Fourth Session, 41st Parliament

(2019) OFFICIAL REPORT

OF DEBATES

(HANSARD)

Tuesday, May 7, 2019

Afternoon Sitting

Issue No. 250

ISSN 1499-2175

The HTML transcript is provided for informational purposes only.

The PDF transcript remains the official digital version.

CONTENTS

Orders of the Day

Committee of Supply

Estimates: Ministry of Finance (continued)

S. Bond

Hon. C. James

T. Redies

T. Stone

J. Thornthwaite

M. de Jong

M. Lee

Proceedings in the Douglas Fir Room

Committee of Supply

Estimates: Ministry of Education (continued)

D. Davies

Hon. R. Fleming

S. Furstenau

T. Redies

J. Thornthwaite

Proceedings in the Birch Room

Committee of Supply

Estimates: Ministry of Agriculture (continued)

M. Hunt

Hon. L. Popham

I. Paton

J. Sturdy

R. Coleman

J. Tegart

W. Shoemaker

L. Larson

T. Shypitka

L. Throness

D. Clovechok

S. Thomson

C. Oakes

D. Ashton

J. Thornthwaite

TUESDAY, MAY 7, 2019

The House met at 1:32 p.m.

[Mr. Speaker in the chair.]

Orders of the Day

Hon. M. Farnworth: In this chamber, I call continued debate on the estimates of the Ministry

of Finance. In Committee A, I call continued debate on the Ministry of

Education. And in the little House, Committee C, I call continued debate on the

estimates of the Ministry of Agriculture.

[1:35 p.m.]

Committee of Supply

ESTIMATES: MINISTRY OF

FINANCE

(continued)

The House in Committee of Supply (Section B); J. Isaacs in the

chair.

The committee met at 1:36 p.m.

On Vote 25: ministry operations, $265,327,000

(continued) .

S. Bond: Good afternoon, Minister, and to the staff. We’re going to pick up

sort of where we left off, because it’s a really critical point, from

our perspective. As we were discussing the budget, one of the things

that…. The minister — this is no surprise to her. We are very concerned

about the sustainability of the budget when we look at spending

patterns, the growth of debt, and we’re also concerned about risks.

Certainly one of the significant risks is related to the financials at

ICBC. That’s not a point of contention. It doesn’t matter where you sit

in this House; people are worried about that.

What we know is that if you take the loss that was experienced in

six months at ICBC and you extrapolate that over an entire year, ICBC,

as late as November, was forecasting a loss of only $890 million, 85

percent of what they predicted in February that they would

lose.

So we have ICBC basically saying to the Finance Minister: “Oh,

guess what. We’ve lost 85 percent of what we said we were going to lose

in an entire year, and we did that in six months.” Our question really

gets to the heart of: how seriously did the ministry and the minister

take this incredible change and the concerns that were being…? From our

perspective, that would be something that would be pretty, pretty

significant.

The question is a straightforward one. We’ll start with this one.

Did the minister meet directly with the CEO, the president, with anybody

at ICBC, to say: “I expect an explanation as to why this spending does

not line up. And when I’m getting that explanation, I want to know what

the reasons are for that differential”?

Hon. C. James: I’ll just reiterate again for the member. The member talks about

concerns with ICBC. The member will know from the budget updates, from

the budget that was tabled, that ICBC was a major risk, identified in

the budget documents as a major risk. It continues to be a concern, as

I’ve raised, and listed as a risk to our fiscal plan.

It was not a matter of myself as Minister of Finance going to tell

the Attorney General what was going on. It was the Attorney General,

myself, all of government, Treasury Board, our staff, who have been

spending time doing the work that I identified before lunch — doing the

work of taking a look at claims coming forward, taking a look at trends,

taking a look at assumptions, stress-testing the assumptions coming from

ICBC, working with their actuarial team and forecasters, reviewing line

by line the budgets, taking a look at the challenges.

[1:40 p.m.]

This was not a matter of the Finance Ministry or the Finance

Minister coming in and saying to ICBC: “We need to get a handle on this”

or “We need to take a look at the challenges.” This was, in fact, an

issue that was raised by the Attorney, raised by government and worked

on by everyone in all departments, to be able to address the challenges

that we were left with.

S. Bond: Well, thank you. I certainly did not imply, and would not mean to,

that I didn’t think work was not going on. I know firsthand that work

was going on. It has been for a long time. To suggest otherwise would be

inaccurate. My point is simply this: at the end of the day, I fully

understand the jurisdictional responsibilities of ministers, and I

understand what the Attorney General’s role is. But this minister booked

a significant transition and transformation at ICBC in her budget, yet

obviously, the answer is no. She didn’t meet directly with the CEO or

with anyone else over there to basically say: “This number is

unacceptable. How on earth are you assuring me that that number can be

capped?”

In fact, it was a major problem — 85 percent of what they said

they were going to experience, they managed to do that in six months.

Yes, I understand work is being done — I’ve been on that side of the

House — but I also know that for this minister, ultimately, the buck

stops with her on the financial side.

I have two final questions before my colleague moves on to other

issues with ICBC. The minister has said repeatedly that they meet with

the executive at ICBC. The Finance staff — I know well — go over the

forecasts. Were they comfortable in November when it was discovered that

the year-end forecast was $890 million? Were they comfortable with

ICBC’s explanation, first of all, of how that happened and of how on

earth they were going to stop the continued growth of that number?

Secondly, did the minister then go to the Attorney General and say: “We

have a problem here that’s bigger than anticipated. What are we going to

do about it?” Did that conversation take place directly?

Hon. C. James: The member asked whether I was comfortable, as Finance Minister,

with the loss that we were seeing at ICBC. I can tell the member that

there wasn’t anyone across government that was comfortable with the

numbers we were seeing, including the Attorney General, including

myself, including the Premier and including all of our government. No

one was comfortable with the kinds of numbers we were seeing and the

kinds of losses we were seeing.

That’s why ICBC has been included as a risk. That’s why we built

prudence into the budget. That’s why, in fact, you see the forecast

allowance increase between Q1 and Q2, from $350 million to $950 million.

Again, knowing that there were continued challenges, that is one of the

tools that I have as Finance Minister: to build in that kind of prudence

and to make sure that we were doing that tracking.

[1:45 p.m.]

I’ve already mentioned, but I’ll mention again for the member,

that not only did I meet with the Attorney, not only did we meet with

Treasury Board, including the president of ICBC, we continued those

conversations — not simply at the staff level but at the political level

— to ensure that we were having conversations about the work that needed

to take place and the challenges that were coming in.

Not anyone across government was comfortable. We continue to do

that prudence and that good work when it comes to monitoring the

information on ICBC — working together. I think that’s the other piece.

The member spoke about it: “Did you go and tell the Attorney General?

Did you go and tell?” There was no need to. This was an issue across

government. This was an issue for the Attorney General, for myself, for

the Premier and for the government, as I said.

T. Redies: Minister, we’ve been talking about the November results and the

forecasts for year-end from November. I’d now like to roll forward three

months to February 2019, which was actually eerily similar to what

happened in February 2018, with respect to ICBC results and the actual

results being well beyond what was forecast. In fact, in February 2019,

the ICBC announced it had lost $860 million for the first nine months,

and now it’s forecasting a loss of $1.18 billion for fiscal 2018-19.

Perhaps not so surprising, the new forecast is very similar to the

extrapolated 12 months’ potential loss I spoke about earlier, based on

the second-quarter losses of $584 million.

On this basis, Minister, it appears there was never any hope that

the company could keep losses to $890 million for the fiscal year-end.

Now, going back to the eerily similar way that this all rolled out in

2018 with fiscal 2017, in September 2017, the corporation forecast that

it would lose $225 million. It was then increased to $364 million, as of

November 2017. Then, lo and behold, two months later the company came

clean and indicated it would lose $1.3 billion for fiscal 2017-2018. In

February 2018, ICBC said it would lose $684 million for fiscal 2018-19,

then $890 million in November. But now it’s going to lose $1.18

billion.

Over the last three years, the company has lost $3½ billion, and

not one of the company’s forecasts have even come remotely close to

actuals. Minister, on this basis, based on all these questions — you can

see the concern on our side — does the minister have any confidence in

the ability of ICBC and its management team to meet its

forecasts?

[1:50 p.m.]

Hon. C. James: I think there were a number of pieces that were in place. I guess

I’ll start off with the review of ICBC when we came into government and

the important review that was there.

It was very clear that ICBC was in a very vulnerable state, that

there were challenges with that organization, that it was in need of

change and that there was not a road map to be able to address that

change — changes that probably should have happened years ago and hadn’t

occurred.

As I said, and I know the Attorney has said as well, this is not a

quick fix. As you know, there are past claims that come forward, so

there are issues that have to be addressed from previous claims. It is

going to take time to bring stability. But am I confident that there is

a road map in place that will begin to address those challenges that

were left us? Yes, I am.

When you take a look at accident claims flattening, when you take

a look at the suite of measures in product reform, in addressing the

increase in claims and the changes that we have made — yes, I believe

those measures will begin to address the challenges that were left

us.

T. Redies: I’m not sure if we’re talking at cross-purposes with the minister.

I understand that there are changes going to be undertaken at ICBC, but

one thing that for sure has been happening is that there has been a

continuous failure of ICBC management to actually forecast even remotely

close what was actually happening at that company. Well, not to belabour

this…. As a former CEO who was responsible to a board, I can’t imagine

going through almost eight quarters where I had continually missed

forecasts and not anything happening with respect to that.

What we have here…. It’s the same process, it’s more or less the

same people, and they’re delivering forecasts which, frankly, don’t seem

to be worth the paper they’re written on. Again, I guess my question to

the minister…. In a situation where ICBC is forecasting that they’re

going to break even this year, more or less, after losing $2½ billion

over the last two years when they said they were going to only lose $900

million — and I use “only” with some degree of trepidation — how can the

minister be comfortable with the current management team, the

forecasting process and whatever review process is going on with the

Finance Ministry?

[1:55 p.m.]

Hon. C. James: I think we’ve canvassed this, but just to reiterate again for the

member. As the member knows and, certainly, as her colleague, I’m sure,

is informing her, this is a complex organization and a complex process

that has to do with both actual results as well as actuarial estimates.

In doing so, there are issues that come forward when it comes to claims

and claims being settled that bring volatility to the forecasting that

comes in.

Our job at Finance is to ensure — as we do, as I’ve talked about —

and to sit down, as the quarterly reports come in, and to take a look at

the estimates that are coming forward, take a look at the suite of

measures that have been brought in. As I said, one of the biggest

volatilities are claims — claims that are settling — and the product

reform that is being introduced to be able to address those increasing

claims.

I certainly feel confident in the staff that we have and the work

that they’ve been doing together and in the work that they are doing to

make changes in the organization, which does impact volatility in the

forecasting. I certainly feel, as I said, confident that the product

reforms will make a change.

Does that mean that we need to continue to monitor it and it

continues to be a risk? Yes, it does. That’s why, in fact, we have built

in prudence. That’s why you saw the forecast allowance increased,

because of the kind of volatility that we see there. But are there

measures being taken to reduce that volatility? Yes, there

are.

T. Redies: Just so you know, I actually understand how complex a business

ICBC is. I actually was responsible for running an insurance business in

part of my career — much smaller, obviously, than ICBC. But I do

actually understand the business. I sympathize with you because this is

a complex issue, and these are challenging times for ICBC.

However, I would say that I think one of the main responsibilities

of the AG and the Minister of Finance would be to make sure that there

are people in ICBC who can actually deliver the results. Right now, that

doesn’t seem to be the case, and nothing seems to be changing on that

front.

I guess my question to the minister is: are you confident…? You’re

confident in your Finance staff, and that’s well understood. But are you

confident in the ICBC staff and their ability to deliver the numbers

that your budget is based on?

Hon. C. James: Yes, I’m confident in the professional team that is working at

ICBC, that works in the Ministry of Finance and that is working together

to be able to address those challenges.

T. Redies: What happens if they miss their targets this year?

Hon. C. James: We will continue, as we’ve done, to work closely as we come up to

quarterly. But it is why we have built in, again, because of the risks,

because of the volatility in the organization and because of the changes

that should have happened years ago and didn’t that bring volatility

into the organization. We will continue to watch that, but this is why

you saw the forecast allowance increased — to be able to address any of

the future risks that may still arise as we wait for the changes that

should have been introduced a long time ago. We wait for those changes

to make the difference.

T. Redies: Could the minister confirm whether or not the CFO is currently

also the chief actuarial officer at ICBC?

Hon. C. James: No, the CFO is not the chief actuary.

S. Bond: Let’s just pursue this again for a moment. The minister just said,

in her own words, that she and the Attorney General and others have had

a discussion about there being no quick fix here. Well, that’s

interesting, considering this minister’s budget looks pretty much like

she’s expecting a quick fix.

[2:00 p.m.]

This minister has not met directly with the CEO or with others who

have botched forecasts. In fact, I’m surprised that she can have any

confidence in the work that’s being done and the promise of what would

be considered a miraculous turnaround by anyone. This is an organization

that is going to attempt to be in a more or less break-even position in

one budget cycle, after proving to British Columbians and two

governments, at least, that they simply have not met those

targets.

Once again, to the minister, can she tell us whether or not she

discussed with the current management team at ICBC whether or not they

have the competencies necessary to meet this commitment? The reason

we’re going to pursue this is because we have looked at a series of

risks to this budget, and every answer from this minister has been:

“We’ve built in prudence.” There isn’t enough prudence for every issue

that we have raised in this House that presents risk to the

sustainability of this budget. So this is a very serious and important

question.

This minister’s watch, in terms of ICBC…. This isn’t about ten

years ago or even five years ago. This is about this minister taking

responsibility for the fact that this organization botched their

forecasts in a pretty enormous way. And now the expectation is that,

miraculously, over the course of one budget cycle, we’re going to go

from an enormous deficit position to basically being

break-even.

How on earth can the minister stand in the House today and say she

has confidence that that organization and that staff can do

that?

Hon. C. James: The member has raised concerns around ICBC and the forecasting and

the losses we’ve seen at ICBC. Those are in fact the very same concerns

as I’ve been talking about while we’ve been discussing this issue — that

I have as Finance Minister, that the government has, that the Attorney

General has around ICBC and the losses. And ensuring that we get that

organization back into the kind of shape it should be as a public

insurer — those are exactly the kinds of issues and concerns.

As I’ve talked about, the job of the Finance Ministry is to ensure

that we are doing the kind of due diligence that needs to be there, that

we are working closely with a professional team at ICBC. Those questions

the member raises are exactly the kinds of questions that have occurred

around Treasury Board, with the CEO of ICBC, with the board chair of

ICBC, with the minister and with all of government — to ensure that we

are doing everything we can, as I said, to try and get the organization

back on track. That work will continue. That is the due diligence that

needs to be there.

Again, I echo the member’s concerns around the challenges at ICBC.

I couldn’t agree more. Those are challenges that need to be addressed.

We’re working on addressing them. I have confidence in the people who

are doing the kinds of changes that need to occur, and we will continue

our due diligence. That does not let up — the kind of work that we do at

Finance and ensuring we are doing the due diligence that needs to be

there.

S. Bond: Simple question. Is the minister confident that ICBC will be

returned to an almost break-even position this fiscal year?

[2:05 p.m.]

Hon. C. James: I think it’s important to note a couple of things. ICBC continues

to be listed as a risk in our budget, which I think speaks for itself. I

continue, as Finance Minister, as all of government does, to be

concerned about ICBC and making sure that things get back on track. I

think that speaks for itself.

I think the fact that there are resources built into the forecast

allowance again shows that we’re being prudent in our estimates. If the

assumptions that are built in are accurate, yes, I believe we’ll be in

the kind of fiscal position…. But again, they are assumptions. That’s

why prudence is built in, and that’s why it’s important to make sure

that it’s there in the budget.

S. Bond: With all due respect to the minister, every time we’ve raised a

risk, the minister says: “We’ve got prudence built in.” Prudence can

only go so far. This is an enormous challenge.

The minister herself said that it’s not a quick fix. Yet we see a

quick fix in this budget. We see this minister standing in the House and

suggesting that ICBC, despite absolutely missing all of the targets,

blowing those forecasts out of the water for all kinds of reasons…. This

minister stands here and says she’s relatively confident or comfortable

that somehow there is going to be a miraculous turnaround.

The minister will have to forgive this side of the House for being

a little more skeptical than that. So here’s the next simple question.

What happens if they do not meet the target the minister has attached to

this budget?

Hon. C. James: I want just to remind the member that a number of changes have

occurred over this last year and a half when it comes to ICBC — major

changes taking place. I know the members are well aware of this. There

have been legislation and discussion and debate on these issues of

product reform, of major changes around claims. Those are taking place,

and that is part of the action that has been put in place to be able to

address the challenges that are here.

We will continue, as I said, doing our due diligence each

quarterly, as the estimates come in, and we will address what needs to

be addressed. But again, the major changes that should have taken place

years ago are now taking place and are part of the work that needed to

happen to be able to address the fiscal problems that were there at

ICBC.

S. Bond: Thank you to the minister for that response. It leads to another

question. The minister has referenced…. And I understand that the issue

of how product reform will work will obviously be canvassed with the

Attorney General, but there is a role for the Finance Minister here. The

Attorney General has put a number of changes in place, and I’m assuming,

knowing past practice as I do, that there would be price tags attached

to those particular changes, transitions, reforms.

Has the minister analyzed the comments and the steps taken by the

Attorney General from a fiscal perspective? Does she have confidence

that all of the changes that have been suggested will actually generate

the revenue that’s required to deliver this type of remarkable

transformation in a year?

Again, there’s a great deal of skepticism about that. What work

has the minister done, specifically, to line up the changes, what the

fiscal results will be and whether or not there is even a hope of

meeting the target attached to this budget?

[2:10 p.m.]

Hon. C. James: Yes, of course there was financial analysis done on the product

reform, as there is on other programs and services that come forward

across government. There was work done by Finance, by ICBC and by the

Attorney General Ministry to look at running all the various scenarios

around product reform, around when changes could impact the fiscal

picture. Those were all presented. There was an opportunity for

discussion at cabinet and an opportunity for discussion at Treasury

Board. So yes, that work was done.

T. Redies: It’s interesting for me to hear about all of this product reform

and the taps and everything else that ICBC is apparently putting in

place this year to turn around this company, but in fact, actually, over

the last two years, basic rates have been raised 13 percent. And over

the next three years, taking into consideration driver growth, ICBC

rates are going to go up 24 percent. Even amongst all of this, if you

look at the details on the forecast, ICBC is still showing an

underwriting loss. So in its core business, it still doesn’t seem to be

able to make a profit, even with all of those increases.

Tell me, Minister, again: are you confident in the ability of the

ICBC management to deliver the results that your government is

expecting? Because, based on the financials, it doesn’t look like they

know the business that well.

Hon. C. James: We’ve had that discussion. I’ve answered that question.

T. Redies: Well, I guess we’ll be asking those questions of the AG in more

detail, but if I was the Finance Minister — and I’m not — I would

certainly not be sleeping well at night with this situation.

Here’s another situation that we’d like to canvass the minister.

I’m not sure if the minister is aware that the salaries and bonuses of

ICBC executives have dramatically increased since the current government

took office.

In 2016, there were two people making more than $300,000. Today

there are six. In 2016, there were nine people making between $200,000

and $300,000. Today there are 26, a 180 percent increase. In 2016, there

were 359 people making between $100,000 and $200,000. Today there are

643 people making that amount of money, or a 79 percent increase. If I

just take the low end of those salary ranges and multiply them by the

increased number of people in those ranges, it works out that in the

last two years, ICBC has increased the salary expense of the top three

categories of earners from about $38 million to $71 million, an increase

of $33 million or 86 percent.

Minister, why has the NDP, in the midst of this self-proclaimed

financial dumpster fire, found it appropriate to astronomically allow

the increase of salaries and bonuses of the ICBC executives and upper

management that got ICBC into this mess in the first place?

Hon. C. James: I know the member, as she said, will have many questions for the

Attorney General. That’s obviously part of the Attorney General’s

budget, and I expect those questions will be asked in that

estimate.

T. Redies: I’m actually quite disappointed in that. Because, as Finance

Minister, with this size of a risk on your budget, I would’ve thought

the minister would be all over this and would be able to answer these

questions, because this is serious.

I mean, ICBC just increased its rate 6.3 percent. Meanwhile, ICBC

executives are making at least $33 million more a year in pay. Does the

minister think that’s an acceptable situation, where British Columbians

are having to pay higher premiums in order to pay ICBC executives, who

can’t seem to meet their forecasts, more money, while they are subject

to increased rates?

Hon. C. James: The member knows they will have the opportunity to ask questions

about salaries for various staff in various ministries’ budgets in those

ministry estimates. So I’m certain the member will bring those questions

forward.

[2:15 p.m.]

S. Bond: This is the minister who booked in her budget, as we’ve talked

about, a significant transformation at ICBC, taking them from a

significant deficit position to, basically, virtually, back to even

balance.

Maybe the minister could answer this question. Is she aware of the

significant increase in the number of people earning additional salary

benefits and costs? Because as far as I can tell, every single dollar

should matter to this minister. This is a question that is rightly in

this minister’s portfolio. She is making assumptions, as is her team,

about this company’s ability to actually close that deficit gap. Is the

minister aware of the cost of significant executive salaries — the

significant increase — and did she ask the Attorney General or anyone at

ICBC what on earth they were doing?

Hon. C. James: Very valid questions for the members to ask. The member should ask

that for the minister responsible for the budget, and I’m certain that

they will.

T. Redies: Minister, maybe I’ll ask it another way. In this robust process of

going through all the forecasts that the minister said the Finance

Ministry did, did anyone ask the question about what salary expenses

were being paid to ICBC executives?

Hon. C. James: The budget and the operational budget for ICBC is the

responsibility of the Attorney General, and I know the member will ask

those questions of the Attorney General.

T. Redies: That’s really interesting. Okay, let’s try another tack,

then.

Maybe the Finance Minister will be able to answer this. Could the

minister please tell us how much ICBC is paying in EHT in 2018, ’19 and

’20? Is that factored into the ICBC premium of 6.4 percent in 2018 and

beyond?

Hon. C. James: Certainly ICBC, as other employers do, as the member knows well,

will be paying the employers health tax. That will be part of their

budget — built into their budget.

T. Redies: Again, I’m just kind of astounded that…. The minister is

responsible for the budget. ICBC is one of the biggest pieces of that

budget — one of the largest Crown corporations. She is responsible for

the EHT, and she and her staff are not able to tell us what the

organization is paying in EHT in 2018, 2019, 2020? Is that not an area

of her responsibility?

Hon. C. James: As the member knows, ministers are responsible for the operation

of the areas that are their responsibility. ICBC is the Attorney

General’s responsibility. The member has the ability, as all members do,

to ask questions of the operational budget. That would include the cost

of the employers health tax.

S. Bond: You know, I have a lot of regard for this minister and her

experience, but these answers, frankly, just don’t add up. To stand in

this legislative chamber and suggest that executive compensation is the

Attorney General’s responsibility is simply not accurate.

I’ve never met a Finance Minister who actually didn’t care about

monitoring and keeping an eye on executive compensation, especially at

an organization like ICBC. This minister has booked a miraculous

transformation at ICBC, going from significant blown forecasts…. And the

minister stands and tells us we need to ask the Attorney

General?

[2:20 p.m.]

Well, I think the minister needs to think that question through

again. Executive compensation — 86 percent, millions of dollars — and

the minister can’t tell us that she actually asked a question about

whether or not that was appropriate yet is relying on forecasts from

ICBC, and now the same thing with EHT? All of these things add up to

part of the reason why this minister needs to stand up and question

whether or not what’s going on at ICBC is actually being managed

appropriately.

Let’s go back to executive compensation. Did the minister ask any

questions related to executive compensation that actually contribute to

the challenges being faced at ICBC fiscally? That is this minister’s

responsibility.

Hon. C. James: The member knows full well that the specifics around compensation

are the responsibility of each minister in their ministry. I have talked

about the fact that we did a thorough analysis and a review of the

quarterly assumptions, as we do with ICBC, and we will continue to do

that monitoring. But the member knows full well that the individual

ministry operations fall within the responsibility of the

minister.

S. Bond: Thank you to the minister for that answer. Is the minister, then,

suggesting that individual ministers just run their ministries, and

whether executive compensation is at an appropriate level or not, this

minister is hands-off? There is no overall strategy in government to

deal with the issue of executive compensation?

If she knew there were significant increases at ICBC, who…. This

government trots that story out all the time, and now we hear that the

minister says that’s over to the Attorney General to take care of those

increases.

Is the minister, then, saying today that she has no overall

provincial oversight, interest, strategy around executive compensation

across ministries?

[2:25 p.m.]

Hon. C. James: The member asked what responsibility there is through Finance,

what responsibility there is through PSAC. As I know the member will

know, government sets the maximum limit for total compensation. That’s

their responsibility. Then, within that framework, it’s up to a board of

directors, if there’s a board. It’s up to a minister, if it’s a

minister. They negotiate, through the CEO or deputy or whoever is

responsible, compensation plans to support the service delivery. They

need to balance that with the resources that are available, and they are

responsible for that.

Again, the members have an opportunity to ask specific questions

about staff and compensation. The responsibility, through the Ministry

of Finance, is to ensure that people are making sure that they only set

those within the maximum limit for compensation that is there. The

specifics…. Again, I know the members will ask those questions of the

Attorney.

S. Bond: Thank you to the minister. But basically the minister is

suggesting that individual ministries work within guidelines and, in the

end of the day, that she as minister has no overarching responsibility

to maintain and to look at the effective management of fiscal planning.

Of course she does. All we need to do is look up the service plan of the

Ministry of Finance, and it lays out exactly those responsibilities —

that negotiating and looking at compensation planning.

Let’s put it this way. Did anyone — either the ministry or the

Attorney General or anybody — raise a red flag for this minister, who is

dealing with ICBC from a fiscal perspective and using their remarkable

transformation to balance her budget, which is a huge risk from our

perspective…? Did anyone raise a red flag at all about compensation to

executives at ICBC?

[2:30 p.m.]

Hon. C. James: I know we’ve canvassed this, but happy to canvass it again if the

members want to review this. There was a thorough review — as there is

with every Crown — of all Crown budgets through Treasury Board, through

the Ministry of Finance. I’ve talked about the work that we do around

the quarterly report. All issues are canvassed. Questions are asked on

all issues, and the minister is then responsible for addressing the

specifics. Is there a thorough review? Yes, there is. And there will

continue to be an extra thoroughness, as I’ve talked about, at ICBC

because of the risks and because of the challenges that were

left.

[R. Chouhan in the chair.]

S. Bond: Well, I take it from that answer, then, that the minister is

comfortable that executives at ICBC over the last number of years have

seen a…. When you look at three categories of top earners, their

compensation has increased by 86 percent. On top of that, this minister

thinks that it’s acceptable that we add on the EHT and the MSP. The

double-dip year applies to ICBC as well.

How does the minister think that there is one shred of credibility

left with an assumption that ICBC is going to go from a significant

deficit to a break-even position in one year? There is no possible

credibility. This government is actually contributing to the challenge

by not even being aware of the kind of wage increases that are taking

place at ICBC, and they add on the double-dip of EHT and MSP.

Can the minister stand here today and tell us that she believes a

proper analysis was done that included factors like the EHT, the MSP,

staff compensation increases? And for the record, can the minister stand

here and tell us that she is confident today that the number in her

budget will actually be achievable by ICBC in this fiscal

year?

Hon. C. James: We’ve canvassed this. The member has asked that question two or

three times. I’m happy to respond again if the member feels the need.

I’m happy to respond again.

We have continued and will continue our due diligence that needs

to occur with all Crowns, with all budgets, across government, including

ICBC. The member knows that we have included it in every budget as a

risk, because we continue to believe it’s a risk. You don’t turn around

overnight the mess that was left us with ICBC. It will take time to make

those changes.

I’m very proud of the work that has been done by the Attorney, and

across government, to be able to start turning that ship around, to be

able to start addressing the things that should have been addressed

years ago and the changes that should have occurred to try and get back

to a strong fiscal position. That is going to take time. That is

recognized in the budget. And we will continue our due

diligence.

T. Stone: As thoroughly entertaining as this discussion has been to this

point and as tempted as I am to weigh in, I’m going to resist for the

time being, other than to say that it has been two years now. It is now

this Finance Minister’s and her Attorney General colleague’s

responsibility to address the financial challenges at ICBC.

[2:35 p.m.]

It is beyond painful to hear this minister stand up…. When the

going gets a little bit tough and there’s a little bit of heat directed

towards her on questions that, as the Finance Minister, she ought to be

able to answer in this House, the immediate deflection is to talk about

the incredible mess that her government was left with.

It was a $225 million fiscal challenge which this minister, this

government, and the Attorney General turned into a $1.3 billion loss in

’17-18 and followed by a $1.2 billion loss the following year. It’s

under this government that they’ve lost $3 billion at ICBC. They’ve had

two years to take action, and the actions they’ve taken haven’t made one

iota of difference to this point.

With that, I’m going to move to a completely different topic, and

that is real property contractor taxation issues. The minister and I

canvassed this particular PST issue a couple of years ago. It was in, I

believe, the interim estimates in the fall of 2017.

The purpose of the questions that I’m going to ask here — and I

believe my colleague from North Vancouver–Seymour has some related

questions in a moment — really, again, relates to hardship that has been

experienced or has been faced by real property contractors, not just in

my community, my hometown of Kamloops, but, indeed, in communities

across the province. It’s really with respect to the consumer taxation

branch’s audits related to the application of the provincial sales tax,

the PST, insofar as real property contractors are concerned.

The issue began back when the former provincial government, which

I was part of, transitioned back to the PST in 2013 and, in doing so,

reverted back to the October 2008 method for real property contractors

to pay PST on materials. Now, this is a complex issue, and the minister

and I, as I said a moment ago, have canvassed this previously. But I

would ask for her patience as I just sort of map out again the framework

for the questions I’m going to ask, insofar as this issue is

concerned.

As the minister knows full well, generally speaking, a real

property contractor who is engaging in a supply and install contract,

whether the contract is a time and materials contract or a lump sum

contract, is required to do two things: (1) pay the PST on the goods and

materials purchased from a supplier, which are the inputs to be used in

the supply and install contract and (2) not to charge the PST on the

inputs to the customer or the end-user.

There is of course an exception to the above rule. If the

end-customer agrees both in writing and in advance of the inputs being

obtained by the contractor to pay the PST on the inputs, then the

contractor doesn’t pay the PST on the goods to the supplier. Rather, the

contractor charges the PST to the customer and remits PST

accordingly.

Now, as the minister, I’m certain, must know, many real property

contractors across the province have been audited. The auditors, in some

cases — I think quite a number of cases — have found that the contractor

in question has charged the customer the PST without having the required

advance written agreement in place stating that the customer agrees to

pay the PST on the inputs. I would suggest that this view is somewhat

dubious, since in most of these cases the customer, I would argue, has

agreed to the pricing in advance by (1) providing a deposit in most

cases and (2) by virtue of the fact that the customer did, indeed,

actually pay the invoice.

The consumer taxation branch seems to have taken a fairly hard

line in these cases and has stated that if the contractor fails to have

the necessary written agreement in advance, then the contractor has

charged the PST in error and must pay the PST on the inputs acquired to

fulfil the contract.

In many cases — and we went over some of these examples a couple

years ago — we’re talking about real property contractors, small

businesses typically. Some of them are medium-sized businesses, like a

Home Hardware–type operation. But many small businesses have been hit

with liabilities in the tens of thousands and in some cases hundreds of

thousands of dollars.

[2:40 p.m.]

These liabilities have caused significant hardship. Again, my

colleague from North Vancouver–Seymour, I think, will speak to a

specific example in her community on that in a moment.

The end result of these assessments, to shine a bright light on

kind of the insult to injury here, is that the treasury ends up

collecting more than double the revenue in respect of each transaction.

That happens for two reasons. First, the PST was collected from the

customer on the retail price of the goods. Second, the PST was collected

from the contractor on the wholesale price of the inputs. So in the view

of the consumer taxation branch, the customer has been charged the PST

in error and could, therefore, apply for a refund of the PST. In order

to protect the treasury in the event that such refunds are applied for,

the contractor must pay the PST on the inputs.

Our understanding is that application for refunds by the customers

for PST charged in error is very low. We do, I think, all have examples

of some contractors who have gone through that process. But the number

of customers and users that actually apply for the refunds is a very

small number. The customer only has, I believe, a four-year time frame

to apply for such a refund, after which a statutory time limit kicks

in.

The potential scope of this issue is massive. I think the minister

knows that new home construction has materials making up an average of

$175,000 of the cost of a home. With 30,000 new homes being built every

year, that’s about $5.25 billion worth of materials. It means that the

contractor is responsible for paying and/or collecting potential PST of

up to about $350 million for renovations. Materials make up $2 billion,

meaning contractors pay and/or collect another potential $140 million

every year.

For these real property contractors, what, frankly, is in most of

their cases an honest mistake…. Whether working on large contracts or

multiple projects, this honest mistake could mean owing tens of

thousands of dollars or more. All along, these contractors have thought

they were doing the right thing. It turns out that wasn’t the case in

some instances, and this honest mistake is costing them a lot of money,

which comes right off of their bottom line.

The Kamloops Chamber of Commerce pointed out in its 2019 policy

position on the issue: “This issue does raise the question as to what is

the best, most efficient way for real property contractors to collect

and remit PST…. With the introduction of the PST, it is vital that the

provincial government work with real property contractors to find the

right balance and fair approach that works for them to collect the PST

and remit it to the government.”

I’ve mentioned a number of audits. I’ve given the minister some

examples in the past. I’ve got a list here of about ten businesses in

Kamloops that have been hit with fines and interest and tax owing as a

result of this issue, with just these ten businesses totalling over $1

million. They’re all relatively smallish in size, employing a lot of

people in Kamloops.

The minister did write back to me December 19, 2017, I think,

acknowledging that this is an issue. Her letter, in part, reads: “It is

true that unless the customer applies for a refund, the government will

collect twice the amount of overall tax that is owed. I can appreciate

that this has caused frustration on behalf of the contractors, as they

feel government is receiving more tax than is legally required to be

paid.”

It seems to be, to me, in that letter from the minister of

December 19, 2017, that she, in her good wisdom and her experience,

understands that there’s an issue here and understands why there would

be frustration on the part of a lot of real property contractors around

the province.

With that very lengthy introduction…. Again, I appreciate the

minister’s patience in enabling me to kind of lay that out, because it

is a complicated issue. I have a couple of questions.

[2:45 p.m.]

The first one is this. Is the minister willing to ensure recovery

of full payment back to the real property contractors who have been

audited, in the cases of those contractors related to whom the

provincial government admits to receiving all PST due? For the

minister’s information, this particular question is focused on the

Ministry of Finance reviewing all impacted audited contractors and

ensuring that those contractors are reimbursed in full — the fines, the

penalties, the interest and the audited assessments, as would only be

considered fair and reasonable by all of these real property contractors

in question.

[2:50 p.m.]

Hon. C. James: I think the member has identified some of the background, but I

think it’s important just to, again, set the context that these changes

were made in 2008. Certainly, there has been some confusion around the

specifics. Because of that, a great deal of work has occurred — I think

we talked a little bit about this in the 2017 estimates — with

associations, with the homebuilders, with the contractors, with public

education that has been done.

We do believe that, in fact, now the vast majority of businesses

do understand the rules, that the rules are simpler than they were

previously. So we certainly don’t want to go back to the old rules. In

fact, these rules are much simpler to be able to administer. This is the

law. So people are expected, obviously, to follow the law, and audits

have shown that. We believe that the public education work has occurred

now.

It is important to note, as well, that this new change that was

made in 2008, in fact, does protect the customer, because the customer

ensures they don’t pay the PST unless they’ve agreed to. So it ensures

that there aren’t markups that are in place where the customer ends up

having to pay them, but they actually have acknowledged that they don’t

pay the PST unless they’ve agreed to it. So that’s important.

There is an appeal process. On appeal, if a customer paid the PST

and didn’t actually confirm that in writing, as is required, the

contractor can appeal. And if they can show, as part of that evidence,

that the customer did agree, they can submit that as part of the appeal,

and that will be considered. That’s another protection that is in place

for the contractors to be able to go through that process, if they

didn’t get the customer to put in writing that they agreed to the

PST.

I think it’s important to note that this was a change made in

2008. It has been in place since 2008. Public education has been done on

this piece, and certainly, the vast majority of businesses, at this

point, do understand the rules.

T. Stone: Well, I certainly agree with the minister insofar as, yes, there

has been a tremendous amount of engagement on this particular file, this

particular issue with respect to the homebuilders and chambers of

commerce and other organizations, not to mention countless small

businesses, themselves, coming forward and expressing the hardship that

they’re experiencing. Again, I go back to my opening statement. These

are real property contractors, in the vast majority of cases, who are

simply trying to do the right thing.

The minister’s right. The rules that are wrapped around this

particular PST issue were established in 2008. They went away when the

HST was brought in. When the HST was eliminated and replaced with the

PST once again in 2013, this PST rule came back in play. There’s no

quibbling on the dates, in terms of when this issue first arose and

where we are with it to this point. That being said….

[2:55 p.m.]

The minister is correct. It is the law, but the reason we’re in

this place is that this is where the law can change. This is where we’re

supposed to come forward on behalf of our constituents and express

concerns that they’re having and, hopefully, with a thoughtful policy

lens, work with each other — work with government and opposition

together — to resolve issues of, if nothing else, fairness and

equity.

This is a complicated tax issue that…. While it is the law and

while many contractors understand the provisions, there were many that

didn’t several years ago and have been hit hard with assessments and

fines and penalties.

The minister is correct that, yes, there is an appeal process. But

I would point to one organization in…. A constituent of mine had

assessments plus penalty and interest of $148,000 and change, and after

two years of a heck of a lot of work and a lot of paperwork, back and

forth between the auditors and this small business, this small business

was able to recover about $35,000. They’re still out and have

double-paid, essentially, to the tune of over $100,000. Now they’re

thinking they might still be able to get another $10,000 or $12,000

back.

It’s wrong on several levels. It’s not wrong from the perspective

of what the law says is correct today. It’s just from the perspective of

fairness and the concept of taxing once and recognizing that the

contractor and these contractors in question are trying to do the right

thing. Remitting, collecting the tax, remitting it and then having to

pay it again — that’s just not the right thing.

My second question to the minister would be this. Would the

minister be willing to consider changes to this tax legislation to

prevent further audits and issues to contractors on this subject?

Specifically, this would involve removing the existing legislative

requirements relating to real property contractors and the PST

legislation and would mean contractors would subsequently purchase goods

with a PST exemption number and charge customers PST on the retail

amount of the product.

That change would ensure, on a go-forward basis, that no further

contractors would be captured by this provision, which, frankly, is

grossly unfair.

[3:00 p.m.]

Hon. C. James: With all of these kinds of tax measures, I think it’s important to

take a look at the principle and the rationale around why they were put

in place in the first place. I think that the principle of this tax

measure, to protect the customer, to ensure that they aren’t paying the

PST unless they’ve agreed to it…. I would not expect that that’s

something that we would disagree with. I think that’s something that I

would expect most members in this House would agree with.

I think this rule has been in place now for 11 years. This law’s

legislation has been in place now for 11 years. As the member

recognized, a lot of public education has occurred. In fact, the vast

majority of businesses know the rules. They know the rules, they follow

the law, and they go through that process.

So if we changed it back now, you’d be again looking at another

round of public education, another round for a vast majority of people

who, in fact, do know the rules and do follow the law and do have their

customers sign off on paying the PST. At this point, as I said, I don’t

think the principle of the tax is something that most people would

disagree with.

Are there opportunities to continue to look at efficiencies and to

look at how to make the process easier or to ensure that the process is

easier for businesses, for others who go through this process? Yes,

always there are opportunities to do that. I would certainly welcome the

member’s approaches around those areas where we could make it

easier.

But to look at changing something that, as I said, has been in

place for 11 years now, has had a great deal of public education around

it and has the vast majority of people following the existing rules

doesn’t make a lot of sense to me.

T. Stone: Well, let’s be really clear here. The rule has not been around for

11 years. The rule has been in place since the HST was replaced with the

PST in 2013. The rule dates back to 2008, but the member knows that the

HST came into place, and this became a non-issue when the HST was in

place. It is only an issue because the HST was replaced with the PST

back in 2013.

I would quibble with the minister’s suggestion that most

businesses are good with this. I think there’s a tremendous amount of

pain and hardship, financial hardship, still being experienced around

the province. I listed ten companies, small businesses, in my riding, of

$1 million. Other members have examples in their ridings.

The chamber of commerce provincially, not to mention all kinds of

chapters, has raised this issue as one of their top priorities because

of the financial hardship that is being realized by these small

businesses. It’s about fairness. The minister acknowledged as much in

her letter to me on December 19, 2017. She’s acknowledged that, you

know, it is true that unless the customer applies for refund, the

government will collect twice the amount of overall tax owed. That’s

wrong.

I would ask the minister on that point: does she think it’s right

or does she think it’s wrong that government could end up being the

beneficiary of double taxation because of how a particular tax

requirement is established?

[3:05 p.m.]

Hon. C. James: I think that the important piece in this is that businesses should

comply. A business should comply with the law that’s in place.

Certainly, as I said earlier, refunds can be issued when the tax

department is aware of it. Individuals have four years to apply for the

refund. Again, it’s very fair in giving them an opportunity to do

that.

We’ve had businesses that have been sharing the application with

their customers to be able to apply for the refund. That’s certainly

another tool that is available to them. But, again, when we talk about

fairness, fairness is making sure that you comply with the law. As I

said, refunds can be issued, so we can also deal with that end for up to

four years.

T. Stone: Well, fairness, I would suggest, is also about making sure that

the law in and of itself is inherently fair. What we’re suggesting here

is that this requirement, which has resulted, in many cases, in double

taxation — in double the amount of revenue being collected by government

than should otherwise be collected — and the government keeping that

revenue, making it, through the way this is structured and the way the

rules provide for, very painful and difficult for small businesses to

recoup some of that double taxation…. That is not fair.

I asked the minister if she thought it was fair for government to

be collecting double the taxation revenue from real property contractors

or not, and she refuses to answer. I’ll give her one more opportunity to

make it very clear to British Columbians and very clear in this House

that, frankly, any tax rule that enables the double collection of

revenue is wrong. It’s not fair.

When we canvassed this two years ago, I suggested a number of

potential solutions. One was, as I just asked again in a previous

question, about just amending the legislation and changing the rule so

that this doesn’t pertain to real property contractors any further. As

part of that, do good by these real property contractors and go back and

make it a priority in the ministry and accelerate the review of these

assessments and ensure that every contractor in this province is

reimbursed in full — the assessments, the fines and the penalties

associated with this particular rule. The minister appears not to be

willing to do that. Fine.

I have also suggested in previous interactions that, as more of an

interim measure, she could look at one solution that would involve the

contractor paying the full amount of the PST applicable on the goods

acquired from the supplier. The contractor would then reimburse the

treasury only for PST rebates charged by each customer. That way, the

contractor would have a chance to remain in business, and the treasury

wouldn’t end up collecting double the revenue.

I suggested previously, as another solution, that another solution

could involve the amount of PST assessed on real property contractors

due to recent audits by a consumer taxation branch. They could be held

in trust by legal counsel. For those customers that do successfully

apply for a refund of PST, the related funds, held in trust, could be

remitted to the treasury. Again, this would ensure that the real

property contractor would not be out of pocket, insofar as the

government receiving double the amount of tax revenue.

[3:10 p.m.]

So one last time, and I’m going to turn it over to my colleague

from North Vancouver–Seymour. In light of everything that we’ve talked

about here today, I’m imploring the minister to take another look at

this. Considering the two years that have passed since we last discussed

this, the two of us, this is still a huge issue for a lot of real

property contractors around the province. It’s inherently unfair and

wrong for these real property contractors to be hit twice, from a tax

perspective.

Could the minister please take one more opportunity here to tell

this House, tell British Columbians, whether or not she feels that this

is fair — that double taxation is fair? If she doesn’t think it’s fair,

is she prepared to change this rule or at least to provide some

mitigation to accelerate the repayment of this double taxation of these

real property contractors?

Hon. C. James: The most important piece to note here is, in fact, if businesses

comply with the law, there is no double taxation. There is no double

taxation. And if the business did not collect the information and didn’t

collect the information from the customer to say they’ve agreed to pay

the PST, refunds can be issued when we’re aware of it.

In fact, as the tax department for the Ministry of Finance, we —

again, when we’re made aware of it and we have the opportunity — want to

be able to refund those dollars. People have four years to be able to

apply for the refund. So in fact, there isn’t double taxation here, if

people comply with the law and if they gather the information. Even if

they don’t gather the information, they still have the opportunity to be

able to say that that didn’t occur, to ask for a refund, and the tax

department is happy to provide that.

J. Thornthwaite: I’m going to be following up on the same vein as my colleague from

Kamloops. I’m advocating for a constituent of mine who has been caught

in this mess.

I’m just going to read you a part of his letter, and then I’ve got

some questions that he’s asked me to ask the minister.

“I have been a small business owner for 28 years of a communication

contracting company. We have eight employees, and if we survive, we will

be hiring more. We are currently being audited by the Ministry of

Finance, PST. The auditor is seeking to double-dip and assess us PST at

the supplier as well. With interest. This would mean a tax bill over

several hundred thousand dollars that would not be recoverable. This

isn’t an expense we can afford and threatens the survival of our

business.”

These are the questions that he has.

“Is the B.C. government okay with one of their branches actively

putting small businesses out of business? If PST is a confusing mess

with vague language, contradictory bulletins and the auditors can’t

answer many questions, how is it reasonable to punish owners for making

an error in the

interpretation when good faith is being

demonstrated?”

Then I have a question for the minister before he asks this

question. Is the minister aware that the auditors get compensated

relative to the dollar amount of the assessment?

Then this is my constituent’s question.

“How is it all ethical or even legal that auditors receive

compensation tied directly to the dollar value of the assessment?

Instead of ensuring businesses are informed and following the rules,

they’re looking for bonuses on huge assessments in as little time as

possible. Before the audit, without seeing a piece of paper and knowing

little about our business, the auditor told me that she will assess PST

on all our purchases.”

[3:15 p.m.]

Then the fourth question:

“The PST has been collected and remitted. How is it reasonable to

demand that it be paid a second time? The ministry knows full well only

a handful of customers will potentially apply for refunds, yet they are

happy to ignore that reality. Why can’t it be handled on a case-by-case

basis?”

Then this is his last question:

“Why does the ministry not pick up the phone or email us if a

customer is claiming we charged PST incorrectly? If contractors have

perfectly legal ways to charge customers PST on real property or it’s

possible we have already refunded the customer directly, then why are

they not obligated to reach out to the contractor to verify if either of

these conditions are in place? Privacy laws should not be relevant, as

we are a party to the contract in question.

“Our customer the ministry refunded PST had no right to claim a

refund, as we had a signed legal contract in place with the purchase

materials that would be paid by the customer.”

Then his last comment to me, pleading me to go to the

minister:

“The prospect of the B.C. government taking hundreds of thousands of

dollars from our business makes me question why I’m struggling so hard

to run a business when it’s all for nothing in the end.”

I did have four questions from my constituent. One was from

me.

[3:20 p.m.]

Hon. C. James: I think, on the first question around auditors being compensated

on the assessment that they bring in or the value, that’s not accurate.

In fact, auditors are BCGEU government employees, and they’re paid a

salary. So that’s not true. That’s the first, most important, piece, I

think, to make sure we put out there.

The question around PST and the misunderstanding, the PST system

being a mess…. In fact, as I mentioned to the previous member, we have

done a great deal of work around public education, around ensuring that

the bulletins are out and doing outreach with groups and organizations.

I think the member acknowledged that himself — that, in fact, there has

been a great deal of public education. But in the end, it is up to the

individual to make sure they are following the law, as it is with other

laws.

We are always available if there’s confusion. We’re always

available, as a tax department, with bulletins and with phone help. If

people aren’t aware of the rules to follow or if they feel there’s some

confusion, they have the opportunity to be able to do that.

I think the other check and balance, of course, is that there’s an

appeal process in place, and there’s always the opportunity to appeal

again. If there are concerns about a specific auditor that the

individuals raise, they can certainly call in. We will take that

information, and we’ll look into it, if there are specific

concerns.

Then on the specific contract issues that the member raised….

Again, the member is welcome to pass those along to us, and we’ll take a

look at them. It’s hard to answer them here without having the contract

in place that the member’s constituent refers to, where he says he has a

contract in place with an individual. Hard to know that unless we see

the contract. So I’m happy to take those issues and concerns and be able

to review them.

J. Thornthwaite: I will take the minister up on her offer, then, to contact her

office and hopefully get to the bottom of this.

S. Bond: Thank you to the minister for accommodating our colleagues. We

will have a few others interspersed throughout the afternoon.

I want to change the topic slightly. I’m wondering if the minister

can provide us with an updated list of concluded contract negotiations

and updated cost increases, where applicable.

[3:25 p.m.]

Hon. C. James: Budget 2019 allocates $180 million to line ministries — because,

obviously, as the agreements are signed, that’s where the dollars go —

over the three-year fiscal plan, to fund all ratified collective

agreements that are ratified by December 31, 2018. Budget 2019 also

includes contingencies to be able to assist with the costs of the

remaining agreements that are not in place yet.

Just to just give the member an idea of the…. I mentioned the

specific costs, but if the member was interested: an increase of 1

percent in total compensation for all employees in the public sector

would be $304 million.

The member asked about numbers. Out of the 330,000 unionized

employees working in the public sector right now, there are 217,000 who

are covered by tentative and ratified agreements under this mandate.

There’s also a list on the PSAC site of those specific agreements that

are in place.

S. Bond: Well, thank you. Could the minister, then, provide us with a

breakdown of the contracts that have been concluded and what the net

increase is for those concluded contracts?

Hon. C. James: As I mentioned, we’ve allocated $180 million to line ministries

over the next three years for the ratified agreements up to December 31,

2018. So that’s the $180 million.

The member will know that in Budget 2019, we also have

contingencies built in for costs for the conclusion of the remaining

agreements. That’s $553 million in ’19-20. For ’20-21, that cost is

$1.183 billion for the concluded agreements, and for ’21-22, it’s $1.827

billion. So in fact, the costs for the agreements are built into the

fiscal plan.

S. Bond: Thank you. I’m not sure why this is not a straightforward answer.

Can the minister name which contracts have been concluded?

Hon. C. James: As I mentioned, these are up on the site, but if the member wants

me to read them into the record, I’d be happy to.

Ratified: community social services, community living; community

social services, general services; community social services, Indigenous

services; the Crowns — B.C. Hydro, Allied Hydro Council; another Crown,

WorkSafeBC, Compensation Employees Union; another Crown, B.C.

Assessment, CUPE Local 1767.

[3:30 p.m.]

In the area of health, we have community health. We have health

nurses. Under health, again, we have the health science professionals.

Under health, we have facilities, and we also have the Doctors of B.C.

Under post-secondary, we have Northern Lights College faculty, which is

BCGEU. We have Okanagan College faculty, which is BCGEU. We have Camosun

College faculty, BCGEU Local 701. For the public service, we have BCGEU

main. Under the public service, we also have the Professional Employees

Association. Under universities, we have the UVic Professional Employees

Association. In K to 12, we have school district 20, CUPE Local 1285,

and under K to 12, we have support staff, school district 81, Fort

Nelson, BCGEU Local 717.

[J. Isaacs in the chair.]

Tentative, ratification still to come: on May 8, resident doctors

and universities, UBC, Local 115. Under post-secondary, again, BCGEU

vocational faculty, common. These are five colleges that belong to the

framework. Again, a tentative settlement on post-secondary education.

Selkirk College faculty, BCGEU, and tentative post-secondary, Coast

Mountain College faculty, BCGEU Local 712.

We have a monetary framework in place, K to 12, support staff,

provincial framework agreement.

Then underway…. Does the member wish me to read the agreements

that are underway as well? No, just the ones that have

concluded.

S. Bond: Thank you to the minister for that.

Can the minister tell us what the time frame is expected to be for

the completion of the rest of the contracts? I think it’s a fairly

compressed period of time. What is the span that is left to finish

negotiations for this bargaining round?

Hon. C. James: There’s about 33 percent left still to bargain. Again, we don’t

set a timeline. Bargaining happens at the bargaining table, and that may

take different amounts of time, based on the negotiations that occur. So

we don’t set a timeline for that.

S. Bond: Can the minister confirm, then, that the contingencies that she

has set aside over a three-year period are almost $3.5

billion?

Hon. C. James: The total amount is $3.563 billion.

S. Bond: Two questions. Can the minister explain how those contingencies

are carried and who they will address in terms of those contingencies?

I’m assuming it’s the overall wage compensation package once they’re all

finalized. Can the minister also identify for us…? If that $3.5 billion

is not required — it is contingencies — does she have a plan for what

she will do with those funds?

Hon. C. James: These funds that were put into contingencies are funds based on

the remaining groups still to bargain and based on the 2, 2 and 2

mandate, because that applies across the board to all employees. Those

funds we expect to be allocated through the bargaining

process.

[3:35 p.m.]

T. Redies: We’re now going to turn to another area of the budget that we have

some concerns about. We talked a little bit about it yesterday. It’s the

real estate market.

Minister, as we know, in the Finance budget, housing starts are

projected to drop 30 percent, from their height at 2017. By 2022,

they’re expected to fall to around 30,500 units. As construction is a

large sector of the economy and drives significant tax revenues for the

province, what is also concerning is that the government is, again,

projecting flat property transfer tax revenues and increasing other

property revenues.

If I can quote Chris Gardner of the ICBA: “The single most

troubling number in the budget was the projected 30 percent drop in

housing starts. Given that construction accounts for nearly 10 percent

of the B.C. economy, this contraction will be widely felt. It

underscores the flaws in an NDP housing strategy that is based on higher

taxes, with little regard for increasing supply, and casts further doubt

on revenue projections.”

Minister, given the substantial contraction in housing starts,

which represents, I think, about 50,000 units over the period that the

NDP have been in government, is the minister sure that she can stand by

her property tax projections?

[3:40 p.m.]

Hon. C. James: Yes, the member is quite correct. The housing starts in B.C. have

declined. They declined in units from 2017 to 2018. But I think the

important piece to remember is that the level still remains above the

historic average in British Columbia. The housing starts are forecasted

to, in fact, exceed the historic average over the short term but also

expected to trend along the historic average.

I think the other important piece, just to take a look at previous

budgets and previous forecasts, is to recognize that, in fact, the

predictions that we have in our budget are actually higher than the

previous four budgets, going back to 2015, when it comes to construction

— expected to be higher.

We have been prudent, based on the Economic Forecast Council’s

projections. Again, as we do with our growth projections, we’ve been

prudent in the housing starts piece as well. They’re expecting housing

starts to trend, and we have, in fact, as I said, taken our estimates

below the Economic Forecast Council.

Again, I think if you take a look at the risks that occur with

speculation in the market, if you take a look at those challenges, the

fact that although, yes, the numbers are down from those high years,

they still are above the historic average of close to 30,000 units,

which again shows strength. It shows a moderation in the market, which,

again, is healthy for both housing as well as for people who need to be

able to get into the market.

And yes, I feel comfortable with the numbers.

T. Redies: Thank you, Minister, for that answer. We already had a housing

affordability problem when supply was up at the 45,000 mark. How does

the minister think a falling supply, which, again, is above the ten-year

average…? How does she think that a falling supply is actually going to

help solve affordability in the province?

[3:45 p.m.]

Hon. C. James: I think the important piece when it comes to housing and supply,

as the member was talking about, is that housing starts in fact are

expected to be higher than B.C. Stats estimate of housing formation over

the next projected horizon. So they do expect the numbers to be higher

than things like in-migration and population increases, etc.

That doesn’t take away the affordability challenges. As we know,

there’s housing available that may not be affordable for people. So it

reinforces the work we’re doing when it comes to being able to look at

affordable housing through our 30-point plan and the number of measures

we have in place there. But, in fact, housing starts are expected to

actually be higher than the B.C. Stats estimate of housing formation

over the horizon.

T. Redies: Thank you for your answer. But we know there is a lot of pent-up

demand for affordable housing. I mean, that’s what we hear every day —

that young people, young families can’t get into the market. So if there

was…. Again, there’s the new family formation, etc., and there’s pent-up

demand. One would think that the housing starts would actually be going

up or at least maintaining their levels.

I guess my question to the minister is: why does she think that

housing starts are actually coming down? Why are builders developing

less condos and townhouses?

[3:50 p.m.]

Hon. C. James: I think I’ll go back again just to reiterate the importance of

taking a look not at the year-by-year but, in fact, the longer-term

trends, because that’s critical when you’re looking. You expect the

adjustments that occur year over year. But even if you looked at those

and took out the spike that occurred in the years — I would certainly

suggest 2017, in particular — where there was a lot of speculation going

on in the market, we are still seeing housing starts above the historic

averages. You are still seeing an increase in housing starts. In fact,

our estimates, as I mentioned, show housing increases over the last five

years of budget. So in fact, we have higher increases when it comes to

five years of budgets.

Given all of that, I think the member knows the market is

adjusting. We can have debates about whether that adjustment is a

positive sign or a challenge, but we are seeing the market adjust. But

even, as I said, given all that, we’re still seeing above historic

averages when it comes to housing starts. I think, in the short term,

you’ll see some variabilities as the market adjusts, but I think it’s

the long-term trends, again, that we’re looking at.

T. Redies: Well, in 2018, the C.D. Howe came out with a study that indicated

that $644,000 of a detached-home price was related to taxation. In fact,

actually, it’s not just the provincial government, but municipal

governments have successively increased taxes on property development in

this province and, I would argue, are actually, probably, the main

culprit in the affordability problem of B.C. That $644,000 represents

about 26 percent of the cost of a detached house, and that percentage is

about the same for a condo or a townhouse. That was before the employer

health tax went in, the $3 million and up school tax and the other

plethora of 19 increased or new taxes that this government has

implemented that are affecting property developments.

The minister also noted that the housing prices are coming down,

and they’re not coming down in a moderate way. They’re coming down very

fast. So we have a situation for developers. You’ve got rising costs of

developments, and you’ve got a market where the prices are coming down.

So the risks for a developer make no sense whatsoever.

Based on this scenario, did the ministry think about this in terms

of…? As they were designing their tax policy and looking to put this in

place and their 30-point housing strategy, did they think about the

impact on developers of these rising taxes in an already highly taxed

situation, on the potential for it to actually result in lower

construction starts? I would argue that’s what’s happening in this

market, not that it’s coming down naturally. It’s coming down because

the economics of development in this province don’t make any

sense.

[3:55 p.m.]

Hon. C. James: I think the first piece I’ll just touch on is the paying attention

to the housing market. The member asked: do we pay attention? Are we

forecasting? Are we taking a look at the trends and the changes? That’s

certainly something…. I think the member has heard me say this often —

how important it is to do that monitoring. Obviously, government doesn’t

control all of the tools and the measures when it comes to the housing

market. Everything from mortgage rates to the dollar to the economy all

impact the housing market. So it’s critical.

I’ve said that from the very start, as we’ve introduced our

measures and our 30-point plan. It needs to be a living document. The

market is adjusting, and it is important for us to pay attention and to

do that monitoring, and that’s exactly what we’re doing.

I think it’s also important to look at national trends and to take

a look at what’s happening to housing across the country. In fact, you

see housing starts in Canada down 16.3 percent compared to the first

three months of the previous year. In B.C., we’re looking at a drop of

7.9 percent compared to the previous three months. Again, you’re seeing

a large drop across the country when it comes to housing. So, yes, you

are seeing the market adjust. There is no question about

that.

I would suggest that that’s a healthy approach for building

long-term, sustainable growth when it comes to housing affordability.

But again, I think we are continuing to actively monitor it. We continue

to pay attention to both outside factors as well as the tools that we

have within our 30-point housing plan.

T. Redies: Clearly, again, the mortgage housing market, etc., is a complex

business, and there are lots of factors involved. But when we’re talking

about the supply, real estate supply and developments, it’s about the

economics. The economics, clearly, in B.C. don’t make any sense. The

costs are continuing to rise because of taxation, and prices are coming

down also because of government policy at all levels of government, not

just this government’s level but also at the municipal level and the

federal level.

Again, speaking about the rest of the country is kind of

interesting, because the minister lauds the fact that the B.C. economy

is growing better than other parts of the country, that there’s job

growth here, etc. So there is, obviously, demand for housing. In fact,

the minister has made that clear many, many times — that one of the

reasons why they’re doing this 30-point plan is because people want to

be able to have homes. Businesses want to have employees who can work

here.

However, if the ministry, or the government, puts in a policy that

basically makes it more expensive for developers to build affordable

housing, condos and townhouses at a time when prices are coming down,

that’s what’s going to drive the supply down.

[4:00 p.m.]

I guess what I’m asking the minister is: why do it this way? Is

the thought process that you’re going to tax developers and you’re going

to take that money, and then government in itself is going to build

affordable housing? Why not reduce the taxation on developers and get

them to build affordable housing? They’re in a much better position to

be able to do that. Why increase taxes on developers? Why not help them

solve this affordable housing crisis instead of what we’re seeing now?

Supply is falling.

Hon. C. James: I think, again, it’s important to note that housing starts are

still above the historic level. You’re still seeing housing starts above

the historic level, which I think is just an important piece to

emphasize.

I know the Minister of Housing, again, will talk a fair bit about

the 30-point plan, but just the pieces that are related to developers.

The member talked about working with developers. In fact, we are working

with developers in a number of different ways, including the work we’re

doing through the housing hub, in partnership with private developers

and others, to look at how we expand the opportunity for the private

sector to be able to get land to be able to build housing, because

that’s often the challenge. That’s part of the work going on in the

housing hub that is occurring that I think is critical to

note.

Then the other challenge that often comes up from developers is

the challenge of different municipalities and different processes they

have to go through when it comes to developments. As we will all have

heard from different municipalities and different developers, sometimes

it can be a one-year process. Sometimes it can be a seven-year process.

Different rules to follow. Different fees in place. The Minister of

Housing has a committee, together with developers, with municipalities,

looking at best practice, looking at how you can streamline those

processes to assist with development.

So in fact, we are working with developers. We are working with

the private sector. We’re working with everyone we can to be able to

look at how we ensure affordable housing is available. We’re using a

number of different tools, as the member knows, when it comes to

building affordable housing, building purpose-built rental housing, as

well, to, again, address some of the affordability issues in the housing

market.

T. Redies: I again agree that the municipal issue and the length of time it’s

taking to progress property developments are a real problem. So I’m glad

to hear that that is happening. But I can tell you, with a bit of

experience in this market, where the government could make real headway

is to reduce the provincial taxation on developers to build affordable

housing. If you keep increasing the taxation on developers, you’re going

to keep seeing the development numbers come down.

[4:05 p.m.]

There’s a tool here for the government to actually start driving

affordability. I hope that the minister thinks about it, because I’m

very concerned when I see those housing starts coming down at a time

when we do have an affordability problem.

I think we’ve had discussions about this in the past, but I’ve

never seen a price problem solved by not dealing with supply going down,

unless we are in the midst of a housing crash, which I very much hope

we’re not. But we are certainly seeing signs in a number of markets in

Vancouver that prices are very, very vulnerable right now.

Minister, I’m going to move on. Again, it’s still within the real

estate area, but it’s more about the property taxes that are being

projected and that. The minister’s forecast is suggesting that other

property taxes, which include the speculation tax, the $3 million, and

up, additional school tax — the list goes on and on — are increasing

from about $2.6 billion in fiscal 2019 to $3.25 billion by fiscal 2022,

which is a $650 million increase in taxes paid over three years, or

roughly a 25 percent increase.

Can the minister break down for us, please, how much revenue is

coming from each new real estate tax? It’s become quite opaque in the

budget. It was a little bit clearer last year when it was first

announced, but now it’s being sort of all put into the big

bucket.

We’d like to know how much is coming from each real estate tax on

this revenue line, including things like the spec tax and the $3 million

and up school tax.

Hon. C. James: While we gather that information, can I suggest we take a

five-minute recess and then come back? It’ll give us a chance to be able

to gather the information the member is asking for as well.

The Chair: The House is in recess for five minutes.

The committee recessed from 4:07 p.m. to 4:17 p.m.

[J. Isaacs in the chair.]

Hon. C. James: Thank you, Chair, for that quick break.

The member asked about the specifics around the property taxes.

I’ve got the information — the member can let me know if there are other

areas — on the property transfer tax, the speculation tax, the school

tax above $3 million and the foreign buyers tax, which are the main

pieces, I think. I think I’ve included everything the member was looking

for.

Again, I’ll just do each of the three years, the ’19-20, ’20-21

and ’21-22. On property transfer tax, $1.9 billion in each of the years.

We had that discussion yesterday, I think, that we have just basically

flatlined that number. Speculation tax, $185 million — again, straight

across ’19-20, ’20-21 and ’21-22. School tax above $3 million, $200

million. Again, that’s straight across for each of the three years. And

then the foreign buyers tax. It’s important to note that this is

actually also included in the property transfer tax. So I’ll give the

breakout for the foreign buyers tax, but that’s actually included in the

$1.9 billion in property transfer tax. That’s $190 million across the

board on all those three years.

T. Redies: Okay. I’d like to now turn to — we talked a little bit about this

— the housing sales and what’s happening in the market. Prices in the

detached home market have fallen 25 to 30 percent, depending on the

area. I’m speaking primarily about the Lower Mainland. I would say, too,

having spoken to a number of realtors in my area, that if you want to

sell your house, you have to drop your price by about 30 percent. But

prices still remain well above what the average person could afford, at

about $1.425 million. Meanwhile, condo and townhouse prices have

remained relatively firm, but they’re also starting to see declines

now.

[4:20 p.m.]

The challenge, of course, is that, with the B-20 rules, it’s still

making it very difficult, from the perspective of affordability, even

with the price changes, for people to buy new homes. And actually, what

we’re seeing now is also getting refinancing, because prices are

dropping.

Given all this, Minister, is it fair to say that the provincial

government and federal government are working at cross-purposes with one

another, with your government trying to drop housing prices

substantially and the federal government trying to prevent people from

getting into the market?

Hon. C. James: It’s an interesting discussion around the outside tools that have

an impact on the housing market. The first thing I’d suggest is that I

don’t think there’s one tool that is having a bigger impact than others.

I think, again, they work in concert with each other, whether it’s

mortgage rules, whether it’s interest rates, whether it’s the economic

situation, etc.

I don’t see the stress test as working in opposition to the work

we’re doing. I think the stress test…. Again, I don’t want to speak for

the federal government. They’d have to speak for themselves. But I think

it has a lot to do with the debt issues and not having people take on

more debt than they are able to manage. That’s, obviously, a concern

that I think all of us have. That’s a different issue than housing

affordability, but they are related, and they could, in fact, work

together, not against each other, because housing affordability is also

about people not taking on huge amounts of debt.

So I don’t see the stress test as working in opposition to the

work that we’re doing around housing affordability. I think, in fact,

there are some ties there as well.

T. Redies: Of course, the challenge is that if you want affordability in a

market like Vancouver, where prices reached, I think, $1.8 million, for

the average person, housing prices would have to fall a substantial

amount. Of course, if they fall by the amount where everybody can get

into the home that they want, we’re going to have a lot more problems

than just housing affordability, as we know, in this

province.

I just want to pursue this a little bit more. I’m sure the

minister is familiar with what happened in the aftermath of the

disastrous 2008 housing market crash in the United States and other

parts of the world, where trillions of dollars basically were lost in

terms of the value of housing markets.

[4:25 p.m.]

Lenders dealing in the United States were forced, by regulation,

to tighten mortgage lending rules, with good reason, frankly, because

there had obviously been way too much predatory lending — and the worst

type of lending, frankly. But in the aftermath, it also made it very

difficult for low and average middle-income folks, even though housing

prices had dropped, to actually get into the market, because the lenders

became so conservative and so bound by their rules that it made it very,

very difficult to even get a mortgage.

One of the concerns I have looking at this current market with

prices dropping, which may be a boon to people who haven’t been in the

market, is it’s not going to be very pretty for the people who are in

the market right now, particularly those who’ve just got into the market

over the last five, six years. Has the minister had any discussions with

the federal government with respect to their lightening up on their

practices? Because we could see a situation where prices deflate, but

just because of B-20 rules and other restrictions, it still makes it

very difficult for people to get into the market.

Again, what happened in the U.S. was it was the wealthy that came

in and scooped up housing, because they had the financial means and the

ability to get mortgages, or they didn’t even need mortgages. So it led

to a much bigger inequality in the United States than what I think

anybody would have expected coming out of that recession.

I guess my question to the minister — a long

preamble — is: has

she thought about this? Has she had any discussions with the federal

government? Is she at all concerned that a similar situation could

happen again here in B.C. where it’s really still just the wealthy who

can pick up housing, and those in the low or middle income are still

kept out of the market?

[4:30 p.m.]

[R. Chouhan in the chair.]

Hon. C. James: I know I don’t need to say this to the member, because I know her

background and the work that she did before she came into the

Legislature, but we have a very different situation than the U.S.,

whether we’re talking about the banking system, the lending system, the

regulations. We’re very fortunate to have a very well-regulated

financial sector in British Columbia. So I think the situation in the

U.S. is, obviously, very, very different than a situation we would face

here.

The member asked whether we have conversations about the rules and

discussion around the federal government’s involvement in the housing

market. Every Finance ministers’ meeting that I’ve attended, certainly

that issue comes up. We have a good discussion about the indicators that

are out there. Usually, the Bank of Canada governor is there as well and

has conversations about what he sees in the upcoming year. So that’s, in

fact, a topic of conversation at every meeting I’ve attended.

Again, because we are in a very different situation, from my

perspective, I am not as concerned about those rules related to the

housing market, but it’s one more tool that we’ll watch. As I said,

we’re monitoring all of the tools that are out there, and it’s one

additional piece that we’ll watch for.

Another important factor. The member mentioned, obviously,

affordability and housing starts, but I think another piece is mobility

within the market. Certainly, anyone in the real estate field talks

about the importance of having mobility in the market so that people who

can afford a more expensive home have the ability to be able to do that,

which provides the opportunity for others to move into their less

expensive home. So it’s not getting rid of the expensive homes, for

example; it’s, in fact, providing that mobility within the

market.

That’s really what we’re looking for. You’re starting to see some

signals, as the member knows. I always say “cautiously optimistic.”

We’re seeing signals on condos. We’re seeing signals on townhomes. We’re

seeing signals on single-family homes moderating, which I think is,

again, a very important signal. We’ve put some of our pieces around the

30-point housing plan in place.

Again, things like student housing — allowing universities to be

able to borrow for student housing — will make a huge difference. When

that housing comes on line, that provides the opportunity, then, for all

of those students to move out of those affordable units in communities

up onto campus, up into student housing, and provides that

back-into-the-pool for affordable housing.

I think those pieces are critical. I think CMHC’s last market

analysis also supported that. They talked about overvaluation coming

down, housing prices in Vancouver moving closer to levels supported by

market fundamentals. So again, all positive signs that we’re taking a

look at and that we’ll monitor very closely.

S. Bond: I have a couple of questions to ask the minister, and then I’m

going to…. We let the minister know that there would be colleagues here

throughout the afternoon. So one of my colleagues will take over after

we go through these two questions.

The minister would know that, historically, many families use the

equity in their homes to help their children get into the housing

market. We now see that sales and prices are falling and fairly

dramatically, particularly in the detached home market. With that

circumstance, many families now find themselves unable to help their

children get into that market. That is a significant concern.

I am sure every member of this House has heard about how important

it is for families to ensure that their children are able to get into

the housing market. So I’m wondering if the minister and her team have

actually contemplated a potential consequence of wiping out significant

equity in people’s homes.

That’s a concern that we are certainly hearing. With the prices

falling, has the minister or her team done any work about the impact on

families who are, frankly, losing equity in their homes?

[4:35 p.m.]

Hon. C. James: The member asked about the ability for parents to be able to help

their children buy a house. I think if the increase in the market caused

all kinds of problems, that was certainly a large problem. There was no

one who could afford to get into the market, never mind provide an

opportunity for their children to be able to get into the market, when

you saw the kinds of skyrocketing prices, the speculation in the market

over the years.

For example, in Vancouver, prices went up in greater Vancouver

76.9 percent between 2013 and 2018. I mean, you are one of the very

fortunate ones if you happened to have a house during that time period.

But that certainly doesn’t provide the opportunity for the vast majority

of people to be able to help their children or grandchildren or others

get into the housing market, when you see those kind of prices. In fact,

the kind of escalation in prices and the rise in prices did cause the

exact challenges that the member is talking about.

Providing moderation in the market and providing an opportunity

for people to get into the market provides more of an opportunity,

whether we’re talking about families or otherwise. We are not there yet.

We certainly know that the challenges exist in the market, but a 76

percent increase in housing prices does not help a family help their

family get into the market.

S. Bond: Thank you for the answer. Having said that, that really wasn’t the

question. The issue is that we now see housing sales and prices falling

dramatically, and people are losing equity in their homes. That’s a

pretty significant and substantive issue, which the minister skirted in

her answer.

Let me bring forward another concern we have, then. We know that

sales and prices are falling. People are losing equity in their homes.

The minister is correct: there needed to be an adjustment in the system.

But now we have other concerns, and that is the loss of

equity.

Secondly, let’s look at young families who actually did manage to

buy a house in the last five or six years. When we now see a 25 percent

drop in housing prices in some markets, that would mean that one in four

mortgages could potentially be underwater on their mortgage. We have

families who are losing equity, can’t help their young people get into

the marketplace.

We also have a consequence that looks at people who purchased five

or six years ago. Now we see a 25 percent drop in housing prices. Well,

guess what. These families are going to have a pretty significant

challenge refinancing their mortgage when they come up for renewal,

particularly under the B-20 guidelines.

Again, we’re talking about loss of equity to the minister. Now

we’re talking about: what are we going to do — or what is the minister

going to do, or what has she thought about? — when it comes to young

people having purchased their home at a peak period in time, and now

they see a 25 percent drop in those prices? Can the minister talk a

little bit about what she and her team are doing to contemplate that

situation for some young British Columbians?

[4:40 p.m.]

Hon. C. James: The most recent numbers. Obviously, the greater Vancouver area….

I’ll use the greater Vancouver area because that’s the area, certainly,

that was the most overheated. It’s not the only area. We’ve got,

obviously, other urban settings in British Columbia that are facing

that. But the kinds of prices you’re seeing in fact show a moderation in

the market. They don’t show a huge drop. They don’t show a crash. They

in fact show moderation.

You’re seeing about an 11 percent drop in greater Vancouver on

average for single family homes. You’re seeing about a 7½ percent drop

in townhomes and a 6.9 percent drop in condos. Again, when you take a

look at the overheated market that we’ve seen, when you take a look at

the kind of triple-bidding that you were seeing in the housing, the pace

of growth, the kinds of challenges that that created in the market,

seeing this kind of moderation, in fact, is a strength — a strength for

our economy and a strength for employers who are looking at recruiting

and retaining employees.

As we know, we have the best unemployment numbers in the country.

That provides an opportunity, obviously, for the need to focus on

recruitment and retention, and housing is one of those key pieces, as

business has been telling us, that we need to address. So in fact, you

are seeing a moderation, and that’s being reinforced, as I mentioned, by

CMHC, by the Bank of Canada, by the rating agencies, when they all talk

about a moderation in the housing market and the adjustment that is

occurring. I think that, again, is good reinforcement for the work

that’s going on.

M. de Jong: Thanks to the committee and the minister and my colleagues for the

opportunity to interject. I wanted to canvass an issue I think is mostly

a good-news story, and probably that’s why I wanted to introduce the

notion and the questions — to hopefully ensure that it continues to be a

good-news story.

The minister will know about the work that has taken place around

the establishment of a cooperative capital markets regulator in Canada.

She will know about the role that the government of British Columbia has

played. It would be remiss of me not to observe that ably assisting the

minister through this process are some people who worked very diligently

to achieve, for British Columbia, a positive reputation, a tremendously

positive reputation, in terms of helping this matter along and trying to

achieve something that has eluded certainly the province but, I suppose

more importantly, the nation for many, many years.

[4:45 p.m.]

In November, the Supreme Court of Canada rendered a decision. I

hope the minister will forgive me. I’m not usually a fan of big

preambles to questions, but it might be worthwhile to set the context

here a little bit. The Supreme Court of Canada rendered a decision on

this matter that upheld arguments advanced by the government of British

from the government of Quebec. British Columbia, I should say, took the

unusual position of not just being an intervenor but also actually

launching an appeal of our own and responding directly as a litigant.

All of which, I think, made sense and, ultimately, was helpful in the

resolution of the matter.

Just to give some context to the issue before the court, it’s

probably wise to consult what the court itself wrote. I’m looking at the

decision. The court, at paragraph 8 in its decision, offered this

background: “Canada is one of the only industrialized countries in the

world that does not have a national securities regulator. This is

largely attributable to the constitutional division of provincial and

federal powers as set out in

part VI of the Constitution Act,

1867.”

Further in that paragraph: “The result is a nationwide patchwork

of provincial regulatory schemes and the absence of a truly national

approach to regulating capital markets.” Later, at paragraph 9, the

court observes: “In spite of this constitutional impediment, however,

various attempts to centralize or standardize the regulation of

securities in Canada have been made for over 80 years.” I guess what the

court didn’t say was “unsuccessfully” over 80 years.

We seem on the verge of changing that. We seem on the verge of

altering a record that has characterized attempts in this regard for, as

the Supreme Court of Canada said, 80 years. The response to that was the

cooperative capital markets initiative, as set out in a memorandum of

understanding negotiated in, I recall, September of 2014. Again, I

cannot understate the tremendous role that officials within British

Columbia played, with counterparts in Ontario and Ottawa, to achieve

that memorandum of understanding.

Here’s what the court, at paragraph 21 of their decision in

November of last year, said:

“The framework of the cooperative system is set out in an agreement

between the federal government and the governments of Ontario, British

Columbia, Saskatchewan, New Brunswick, Prince Edward Island and Yukon,

together the ‘participating jurisdictions,’ which is known as the

‘memorandum of agreement regarding the cooperative capital markets

regulatory scheme,’ the ‘memorandum.’

“This system has four primary components, which are as follows:

(1) Uniform provincial and territorial legislation. The cooperative system’s

first component involves the standardization of provincial and

territorial legislation respecting the day-to-day aspects of the

securities trade. To this end, the memorandum provides that each

participating province is to enact a statute that mirrors the model

provincial act.”

I’ll stop there. My purpose was not to read 90 pages of Supreme

Court of Canada decision, but I think the court accurately summarizes,

there, both the achievement and some of the work that needs to be

done.

I guess the first question for the minister — and I think I know

the answer to this — is: does she and the government of British Columbia

remain supportive of and committed to not just the concept of a national

regulator but the specific model set out in the memorandum of

understanding that was litigated and ruled upon by the Supreme Court of

Canada in November of last year?

[4:50 p.m.]

Hon. C. James: This is certainly something that I know the member had a passion

about and has a passion about and did a great deal of work on. I don’t

need to reiterate the court decision. As the member has said, it ruled

that it was constitutional. Obviously, we’re in support of that

direction, and we’re continuing to work around the table.

We do believe that there are opportunities, as the member pointed

out, for Canada-wide approaches. That makes sense in many ways. So we

are working around that table to look at the timelines.

One of the challenges that I have identified — and I think

probably the member would agree — is that this has been a much slower

process than I think anyone expected when the process was begun. That’s

meant that some of our own regulatory work, which government had hoped

would be able to be done through this process, has had to move ahead. In

fact, because the process is taking longer, another province now has

joined on. Again, that takes some time to have that structure occur. It

just means that we are going to take our focus and make sure that we

move ahead on those pieces while the work goes on.

So yes, we’re still at the table. Yes, we’re involved in the

process. We’re looking at the positives that we believe will occur, but

we’re not stopping our work that needs to be done around white-collar

crime, around making sure that we have a very robust regulatory system

and that that’s all in place. That’s work that we’re going to continue

to do.

M. de Jong: Thanks. That’s helpful from the minister. I take it, then, from

those comments, that the minister is confirming that she and the

government remain committed to the establishment of the cooperative

capital markets regulator in the way envisaged by the memorandum of

understanding of September 2014.

Hon. C. James: Yes, we are still committed. We’re still around that table, as I

said to the member. I think there are certainly some areas where, again,

we want to make sure that the robust work that we’re doing is recognized

around the work that happens at the Canadian level. But those are

discussions that will be ongoing, obviously, as we look at the work

that’s still ahead to develop the market.

M. de Jong: Again, in, I believe, the category of good news, the minister

referred to another Canadian jurisdiction that has signed on. I

understand, just for the record, that Nova Scotia became the sixth

province to join the assembled provincial jurisdictions moving forward

with this.

Hon. C. James: Yes, the member is correct.

[4:55 p.m.]

M. de Jong: The minister may not be able to comment on this, but my

information is that there may be yet a seventh jurisdiction from…. Well,

if I said east of the Rockies, I’d be pointing at all the provinces that

may yet be, in the foreseeable future, signing on. Is the minister able

to offer a general observation in that regard?

Hon. C. James: No. No official word.

M. de Jong: Well, let’s, then, go back to the question of the timeline. I will

acknowledge to the minister…. First of all, I’m very pleased to know

that she and the government remain philosophically and conceptually

disposed to advance this work.

The country has never been as close, if I can use that term, to

actually realizing the objective of creating a national regulator,

which, for a country of 35 million or 36 million people, would seem a

logical thing to do. We heard, in the words of the Supreme Court of

Canada, the acknowledgment that we’re the only industrialized country

that doesn’t have such a regulatory creature.

It’s interesting. The minister was kind, a few moments ago, in

suggesting a passion that I might have had. I’m not sure “passion” is

the right term. It just seems like a logical thing for the country to

do. The amount of time that has been devoted, over the past 80 or 90

years, in the futile effort to realize it…. Hopefully, this Minister of

Finance for British Columbia and the Minister of Finance nationally and

in other jurisdictions can oversee and actually breathe operational life

into the regulator.

In that regard, maybe I can ask the minister…. And I do this all

gently, simply wishing to derive some information.

Hopefully, the minister can use this as an opportunity to

reinforce to the people who are interested…. Look, that’s not the vast

majority of people watching. This is not necessarily the topic of choice

for the great majority of the population. Yet it does, as the minister

has pointed out, in terms of other aspects of securities regulation,

have an impact on the lives of people and their retirement savings and

how their assets are properly safeguarded and managed.

There was an objective at one point to operationalize, to fully

launch, in the fall of last year. That didn’t happen. I’m not assigning

any blame anywhere for that fact. It is a complicated endeavour. But I

understand that the significant missing piece is the finalization of the

model provincial act, the Capital Markets Act.

It’s really a two-part question. Where are we with the Capital

Markets Act, and what is the target date? I’m not asking that question

to trick anyone or to trick the minister. We didn’t get it done by

November, and that’s fine. November has come and gone. What we got

instead was validation from the highest court in the land, and that’s a

good thing. But what is the target date now for the launch of Canada’s

cooperative capital markets regulator?

[5:00 p.m.]

Hon. C. James: I think one of the things that occurred over the last couple of

years has been a number of changes — changes in government in particular

— that have occurred, which have changed the priorities and the timeline

around the work that’s happening through the cooperative capital

market.

The officials involved right now are working on a new timeline.

They’re recognizing that the timeline that was in place previously

obviously has not been met for a variety of reasons in a variety of

provinces. They’re looking at a new timeline, the resources necessary to

be able to look at that timeline.

Once that comes out, our staff will be taking a look at that and

looking at our obligation. That’ll obviously be a discussion for the

ministers, as well, from those provinces. Then we’ll take a look at

putting together our capital markets act.

The other piece that will be needed is the implementation

legislation that will be required as well — again, a very complex piece

of work that will need to occur. That will need to occur along with the

capital markets act to make sure that they’re coordinating with each

other and to make sure the implementation is done well. So there’s still

a fair bit of work to do, and as I said, we’re waiting for the

officials’ work around the timeline and the resources needed for this

next stage, for all of the provinces.

M. de Jong: Again, that is helpful, and I’m obliged to the minister. Maybe my

question, though, to be fair to everyone, is a little bit more about

political timelines and political prioritization.

The minister I think fairly candidly acknowledged that, to a

certain extent, what has influenced this is a change in governments. I

think her words were “changing priorities.” So recognizing that there is

complex work and drafting that needs to be done, what is her

objective?

I think she has been on the job long enough now to know that on a

project like this, none of this will get across the finish line unless

there is a political imperative attached, where the minister and/or the

government say: “Look, our objective is to have this operational by such

and such a date.” I’m hoping…. Then those able staff members and

officials that I have been talking about will say to the minister:

“Well, that’s going to be a challenge for the following reasons.” Fair

enough.

[5:05 p.m.]

What can the minister say to the committee, looking at the months

ahead, about what her objective is for having this work done and seeing

the national regulator, the cooperative capital markets regulator up and

running?

Hon. C. James: This does come back, as I talked about earlier to the member about

the amount of time it’s taken to do this work. A lot of that related to

changes in government, because, obviously, this is a cooperative. The

name speaks for itself. It is a cooperative regulator. Therefore, as

governments change, it’s important for each of the partners around the

table to come and reinforce their support for the memorandum of

understanding for the work that’s going ahead, for the resources that

are needed.

I didn’t speak about the time challenges because of any negatives.

It’s just a reality of having a cooperative and having everyone needing

to be at the table and to be focused on the work that needs to happen

ahead.

So with those delays, it meant that there is work that we believe

needs to be done — and I’ve spoken about this before — updating our own

securities legislation, ensuring that tools are available for

enforcement of that legislation, ensuring that we have a robust

regulatory system.

That’s the first priority of our government, and I think that’s

clear. I’ve said that and certainly spoken to that publicly. That’s our

first priority of work. But the timing is good because, again, the work

being done by officials on resources, on new resources needed and

timelines still needs to occur before we can move ahead on our

legislation.

As I said, we’re still involved in the process. We’re still at the

table. It continues to be something that we’re supporting. We’re moving

ahead with our own work on our own legislation to ensure that our

processes are strong. Then we’ll see the timelines. And then, as the

member knows well, we’ll share and sit down with staff and look at

setting the priorities that we need to, to move ahead on our timelines

that will be agreed to by everyone around the table.

M. de Jong: Well, I hope what follows is a fair question. I think it is. Is it

the minister’s objective — and I use the word “objective” because there

can be any number of intervening forces that frustrate realizing the

objective — to see the uniform capital markets legislation introduced

and passed in British Columbia during the government’s present term in

office?

[5:10 p.m.]

Hon. C. James: I think I would say that my objective is to do it well. If we’re

going to move ahead on it, we need to do it well. We need to ensure that

it meets the needs, the goals as signed off in the memorandum but also

the goals of British Columbia and British Columbians.

Without having a new timeline in place, would I hope that we’ll

see it over the next couple of years? Yes. But given the work that has

happened and given changes in government that may occur over that

timeframe, which may have an impact, again, on the work that’s being

done, I wouldn’t want to set timelines. I think if the government had

set a timeline previously, it wouldn’t have been met, because the work

wasn’t completed, and the provinces still had more work to do to get to

an agreement.

I think the objective is to do it well, to do it right, to make

sure that it does meet the benefits that are there. My hope, certainly,

is that it would happen in the next couple of years, but I wouldn’t set

a timeline. I think it’s important to recognize this is a cooperative,

and it needs all the provinces together to be able to make a

determination on the work that’s being done.

M. de Jong: I won’t belabour the point. I will offer this to the minister. On

a matter of this sort, absent the creation of some timeline objectives

at the political level, these things tend to drag on unresolved. Setting

that timeline doesn’t always guarantee it’ll be met, but it does create

a sense of urgency.

I’m hoping that, armed with further information from those who are

working on the project — I’ll have a few questions about that here in a

moment — at some point the minister will be in a position to say that

she and the government have set as an objective having the cooperative

capital markets regulator operational by such-and-such a

date.

B.C. is a founding mother or a founding father — or whatever the

appropriate term is — and I think the country is looking to British

Columbia to maintain this as a priority. When the memorandum was signed,

the one that the Supreme Court has now ruled very favourably upon,

defying the odds, B.C. was the chair of the Council of Ministers. If one

looks at where the capital markets tend to be headquartered in the

country, that might have been a bit illogical, but it was the result of

national recognition for the role British Columbia was playing. I hope

we can continue to play that role.

I wonder if the minister can advise the committee with respect to

the, perhaps, most important component of this, the capital markets

legislation. British Columbia, as I understand it, was continuing to

co-lead that drafting project with the province of Ontario. Is that

still the case?

[5:15 p.m.]

Hon. C. James: As the member knows, staff were engaged and involved in working on

the cooperatives market, to be involved in that process. Because of the

delay, again, as I mentioned when it came to priorities, we as a

government…. Our priorities are to ensure, as I said earlier, that we

have our Securities Act in a good place to ensure that the changes that

we bring in, yes, will work with the cooperatives market but are also

important for British Columbians.

When the delay occurred, when the timelines weren’t met and the

staff had gone off to do that work, we pulled our staff back to focus on

the work that needs to be done in British Columbia, the changes that

have been made. And they will be engaging back with the process of staff

resources in June of this year.

M. de Jong: I think the minister just answered the second part of the question

I was going to ask: when did the disengagement occur? I believe the

minister has just indicated to me and the committee that the team will

be re-engaging on this project next month.

Hon. C. James: Just to make sure I’m clear with the member. Staff are still

taking place calls. They’re still involved in that work to make sure we

keep up to date with this. But we focused through the summer and fall on

our own work that needed to be done around our securities legislation.

And the member is quite correct. They will be engaged next month back in

providing more resources and more time to work that needs to be

done.

M. de Jong: Does that also include, specifically, work on the completion of

the uniform capital markets act?

Hon. C. James: Certainly, it is one of the pieces that needs to be done. But

again, that’ll be the work plan that’ll come forward from the staff who

are working on that piece nationally — the new timeline, the work plan

and the resources needed. But yes, that’s one piece of the work that

they’ll be engaged in.

M. de Jong: Right. Again, not to belabour, but my recollection and the advice

I’ve received is that over the intervening year and a half, the task of

drafting a uniform provincial capital markets act was assumed or

assigned specifically to British Columbia and Ontario to work on

jointly.

In a moment, I’ll offer the minister an opinion on why that is

important. I think my question is fairly specif