March 18,

HOUSE OF ASSEMBLY PROCEEDINGS

Vol. XLI No. 9

The House met at 2:00 p.m.

MR. SPEAKER (Lush): Order, please!

The hon. the Minister of Finance.

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

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

Chair.

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

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

The hon. the Minister of Finance.

SOME HON. MEMBERS: Hear, hear!

MR. BAKER: Mr. Speaker, it is my pleasure to present to

this Honourable House the fifth Budget of the Wells administration. This Budget

comes at a time when the people of Newfoundland and Labrador face unprecedented

social, economic and fiscal challenges. These challenges are imposed upon us by

fundamental changes occurring both nationally and internationally, compounded by

more than 20 years of mounting debt and intensified by the untimely crisis in

our fishing industry.

Mr. Speaker, the only basis for real hope is truth. The

people of this Province must be fully informed of the challenges if we are to

work together to overcome them. We have been open and forthright in presenting

our financial position. We must accept that we each have a role to play in

overcoming the challenges, not to protect only our own personal interests, but

to ensure that we collectively will pursue a course of action which has as its

goal the maintenance of the financial integrity of the Province. This is the

only way to maintain our essential public services and enhance our economic

prospects.

The Government of Newfoundland and Labrador, on its own, does

not have the resources or the means at present to ensure that economic good

fortune will prevail in this Province. Cooperation, dedication, hard work, and

indeed, some sacrifices by all the partners in the Newfoundland economy,

including individuals, businesses and all levels of government, are required to

identify and take advantage of the many new economic opportunities that lie

before us. We are not seeking expedient short-term fixes. To improve our

fortunes and realize our potential we must actively pursue sound fiscal,

economic and social policies that address both the challenges and opportunities,

and offer a course of action sustainable over the longer term.

Mr. Speaker, I now will give a brief overview of the economic

and fiscal performance of the past year. Details are provided in supplementary

documents.

During 1992, the Canadian economy underperformed most

forecasts because of a weaker than expected international economy, high consumer

and business debt, persistent high unemployment and economic restructuring.

The Newfoundland economy in 1992 declined by 3.2 per cent in

real terms, primarily because of resource shortages in the fishery,

uncertainties related to the Hibernia project and, of course, the continuing

recession. Resultant employment losses lowered personal incomes and contributed

to lower spending. The weak Canadian and Newfoundland economies had an impact on

our fiscal performance.

The 1992 Budget projected a current account deficit of $29

million. The effects of the prolonged recession on provincial revenues and

downward adjustments to federal transfers caused a major deterioration in our

financial condition, which was partially addressed in the December Ministerial

Financial Statement. With the measures introduced at that time, we have been

successful in containing the current account deficit to $81.6 million, slightly

higher than the $78.6 million projected in December. Net capital account

expenditures of $183.9 million are $26.9 million below budget. So despite the

economic situation, Mr. Speaker, the resulting total budgetary requirement of

$265.5 million, is only $25.7 million higher than budget, and is lower than for

the previous two years.

Mr. Speaker, before presenting our strategy for addressing

the current economic and fiscal situation it is useful to examine how this

situation, in fact, developed.

The post-war economic boom generated revenue growth that

permitted ambitious new social programs and expanded public services. In

Newfoundland and Labrador, this period coincided with Confederation. In the

1970s, economic growth started to wane but public sector expansion was prolonged

artificially by higher taxes and increased borrowing. Although the Province has

witnessed significant advances in public infrastructure and services, this

progress has been financed to a large extent through a significant accumulation

of long-term debt. As a result, over two decades the attitude has become

instilled that Government has an endless ability to borrow to finance

ever-expanding public services and support programs. The growth in our debt

illustrates that this has become an increasingly false expectation. This

Province joined Confederation with a financial surplus. By 1960 this surplus had

been transformed into a debt of over $100 million. Total public sector debt

increased to over $700 million by 1970, to $3 billion by 1980 and to over $6

billion today.

Although the national and provincial economies faltered

during the early 1980s, there followed several consecutive years of strong

economic expansion driven by an international explosion of private and public

sector debt. This excessive borrowing further delayed the day of reckoning for

public finances.

The transformation from the economic expansion of the past

two generations to the current reality has been sudden and dramatic. The

recession and global economic restructuring have exacted a particularly heavy

toll. We are forced to think differently about our economic future than we did

even a few short years ago. The strong revenue growth enjoyed by the Government

of Newfoundland and Labrador right up to the end of the 1980s, was virtually

halted by the recession. Average annual rates of revenue growth have dropped

dramatically from 8.0 percent in the latter half of the 1980s, to just 2.2

percent over the last three years, and this 2.2 percent was largely the result

of tax increases.

Federal transfer payments play a vital role in supporting the

fiscal position of this Province. Since 1989, unilateral federal EPF restraint

measures - EPF is the funding that provides for our hospitals, post-secondary

education and so on - that restraint has cost us about $500 million. There has

been a further decline in equalization due to the ceiling on equalization

payments and it has cost us another $150 million, that is a total of $650

million. In addition to that, there has been a further decline in equalization

due to the national recession. Recent federal decisions regarding population

data further reduce future equalization payments by more than $30 million

annually and require us to repay an estimated $70 million that we received in

the past. Federal transfers, which just seven years ago provided over 48 percent

of our total revenue, will account for only 41.7 percent in 1993-94. Mr.

Speaker, we as a government and we as a Province have no alternative but to

operate within these constraints.

Transfer reductions have caused the people of this Province

to endure more severe corrective actions than have the residents of most

provinces. This is due to our limited fiscal capacity and the fact that the

Canadian transfer system does less to address regional fiscal imbalances than

the systems in some other federated countries.

The decline in transfer payments has placed a heavy burden on

the Province's finances and added pressure on our credit rating, which is the

lowest in the country. Our current fiscal and economic position gives the rating

agencies cause to closely monitor our situation. If we do not manage the

Province's finances in a manner that protects our current credit rating, our

access to financial markets will be limited and our cost of borrowing will

increase. This could curtail, or even exhaust, our ability to borrow for

essential public services, as happened in New Zealand in the early 1980s. Mr.

Speaker, we do not want this to happen.

One of our responses to these pressures has been to impose a

series of tax measures to contain our deficit and limit our borrowing. If taxes

had not been increased since 1989, in 1993-94 our accumulated debt would have

grown by an additional $250 million and our current account deficit would be

$145 million higher. The tax measures demonstrate that all taxpayers have shared

the burden of overcoming our fiscal challenges.

Because higher taxes, high debt and lower transfer payments

limit our fiscal flexibility, we have had to be very prudent in our delivery of

services and programs. Regrettably, some of the expenditure restraint and

efficiency measures have created hardships for individuals and families

throughout the Province. We recognize that. There were, however, no acceptable

alternatives. Failure to act would have had an even more drastic and potentially

devastating impact on families in the future.

Mr. Speaker, the responsible approach we have taken with

respect to fiscal management is part of a comprehensive economic and fiscal

strategy for the Province. The strategy encompasses provincial and federal

actions to diversify the economy, and strengthen our fiscal position.

The focus and direction of the economic components of the

overall strategy are detailed in the Strategic Economic Plan. The Plan will

guide this Province's economic development efforts and provide the basis for

joint federal-provincial action aimed at economic diversification and renewal

through all regions and sections of the Province. The implementation of the Plan

commenced immediately upon its release and substantial progress has been made on

its 134 action items. Mr. Speaker, this plan is not just another study but is an

action plan for progress.

Mr. Speaker, there are no quick fixes to our economic

challenges. The Plan emphasizes the need for change if we are to achieve

long-term prosperity. The Plan calls for a renewed sense of entrepreneurship,

self-reliance and pride. We must work towards creating an internationally

competitive economy based on innovation, productivity and quality.

The Plan focuses on opportunities for growth in manufacturing

and technical industries, environmental industries, export services and, of

course, tourism. Many Newfoundland firms in these sectors have shown that they

can compete successfully in the global marketplace, already. For example, a

footwear company from Harbour Grace sells its products in the high fashion

centers of the world. A St. John's technology company has formed a strategic

alliance with a major international company to commercialize an innovative

aviation technology that was developed here in this Province. A Grand Falls

company, after identifying a need and taking on the challenge of designing a new

product for the protection of health care workers, has successfully marketed its

product across Canada and now is exploring international markets.

Marble Mountain is an example of the success we are having in

developing winter tourism as a growing segment of our tourism industry. Planning

is already well underway to maximize the opportunities in 1997 of the 500th

anniversary celebration of John Cabot's voyage, and this, of course, has very

unique tourism potential in the future.

Two new departments, with explicit mandates to pursue new

economic opportunities, have been created. The Department of Industry, Trade and

Technology is now supporting growth in manufacturing, innovative technologies,

information, environmental industries, and export services. The Department of

Tourism and Culture is fostering development of adventure tourism, recreational

activities, cultural industries and crafts.

In addition, several new federal-provincial development

agreements, targeted at certain actions within the Strategic Economic Plan, have

been signed over the past year. A $43.5 million Strategic Investment and

Industrial Development Cooperation Agreement will assist companies to secure

their place in the changing global marketplace. This agreement will foster

long-term strategic ventures to attract new investment to the Province and

improve the ability of Newfoundland and Labrador firms to compete outside the

Province. It will encourage outside investment in established local businesses

operating in high growth sectors and will improve international awareness of

business opportunities in this Province.

A $42.9 million Human Resources Development Agreement will

place a new emphasis on development and training to improve the knowledge and

skills of people entering the labour force. The agreement will enhance

mathematics, science and economics education in the school system, and will

improve post-secondary training by raising the skills of teachers and

instructors, by introducing better educational equipment and materials, raising

training standards and finding better ways of delivering worker training

courses. Mr. Speaker, there have been other such cooperative agreements aimed at

objectives in the Strategic Economic Plan.

The Province will be using the Strategic Economic Plan as the

basis for negotiating new agreements with the federal government. Because of the

similarities in the objectives of the Strategic Economic Plan and the federal

Prosperity Initiative, we are pursuing a new style of agreement emphasizing

flexibility. This would allow us to respond jointly to actions we both identify

in our economic strategies and to eliminate duplication.

Mr. Speaker, although we have had to increase taxes, we are

continuing our efforts to reform the Province's tax system to improve fairness

and create a more positive business climate. In December, we announced that

corporate income tax rates were to be reduced effective January 1, 1993, to

assist businesses in the current economic environment and, of course, to

encourage future business growth. Also, for 1993, the payroll tax relief for new

employment has been granted to all small businesses.

As well, Mr. Speaker, the Province remains committed to

pursuing harmonization of our retail sales tax with the federal GST. Because

harmonization encompasses so many complex issues and has far reaching

consequences, consultations are ongoing with the federal government and the

business community to ensure that a thorough evaluation is completed. Government

will not make a final decision to proceed with harmonization until the public

has had the opportunity to present its views through a consultation process. Our

interest in harmonization is to create a more positive environment for economic

growth and diversification, and it is not, Mr. Speaker, to increase the tax

burden.

Government is committed to pursuing the creation of trade

enhancement zones in the Province. These zones would help businesses become more

competitive by eliminating customs duties on foreign inputs for products to be

re-exported. They have proven successful in over 80 countries of the world and

are an example of the kind of innovative concepts this country will have to

adopt if we are to compete in the global marketplace. The Province has requested

federal support for this concept and is ready to move as soon as we obtain

federal approval. The federal government, Mr. Speaker, should realize and

recognize trade enhancement zones as a legitimate economic development tool.

Investment prospecting is potentially one of the most

important components of our economic strategy. We will take an active role in

attracting new capital and expertise. We will increase our efforts to identify,

target and pursue national and international companies to establish operations

in the Province or to form joint ventures with local companies.

Mr. Speaker, all of our efforts to diversify and strengthen

the Newfoundland economy will build upon the continuing and substantial economic

contribution made by our fishing, forestry, mining and other established

industries. The result will be to create a dynamic, diversified, internationally

competitive economy in which the skills of our people are combined with

sophisticated technology to produce world class goods and services.

The second element of our comprehensive strategy is to

enhance our fiscal integrity, while, at the same time, being sensitive to the

legitimate needs of people for adequate and necessary public services.

Our strategy to strengthen our financial position has been

articulated consistently over our five Budgets, and is reflected in our sound

fiscal management of the Province during these very challenging times. To ensure

our financial viability, we are firmly committed to the containment of deficits

and borrowing within fiscally responsible levels. During the last four years, we

have reorganized and downsized operations; we have restrained growth in program

spending and public sector compensation. The extent of these corrective actions

was necessitated by federal transfer reductions and the impact of the recession

on provincial revenues.

The deterioration in our financial position brought on by

these circumstances has more than offset improvements we have achieved through

these expenditure and revenue measures. Both our current account and capital

account deficits for 1993-94 will be restrained in order to minimize borrowing

and to avoid undue risk to our credit rating. Given the magnitude of tax

increases announced in December and the lack of additional tax flexibility,

Government must rely upon reductions in spending growth to achieve our

objectives.

Mr. Speaker, we remain committed to the achievement of a

consistently balanced current account budget. As our economy improves over the

medium term, we intend to work towards balancing the combined current and

capital account budgets, thereby reducing debt levels.

A major component of our fiscal strategy is to obtain an

provinces. Over recent years, the federal government has been attempting to deal

with its own considerable fiscal difficulties by restraining its expenditures,

including transfer payments to provinces. Mr. Speaker, we understand that. While

the federal government must protect its fiscal position - it is absolutely

essential for us that it protect its fiscal position - transfer restraint must

be distributed in a manner that recognizes the need to reduce the remaining

fiscal disparities among provinces, if the Constitutional commitment to

comparable levels of services and taxation is to be met.

The current federal-provincial review of the major transfer

arrangements provides the opportunity to reform the transfer programs so that

all Canadians are treated more fairly. We are encouraged by the efforts of the

federal government and provinces to examine means to recognize differing

expenditure needs in the transfer system, and to remedy the inequitable

equalization taxbacks associated with offshore oil revenues. That will reap

dividends for us in the future.

Mr. Speaker, we have a strategy for the future based on the

economic and fiscal plan I have just outlined. As announced in the Throne

Speech, soon we will have a Strategic Social Plan, which will be the final

component of our comprehensive strategy to guide this Province into the next

century. Our economic plan addresses the challenges and opportunities presented

by our current economic situation and is comprised of actions to achieve

sustainable, long-term economic growth and diversification. Our fiscal plan will

fulfil our duty to provide for the needs of people while ensuring we live within

our means and strengthen the financial integrity of the Province for future

generations. Our social plan will integrate with our economic and fiscal plans

to ensure a social policy direction that will meet the reasonable needs of our

people in health, education and social services and will complement and build

upon the successes we already have achieved in this Province. This Government

has not and will not minimize the extent or magnitude of the challenges that

face us. But we have a strategy to address these challenges and to advance to

the future with confidence.

Mr. Speaker, I will now briefly discuss the economic and

fiscal outlook for the coming year.

Real GDP growth of 1.2 percent is expected for the

Newfoundland economy in 1993. The main contributor to this growth will be the

Hibernia project. Total direct expenditures on Hibernia in the Province during

1993 are forecast to be about $365 million, and employment could reach 3,500

jobs. This Newfoundland project, Mr. Speaker, is also generating thousands of

jobs in the engineering, construction, manufacturing and service sectors in

other areas of Canada, as well.

Our petroleum potential extends beyond Hibernia. The Terra

Nova, Hebron and Whiterose offshore oil fields have significant development

potential. The Terra Nova field in particular, has early development potential.

In addition, attention is being given to the development potential of the

onshore petroleum resources in western Newfoundland.

Oil and gas development allows the business community to

invest with confidence, and proceed with the development of technology based

products and services for the international marketplace. Several international

companies have established co-operative business arrangements with local

companies to pursue business opportunities in the Newfoundland offshore.

Developers looking beyond the Hibernia project have access to the deep water

industrial site at Bull Arm for future offshore engineering and fabrication.

During 1993, the Canada-Newfoundland Offshore Development

Fund will provide over $20 million in financing for further development of the

Bull Arm construction site, as well as the completion of the offshore

fabrication facility at Cow Head, and a joint venture training initiative at the

Marystown Shipyard, to assist these facilities in competing for petroleum

related contracts.

The performance of the fishing industry over the foreseeable

future will be guided primarily by resource considerations, particularly in the

groundfish sector. Conservation measures taken over the past several years to

rebuild seriously depleted stocks will help address any further resource

declines. Notwithstanding this, the industry faces unprecedented uncertainty and

stock rebuilding presents the only real opportunity to ensure the industry's

revival.

Continued employment and economic adjustment measures will be

necessary to alleviate the impact of the sharp decline in volume and value of

fish landings. The present crisis will require the collaborative efforts of both

the federal and provincial governments in addressing its impact on hundreds of

communities throughout the Province.

We are committed to diversifying the fishing industry by

pursuing opportunities in aquaculture, value added processing and new resource

utilization. The necessary realignment of both harvesting and processing

capacity to reflect present resource realities can best be accomplished through

SOME HON. MEMBERS: Hear, hear!

The Province's assessment of alternatives for a comprehensive

fisheries policy framework will be released after the upcoming fisheries

symposium being held at Memorial University.

The performance in other industries is expected to be mixed.

Improving market conditions in the newsprint industry are expected to result in

a slight improvement in the volume of shipments. Marginal improvements are

expected in the value of mineral shipments due in part to increased production

from the Hope Brook gold mine, which recommenced operations last year. Iron ore

shipments are expected to be slightly below the 1992 level. Housing starts are

expected to increase for the first time since 1989.

Mr. Speaker, as a result of the fiscal measures taken in this

Budget and the December Ministerial Financial Statement, the projected current

account deficit for 1993-94 has been limited to $51 million. Net current account

expenses are projected to increase by only 1.4 percent from last year's level,

while revenues are expected to rise by 2.6 percent. Our own source revenues will

grow by 4.9 percent, primarily as a result of the tax increases announced in

December, while the federal transfers will decrease by 0.5 percent. The net

capital requirement is projected to be $172.3 million, more that $40 million

below the average of the last ten years. Given our decision to accept a current

account deficit this year, the reduction in capital account is necessary to keep

our combined budgetary requirement within acceptable limits.

The combined current and capital budgetary requirement will

be $223.3 million in 1993-94. This is $42.2 million less than 1992-93 and the

lowest level in three years.

As part of our commitment to financial accountability, we

will examine the merits of adopting full accrual accounting, along with the

consolidation of Crown corporations in the presentation of the public accounts

of the Province, and that examination has started.

Mr. Speaker, I am pleased to announce that there are no new

taxes or tax increases contained in this Budget.

SOME HON. MEMBERS: Hear, hear!

MR. BAKER: To fulfill one of the major items of our tax

reform agenda, Government recently completed a review of our mining tax regime,

as part of a plan to ensure a positive climate for investment in mineral

development. The result will be a revised Mining and Mineral Rights Tax Act to

increase incentives for exploration and development. For the first 10 years a

new mine is in operation, any Newfoundland corporate income tax paid will be

allowed as a credit against mining tax otherwise payable. Our depreciation rates

and processing allowance, which have been among the least generous in Canada,

will be brought into line with those of other jurisdictions. Many technical and

administrative amendments will benefit mining companies in understanding and

complying with our tax regime.

I bring to the attention of the hon. House of Assembly our

concern with the smuggling of tobacco and alcohol, which is costing the Province

millions of dollars annually. The RCMP will be devoting extra resources to the

reduction of smuggling activity. The penalty provisions of provincial

legislation dealing with alcohol and tobacco offenses will be strengthened to

substantially increase fines and to provide for periods of incarceration. The

legislation also will be amended to provide for a permanent loss of licence to

operate for any person or business convicted of selling contraband.

Our expenditure plan, Mr. Speaker, reflects our continuing

commitment to keep current and capital account expenditures to an affordable

level.

In 1993-94, net current account expenditures are projected to

increase by only 1.4 percent. These expenditures would have actually declined if

not for increased debt service costs, the annualization of school tax

replacement funding and an extra pay period for teachers. Net capital account

expenditures will decline by 6.3 percent.

Mr. Speaker, in light of our current financial situation,

construction of several major projects initially planned for 1993-94 will be

deferred. These include the replacement of the Melville Hospital and the

Clarenville Court House, the redevelopment of James Paton Hospital and Cabot

College but ongoing planning will continue. Planning only will be undertaken for

the new Sir Thomas Roddick Hospital in Stephenville and for the redevelopment of

the Notre Dame Memorial Hospital in Twillingate.

Certain capital account expenditures are necessary to more

efficiently provide health care services, thereby easing some of the pressures

on operating budgets. I am pleased to announce that funding is provided for the

redevelopment of Bonnews Lodge at Badgers Quay and the out-patient department at

the Brookfield Hospital. Also, provision is made for the addition of chronic

care beds at Curtis Memorial Hospital in St. Anthony to replace the St. Anthony

Interfaith Home, as well as for the redevelopment of the Blue Crest Home and the

addition of a community health center in Grand Bank. In Placentia, funding is

provided for a community health center and some acute care beds attached to the

Lions Manor. In addition to these projects, Government will be constructing a

new clinic at Shea Heights, completing the extension to the Whitbourne Clinic,

and redeveloping the Nain Clinic.

School construction will be limited to $12 million, a

reduction of $8 million from last year. This will allow for the completion of

ongoing school construction projects and necessary repairs.

Expenditures for provincial highway construction in 1993-94

will be maintained at $25.5 million. As well, $50.4 million will be spent on

municipal capital works. These expenditures are necessary to improve public

infrastructure. The Ministers of Works, Services and Transportation and

Municipal and Provincial Affairs have been directed to release these projects

immediately, and prepare for tender calls to allow for early commencement of

construction.

Mr. Speaker, government is committed to actively examine and

act upon the privatization of certain Crown corporations, or portions of their

operations, which do not serve a public policy objective. Further details will

be announced over the coming weeks.

Mr. Speaker, after several years of restraint, the choices

that have to be faced in reaching an acceptable level of expenditure on current

account are extremely difficult. A substantial portion of our expenditures are

relatively fixed, such as debt service and social assistance costs. Expenditure

reduction efforts must target program and operating expenditures and

compensation costs that are controllable. We have addressed both areas in this

Budget.

Mr. Speaker, the December statement directing all departments

and agencies to reduce salary budgets for 1993-94 by one percent and operating

budgets by three percent from 1992 Budget levels have been acted upon. The only

areas where this target could not be fully achieved are the hospital sector and

child welfare.

We are committed to providing quality social programs for the

residents of this Province, within our ability to pay. Therefore, greater

emphasis must be placed on more cost-effective and efficient operations and

organizational structures, and also for the adoption of new technologies.

In consultation with the health care sector, cost saving

measures will be taken to reduce hospital bed utilization by decreasing the

average length of stay, by using measures such as same day surgery and

increasing programs for out-patient surgery. The Department of Health will be

pursuing these matters with hospitals around the Province and introducing the

concept of short stay units for certain program areas. This will result in some

bed closures and staff layoffs. We recognize that these measures will place

added pressure on continuing care services, and accordingly we will provide the

Department of Health with an additional $1 million for this particular program.

Mr. Speaker, the cost of social assistance has been

increasing rapidly. While much of this is attributable to our economic

circumstances, there are continuous reports of suspected or perceived abuse of

the social assistance program. In response, we initiated a pilot project to

investigate the extent of abuse and this pilot project resulted in the recovery

of significant revenues. To control abuse throughout the Province, funding is

provided for ten investigators. This measure is projected to result in

substantial savings, which will allow our limited resources to go to those who

are truly in need. We also will be taking action to reduce the cost of

transportation services provided to social assistance recipients.

The cost of providing home support services through the

Department of Social Services has quadrupled since 1988-89. We cannot sustain

this rate of growth. Consequently, the budget for this program has been frozen

at the 1992 budget level.

Mr. Speaker, Government can no longer justify the $2.5 to 3.0

million annual subsidy to the hog industry. These subsidies, which on average

equate to $28,600 per job, exceed by 35 percent the average income earned by

those working in the industry.

Newfoundland Farm Products Corporation will be directed to

close the hog abattoir at its St. John's plant, reducing by over $800,000

annually the losses of this Crown corporation. As well, Government will no

longer pay production subsidies to hog producers, saving $900,000 annually, and

we will close the Central Swine Breeding Station for an annual savings of

$600,000. The Minister of Forestry and Agriculture will be meeting with the

producers to discuss appropriate financial and other arrangements as a result of

this decision.

Mr. Speaker, in order to achieve the expenditure reductions

necessary to bring the deficit to an acceptable level, a number of additional

measures beyond those announced in the December statement were taken across all

government departments and agencies. Grants to many third party organizations

have been either reduced or eliminated. The electrical power subsidy program for

recreational facilities will be eliminated. Consulting services and computer

budgets for government departments have been further reduced, as has operational

funding for Government House. Funding for the replacement of light vehicles has

been totally eliminated. The subsidy for the coastal Labrador air service has

been reduced, resulting in a rise in airfares of about five percent. Finally,

various departments and agencies have been directed to implement measures to

effect other budget reductions, and the complete lists are contained as an

appendix to the speech.

Mr. Speaker, Government appreciates the efforts of public

servants in this Province. We recognize that the past couple of years have been

difficult for public servants and that sacrifices have indeed been made. It has

also to be recognized, Mr. Speaker, that the past few years have been quite

difficult for practically all residents in all areas of the Province. Major

sacrifices have been made in just about every sector of our economy. I believe

the reduction measures which I have announced clearly demonstrate that this

Budget and the December statement represent a shared approach to reducing the

deficit. Taxes have been increased significantly, capital expenditures have been

reduced, program and operating costs have been cut, and there is a judicious

level of borrowing.

Mr. Speaker, our forecast current account deficit for 1993-94

of $51.0 million is predicated on achieving a reduction of $70 million from the

total compensation package for all those who draw their salary, in one form or

another, from the public purse. Government is not prepared at this stage,

however, to unilaterally take action to achieve this reduction. Discussions have

been ongoing with representatives of public sector employees for some time and

these are continuing.

I think I should inform the Honourable House, Mr. Speaker,

that about half-an-hour ago press releases were made by the NTA and the nurses'

union indicating that they would be going to their membership to recommend a

package to satisfy the conditions that we have laid out from the beginning.

SOME HON. MEMBERS: Hear, hear!

MR. BAKER: Mr. Speaker, as evidence of our willingness to

share in this effort, all members of this Honourable House, the Honourable the

Premier, all Honourable Ministers, Mr. Speaker and the Honourable the Leader of

the Opposition will, with effect from April 1, 1993, take an actual pay cut

equivalent to the reduction in total compensation being sought from public

employees.

SOME HON. MEMBERS: Hear, hear!

MR. BAKER: Members of the executive group, management and

non-bargaining unit staff, as well as political support staff, will take a like

reduction in total compensation.

Mr. Speaker, the world of the 1990s is profoundly different

from what it was in the preceding decades. We have faced the challenges

presented by the fiscal and economic realities of the 1990s, and have made

decisions outlined in this and previous budgets that we believe will enhance the

financial integrity of the Province and lay the groundwork for sustainable

economic growth in the longer term. The situation we face today is not an

indication that we have failed as a province or as a nation, it reflects the

fact that the whole world has changed. If we are to succeed in the future, it

will not be because government has fulfilled everybody's dreams, expectations

and aspirations. It will be because government has created an environment where

individual initiative and the private sector can flourish by responding to new

growth opportunities and the challenges of the global economy.

Our decisions have been taken after a detailed examination of

our present situation and our future prospects. We have concluded that we cannot

pass on the responsibility for resolving our current fiscal challenges to the

taxpayers of this Province through additional tax increases or to the future by

further increases in our borrowing. Implementing new taxes or increasing

existing taxes at this time would detract from our objective of nurturing

improvement to the general economic situation. Those who advocate increased

borrowing as the way to resolve our fiscal difficulties should remember that

borrowing is nothing more than deferred taxation. There is no clearer evidence

than our more than $6 billion provincial debt to indicate that we have obligated

our children and future generations to pay more than their share, for the public

services we enjoy today and have enjoyed over the past two decades.

Yet, even with already high taxes and high debt, many feel

their personal contribution to the maintenance of a sound fiscal position and

viable economic future for the Province is, in fact, too great. Rather than be

overcome by the challenges that face us, we should look back and measure for

ourselves the great and positive changes that have taken place in Newfoundland

and Labrador since Confederation. Let us then look forward to what we can

accomplish if we can build on the progress we have already achieved by turning

our present challenges into an opportunity to refocus and redirect our efforts

towards creating a better and brighter future. This can be accomplished only by

individual and collective hard work and initiative. The simple truth is that,

with the fiscal situation we face today, our expectations will have to match our

means if we are to steer a course through this current period of uncertainty and

restraint to the prosperous future we all want, and one which can make us proud

of our accomplishments.

In this Budget, let there be no mistake, we are asking the

people of this Province to accept that expectations in the short term have to be

lowered from what have been unrealistic levels, given our means. But there is a

reward for this. It is a means to an end. It is necessary to create opportunity.

And it is only with this opportunity that we can enhance our ability to move

forward with the confidence that we can manage our fiscal and economic affairs

prudently and in the best interest of present and future generations.

Mr. Speaker, this is a Budget of truth and hope. The

overspending in days gone by has given birth to an immense financial challenge.

The attitude that we can have whatever we want today, to be paid for by some

future generation, must be recognized for the denial of responsibility it

represents. For the sake of our children, we must now begin to pay our way, and

reduce the burden we leave for future generations. We must all give a little to

deal with that truth, in order to enable us to move to the future with renewed

confidence and above all, Mr. Speaker, renewed hope.

Thank you.

SOME HON. MEMBERS: Hear, hear!

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

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

adjourned until tomorrow.

MR. SPEAKER: The motion is that the debate be adjourned

until tomorrow.

Those in favour, 'aye', those against, 'nay'.

Carried.

The hon. the Minister of Finance.

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

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

MR. SPEAKER: All rise.

To the hon. the Minister of Finance:

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

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

ending March 31, 1994 in the aggregate of $2,859,968,800 and in accordance with

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

House of Assembly."

Signed:________________________________

Frederick W. Russell, Lieutenant-Governor.

We will take a few moments to have documents distributed to

all hon. members.

MR. SPEAKER: Order, please!

The hon. the Minister of Finance.

MR. BAKER: Mr. Speaker, I move that the Message, together

with the Estimates, be referred to a Committee of Supply.

On motion, that the House resolve itself into Committee of

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

with the Estimates, Mr. Speaker, left the Chair.

Committee of the Whole

MR. CHAIRMAN (L.Snow): Order, please!

The hon. the Government House Leader.

MR. ROBERTS: Mr. Chairman, I move that the Committee

rise, report progress and ask leave to sit again.

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

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

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

Verde.

MR. L. SNOW: Mr. Speaker, the Committee of Whole on

Supply has considered the matters to it referred, and has directed me to report

progress and ask leave to sit again.

MR. SPEAKER: The Chairman of the Committee of the Whole

on Supply reports that it has considered the matters to it referred and has

reported some progress and ask leave to sit again.

On motion, report received and adopted, Committee ordered to

sit again on tomorrow.

Notices of Motion

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

MR. BAKER: Mr. Speaker, there are no motions because

there are no tax increases.

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

SOME HON. MEMBERS: Hear, hear!

MR. ROBERTS: Mr. Speaker, I move that the remaining

Orders of the Day do stand deferred, that the House at its rising do adjourn

until tomorrow, Monday, at 2:00 p.m., in keeping with our established practice

of allowing the Friday and weekend for hon. members and for the people of

Newfoundland and Labrador to assimilate the magnificent speech just delivered so

well by my friend and colleague the Minister of Finance. I move the House do now

adjourn.

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

Monday, at 2:00 p.m.