.

F. Gingell: But in the B.C. Utilities Commission, particularly when we have had a commissioner that has been in office for some time.... Surely the government seeks his advice on the consequences of actions they may take. Who else better understands the consequences of special direction No. 2 and special direction No. 8, and what he's likely to approve and what he's not likely to approve? Is the minister suggesting that the Premier went ahead and made this promise to the people of British Columbia that residential rates would be frozen and didn't understand the consequences of what that might do to the balance of income and expenditures of B.C. Hydro and to rates?

Hon. A. Petter: I think the member is trying to put words into my mouth and, through me, perhaps into the commissioner's. That's not the case. I'm sure if he asks the minister responsible for B.C. Hydro, the minister will be a fount of information as to what the implications of the rate freeze are for B.C. Hydro. The point is not that; the point is that the B.C. Utilities Commission is an independent agency. The government is at great pains not to compromise that independence either by providing direction, by soliciting advice of a political nature, a policy nature or any other nature that might compromise the independent functions of the Utilities Commission.

F. Gingell: Seeing that the minister is being advised by someone who knows more about these issues than 99.99 percent of the population, could the minister advise us what the consequences will be to the non-residential users if you pay a $214 million dividend, and if you live up to the requirements of special direction No. 8?

Hon. A. Petter: It would be inappropriate to have the commission declare itself ahead of time, through me, on a matter that may come before the commission. It's a great trick if you can do it, but lawyers who try to do it with judges usually get into trouble.

Having said that, if memory serves me correctly, I think it was this member who said during the election campaign that he was unimpressed by B.C. Hydro's rate freeze because there wouldn't have been an increase in any event. Perhaps he was aware, as I guess the commission is, of the huge reductions that are taking place in costs within utilities such as Hydro and of the previous decision of the commission not to allow a rate increase. He can reach his own conclusions, based upon that information, as to what consequences, if any, might be visited upon non-residential consumers.

F. Gingell: Thank you for those responses. Looking at the financial statements of B.C. Hydro for the nine months ended December 31, 1995 -- some six months ago -- compared to 1994, I don't see many of these savings taking place. The income, as we know, has been reduced by almost 40 percent -- 39 percent -- so none of those savings have begun to be reflected.

If the minister had really been listening to what I said during the election, what I said is what I said the other day -- that is, I am concerned that organizations like B.C. Hydro should be directed by their directors. If you appoint directors who have responsibility for directing the organization, it is they who should decide what the right thing to do is.

[8:15]

I just have concerns. Without any specific knowledge, it seems to me, from a commonsense point of view, that if your earnings are going down, which they are, and your dividend is going up, which you want it to do, and you have frozen residential rates, the only balloon, the only movement other than some reduction in cost -- which so far has not become apparent -- is that you are going to have to make substantial increases in the cost of electricity to non-residential users. We all know that our competitive position in British Columbia is what determines how many jobs we have.

Electricity is an important cost component of family-supporting jobs and manufacturing and chemical businesses like ERCO Industries and Hooker Chemicals. I had hoped to get a response from the minister about the Utilities Commission, which would have considered what effect these various things would have on B.C. Hydro -- and on demand, too, because if you start pushing the prices up for commercial users, then they'll try to find some other means of acquiring their power or going somewhere else.

I guess, hon. Chair, I'm not going to get any further on that subject unless the minister provides a response. The B.C. Utilities Commission is a $10 vote -- i.e., you recover all of your costs by charges to the various people whose applications you hear. During the course of the election, an announcement was made that the Utilities Commission was being called upon to investigate the price of gasoline. I wonder if the minister could advise us what the cost of that study is, if it is complete and who the cost is going to be recovered from.

Hon. A. Petter: I caution the member not to confuse Mr. Jaccard's role as a member of the Utilities Commission with

[ Page 1190 ]

his role as a special inquiry commissioner looking into gasoline prices. The latter is a separate role done under the Inquiries Act; it is not part of this ministry and not part of his role in respect of the Utilities Commission.

F. Gingell: I didn't realize that, because when one hears the inquiry commissioner's name, one immediately ties it to the Utilities Commission. Seeing that the commissioner now has this big contract outside his regular employment, is it the case that his income from the commission is going to be reduced?

Hon. A. Petter: No. Mr. Jaccard's expenses and remuneration with respect to his role as an inquiry commissioner are paid out of general revenue; then there's a commensurate reduction made in what he is paid in respect of his activities as a member of the Utilities Commission. So there is no double compensation, and everything is done according to Hoyle.

F. Gingell: There has been quite an exercise this past year in dealing with certain applications by Westcoast Transmission in relation to new gas-gathering plants -- whether they're all to be rolled into one and all the various exercises. The National Energy Board dealt at some length with the issue of whether this was even in their jurisdiction or in the jurisdiction of the province, as I understand it. Can the minister advise the committee of the result and whether that result is going to change the role, function, work levels and workloads of the Utilities Commission in future years?

Hon. A. Petter: I'm given to understand that this issue is wending its way through the courts. The most recent decision of the Federal Court, as I understand it, is -- no doubt based on arguments of interprovincial undertakings and the like, which I think we'd best not get into -- that this matter is within the purview of the National Energy Board regulatory regime. However, that decision, as I understand it, is on appeal to the Supreme Court of Canada, and we are going to await the outcome of that appeal for a definitive ruling that will determine who has regulatory authority.

F. Gingell: Please correct me if I'm wrong, but I understand that the project itself has been cancelled now, hasn't it? They've sort of backed down from it. Is it the intent of the British Columbia government to ensure that this particular issue moves forward so that issue will be dealt with -- whether this is federal or provincial jurisdiction?

Hon. A. Petter: Let me see if I can answer the question this way. Notwithstanding that the project in question has been cancelled, there are other projects, as I understand it, that fit within the same category and for which this issue needs to be resolved, in any event. The appeal is being pursued by B.C. Gas. I am not 100 percent clear on the status of the appeal -- whether, for example, standing has yet been granted by the Supreme Court of Canada and if the cancellation of the project is relevant to whether the Supreme Court will hear the appeal. I just don't know the answer to that. But the appeal is being pursued not by the provincial government but by B.C. Gas.

F. Gingell: One last question. The world of utility regulation has been changing, particularly as privatization has taken place in Britain, primarily, and in other places. Has the Utilities Commission been watching what is going on there with the various forms of regulation with Ofgas and others? Does the commission believe that there are any lessons for us or reactions that we should have to what's happening there?

Hon. A. Petter: Yes, I'm informed that the commission has been very active in looking at the experience elsewhere and has been a leader in a number of critical areas that I think are relevant.

In two areas in particular, the commission has taken a major leadership role. One is in alternative dispute resolution and negotiated settlement process. In an effort to improve the quality and efficiency of the regulatory process in B.C., the commission has explored different methods of regulation that are alternative or complementary to methods currently used, to provide alternative ways of resolving disputes.

The other is incentive regulation. I don't fully understand this, but as I understand it, the commission institutes direct utility and shareholder incentives for cost-efficiencies that do not negatively affect the quality of service but do allow for the commission to not make regulatory decisions on an annual basis, but rather to allow for that incentive regulation to allow for longer periods between reviews and greater alignment of interests of shareholders and ratepayers. I'm informed that this is a cutting-edge activity of the commission.

F. Gingell: Unless anyone else has any questions for the Utilities Commission, can we thank the commissioner and move along? John is here, and the member for Oak Bay-Gordon Head has some questions.

Hon. A. Petter: I thank the member for the courtesy of allowing me an opportunity to introduce John Cook, who is superannuation commissioner, and who has kindly joined me today to assist me in providing answers to members' questions with respect to pension administration.

I. Chong: First of all, I want to say greetings to Mr. Cook. I never had the opportunity to personally meet him. I just had a picture to refer to, so I'm glad to have the opportunity to speak with him.

The questions I have relating to the municipal pension plan, as you perhaps are aware, are such that there was some concern at the municipal level. I may be rehashing some of these questions and I apologize for that, but it may be the only opportunity that some of these questions are answered. I have before me the municipal pension plan annual reports for 1993 and 1994. I'd like to find out whether the 1995 annual report is in progress and how soon that may be available.

Hon. A. Petter: I believe that I tabled the 1994 report recently, and I'm informed that the '95 report will be ready for tabling by the next spring session of the Legislature.

I. Chong: I want to ensure that the questions I ask are not too outdated, but that is the only information I have to work with.

First, in the '93 and '94 reports, the reference to the actuarial valuation.... The last one was done in December of 1991, and I understand another was being prepared for December 31, 1994. I'd like to ask the minister what progress has been made towards this, in that there is no reference to any more current actuarial.

[8:30]

Hon. A. Petter: Just to clarify, the report the member referred to is the 1994 annual report, which ends.... It's a calendar year, so it isn't '93-94; it's a 1994 report. I'm informed that there has been an actuarial report on the municipal

super-

[ Page 1191 ]

annuation fund, related to valuation as at December 31, 1994. That is now in hand and will appear and will be referred to in the annual report to be tabled next spring.

I. Chong: So I'm to assume that the actuarial has been completed, and if I had questions regarding that, they would be available this evening?

Hon. A. Petter: Yes, that's correct. If the member wants to spare herself the necessity of asking a lot of questions, I'd be happy to arrange, through the commissioner, to provide her with a copy of the report so that we won't have to communicate back and forth about something she can probably understand better than I ever will, by looking at it directly.

I. Chong: I will take advantage of that, but perhaps some of these questions can still be answered. I will take it upon myself to have a further, more detailed review.

The question I have is in regard to the unfunded liability. In 1988, there was reference to it being $1.08 billion; in 1991, it was $1.41 billion. I guess I was waiting for this actuarial evaluation to see whether this unfunded liability would have increased over these three years. I don't want to give you a loaded question. I do want to advise that the reason I'm asking is that I understand that changes recently in the PBSA, which is the Pension Benefits Standards Act, were to provide for unfunded liability to disappear over time. I was hoping to perhaps see some effects of that in the actuarial evaluation.

Hon. A. Petter: Well, it's heading in the right direction. The number for 1994 is $1.309 billion, which is down from 1991, which was $1.411 billion.

I. Chong: I thank you for that answer. It does reassure me somewhat, as I was concerned that it was going in an increasing direction.

Referring now to the municipal pension fund, I note that it is a trust fund where contributions accumulate and are invested to pay the current and the future pension benefits. I'd like some clarification as to what is meant by benefits -- by that I mean whether it's strictly benefits of a monthly amount as a pension amount or whether that includes a number of other entitlements.

Hon. A. Petter: In addition to monthly benefits, some of the additional benefits that are provided are extended health, MSP and some dental benefits.

I. Chong: That was what I was expecting. I just wanted to ensure that there were no further amounts included in that.

The next question I have is: who would determine what the benefits are should there be increases to that amount? If some other benefit plan were to be introduced to the pensioners, who makes that determination?

Hon. A. Petter: Government, through Treasury Board, would ultimately make that determination based on recommendations received from the Municipal Pension Board.

I. Chong: Just to confirm, then: would the criteria that form the basis for any changes to benefits or increases in benefits -- such as increases in the amounts provided for in extended health or dental benefits, etc. -- be under the purview of the Municipal Pension Board?

Hon. A. Petter: Yes.

I. Chong: On my question regarding the Municipal Pension Board, I note that the commissioner serves on this board and is also the chair of this board. I read in the notations to the annual report that this board, amongst its responsibilities, provides direction to the commissioner on the application of the various plan rules. I would like to know whether there is, I suppose, a conflict, in that the board members are providing direction to their own chair within that board.

Hon. A. Petter: Any potential conflict that might otherwise arise is resolved, as I understand it, by the chair of the board exempting himself from any decision-making which could affect decisions made by him in his capacity as plan administrator.

I. Chong: My concern, then, is: where is the independence in this? Ordinarily, on any board or agency where you have a board of directors, the members who serve on it work collectively with the chair and then pass direction to the administrator or CEO of that particular organization. I'm sure Mr. Cook is well qualified to serve as the chair of the board and the CEO of this particular plan, but my concern is: how can we feel assured that there is, in fact, independence in his role in this? Shouldn't there be a chair who is not related to the Municipal Pension Board?

Hon. A. Petter: I suppose the answer resides in the plan's members and, to some extent, in the government. If they do not feel that this current arrangement provides a regime that is reflective of their interests, then they are free, I suppose, to indicate that. But to this point, there has, to my knowledge, been no indication of that from plan members, and certainly not on behalf of the government.

I. Chong: I'll move further on, then, to the provincial treasury. I noticed there was an investment advisory committee in place in 1993, which met every quarter for the purpose of reviewing investment strategies and performance. I could not see this advisory committee having any involvement in 1994, so I would ask the minister to confirm whether this committee still exists and, if it was abolished, when it was abolished and who is now assuming those responsibilities.

Hon. A. Petter: As I understand it, the committee acted in an advisory capacity to the minister, and that capacity has now been folded into the pension board. So the pension board continues to act as an advisory committee on investments to the minister.

I. Chong: I'm not sure if I understand the ramifications of that. Is the minister saying that the investment advisory committee has been eliminated as a result of the Municipal Pension Board being established,

whereas the Municipal Pension Board acts on issues not related to investments? I'm wondering where the investment planning and strategy reviews are being conducted.

Hon. A. Petter: I'm advised that the functions of the investment advisory committee, through statute, have now been conferred upon the board, but the functions have not altered. In other words, the same functions are being performed by the board through statute.

I. Chong: Can the minister advise whether those who are on this board have any expertise or background in investment strategy and review?

[ Page 1192 ]

Hon. A. Petter: Maybe it will help if I clarify it in this way. The membership of the pension board, as I understand it, is essentially the same as the membership of what was previously the investment advisory committee. Although the committee has been disbanded in name, the individuals are essentially the same. The expert advice, which was sought by the committee and will be sought by the board, comes in the form of expert advice that is obtainable through contracts with experts in the field. So really, there's been no change in the expertise or the relationship with those who have expertise as a result of this legislative shift.

I. Chong: I don't want to belabour the point, but I must request clarification again. In 1993, the annual report states that there was a municipal pension plan advisory council, and it lists a number of people on that committee: representatives from the municipal employees' pension committee, the Union of B.C. Municipalities, etc. There is also mention of an investment advisory committee, and I note in there that the members on that committee are different than those on the municipal pension advisory council. So there were two committees set up in 1993.

In the 1994 report, I see no reference to that investment advisory committee, yet I see a new committee being set up as the Municipal Pension Board. My concern is that a committee has been eliminated, which dealt with reviewing investment strategies and performance, and which met every quarter for the purpose of those reviews. I'm concerned that now that is not being handled by another independent committee.

[8:45]

Hon. A. Petter: If the member is suggesting that there was a different structure -- namely, that the investment advisory committee and the investment advisory council were different -- that doesn't seem to strike a responsive note over here. Unless the member has some new information we're not aware of, I think the assumption we're making is that the investment advisory committee and investment advisory council are one and the same.

What's happened to the pension board is that those same representatives have moved over to the pension board, and there has been the addition of some government representatives, including, as I understand it, a representative from the UBCM. They continue to essentially perform the same function in the same way as the committee did, seeking and enlisting the same expert advice that the committee previously would have.

I. Chong: I'm not suggesting anything other than what I've seen in the 1993 report. The municipal pension plan advisory council's membership is here in the 1993 annual report, and one of its functions, of course, is to review pension plan investment strategy and performance. I turn over the page and see an investment advisory committee, and it also lists members such as the commissioner, someone from the Municipal Finance Authority, someone from the municipal employees' pension committee, the deputy commissioner and the superannuation commissioner. So it does show that there are two separate entities, whether you want to call them a council or committee.

When I was going through the 1994 report, which was just tabled, I saw that there is, in fact, only one board or committee now, the Municipal Pension Board, and it seems to have taken over the functions of the municipal pension plan advisory council. So I'm concerned that the investment advisory committee no longer exists. Not knowing what has happened in 1995, I'm just looking for a bit more clarification as to what I could expect.

Hon. A. Petter: I appreciate that clarification; it seems to have triggered the necessary recollection. As I understand it, the two entities the member is referring to performed two complementary functions: one was with respect to investment advice and the other one with respect to pension advice. Both of those functions have now been rolled into the pension board.

If the member wants to get into this level of detail around these kinds of fine structural changes, I would be more than happy to arrange a briefing with the commissioner so that this information could be provided without having to use me as an intermediary. God knows, I'm not a very effective intermediary in these kinds of matters, given the expertise that exists in the two parties I'm trying to mediate between.

So while I appreciate the member's interest, if the member felt that her interest could best be pursued, as I think it might, through a direct briefing from the superannuation commissioner, I'd be more than happy to facilitate that and spare her the agony of having to hear my secondhand accounts of answers to her excellent questions.

I. Chong: I thank the hon. minister for his comments, and certainly I will avail myself of that opportunity. I don't mean to get into that fine detail, except for the fact that you had confused me when I was trying to determine the structure of the plan. The reason I was asking these questions was more general in nature. It was to find out whether there was something in place that would ensure that there was a group meeting on a quarterly basis, as in the past, and reviewing the investment strategies and performance, because I am concerned regarding this plan and the potential for its sustainability.

If the duties have in fact, been rolled together, which I will speak with the commissioner about, perhaps you can answer one last question on this area, and that is whether or not, or how often, the Municipal Pension Board does in fact meet.

Hon. A. Petter: I am informed that the pension board meets three times a year as a separate board, and then it meets together with the other pension boards, for the fourth time, once a year. One of the functions the board performs in each of those quarterly meetings is to review the pension and investment matters that the member refers to.

F. Gingell: I am actually pleased to hear that things have moved forward. I was the B.C. School Trustees' appointee to the teachers' pension board -- whatever it was in the mid-seventies -- and we weren't allowed to do anything. We were handed a little bit of wood with a piece of rubber on the bottom of it and one of those ink pads as we came into the meeting. That was the total extent of our ability to do anything.

There was one issue that I wanted to bring up. I believe 1996 is the year that British Columbia gets involved in discussions with the federal government with regard to the Canada Pension Plan. Is it your superannuation commissioner that advises the government on those issues, and have I got the right year?

Hon. A. Petter: No, it's not the superannuation commissioner who would be the official responsible for this. I think the member is correct: yes, Canada Pension Plan discussions

[ Page 1193 ]

with the federal government are taking place, as the member is probably aware from the news media. This year there has been a whole consultation procedure around the Canada Pension Plan. If the member wanted to raise those questions, I could have an appropriate official here to discuss it, or we could simply discuss it separately at some future time.

I. Chong: A lot of the questions I have are directed more in detail to the commissioner, so I won't use this opportunity to use the minister as intermediary.

Perhaps I can ask what has occurred at this time with the UBCM recommendations from 1995. There was an extensive review of the municipal superannuation plan, there was input requested, and there were some concerns by municipalities and school districts as well as regional districts regarding the sustainability of the plan. I understand that there was a promise that this would be reviewed, and I'd like to know the status of that.

Hon. A. Petter: I am informed that UBCM has a representative on the board. To date, the only issue that has been communicated to the board from the UBCM has to do with employer contribution rates. Other issues that may have been the subject of the concerns the member is referring to have not yet been formally communicated to the board, although they could obviously be communicated through the agency of this representative.

I. Chong: Am I to understand, then, that the only issue that has been raised at this time is the employer rates? If that is the case, would the minister advise what, in particular, the employer rates are that we're concerned about? Employer rates represent a downloading onto local governments and jurisdictions.

Hon. A. Petter: I understand that the employer contribution is currently governed by a formula that tracks age, sex and the maximum retirement age of employees. The issue being looked at here is the formula and whether it should be maintained or altered in some way. This is part and parcel of a review which is likely to take the better part of a year or more to resolve.

I. Chong: What I'm hearing is that there are a number of factors that will relate to the employer contribution rate. Can the minister then confirm that it does not entail unnecessary increases to the employer contribution rate? Is that an assurance I can get from this minister?

Hon. A. Petter: I understand that the goal is not to increase the overall employer contribution, but by revisiting the formula -- if there are changes in the formula -- the relative contribution of particular employers may go up or down. But the goal is not to change the overall contribution.

I. Chong: I take it that you're looking at the base, and I'm quite comfortable with that at this time. I would like to ask one more question regarding the plan. I know that I may have to refer to the commissioner at a future time, but I'll ask in case you have an answer. It concerns the inflation adjustment account. There was some concern regarding this. The purpose of this account was, as I understand, to ensure that those who are retired will continue to have their pensions appropriately indexed. I'm wondering whether the inflation adjustment account has been subjected to an actuarial review as well. I understand that it had been excluded at a previous actuarial review.

[T. Stevenson in the chair.]

Hon. A. Petter: I understand that it is, and continues to be, excluded. I understand that there are good reasons for that, relating to what is susceptible to review. The reasons are highly technical and, again, this is a matter the member could take up with the commissioner who could explain it more eloquently, fully and accurately than I am capable of.

[9:00]

I. Chong: I'm disappointed to hear that, because that was a major concern for review when I sat on a particular task force. The inflation adjustment account did bring some concerns as the number of retired pensioners continued to increase, and the members that I spoke to continue to be concerned about that. So I am hoping that I will get to speak on this matter at a future time and to ask this minister to reconsider that.

I will move on to one last question -- and I'll let you off easy this evening -- and that is to ask whether the minister is aware of any ongoing discussions or potential discussions about the re-establishment of a municipal sector distinct pension plan. That was one of the items that was being asked for at the UBCM level -- that a distinct municipal plan be set up strictly for municipal employees versus the combined municipal plan that is in place now. Has there been any further consideration of that?

Hon. A. Petter: I am not aware of any, and I don't think any proposal, to my knowledge or to the commissioner's knowledge, has come to the board in that regard.

I. Chong: As I stated, that was going to be my last question, and I will stick to my word. I just want to thank the minister and the commissioner for providing me with some answers and some direction for where I can get further answers. I will pay a visit to the commissioner's office in the very near future.

K. Krueger: The official opposition has asked me to ask some questions concerning the government's policies on gaming in general: the B.C. Racing Commission, the B.C. Gaming Commission and the B.C. Lottery Corporation in particular.

As I made my way through the estimates books, I began to feel as though I was involved in a lottery game or a game of chance of some kind myself. There were transfers in and transfers out of many different ministries -- Labour, Government Services, Sports, Multiculturalism, Human Rights and Immigration, Finance and Corporate Relations, and the Attorney General ministry. It was like Super Mario Brothers.

It was really puzzling, because I knew that the destination was to be the Finance ministry, but the major book -- the 270-odd-page book -- shows these transfers to the Attorney General and away from Sports and into Labour and back and forth, and it didn't really end up with the Finance minister.

Then the supplement to the estimates shows the B.C. Racing Commission and B.C. Gaming Commission finding a final resting place for the year, apparently, in the Ministry of Labour. Of course, I knew they couldn't stay there, and in the end there is a page stapled into the back of the main estimates book, a two-sided page. On the back of it, we see this very latterly move of the Racing Commission and the Gaming Commission to where they are supposed to be. Apparently the buck stops here; the buck stops with the Finance minister.

So if I ask some questions that should seem obvious to people who have been through these routes before, pardon me. This is my first time through.

[ Page 1194 ]

The B.C. Lottery Corporation is reporting gross earnings in the amount of approximately $800 million per year. Various sources have indicated that the total gross economic activity of gambling in British Columbia is substantially higher than that. I wonder, to begin with, if the minister could tell me what the approximate figure is as to the gross intake from gambling activity in British Columbia per annum.

Hon. A. Petter: To explain to the member: first, he can be assured that his questions will be fresh and alive to me, because I'm as new to this as he is; second, I'm just waiting for some staff to arrive to assist me in answering his questions, so perhaps we can just take a minute or two while they do so.

Let me start by introducing the two officials who have joined me here. On my left is Dick Macintosh, who is chair of the B.C. Gaming Commission. Mark MacKinnon is a senior projects analyst with the Ministry of Finance. I will now endeavour to get the answer to the member's question.

K. Krueger: Hon. Chair, I apologize to the minister that we didn't warn him earlier. We weren't sure when this would come up.

My first question was that I wanted to get a handle on the approximate total of gaming activity in British Columbia. I mentioned that the B.C. Lottery Corporation reports gross income in the amount of somewhere around $800 million per year. Of course, there are a lot of other activities as well. Do we have a global figure for the amount of economic activity in gaming per year in British Columbia?

Hon. A. Petter: Yes. In addition to the $800 million or so through the Lottery Corporation that the member refers to, the figure I have for B.C. charitable gaming on top of that will be gross revenue of $668 million.

K. Krueger: On pages 4 and 5 of the main estimates book, some net income figures are shown: $262 million estimated for '96 and '97 from the B.C. Lottery Corporation; on the same page, $21 million in public gaming licences and permits; on the facing page, page 4, $6 million from horse racing. Are these the total net proceeds to government revenues from gaming in British Columbia?

Hon. A. Petter: I'm not exactly sure I picked up on all the different headings the member mentioned, but these are the figures that represent the contribution to the consolidated revenue fund from the respective activities: horse racing, the British Columbia Lottery Corporation, public gaming licences and permits, etc.

K. Krueger: I wanted to ensure that I hadn't missed any lines of income beyond the ones I mentioned, which were the public gaming licences and permits, proceeds from the British Columbia Lottery Corporation and horse-racing revenue. Are there any other areas of revenue from gaming shown elsewhere in the government's books?

Hon. A. Petter: To the best of my ability to determine, it appears that those are the major sources -- indeed, the only major sources -- of gaming, lottery and horse-racing receipts that come into the consolidated revenue fund.

K. Krueger: My thanks to the minister. We're fellow seekers on this road, and that's all I could find as well.

Looking at the percentages, if we're talking about $1.5 billion in economic activity and about $300 million net to the government each year, I would like to relate those numbers later to social issues I want to raise. I'll just leave that thought with you for the moment.

Given the struggles that the province has in balancing its budget and the deficit situation from last year, has any active consideration been given to expanding gaming in British Columbia and deriving greater income from these sources?

Hon. A. Petter: First let me introduce another official who has happily joined us: Gail White, who is branch manager with the British Columbia Lottery Corporation here in Victoria.

In the 1994 policy there was, I believe, provision for the expansion of bingo. That continues to stand as policy. In addition, as the member is aware, the government is undertaking a complete program review of all government activities, and certainly gaming activities will be subject to scrutiny along with others. There is, I suppose, the potential to look at gaming activity as a possible source of revenue, although that must also be balanced against some of the social concerns that always surround these kinds of questions.

[9:15]

K. Krueger: Turning for a moment to the question of advertising, could I get a global figure for the expenditures of these various corporations or commissions, arms of government, on advertising gaming in British Columbia in a year?

Hon. A. Petter: The Gaming Commission, while it does excellent work, finds no need to advertise. On the other hand, the Lottery Corporation, of course, does extensive advertising. I'm told that the figure for '95-96 is in the vicinity of $10.6 million. That includes all buys -- television, billboards, radio. Whatever is entailed in the promotional activity would fall within that $10.6 million.

K. Krueger: I'd like to know if the government lays down any guidelines for B.C. Lottery Corporation as to the nature and the cost of the advertising that it does.

Hon. A. Petter: I'm not aware of any guidelines per se. Obviously, government reviews the activities of the Lottery Corporation with a mind to ensuring that dollars are well spent. I'm told that in this particular instance, the ratio and recoveries that are done by the Lottery Corporation in respect of advertising are very favourable. In other words, the amount they spend on advertising in terms of the amount they get back in patronage is a very good ratio in comparison to other jurisdictions. It compares very favourably.

K. Krueger: I've had considerable input from the public about the "I'm sorry, so sorry" ads of the B.C. Lottery Corporation. People feel as though those ads cross the line between making people aware of the size of the jackpot, and so on, and actually making people feel badly about not having purchased tickets. Rather than being explanatory, they go into what people feel is almost a form of coercion. That's one of the reasons why I asked about guidelines. I wonder if the government is looking into that sort of guideline. Perhaps it's more a matter of taste than dollars and cents.

Hon. A. Petter: I'm informed that the corporation itself does market research in respect to its commercials. I'm not familiar with the commercial; at least, I don't recall it. I'm informed that that one apparently does very well in market

[ Page 1195 ]

research in terms of public approval -- it's the second-most popular. If the member wants at some point to explain to me his concern, I'd be happy to review it and consider what the concern is. I'm told that internal to the Lottery Corporation there is market research and review done of their commercials, and I've already indicated the outcome in this regard.

K. Krueger: I'll spare everyone the agony of hearing me try to sing the commercial for the minister.

Interjection.

K. Krueger: My colleague says he'd like to hear it, but it wouldn't even look good in Hansard . It actually says, "I'm sorry, so sorry, for being such a fool" -- that I didn't buy the bonus, is the point. So I appreciate the minister's commitment to have a look at that.

Looking at the Ministry of Government Services annual report for 1994-95, I want to ask about the gaming policy project outlined on page 16. The

preamble says: "The gaming policy project has the responsibility of developing and recommending to government a comprehensive policy on the regulation and conduct of charitable gaming in B.C., including the role of the first nations. A part of this project is the evaluation of potential gaming expansions." I take it that's a different project than the one leading to the Report of the Gambling Policy Review dated October 1994, in that this report is dated March 31, 1995, and refers to a project that, apparently, wasn't complete at that time. Could I have that clarified? Is there an ongoing gaming policy project?

Hon. A. Petter: As I understand it, there were essentially two parts to the same enterprise: one was the policy component, and the other was an implementation plan that culminated in the announcement of the implementation through a news release in the spring of '95.

So the answer is no, that initiative does not constitute an ongoing policy review. However, I go back to the point I made earlier, that government is undertaking a comprehensive review of all programs. Gaming will fall within that review, and there may well be elements of that review that look at gaming policy. I don't want to mislead the member into thinking that gaming is not going to be subject to review -- not as part of the continuation of the projects he's referring to, but rather as part and parcel of the comprehensive review of government programs I've just referred to.

K. Krueger: The gaming policy project referred to in that report set out three specific goals. I wonder if we could learn the status of those initiatives. One is to "obtain input from affected parties and stakeholders on implementation issues." What is the status of that?

Hon. A. Petter: Following that recommendation, consultations were undertaken with representatives of bingos, casinos and charities -- some meetings together, some meetings apart -- to discuss issues of implementation with respect to policies affecting those particular interests.

K. Krueger: A second goal stated was to "reach a negotiated agreement with first nations on gaming issues." What is the status of that initiative?

Hon. A. Petter: The short answer is that the negotiations broke down, and there was a news release issued May 9, 1995, indicating that they had broken down and giving the reasons, quoting the Government Services minister of the time as saying that the First Nations Summit was looking for a significant increase in the number of facilities and wanted casinos which were more like Vegas-style operations -- large numbers of table games, high betting limits and slot machines -- and that this was incompatible with the government's policies.

So that broke down, but I understand that subsequent to that some first nations were coming forward and expressing an interest in securing opportunities to share in the proceeds of gaming activities on the same basis as other groups, through the charitable opportunities that exist for bingos, etc.

K. Krueger: Are there ongoing negotiations, or have negotiations resumed with first nations pursuing that goal of an agreement on gaming issues?

Hon. A. Petter: No. The negotiations reached an impasse and were broken off, and they have not resumed.

K. Krueger: Were the negotiations that took place -- or whatever success did occur -- ever publicized, or were the matters all held in confidence, other than the news release that the minister referred to?

Hon. A. Petter: No, there was not a publication, if I can put it that way, of the positions taken in the negotiations or whatever. The negotiations broke off, and the news release I referred to outlines in fairly clear terms the reasons why, at least from the government's point of view, the negotiations failed, and the objectives of the province that could not be met in those negotiations. To the extent that there was information gleaned through the negotiations, that has been factored into policy decisions that have been announced, but the negotiations themselves have not been publicized in any way.

K. Krueger: The various documents that I've resourced in preparing for my questions have indicated that first nations people have about a 0.5 percent share in the gaming proceeds derived in the province through gaming activities, and I'd like to know if that is still approximately their share of the proceeds.

[9:30]

Hon. A. Petter: The figure that I have available to me is with respect to charitable gaming, and it's about 2 percent of charitable gaming, as I understand it, that is directed specifically to first nations. Then, of course, first nations citizens benefit, as do all citizens, from the benefits and proceeds of gaming activities. But as a specific beneficiary, it's 2 percent of charitable gaming.

K. Krueger: The third and final goal of the gaming policy project referred to in the 1994-95 Ministry of Government Services annual report was to "develop a legislative framework for charitable gaming issues." Close to the bottom of the left-hand side of page 17, the statement is made: "The next step will be the implementation of comprehensive gaming legislation and regulations that will provide the necessary foundation for future gaming decisions." Could we learn the status of that initiative?

Hon. A. Petter: Yes, there has been work done on draft legislation. However, it has been placed in abeyance pending the outcome of the Nemetz inquiry, in the expectation that that inquiry will have something to say and some recommendations to make that will be relevant to legislative changes.

[ Page 1196 ]

K. Krueger: That makes eminent good sense to me, again.

That same report, on page 17, gives a brief status report on the public gaming branch. I'd just like to have clarified the present status of the public gaming branch -- whether it has a budget and whether it has a staff.

Hon. A. Petter: My understanding is that the public gaming branch ceases to exist as a separate entity. Most of its functions were absorbed into the commission. I understand there were some smaller functions -- audit functions -- that essentially were transferred over to the Attorney General ministry and are now performed within the context of that ministry's activities.

K. Krueger: I kind of thought that, but there was nowhere that it says that sort of thing. FTEs and budgets come and go, and move between ministries.

I was also really puzzled by the 1993-94 annual report of the Ministry of Government Services, in that this document, on page 17, refers to the gaming policy implementation project, although it was written a year before the document about the gaming policy project. It would be an implementation prior to a project having been initiated, so it must be a different project.

It says: "This project, begun in February 1994, has the mandate to develop a comprehensive government policy on the regulation and conduct of gaming in B.C., including the role of first nations." I just want to clarify that there haven't been two different initiatives. Perhaps these are both the same initiative mentioned in that peculiar way in the two reports, and the status is the same -- nothing is presently ongoing with first nations. Is that correct?

Hon. A. Petter: It is correct that there is no consultation process or negotiation with first nations with respect to aboriginal gaming, other than the opportunities that are available to first nations to apply for and participate in the current framework of gaming activities that exist.

K. Krueger: There are a number of references in the material to a quote by then Premier Harcourt in the fall of 1994 to the effect that there were at that time 10,000 illegal video lottery terminals operating in British Columbia. I would like to know whether the government feels we now have a handle on those activities and whether those machines have been shut down.

Hon. A. Petter: Yes. The member may be aware, as he may have raised this matter already in the Attorney General's estimates, that the Attorney General, I believe, struck a committee with RCMP representation and other representation to look at the problems around grey machines and how to ensure that illegal machines were shut down. I do not know the progress to date on that, but the Attorney General would know through that committee.

K. Krueger: There has been a figure of 50 percent that I've repeatedly heard: 50 percent of the net proceeds of gaming in British Columbia that flow to the government are directed to the Ministry of Health. Is that correct?

Hon. A. Petter: Fifty percent of lottery proceeds flow into the Health special account.

K. Krueger: The reason I ask is that I've had a lot of input about problem gambling and gambling addictions that people develop in British Columbia, and I wonder if any portion of that money is designated to deal with that problem, in that it's so integral to the source of the income.

Hon. A. Petter: I'm not aware that the funds in Health from that 50 percent are specifically targeted for addiction problems. I can't confirm that for the member. There has been some work done, as I understand it, initially within the Ministry of Health -- and I think it may be well worth pursuing now -- on addiction problems and addiction programs, and looking at some of the work that has been done on alcohol and other kinds of addictions. But I think this is an issue that, if the member has suggestions, we could perhaps pursue and consider what might be undertaken.

I'd be happy also to see what programs are currently provided within the Ministry of Health that deal with addiction. Maybe this is an area where we can work together in considering what kinds of programs should be offered.

[G. Brewin in the chair.]

K. Krueger: I really appreciate that gracious answer from the minister. It's an issue that affects families tremendously deeply and affects them in many ways. I've talked to people who were divorced because one of the partners developed a gambling addiction. People have lost all their assets; people have ended up on welfare. A young woman called my office just recently. She had learned that I was the opposition's gambling critic. She was in tears. She said that her father has developed a gambling addiction, that he buys tickets all the time and that it's driving her mother to distraction.

The family is falling apart. She tried to speak with him about it, and he choked her until she couldn't breathe. She still couldn't swallow when she was talking to my office. It does terrible things to people.

The B.C. Lottery Corporation, as I understand it, commissioned the Angus Reid Group -- probably in 1993, since the report was written in January 1994. I don't want to take a lot of the House's time, so I'll just go to the conclusions. It says:

"Implications. Combining the present survey results with the most recent census data, we estimate there are between 12,700 and 42,100 current probable pathological gamblers in British Columbia; assuming that half of these eventually seek assistance, treatment will need to be provided for a minimum of 6,000 cases. Bingo, casino and horse-track bettors represent the most at-risk gaming segments for problem gambling behaviours."

In conclusion, it says:

"Gambling represents an extremely popular range of activities in British Columbia. The vast majority of the adult population has participated in one or more types of gambling in their lifetime. This gambling generates substantial revenues for the provincial government, charities and other organizations in the province on an annual basis. While the majority of British Columbians participate in legal gambling activities in a responsible way and experience few negative consequences, the results of this study indicate that there are substantial social, economic and health concerns associated with legal gambling in British Columbia."

Because of the order of estimates and the way that they've come up, I haven't yet been able to ask in the Ministry of Health estimates whether there are any programs and funds specifically directed at that problem, although the Minister of Health did stand in for the Minister of Social Services. I think she was answering from a Social Services point of view, but she said there were no designated funds. The Minister of Social Services didn't even want to answer the questions.

Of course, it wasn't really the Attorney General's area when I asked him about that, although he certainly has to deal

[ Page 1197 ]

with the costs of crime and crime-fighting through his ministry, and doubtless the sorts of desperate situations I've discussed lead to crime. Clearly they lead to people falling into the social safety net who wouldn't otherwise be there.

Just to wrap up those numbers, there are larger numbers contained in the report of the gaming policy review written by the Ministry of Government Services in October 1994. Those are that approximately 3.5 percent of British Columbians have a gaming problem. Provincial action on problem gambling should address this issue comprehensively from prevention to treatment. So 3.5 percent of the population would be something over 120,000 people.

There are numerous assurances in this report and in others I have that the government is coming to grips with this issue, but the victims tell me that they just don't know where to go. As I said, I really appreciate that commitment. I will be following up on it. I think it would probably be relatively easy to direct some of that income stream to dealing with the social problems that flow from the issue.

One thing that puzzled me a bit in the estimates was a mention of debt on the part of the B.C. Lottery Corporation, but it isn't necessarily theirs. It's on page 2 of the main estimates book. A debt of $95.7 million is shown in parentheses and categorized as "other debt," to be reduced to $47.6 million in 1996-97. Then, in the fourth subnote, the explanation is that it includes all kinds of things: student assistance loans, the British Columbia mortgage assistance program and non-guaranteed debt of the British Columbia Lottery Corporation.

I wonder if we could have a breakout of how much of that debt is the non-guaranteed debt of the British Columbia Lottery Corporation and an explanation of how it happened, when they generate such substantial income.

[9:45]

Hon. A. Petter: I'm just looking at the 1994-95 annual report of the B.C. Lottery Corporation, and it indicates the long-term debt at $4.7 million for 1995. I'm guessing that it relates to the capital program, but I don't know that for a fact. I'd be happy to get that information for the member; I don't have it at hand.

Interjection.

Hon. A. Petter: A usually reliable source informs me that it's a mortgage on.... Given the reliability of that source, the member may want to consult that source directly.

K. Krueger: The knowledge of that source never ceases to astound me, and sometimes you just don't think to ask the right person.

The B.C. Lottery Corporation has two large operations, one larger than the other: one in Kamloops and one in Richmond. I'd like to know whether the minister, or the people with him, has given any consideration to consolidating the two operations into one and has studied what savings and efficiencies might be achieved through that business move.

Hon. A. Petter: In 1991, as I understand it, Ernst and Young Management Consultants conducted a review of the organizational structure of the B.C. Lottery Corporation, and the findings from that report indicated that the departments are located where they are for valid business reasons. The goal has been, from the inception of the corporation, that whatever can be in Kamloops will be and that whatever must be in other areas of the province will be kept to a minimum in order to do the job that's necessary.

Various departments located in Kamloops are there, by design, to fulfil a mandate to locate in Kamloops any functions that can reasonably be located there. The rationale for locating certain functions in Richmond is based on the requirement to be in the lower mainland in order to accomplish the primary responsibilities of that particular function or department -- for example, marketing support and advertising.

There's a note here to suggest that one of the reasons for a substantial number of employees being located in Richmond is the sales and marketing activities that are concentrated in the lower mainland, where the most significant number of customers reside. That's a 1991 study.

Again, we're doing a program review that includes all aspects of government, but the most recent review that was done suggests that there are legitimate business reasons for the current configuration of operations in both Richmond and Kamloops.

K. Krueger: My thanks to the minister. Although I have a plethora of questions I'd like to explore with the minister, the hour is somewhat late. I'm not entirely sure if the

schedule remains as it was, but the learned source that we referred to moments ago has asked if he could resume directing the debate. Although he's presently engaged in a little conversation, I think that's what he wants to do. So if I could call upon the Finance critic of the official opposition. . . .

Interjection.

K. Krueger: His advice is that I ask the hon. minister one last question and say thank you very much. He didn't hear me do that. So thank you very much, hon. minister.

M. Coell: Hon. Chair, I have a few questions on the Public Service Appeal Board and also on the Public Sector Employers' Council.

If I could digress for a moment.... This is the first time I've had an opportunity to ask a question of the minister. I remember that the first time I met the minister was in Saanich council chambers some five and a half years ago, when I had just been elected mayor and he'd just been nominated as the NDP candidate for Saanich South. I notice he's holding up rather well in this chamber, and I hope I do the same, given the length of time.

With regard to the Public Service Appeal Board, I wonder if the minister could tell me the number of staff it has at this point.

Hon. A. Petter: Well, I'll take advantage of the generosity of the member's comments to caution him that the depth of resource material we have on this topic is perhaps not as deep as he would like. I didn't expect this topic to come up, but that being the case, I understand there are four staff -- excluded staff -- who are committed to the appeal board.

M. Coell: I wonder if the minister could tell me the number of cases the board would see in an average year and whether there are any order-in-council appointments to the appeal board.

Hon. A. Petter: The member may have to repeat his question, because I was trying to get the information while following it. We're not quite clear on the status of the appointees. Obviously Ms. Leach is an order-in-council

[ Page 1198 ]

appointment. If the member was asking about the activities -- whether he was or wasn't, I'll give him the information -- the information I have is that the board received 132 appeals filed by employees. Of these, 57 were withdrawn, nine were untimely, 13 were no-jurisdiction, 14 are still in progress and a total of 39 appeals went to hearing. Of 30 percent of the appeals that were filed during the year, 25 were dismissed and 14 were allowed. That's in the period of 1995-96.

M. Coell: Hon. Chair, that was far more information than I requested, and for a change, that's delightful.

With regard to the Public Sector Employers' Council, I wonder if the minister could briefly describe how that council functions. Also, I'd be interested in knowing the number of staff and their caseload.

Hon. A. Petter: First, let me introduce Peter Cameron, who is vice-president of the secretariat of the council and who is helping me answer questions in this regard.

As I understand it, the council's activities take place formally through meetings that are held from time to time. But the day-to-day activities are performed by a secretariat, of which Mr. Cameron is vice-president, and that secretariat is comprised of 17 employees.

M. Coell: The 17 employees: are there any order-in-councils in there as well, or are they all provincial government employees? The other question is on the caseload. How many cases would they see a year?

Hon. A. Petter: First, in respect to the question of order-in-council appointments, the CEO would be the only order-in-council appointment. The others would be excluded employees. The acting CEO right now happens to be Doug McArthur, who also serves, of course, as deputy minister to the Premier.

In terms of caseload, there really isn't a caseload; the council is a coordination body. But perhaps the best way to answer that question is to say there are six employer associations with respect to whose activities the council operates, oversees and coordinates.

M. Coell: I wonder if the minister could just briefly describe the operation of the employers' council. He started to, and I'd be interested in hearing a bit more.

Hon. A. Petter: The creation of the council came out of the recommendations of the Korbin commission in an effort to better coordinate bargaining within the larger public sector. The council operates as a deliberative body that brings together representatives of the five employer associations, as well as representatives of the provincial cabinet, to try to better coordinate and carry out employee-employer relationships within that broader public sector.

M. Coell: I wonder if the minister could tell me whether the office is in Victoria or in another part of the province and what the tenure usually is for the CEO -- whether that's a two-year appointment or more.

Hon. A. Petter: First of all, the offices are in Victoria, on Belleville Street, as I understand it. The OIC appointment of the CEO is an at-pleasure appointment.

[10:00]

M. Coell: Thank you for your comments. I won't keep you any longer.

M. de Jong: It's our intention now to move on to the minister's responsibilities in the intergovernmental affairs area, unless, of course, the lead critic for the opposition. . . .

F. Gingell: I understand that there has been some discussion about finishing now and leaving intergovernmental affairs for tomorrow. But you have the official here, and perhaps we should take advantage of this and move it along. We understand our responsibilities to deal with estimates in an expeditious manner.

M. de Jong: Maybe we could begin with some fairly basic questions to the minister about the intergovernmental relations secretariat. I think that's the correct term for that portion of his office. What is it? What exactly gave rise to its creation? How is it constituted at the moment?

Hon. A. Petter: I'll give the short history instead of the long history. First, let me introduce Peter Heap, who is the acting ADM at IGR, and I'm very pleased that he's able to join us today. I appreciate the members' indulgence in accommodating not so much me as Mr. Heap, who has waited long enough to assist me for this portion of the estimates today.

Members will know that there was at one time a separate ministry of intergovernmental affairs in this province. Over time, under previous administrations...

An Hon. Member: The golden years.

Hon. A. Petter: The golden years? Well, not as I recall them, hon. member -- but there we go.

... that got brought into the Premier's Office as a secreta