1984 Legislative Session: 2nd Session, 33rd Parliament

HANSARD

The following electronic version is for informational purposes only.

The printed version remains the official version.

Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

MONDAY, FEBRUARY 20, 1984

Afternoon Sitting

[ Page

3331 ]

CONTENTS

Routine Proceedings

Oral Questions

Ministry of Forests scaling practices. Mr. Barrett –– 3331

Mr. Skelly

Mr. Macdonald

Tabling Documents –– 3333

Motion to refer public accounts. Hon. Mr. Curtis –– 3333

Mr. Skelly

Mrs. Wallace

Hon. Mr. Nielsen

Mr. Lea

Hon. Mr. Bennett

Mr. Barrett

Budget Address

Hon. Mr. Curtis –– 3338

Mr. Stupich –– 3347

Income Tax Health Care Maintenance Amendment Act, 1984 (Bill 2). Hon. Mr. Curtis

Introduction and first reading –– 3348

Hotel Room Tax Amendment Act, 1984 (Bill 3). Hon. Mr. Curtis

Introduction and first reading –– 3348

Home Owner Grant Amendment Act, 1984 (Bill 4). Hon. Mr. Curtis

Introduction and first reading –– 3348

University of Victoria Special Appropriation Act, 1984 (Bill 5). Hon. Mr. Curtis

Introduction and first reading –– 3348

Resource Revenue Stabilization Rind Act (Bill 6). Hon. Mr. Curtis

Introduction and first reading –– 3348

Assessment Amendment Act, 1984 (Bill 7). Hon. Mr. Curtis

Introduction and first reading –– 3348

The House met at 2:06 p.m.

Prayers.

HON. MR. CURTIS: Mr. Speaker, I would like to extend on

behalf of yourself and all bon. members a welcome to a number of

distinguished visitors who have accepted the invitation to be here

today, some from Victoria, some from Saanich and the Islands, I might

confess, and in addition some from considerable distances away.

MR. LEA: Sooke?

HON. MR. CUKTIS: Farther than Sooke, Mr. Member. I was thinking of New York and Toronto and Montreal.

It may be somewhat unorthodox, but I am sorry that not present today

is the Deputy Minister of Finance, Larry Bell, who has fallen victim to

the flu bug. I spoke to him this morning, and I'm sorry that the deputy

who worked so hard with me leading up to today is not present.

HON. MR. SMITH: Mr. Speaker, I wish to make a very brief statement.

In view of the special report of the ombudsman investigating a

complaint about the Ministry of Forests scaling procedures at Shoal

Island, British Columbia, and to assist members in question period on

this budget day, I would like to advise the House that I will make a

full statement tomorrow in the Legislature on this matter and on the

government's reaction.

Oral Questions

MINISTRY OF FORESTS SCALING PRACTICES

MR. BARRETT: Mr. Speaker, to the Minister of Finance: could

the Minister of Finance inform the House when he first became aware of

the ombudsman's report number 7 to the Legislative Assembly?

HON. MR. CURTIS: Mr. Speaker, I would have to take the question as notice, in order to be completely accurate in replying to the hon. member.

MR. BARRETT: Mr. Speaker, to be within a degree of accuracy, has the minister been aware of this for a month or six weeks?

HON. MR. CURTIS: Mr. Speaker, to the hon. Leader of the

Opposition, I took the question as notice. I will note my diary with

respect to when I first was aware of the report, and I will report back

to the House.

MR. BARRETT: Mr. Speaker, we can assume that the minister

made note of it or the fact that it was given to the cabinet and will

come back to the House and give us the exact date.

Since that time, has the Minister of Finance initiated any action, through

the Minister of Forests (Hon. Mr. Waterland), to recover the money in question

owing to the people of British Columbia, or does he believe in the policy of

free logs, as outlined in this report?

HON. MR. CURT IS: The question is in two parts. Quite clearly

the allegations which have been made in connection with this particular

matter are the subject of discussion with my colleague and colleagues.

MR. BARRETT: I am glad to hear the minister tell us it was a

subject of discussion, but that is not my question. My question is: has

the Minister of Finance, who is responsible for collecting the taxes

due to all citizens of this province, taken any steps whatsoever to

recover this money for the Crown so that we can provide services and

schools and hospitals and roads in British Columbia?

HON. MR. CURTIS: Mr. Speaker, I understand the duties of

government. The question is somewhat premature, and any answer would

similarly be somewhat premature.

MR. BARRETT: On page 28 the ombudsman's report says — a

supplementary, not to the former Attorney General: "In my view, a grave

injustice has resulted from the Ministry of Forests scaling at Shoal

Island — an injustice which adversely affects both the contractors and

the revenues due the province." This is not an allegation but a

statement of fact, Mr. Speaker, and I refer now to the statement of

fact. Does the minister have any knowledge that the statement of fact

given by the ombudsman is contrary to what the ombudsman says, and is

that the excuse for not collecting the tax?

HON. MR. CURTIS: Mr. Speaker, the hon. member has made a

number of conclusions which in time may prove not to be completely

correct. I would caution him with respect to questions which he may ask

in the safety of this chamber.

MR. BARRETT: A supplementary, Mr. Speaker. I will ask this

question in any comer of British Columbia — in or out — and if it comes

to the safety of this chamber, that is up to the minister to decide. I

ask the minister clearly: do you intend to collect the money owing the

people of British Columbia, as stated factually by the ombudsman to

this Legislature? Have you initiated any steps to collect this money in

the name of the Crown?

HON. MR. CURTIS: In this matter, as in all others, I trust

that I will carry out the duties that go with the portfolio of Finance,

and indeed, I'm somewhat offended that there would be a suggestion that

I would do otherwise.

MR. BARRETT: Mr. Speaker, there are laws in this province that govern such circumstances. Under

section 87 of the Forest....

HON. MR. CURTIS: What's your question?

MR. BARRETT: It's not a question of my questions: where are your answers?

Related to this matter of scaling,

section 87 of the Forest Act has

a clear-cut method of recovering funds due the Crown. Is the minister

aware of

section 87 of the Forest Act, dealing with recovery of such

funds?

[ Page 3332 ]

[2:15]

HON. MR. CURTIS: I believe the member is asking a question

with respect to a statute of British Columbia. The question is a matter

of record and self-evident.

MR. BARRETT: Is the minister aware of that

section of the act?

Interjection.

MR. BARRETT: No, you're not aware of it?

HON. MR. CURTIS: No, I'm not going to answer that question.

MR. BARRETT: You're not going to answer that question. Can

the minister explain to this House why it is that some taxpayers get

preferred treatment and others don't, and he isn't aware of this method

of collecting taxes? Mr. Speaker, I ask the Minister of Finance why it

is that these forest companies are getting preferred treatment in tax

collection.

HON. MR. CURTIS: The member has been in this House a long time.

MR. REID: Too long.

HON. MR. CURTIS: Some would say too long, but I wouldn't say

that. I would point out, as I attempted to do earlier, that the duties

associated with the collection of taxes due the Crown are duties that

all of us in this government take very seriously. I suggest that the

member has jumped to some conclusions which may prove not to be

completely correct in the course of the weeks to come.

MR. BARRETT: I have been here for some time, but I ask the

minister to explain to me why in all the time I've been here these

taxpayers are not being asked to pay up on the same basis that

everybody else is asked to pay. Does the minister possess any

information that indicates that the ombudsman's report is totally

inaccurate in terms of the Crown not receiving the revenues due it? Do

you have any information that leads you to believe that the ombudsman's

statement is incorrect?

HON. MR. CURTIS: No, Mr. Speaker, I have no evidence that the

ombudsman's report is "completely incorrect" — I believe that was the

phrase used by the member, or very close to it.

SOME HON. MEMBERS: No.

HON. MR. CURTIS: I paraphrase it slightly. The member may care to check Hansard a little later.

I am not, sir, refuting every single statement made in the report of

the ombudsman with respect to this matter. I am simply urging that

member, as perhaps some other members of the NDP on other occasions

might have done, to be a little more careful — and let no one think

that's a threat. We had a case a couple of years ago where questions

were asked back and forth in the chamber....

AN HON. MEMBER: The Sommers case?

HON. MR. CURTIS: Well, I was thinking of another one, Mr.

Speaker: the former Deputy Attorney-General, where outrageous

statements were made and later found to be incorrect. I simply

cautioned the member on that point.

MR. BARRETT: Mr. Speaker, does the Minister of Finance

believe that there has been a single outrageous statement in the

ombudsman's report, related to the collection of taxes from the forest

companies? Is there, to your knowledge, any factually incorrect

material in this report related to the fact, as stated in this report,

that the funds were not collected on scaling of these logs?

HON. MR. CURTIS: Mr. Speaker, we may, in fact, find that there are some inaccuracies. We may find those in due course.

MR. BARRETT: Mr. Speaker, is it not government policy to

collect taxes due from every citizen in this province, and if there is

any dispute on those taxes, there is an appeal process through the

minister? Can the minister name any other instance where it has been

brought to his attention as Minister of Finance that taxes are due and

he decided not to collect them, as government policy?

HON. MR. CURTIS: Mr. Speaker, in his latest question the

member has assumed that there is to be no further government action

whatsoever with respect to this matter. The member, again, is jumping

ahead some days, weeks or months with respect to possible government

action in this regard.

MR. SKELLY: Mr. Speaker, a question to the Minister of

Finance on the same issue. The ombudsman indicates that in the Shoal

Island case the amount owing to the Crown, from the contractors'

portion of the logs delivered to Shoal Island alone, is $1.3 million to

$2 million, and that represents one third of the total timber delivered

to Shoal Island, which would bring the amount of stumpage at that site

owing to the Crown to around $6 million. The ombudsman also indicates

there are five additional sites around the province, which could bring

the amount owing to the Crown, and uncollected, to approximately $36

million to $40 million. Has the minister investigated other sites as

well as the Shoal Island site to see how much uncollected revenue

remains owning to the Crown as a result of the practices that took

place?

HON. MR. CURTIS: Mr. Speaker, that is a matter that would be decided in due course.

MR. MACDONALD: A question to the Minister of Forests. On page

28 of the ombudsman's report it says: "Documents on the ministry's

files indicate that in March 1983 the Minister of Forests asked one of

my complainants to get the ombudsman out of the investigation." My

question to the minister: is that a correct statement made by the

ombudsman?

HON. MR. WATERLAND: Mr. Speaker, no.

MR. MACDONALD: A supplementary, Mr. Speaker. Then in what

respect is the statement incorrect? Let me put it like this: was there

any contact between the Minister of Forests and one of the complaining

companies? This is a very

[ Page 3333 ]

serious allegation, and not one that the Premier should be smirking about.

MR. SPEAKER: Order, please.

MR. MACDONALD: Interfering with the ombudsman, which is found

here in this report, is not a laughing matter, I ask the Minister of

Forests: did he have contact with any of the complainants during the

course of the ombudsman's investigation?

HON. MR. WATERLAND: Mr. Speaker, the question posed by the member has been answered. The ombudsman's statement is incorrect.

MR. MACDONALD: Supplementary. I ask the same question again:

has the minister been in contact with any of the complainants to the

ombudsman relating to this matter during the.course of the

investigation? Have you been in contact with any of them, discussing

the question that was under investigation? Have you or not?

HON. MR. WATERLAND: Mr. Speaker, to the best of my knowledge

I have not discussed the subject of the ombudsman's investigation with

any of the complainants since the ombudsman's investigation has been

underway.

MR. MACDONALD: The ombudsman refers to documents in the

ministry's file to the effect that I have just mentioned. Has the

minister looked up those documents, or tried to ascertain what they

are? Have you taken any interest in finding out just what those

documents were?

HON. MR. WATERLAND: The answer to both questions is yes.

MR. MACDONALD: Then will the minister table those documents in this House? Is he prepared to undertake now to table those documents?

HON. MR. WATERLAND: Mr. Speaker, the comments made by the

ombudsman were made by him. I would suggest that if any documents are

to be tabled, you ask the ombudsman to table them.

MR. MACDONALD: Mr. Speaker, the ombudsman is referring to

documents in the files of the Ministry of Forests. not in his own files

— except perhaps a copy, at this point. I would ask the minister if he

would be prepared, to clear up this very grave matter, to file all

those documents with this House.

HON. MR. WATERLAND: Mr. Speaker, the ombudsman is the person

who has claimed that there are documents in the Ministry of Forests'

files which indicate that the Minister of Forests attempted to

interfere with the investigation of the ombudsman. It is up to the

ombudsman to identify which documents he is referring to. The ombudsman

has complete access to the Ministry of Forests' files. I would I

suggest that that member ask the ombudsman to identify which documents

it is on which he makes such an allegation.

MR. SKELLY: The Minister of Forests said that the ombudsman

had complete access to the files of the Ministry of Forests, yet when

the ministry was requested to provide a document, made available to him

by the Attorney-General, which said he had no power to assess stumpage

from B.C. Forest Products under

section 87 of the Forest Act, the

minister refused to provide that document. Has the minister since

provided that document or that legal

interpretation of

section 87 to

the ombudsman? If not, is he willing to table it in this House?

HON. MR. WATERLAND: Mr. Speaker, the ombudsman has been

advised of the content of that document. But it is not in the best

interest of the Crown to give that document in its entirety to the

ombudsman, because it does touch on matters other than strictly legal

interpretation.

SOME HON. MEMBERS: Oh, oh!

MR. SPEAKER: Hon. members, just prior to calling the next

order of business, could we just have a very brief recess to turn on

the necessary lights.

Orders of the Day

Hon. Mr. Curtis tabled the Public Accounts of British Columbia for the fiscal year ended March 31, 1983.

HON. MR. CURTIS: Mr. Speaker, I move that the Public Accounts for the fiscal year 1982-83 be referred to the Select Standing Committee on Public Accounts and Economic Affairs.

[2:30]

On the motion.

MR. SKELLY: Mr. Speaker, I would like to move an amendment to

the motion, seconded by D. Barrett, to delete the word "year" and

substitute therefore the following: "...years 1981-82 and...."

MR. SPEAKER: The motion is that the motion be amended by the

deleting the word "year" and substituting therefore the following:

"...years 1981-82 and...."

On the amendment.

MR. SKELLY: Mr. Speaker, it is my understanding that the motion is debatable.

The opposition would like to debate this motion, the reason being that the incidents

described during question period took place between the years 1978 and 1981

and there will likely be material in the Public Accounts for the years 1981-82

that would be material and of some assistance in helping the members of the

House and the public get to the bottom of what actually took place in the Shoal

Island case and in the case of other dry land sorts around the province, where,

through defective scaling techniques, which appear to have been approved by

the ministry, millions upon millions of dollars of potential revenue was deprived

the Crown. In fact, Mr. Speaker, if that amount was in the neighbourhood of

$6 million at Shoal Island, it was likely somewhere between $36 million and $40

million total for the six sites where these scaling practices occurred around

he province.

I cannot believe that this government that sits across the floor

would tolerate for another minute the Minister of Forests sitting in

this House in his current office while $36

[ Page 3334 ]

million of public funds have been diverted from the

Treasury by defective scaling practices in his ministry, practices

which were made known to him as early as 1981. It's of serious concern

to the members of this House and to the people of this province. Mr.

Speaker, you can imagine how much revenue would have been made

available to provide the social services that are required by our

citizens had those practices been corrected, and had those funds flowed

property into the provincial treasury rather than being left in the

hands of private companies for the use of those private companies over

a period of three years. We need access to thePublic Accounts of

1981-82 in order to examine the revenue figures for that year and in

order to get to the bottom of this case. We simply cannot rely on

police reports which have been done by this government into other

ministries, such as the Ministry of Tourism. Where are the results of

the police investigation into activities within the Ministry of

Tourism? What other police reports have been done into the activities

of various ministries of this government? This question should be

analyzed fully and openly. Full access should be had to this material

by members of the Legislative Assembly and by the general public in

this province. We should all have access to that material. This is only

one small access that we have: the 1981-82Public Accounts of the province. So the Public Accounts

committee of the province should have access to those documents in

order to get some idea as to what took place in the case of Shoal

Island and those other dryland sorts.

Every day we hear from organizations around the province who are

being told that because of the lack of revenue available to this

government and the lack of money in the provincial treasury, their

useful services are being required to be curtailed or cut off

completely — services such as legal aid, services such as those

provided by the Vancouver Status of Women women's centres, services

such as child care and group homes and transition homes. All of those

things were told that because of inadequate revenues the government

must cut back on those services or privatize those services. Yet here

is an example where the government has, either through neglect or

design, not collected revenues owing to the Crown that could have

provided the moneys needed to keep those services going. We're told

that one of the reasons boards and commissions around the province are

being cut back is that the province doesn't have the money to fund

those boards. We're told that Public Utilities Commission hearings will

no longer fund interveners because it's too expensive — the Crown can't

afford it. Yet here is a case where $36 million owing to the Crown has

been left in the hands of private companies — revenue that was owing to

the citizens of British Columbia from resources owned by the citizens

of British Columbia and that the government, through negligence or

design, has failed to collect.

The evidence in the ombudsman's report is damning to the ministry.

It accuses the minister — the person responsible for that ministry — of

violating his own act. It also says he can make no claim to be managing

the forests of this province in the public interest. This is damning

evidence from the ombudsman's report. Some opportunity should be given

to the members of this Legislative Assembly either to clear the

minister or else to confirm the evidence that's been given in the

ombudsman's report and have the minister do the decent thing, which is

to resign until this issue is cleared up.

Mr. Speaker, I think it is urgent that the members of the

Legislative Assembly have the opportunity to examine the public

accounts for the years 1981 and 1982 as well as for 1982-83, to give us

a full opportunity to look into the activities of the minister during

that year that some of the problems took place at Shoal Island so that

we can make that information public, debate the activities of the

ministry in public and make sure one way or the other that the minister

has either been acting correctly in carrying out his mandate as

Minister of Forests or else he has been negligent in not carrying out

his mandate. It's important that we get access to that information.

MRS. WALLACE: Mr. Speaker, I rise to support the amendment. I

want to speak on the same topic but from a slightly different angle. I

want to speak on behalf of those six small contractors, many of whom

operate in my own constituency. I want to speak on behalf of their

economic need. We all agree that it has been a difficult period for the

forest industry during the past few years, but how much more difficult

for those small contractors who have found that their return is much

reduced because the logs that they have supplied to B.C. Forest

Products have not been scaled in the full amount. Do you know what that

means to a small contractor, Mr. Speaker? It means that they may not be

able to meet their payroll. That means that the people who are living

and working in my own constituency find that they don't have money to

pay their mortgage or to buy their groceries, and we in Cowichan are

already hard hit by the forest downturn. Those are the kinds of things

it means. It means that those small contractors can't meet their

payments on their trucks and their logging equipment. That's what we're

talking about here. We're talking about a government so callous and so

careless that it has not bothered to ensure that those small operators

have their rightful return. That's what we're talking about here. If

there is any way that we, as legislators, can have access to the

documentation for the period involved, then it is extremely critical

that we have that access. That's what this amendment will provide, and

that's why I support this amendment.

HON. MR. NIELSEN: Mr. Speaker, a few comments on the

amendment. If for no other reason than the insatiable appetite of the

opposition and certain members to muck about in the mud and to try to

capture the headlines for whatever purpose, a statement has been made

in the House today by the Attorney-General (Hon. Mr. Smith) that a

complete statement will be forthcoming tomorrow. Other comments have

been made by the Minister of Finance (Hon. Mr. Curtis) with respect to

the actions of his ministry and the government. Repeatedly we have seen

the opposition reach incredible conclusions based on a preliminary

document; it is different this time in that it wasn't simply a news

report somewhere from which they reached incredible conclusions.

The members opposite have received a report and have reached certain

conclusions because of which they are calling for, among other things,

the resignation of the Minister of Forests (Hon. Mr. Waterland). The

member for Alberni (Mr. Skelly) said that the committee should look

into it to determine if the Minister of Forests was responsible in any

way, yet just immediately prior to that called for his resignation. May

I remind the House that the same crew opposite, upon receiving a report

some time back by way of the media, immediately called for the

resignation of the then Deputy Attorney-General, immediately called for

his office to be sealed, immediately called for a provincial judge to

seize

[ Page 3335 ]

files, prior to any investigation whatever and prior to the conclusion of an RCMP investigation.

It has been made public that the RCMP are investigating the

incident. The opposition has reached its conclusions for political

expediency. They have redeployed the Star Chamber mentality. The

situation with respect to the ombudsman's report is one of great

severity, and everyone realizes and appreciates that. The members

opposite, in their attempt to create headlines and draw attention to

themselves, be it for their own personal future or as a party....

MR. MACDONALD: You're repeating yourself.

HON. MR. NIELSEN: It's worth repeating.

They have dropped back into their previous style of muck-raking,

forgetting that for a brief period of time they had decided to take the

high road until they decide who their new leader's going to be. I think

the people of British Columbia should recognize that it was only a

momentary lapse in their style which we've witnessed for so many years.

For no other reason than their ineptitude, I would certainly vote

against that amendment.

MR. LEA: I rise to support this amendment. This is a time,

Mr. Speaker, when it shouldn't matter which side of the House you sit

on. We're talking about process, and there are members in this House

who are trying to cloud the issue of process by trying to bring in

whether we're muckrakers or not, whether we're having a leadership race

or not. It doesn't matter. The fact of the matter is that if we're

going to gain respect as a legislature, not just this side of the House

but that side and in fact every member in this House must act

correctly. Can any member take his or her place in this House and say

that the public should not know whether the ombudsman's report is

correct? No one. So we're going to talk about a process.

I don't know whether there has been any criminal wrongdoing, and I'm

sure not going to say there was. We on this side of the House have

never said that. The public has a right, though, to know whether there

has or hasn't been. The public also has a right to know whether the

Crown is handling the people's money correctly, either in spending it

or in collecting it. It's by no accident that it's called public

accounts. It's called public accounts so that the public, not the

members of this House, will know that the business of the people is

being done correctly. That's why this amendment. We want the people of

this province to see clearly whether or not their affairs have been

handled appropriately — no more, no less. There are no charges being

made by us. There have been charges made by the ombudsman's report.

It's yet to be seen whether those charges are correct or incorrect —

the Minister of Finance (Hon. Mr. Curtis) was absolutely correct.

[2:45]

For those reasons I would think that the Minister of Finance and the

government would back this amendment, and for the first time in the

history of this Legislature the government would refuse to put

government members on the committee to represent the Social Credit

Party onPublic Accounts . It should be the members of this Legislature

who are not government members who sit on that committee to investigate

this charge, because we, as back-benchers on this side of the House and

on that side of the House, have a bigger duty than supporting or not

supporting the government. We have a duty to carry out the people's

business, For members of the government to sit onPublic Accounts to

investigate the government seems a bit ludicrous to me, Mr. Speaker. It

should be the independent back-benchers of this House, from both the

Social Credit and the New Democratic sides. We have an obligation to

make sure the people know. We have an obligation to invite witnesses,

with no interference from government members. When I say government

members I mean cabinet members: they are the only government members.

To have government members sit onPublic Accounts, when it is the government itself that is under investigation, will not satisfy the people of this province, nor should it.

I call upon the Premier, not only as the leader of the Social Credit

Party but as the leader of this province, to make sure that no cabinet

ministers sit on thePublic Accounts committee during this next session.

I call on the Premier to stand up and say: "My government will support

this amendment, because we want the people to know."

The people sitting around this floor and watching today must be

wondering why the government is not standing up and saying: "Never mind

the opposition asking for this investigation in Public Accounts ,

we're going to ask for it. Never mind voting against this amendment, we

should have initiated it." I would think that the Premier, more than

any other person in this province, would want the public to know. I

would think that more than any other person in this province the

Premier would make sure that the people know. I would think that more

than any other person in this province the Premier would say: "Yes, I

vote for this amendment, because I wantPublic Accounts to investigate. I want Public Accounts to have witnesses. I want the small contractors to come forward to Public Accounts and put their case. I want the big corporations to come to Public Accounts and put their case. I want everyone involved to come to Public Accounts and let the story be told."

If this government votes against this amendment, we will not judge;

the people will judge. If the Premier and his cabinet do not vote for

this amendment, the people will judge, and the Premier and his cabinet

will be found wanting, in everyone's opinion.

HON. MR. BENNETT: Mr. Speaker, it is evident that the member

for Prince Rupert (Mr. Lea), embarrassed by his leader and his

colleague who is seeking the leadership against him, tended to soften

what we witnessed here earlier today.

What they are asking for here in this amendment is not justice or

due process, but an opportunity for a political trial before all due

process has taken place. Obviously the members of this Legislature know

full well that there are protections now that were not there before.

Are the members opposite denying the fact, or are they challenging the

competency of the auditor-general to police, on behalf of all members

of this Legislature, investigations, particularly in the formative

stages? Or do they want a political trial before all of the

investigation and all of the facts are assembled?

I know full well how that opposition uses Public Accounts for

political trials. Long before I was a member of this House and long

before I was an active politician, members of the NDP, in order to

embarrass the government and the then Premier, made false accusations

about me inPublic Accounts. The members then, and we can recall them well, because it was the subject of a libel case which I won....

That side hasn't changed since the days when Gordon Dowding, a

leader within that party, both in its standards and its conduct, and

Bob Williams made those incorrect statements

[ Page 3336 ]

in Public Accounts. Not only have those statements

been denied and proven false, but they have shown what can happen when

the NDP at their lowest can sink to the type of political muck-raking

that can take place while investigations are going on; or be totally

wrong and fabricate stories just to get a headline. I remember that

very well.

In his judgment on that libel case, when I sued the Sun , Judge Anderson made a stinging indictment of the two NDP members who had used their position in Public Accounts

to make untrue statements that would affect the life of an innocent

party who was not a member of this House. In fact, they were only made

to try to get some political gain. That's the history of the NDP inPublic Accounts.

I want to say to the member for Alberni (Mr. Skelly) that he may not

trust law enforcement officers and the RCMP in this province, as he

stated, but I do and the public does. In your eagerness to get some

media attention as you scramble for the leadership, you may not care

what havoc you create. But I've got to tell you that the people of this

province trust the police, as does, I believe, every other member of

this Legislature. Some trust the auditor-general to protect the

legislative and the public interest. In due course the legislators and

the members can have their say, but there is every good example from

the due process side.... What happens when the search for the truth

becomes embroiled in partisan political gains, far in advance of all

the evidence being collected in the proper manner?

Mr. Speaker, I reject this amendment for what it is — a cheap,

shoddy, political attempt to try to revisit the days of Dowding and Bob

Williams inPublic Accounts in those years that many of us can remember. Every decent person would reject this motion for those reasons as well.

MR. BARRETT: Mr. Speaker, we have now embarked upon a

wide-ranging debate on a very innocuous amendment. Nonetheless, we are

in that debate, and I think it is an important debate. Perhaps to the

inconvenience of a few people, the debate should be measured on the

basis of the selective history that the Premier has brought forward. I

call it selective history, because when I hear the Premier refer to

this amendment, which is asking that the 1981-82 public accounts be

reopened for public scrutiny.... When I hear the Premier reopen,

through selective memory, some of the chapters that may not have been

the happiest in the history of British Columbia, it is important to

recount all of the chapters.

When the Premier talks about a political trial before due process,

the only time I witnessed a political trial before due process in this

chamber was when the member for North Vancouver–Seymour (Mr. Davis) was

convicted in this House by the Premier and his office locked before he

had his day in court. I never witnessed the demeaning of a cabinet

minister without any due process in court, as that member was demeaned

by the Premier in this chamber, convicted by the Premier in this

chamber and relegated to a footnote in history by the Premier before

there was even a court trial and that member could have his day in

court. Who did that, Mr. Speaker? The Premier of the province. Since

we're now dealing with memory, I ask this question: why was there

selective treatment of Jack Davis but not of this minister'?

MR. SPEAKER: Order, please, hon. member. First, the member is

well aware of the rules of this chamber. Second, we must contain our

remarks somewhat within the motion and the amendment before us.

MR. BARRETT: Mr. Speaker, I appreciate the admonition. But I

neglected to witness the same admonition to the Premier when he used

selective history as to his experience in this chamber. Within the due

frame of time, I think I am entitled to have the same leeway. I recall

the Jack Davis incident.

MR. SPEAKER: Order, please, hon. member. The member has been

a member here long enough to know about the rules regarding the naming

of members in this chamber. And I'm sure that the member can contain

his remarks in the....

MR. BARRETT: I apologize, Mr. Speaker. I refer to the member

for North Vancouver–Seymour. He was a minister of the Crown and he was

convicted in this chamber by the Premier before he had his day in

court. That had never happened before.

Now we deal with the second case of RCMP investigation and no one

questions the RCMP in this chamber. The government had the RCMP report

on the Sommers case for two years, and the government refused to

release it — not the RCMP, Mr. Speaker. If we're going to recount

history, let us not be selective in judgmental history. It is

worthwhile asking: why did the government sit on the Sommers case for

200 and some days? The Butler report was the RCMP document that that

government deliberately withheld from the public. So I point out two

cases — two to one, Mr. Speaker. If the Premier wants to go back in

history, we certainly can.

Let us deal with the matter at hand. May I respond to the former

Attorney-General? If there is no muck, there will be no raking. Are you

afraid to find out whether or not there is anything in there?

Interjections.

MR. BARRETT: Mr. Speaker, my colleagues....

Interjections.

MR. SPEAKER: Order, please. Hon. members, one member at a time, please.

MR. BARRETT: Thank you, Mr. Speaker, and I thank my colleagues over there for listening so closely.

What is it that the House is attempting to address through this

amendment? We're not rewriting history. We'll be long gone and long

dead. History will be there for all of us. But it is our duty as Her

Majesty's Loyal Opposition, no matter what personalities occupy these

seats, to do our duty. One of the duties inPublic Accounts is to scrutinize the money that has been collected or spent. Here is a statement........

HON. MR. CHABOT: Why didn't you?

MR. COCKE: Because we had day and night sittings.

MR. BARRETT: Mr. Speaker, the minister calls over....

Interjections.

[ Page 3337 ]

MR. BARRETT: These asides should be dealt with in order. The

minister asks: "Why didn't we?" Mr. Speaker, in the last three months

the government deliberately thwarted the work of thePublic Accounts committee by not showing up for that committee. But, Mr. Speaker, I do not wish to embark....

[3:00]

Interjections.

MR. BARRETT: If there were no interruptions, I would not slip into history.

What we are dealing with here is the documented statement of the

ombudsman of the province of British Columbia. Would any fair-minded

citizen suggest that the ombudsman was not doing his duty in giving

this report to the chamber? No one would. Would any fair-minded person

suggest that we in this chamber not deal with this report? No one would.

What is this report, Mr. Speaker? In essence, it is in one

paragraph, which I will read. This report from the ombudsman states:

"But the Ministry of Forests has failed in its duties." That's not an

allegation from the opposition; it is a statement by the ombudsman. Is

the Premier intending to sue him for libel? Mr. Speaker, it's a

libellous opinion if I've ever heard one. Are you going to sue the

ombudsman for libel? Is that your line? Well, let's do it. Sue the

ombudsman, but don't come into this chamber and intimate that because

somebody makes a statement, it's libellous. The ombudsman has made a

public statement saying that the Ministry of Forests has failed in its

duties. It's clearly libellous. Are you going to sue the ombudsman? I

don't think so, Mr. Speaker. Why would the ombudsman make such a

statement?

He goes on: "In this report I draw to your attention a situation in

which the ministry's failure has resulted not only in significant

financial losses for a number of small contractors but also in millions

of dollars of lost revenue owing to the province for the use of Crown

timber." Is that muckraking, Mr. Speaker? Is the ombudsman indulging in

muckraking when he says that the people of this province have not been

collecting the money that is due them from a natural resource? Is that

libel? Is that slander? Is that muckraking? It is a statement of the

ombudsman. For every senior citizen in this province who does without a

meal, for every handicapped person who does without a service, for

every ill patient in a hospital who has to wait, there is an

explanation due as to money that should have been there to provide that

service. Is that libellous? Is that muckraking? These are honest

statements of fact by the ombudsman, and the government immediately

labels them.

I'll read further and I'll finish shortly, Mr. Speaker. "Briefly

put, the ministry did not scale large amounts of Crown timber as

required by the Forest Act — that is, it did not determine the volume

of timber removed from the province's forests." Through you, Mr.

Speaker, I ask the Premier: is the ombudsman lying? Is he slandering?

Is he libelling? What are you trying to hide by using those kinds of

words when we're dealing with a factual report from the ombudsman?

I conclude by reading this sentence, and then some comments. "Since

the timber was not scaled, the company benefitting from the use of

Crown timber has never been billed...." They've been giving them free

logs, Mr. Speaker. Is it not the duty of Her Majesty's Loyal Opposition

to get to the bottom of why free logs are being given to a big company,

and to do so without the abuse of personal comments, political

interpretation, vituperative analyses of the past? We're here to serve

the citizens of this province with the truth. This amendment is an

attempt to get at the truth of allegations and statements made by the

ombudsman. Any government that has nothing to hide would vote for this

amendment. Any government that votes against this amendment indicates

fear of the truth and an unwillingness to let honesty shine through

this province and facts come out publicly. It has been a record of

Social Credit to have the only minister of the Crown in the history of

parliamentary government be sentenced to jail because of similar

allegations. You'd think they'd have learned once, Mr. Speaker. There

is nothing to hide in getting at the facts, unless you've got something

to hide. Pass this motion and let's have some truth in the province of

British Columbia.

Amendment negatived on the following division:

YEAS — 18

Macdonald

Barrett

Howard

Cocke

Dailly

Stupich

Lea

Gabelmann

Skelly

D'Arcy

Brown

Hanson

Lockstead

Barnes

Wallace

Mitchell

Passarell

Blencoe

NAYS — 32

Chabot

McCarthy

Nielsen

Gardom

Smith

Bennett

Curtis

McGeer

R. Fraser

Davis

Kempf

Mowat

Waterland

Brummet

Rogers

Schroeder

McClelland

Heinrich

Hewitt

Ritchie

Michael

Pelton

Johnston

A. Fraser

Campbell

Strachan

Ree

Segarty

Veitch

Parks

Reid

Reynolds

Division ordered to be recorded in the Journals of the House.

MR. SPEAKER: Hon. members, the main motion is that the public

accounts for the fiscal year 1982-83 be referred to the Select Standing

Committee onPublic Accounts and Economic Affairs.

Motion approved.

Hon. Mr. Curtis tabled the comptroller-general's interim financial statement for the nine months ended December 31, 1983.

ESTIMATES OF SUMS REQUIRED

FOR THE SERVICE OF THE PROVINCE

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

a bill intituled Estimates of Sums Required for the Service of the Province

for the fiscal year ending March 31, 1985.

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

[ Page 3338 ]

Motion approved.

HON. MR. CURTIS: I move that Mr. Speaker do now leave the chair for the House to go into Committee of Supply.

BUDGET ADDRESS

HON. MR. CURTIS: Mr. Speaker, hon. members, it is my pleasure

to present today the provincial budget for the fiscal year ending March

31, 1985. This budget follows by only seven and a half months the

presentation of that for the fiscal year 1983-84. Clearly the

intervening period has been one of intense activity in carrying out

last year's initiatives and preparing this year's goals and objectives.

During the preparation of the budget, I have held direct

consultations with representatives from a wide range of organizations

to obtain their views on a variety of economic and fiscal matters. I

listened with interest to a great number of observations and

suggestions. Obviously, the government could not accept all of the

recommendations; but many of them have, I believe, helped to improve

the budget. I want today to extend my thanks to all participants.

In framing this budget for the coming year, I have attempted to

address three major objectives. First, the policy of reducing the size

and scope of government will continue. This budget will complete the

first and most difficult phase of the process and demonstrate the

progress achieved in managing during an extremely difficult period. The

measures proposed today will build a solid base for the elimination of

the deficit and the retirement of the debt over the next several years.

Secondly, the government's commitment to the preservation of essential

social services remains absolute. Important measures toward this goal

will be introduced. Thirdly, the government will take steps in the

coming year to capitalize on the benefits of restraint to build a more

stable and secure economic future for this province.

Difficult choices have been necessary in the preparation of the

budget, as with others preceding it, but I believe the result fairly

and responsibly serves the interests of British Columbians.

After a strong start, the 1980s have proven to be a difficult and

sobering period for British Columbia. While most of North America

entered a period of serious economic stagnation in 1980, British

Columbia continued to exhibit strong growth until approximately

mid-1981, as the effects of booming resource commodity markets

continued to work their way through the provincial economy. Partly as a

result of this previous strength, British Columbia suffered a much

larger decline in economic activity and employment during the major

downturn of 1982. Moreover, the recovery in the provincial economy,

which began in early 1983, has been modest.

The past four years have represented, in many ways, a period of

readjustment in the world economy and in the psychology of all its

participants. Unrealistic expectations have been lowered, obsolete

plants have been eliminated, inflation has been reduced and cost

control has been tightened. As we move into a new era, we find that

industrial structures and trading patterns have permanently changed and

nations around the world are moving quickly to reorient their economies.

I'm fully aware — and the government is fully aware — of the

difficulties this period of adjustment has caused for many British

Columbians. In fact, the price exacted by the recession makes it doubly

important that we learn well the lessons it has taught us.

We must recognize the limits of our ability to manage our economy

independently. Our close interdependence with other nations means that

our industries, and therefore our jobs and incomes, depend on export

sales. As a result, we cannot significantly affect the health of our

economy by spending or consuming more ourselves.

We must recognize the cyclical nature of British Columbia's economy.

Long-term government spending commitments should not be based on

short-term revenue trends.

[3:15]

We must recognize the importance of our ability to compete in world

markets. Erosion of our competitiveness through increased costs,

including the cost of government services, will lead inevitably to a

loss of jobs and economic security for our citizens.

Finally, we must recognize the dynamic changes taking place in the

world economy. Our industries and institutions must be made

sufficiently flexible to adapt to, and take advantage of, the

international environment.

Failure to heed these lessons will necessitate greater and more difficult adjustments in the future.

The new era in which we now find ourselves will be much tougher than

the period of growth and prosperity enjoyed through much of the 1960s

and 1970s. Economic growth, while somewhat more stable than in recent

years, is likely to be slower than in the past. To be successful we

shall require a higher degree of responsibility and cooperation from

all segments of society: individuals, government, business and labour.

First, individuals must moderate their demands for government

services. We have to accept that increases in living standards can no

longer be automatic. Governments can and will continue to provide

essential services and to protect those in need, but there are real

limits to the range and volume of services which can be provided. As a

society, we now must earn our way in the world. We can only consume

goods and services to the extent that we are able to produce and sell

our products.

All governments must reduce their demands on the economy, whether

through taxation or regulation. Fiscal balance should be pursued

wherever possible through limiting expenditure rather than increasing

taxes, and closer attention should be paid to the real impact of

government activity, which often differs from that initially intended.

Similarly, businesses must realize that government cannot protect

them from shifts in market conditions. Reduced government intervention

in the economy should be accompanied, I suggest, by greater

self-reliance.

Employees must continue to be flexible, seeking wages and working

conditions that reflect their shared interest in productive and

competitive enterprises. Those who generate the wealth in our society

should temper their expectations to suit the state of the economy. We

can only maintain and increase our standard of living here in British

Columbia if we keep pace with very aggressive international competitors.

I'm confident that British Columbia will rise to the challenges

presented by this new economic reality, and I am proud of the

leadership this government has provided in this vital endeavour.

Two years ago British Columbia was facing a major economic crisis

caused by a shift in the world economic environment. No longer could we

increase wage levels and

[ Page 3339 ]

public expenditure while expecting the world to

simply go on buying our products. We had to recognize our place in a

changing world economy, and adapt to circumstances beyond our control.

The government took major action in February 1982 — two years ago —

through the compensation stabilization program and the

restraint-on-government program to deal with the factors within our

control. In May 1983 the people of British Columbia were asked to

decide whether they favoured continuing this approach. They responded

at that time with a clear answer in the affirmative, and they continue

to strongly support our restraint policies today. The program of

reducing the size of government and restraining compensation will

therefore continue as the government carries out the decisive mandate

given to us by the voters.

The government's economic policy, particularly as refined over the

past two years, is designed to meet the basic problems facing this

province.

First, to deal with the sharp cyclical downturn which resulted from

international economic fluctuations, the government has pursued a

policy of selective stimulation to help sustain employment and

accelerate recovery. Within the limits of the taxpayers' financial

capacity, the impact of the recession was cushioned by social program

expenditures and accelerated expenditure on capital construction

projects. As the recovery gains momentum through 1984, these

expenditures can be reduced and the government's financial position

strengthened.

To redress the erosion in our competitive position, steps have been taken to

reduce the burden of government on the economy and to restrain increases in

wage and salary costs. A thorough review is now being undertaken to determine

the impact of taxation on our business sector. Efforts to improve competitiveness

will be continued to ensure that the gains of the past two years are not lost.

To increase the resilience and flexibility of our industries in the

years ahead, government policy must now focus on breaking down

rigidities in our economy. Government programs and regulations

affecting all industrial sectors will be reviewed to identify those

which present barriers to innovation and higher productivity. Some

programs intended to assist industry actually promote inefficiency and

penalize efficiency. Given the economic pressures now facing us, this

situation is simply not tolerable.

As we continue to develop and refine our approach to economic policy

in British Columbia, it is important that we distinguish clearly the

problems related to the fluctuations of the business cycle from those

related to the underlying structure of our economy and to longer-term

trends in the world's economy. These difficulties often merge, with the

result that policies appropriate to one type of problem are regularly

recommended, and frequently adopted, to deal with other problems for

which they are completely inappropriate. How many times, for example,

is increased government spending proposed as a way to make the economy

grow more rapidly? This approach can be effective for accelerating a

cyclical recovery, and indeed it was a key element of my last budget.

But any suggestion that more government spending can raise the

long-term growth rate of the economy should be recognized as misguided.

We should be cautious when reviewing any government expenditure which

is justified only by the statement that it will stimulate the economy.

This probably means that it cannot be justified on its own merits when

recognized as a demand on the taxpayer.

To further elaborate on this point, I'd like to emphasize that in

the long term raising public expenditure simply substitutes one type of

activity for another. Yes, in some cases it may marginally increase

total economic activity, but more often there will be a loss of

efficiency resulting in a reduction in the size of the economy. We must

now accept that there is no magic formula for making an economy grow

faster. The solution is at once very difficult and very simple: respond

to the demands of the world marketplace and become more and more

productive at doing what we do best. The same advice applies to

individuals, businesses, regions and nations. Probably because of its

simplicity, it is often forgotten or ignored.

Today I want briefly to discuss the economic outlook for the coming

year. The United States economy has now been recovering for about 15

months and has shown much more strength than was anticipated a year

ago. There are recent signs that growth is abating from the high rates

reported last summer, but the pace of expansion continues to indicate

that this is a typical business cycle upturn. The early stage of the

United States recovery has been led primarily by consumer spending and

housing construction. In 1984, I suggest, the expansion is likely to

broaden, with business investment becoming a key source of growth. With

continued growth in output and employment and relatively low inflation,

1984 promises to be a good year for the United States, and as a result

British Columbia can expect to reap some of the benefits. Nevertheless,

I would be negligent this afternoon if I failed to point out three very

serious threats facing the world economy in the years ahead: government

deficits, trade imbalances and inflation.

First, government deficits at the federal level in both the United

States and Canada are too large. The massive borrowing required to

finance these deficits is conflicting with attempts to maintain a firm

monetary policy in the continuing fight against inflation. The result

is interest rates that are still too high. Federal fiscal policy in

both countries should be brought into line, mainly through spending

reductions, so that interest rates can be brought down even further. At

current levels interest rates are limiting a recovery in capital

investment. Moreover, by attracting foreign funds to North America,

they've caused our currencies to be overvalued and our products to be

less competitive in overseas markets.

[Mr. Strachan in the chair.]

Second, large trade imbalances could lead to disruptions in the

development of world trade. The recovery from the 1981-82 international

recession has so far been very slow in areas outside North America, and

the resulting weakness in exports to those areas has caused a record

trade deficit for the United States. While faster growth is forecast

for 1984 in Japan and other market economies in Asia, continuing

adjustment problems are expected to restrain growth rates in Western

Europe. As a result, the United States trade deficit may increase

further in 1984 and create pressure for corrective measures. If

significant policies of protectionism are adopted in response to that

temporary trade deficit, the future growth of world trade, on which

British Columbia relies heavily, could be severely impaired.

Third, despite very positive progress against inflation in the past

few years, the performance of prices remains of concern for the future,

In the United States inflation fell from a peak of 13.5 percent in 1980

to 3.2 percent in 1983. An even more impressive reduction was

accomplished in the

[ Page 3340 ]

United Kingdom, where inflation was lowered from

18.1 percent in 1980 to 4.6 percent in 1983. For Canada the rate peaked

at 12.5 percent in 1981, before falling to 5.8 percent in 1983, while

in British Columbia inflation was reduced from 14.3 percent in 1981 to

5.5 percent in 1983.

Despite these impressive gains, which demonstrate that we need not

accept rapid inflation as inevitable, there is no room for complacency.

A severe economic downturn, the worst in 50 years, was required to

bring down inflation to a level which is still high by the standards of

the 1950s and 1960s. Some upward pressure on prices may be unavoidable

as the current expansion progresses, but clearly a significant

resurgence in inflation would be disastrous. In the current

international financial environment, characterized by large government

deficits, heavy debt burdens and nervous investors, higher inflation

could cause another rise in interest rates and lead to a premature

weakening of investment and consumer spending. If this occurs, we may

be forced to undergo another painful recession without having fully

recovered from the last one. I sincerely hope, and the government of

British Columbia hopes, that economic policymakers throughout the world

will ensure that this does not happen. I know that we in British

Columbia will do our part.

[3:30]

To repeat the earlier observation, 1983 was a difficult year for the

British Columbia economy. As we emerged from the recession, the growth

we experienced was uneven, both among sectors of the economy and over

the course of the year. Consumers and businesses in the province

remained cautious and concentrated on improving their financial

position. Nevertheless, I believe the pattern of growth in British

Columbia merely reflects a delay between the recovery of certain

industries, notably lumber production, which responded quickly to the

United States upturn, and other industries which take somewhat longer

to respond. Provided that we avoid major labour-management disruptions,

the next phase of the recovery should soon be underway.

Therefore, following the rapid growth of early 1983 and the moderate

growth of late 1983, we can expect a more general expansion in 1984.

Real growth in gross provincial product is estimated to have been 2

percent for 1983, and is forecast at 3 percent for 1984. Consistent

with this outlook, increases are forecast for exports, retail sales and

employment during this second year of recovery.

As mentioned earlier, in the past few months I undertook to seek out the views

of a number of organizations in the province to assist me in the preparation

of this budget. In this consultative process, I met with representatives of

the following groups: the British Columbia Central Credit Union; the Employers'

Council of British Columbia; the British Columbia branch of the Canadian Federation

of Independent Business; the Council of Forest Industries of British Columbia;

the British Columbia Real Estate Association; the British Columbia Federation

of Labour; the Mining Association of British Columbia; the Institute of Chartered

Accountants of British Columbia; the Tourism Industry Association of British

Columbia; the British Columbia Federation of Agriculture; the United Elders'

Association of British Columbia; the British Columbia council of the Housing

and Urban Development Association of Canada; the Law Society of British Columbia;

the British Columbia Road Builders' Association; the Union of British Columbia

Municipalities; the Education Coalition; the British Columbia Chamber of Commerce;

and the Association of British Columbia Professional Foresters. I also received

written representations from two groups with whom meetings could not be arranged:

the British Columbia Motels, Resorts and Trailer Parks Association and the Canadian

Manufacturers' Association. I found this process to be very useful. I intend

to commence a new round of consultations on other policy issues within the next

six months.

The budget that I am presenting today should be viewed as part of a

multi-year plan initiated by the budget of July 7, 1983. The measures

to be introduced for 1984-85 will complete the first phase of the

restraint program and begin the next phase, in which we shall reap

additional benefits.

Important progress has already been achieved through restraint.

Inflation has been brought down, and a solid base laid for our

recovery, and more progress will be evident in the coming months and

years. It should, nevertheless, be recognized that the province

continues to face a severe fiscal imbalance — I would call that a

deficit, Mr. Speaker — which will take several years to correct.

In discussing the deficit I think it is important that we make a

clear distinction between two components. There are many who will

readily understand that the cyclical part of the deficit is related to

the impact of the recent recession on the government's revenue and

expenditure. As the economy continues to recover, this part of the

deficit will be eliminated gradually and an offsetting surplus will be

created. The structural part of the deficit is that portion unrelated

to the business cycle. It reflects a basic imbalance between the

revenue base and the program structure of government, and it can only

be corrected by permanent increasesin tax rates or reductions in

program costs.

Last July I presented a budget which started the process of

eliminating the structural component, partly through modest tax

increases, but mainly through measures to reduce the size and scope of

government activity. By eliminating less essential programs,

transferring functions to the private sector and making government

leaner and more efficient, we are avoiding the need for major tax

increases which would threaten future economic development in B.C. The

1983 budget provided us with the tools needed for the very difficult

task of defining the balance between the private and the public

sectors. Today's budget represents the consolidation of those gains and

sets the stage for a period of stable and sustained growth for our

province.

Notwithstanding the policy measures introduced last year, the

lingering effects of the recession continued to affect the government's

revenue and expenditure. In July I forecast a deficit for the 1983-84

fiscal year of $1.603 billion. I am very happy to report to this House

that revenue has grown somewhat more strongly than I had anticipated

and that further savings have been made in expenditures. As a result,

the deficit for 1983-84, the year just coming to a close, is now

forecast at $1.307 billion.

Even with this improvement, however, the direct debt of the

government, excluding that incurred on behalf of Crown corporations,

will reach an estimated $1.9 billion by March 31, 1984, and will rise

further in the next year. The Premier and my colleagues in government

are determined that this debt will not be left as a burden to be borne

by future generations of British Columbians. Accordingly, I shall

introduce legislation to establish a mechanism for repaying the debt

over the next few years.

Under this new system, to be phased in commencing in 1984-85, natural resource revenue will no longer be directly

[ Page 3341 ]

available to finance current expenditures. Since

1982-83, resource revenue has been credited to the Resource Revenue

Stabilization Fund and then transferred to the general fund to meet

operating expenditures. In future years the primary charge on the

Resource Revenue Stabilization Fund will be for the repayment of debt.

In this way revenue derived from our resource endowment will be used to

build the financial strength of the provincial government in

preparation for any future economic downturns.

The new fiscal year will be one of transition. Approximately 70

percent of natural resource revenue will be credited to the Resource

Revenue Stabilization Fund, while the remainder will be credited to the

general fund to help maintain social programs.

The first allocation from the Resource Revenue Stabilization Fund

will provide for the retirement of the British Columbia Railway

Company's historic debt. I want to take a few minutes today to recount

the history of the British Columbia Railway and to describe the steps

being taken to place the railway in a sound financial position.

It is well known that the railway incurred large losses during the

1970s and spent huge amounts on capital construction, principally on

the Dease Lake extension. These problems, which left a large debt load,

have obscured the accomplishments of the railway, both prior to the

decade of the 1970s and from 1980 onwards.

From its inception in 1912 as the Pacific Great Eastern Railway, the

British Columbia Railway has played a major role in the economic

development of the province. Access to the forest and mineral resources

of large parts of our interior would have been practically impossible

without it. Although the railway required financial assistance from the

government on more than one occasion, it was largely able to pay its

way and did not receive the massive amount of federal government

financial assistance which has been provided to the Canadian National

and Canadian Pacific Railways. By the end of 1960, in fact, the British

Columbia Railway showed less than $13 million outstanding in long-term

debt and was successfully operating 1,200 kilometres of rail line.

The railway's financial difficulties began with the construction of

the northern extensions in the 1960s and 1970s, which represented a

continuation of the policy to provide access for the development of

provincial resources. Unfortunately, rail construction in the north

proved to be much more complex than expected, and rapid inflation

caused construction costs to soar. By the end of 1971, the railway's

long-term debt had risen to $211 million, and in the next five years it

ballooned to $620 million. This debt was incurred to finance

construction costs, mainly on the Dease Lake extension, which cost more

than $200 million, and losses incurred in operating the railway and

paying interest, In fact, in the six years ending in 1976 the railway's

losses were $157 million. In the next three years losses were a further

$153 million, mainly as a result of interest, expense.

The decade of the 1970s was certainly a very difficult period for

the railway, as losses totalling $310 million were recorded. Long-term

debt stood at $658 million at the end of 1979.

This government recognized the need to provide financial assistance

to the railway and in 1980 commenced paying debt-servicing grants

amounting to $70 million annually. The government has also recognized

that the railway should be compensated for operating uneconomic branch

lines where government policy requires them to be operated for

overriding social or economic reasons. Annual grants for the operation

of the Fort Nelson extension and for passenger services have been made

under this government policy.

The government has also given the railway the freedom to operate

commercially and appointed a board of directors who are experienced and

knowledgeable in the railway industry. I am happy to note that these

policies are meeting with success. In spite of the economic

difficulties experienced in the last three years, the railway has been

able to increase its operating profit from $3 million in 1981 to an

expected $37 million in 1983.

To complete the task of rebuilding the finances of the railway, the

government has decided to completely eliminate the burden of that

historic debt. At the end of 1983 this debt amounted to $610 million,

slightly less than the balance seven years earlier. A payment of $470

million will be made from the resource revenue stabilization fund, to

be added to the sinking funds for the railway's historic debt. This

will increase the sinking funds sufficiently to provide for all future

interest and principal payments on the historic debt up to the year

2005, when the final payment is due. In the absence of this payment the

government would have been required to continue the annual

debt-servicing grants for the next two decades. Those grants will no

longer be required.

The removal of this debt burden from the railway's accounts has been

recommended by the Royal Commission on the British Columbia Railway and

by the auditor-general, By this action, the government has completed

the job of putting the railway on a sound financial footing and

ensuring that it is run on a commercial basis.

I want to emphasize that this payment to the railway will be used

exclusively for the retirement of the historic debt. It will not be

available to meet normal operating expenses or any costs, operating or

capital, of the Tumbler Ridge branch line. The railway is expected to

carry the costs of the Tumbler Ridge branch line, which was constructed

to move northeast coal, without any subsidy from the government. The

construction costs have been met by the railway, largely through

short-term borrowings which are to be replaced with longer-term

financial arrangements in the near future. The railway will pay the

annual costs of the long-term financing. In the 1984-85 fiscal year the

railway will receive an estimated $16 million in freight surcharges on

coal shipments to assist in paying for construction of that line. That

is just the first payback on our investment. Any future extensions to

the railway will similarly be undertaken only where provision is made

for recovering the investment over a reasonable period.

[3:45]

On behalf of the government, I want to take this opportunity to

commend the directors and the management of the British Columbia

Railway for their success in improving the railway's operating

position. Prior to 1978 the railway experienced a series of operating

losses. It has now experienced six consecutive years of operating

profits. With the completion of the financial restructuring, the

railway will be able to proceed on a totally commercial basis and may

soon begin paying dividends to its shareholders, the people of the

province.

Let me briefly return to the subject of the resource revenue

stabilization fund. Commencing in 1985-86, it is planned that all

resource revenue will be allocated to the fund to provide for the

repayment of direct public debt as well as that guaranteed debt which

is not commercially supportable. By

[ Page 3342 ]

starting now to make provision for repayment of the

debt, I intend to make certain that British Columbia does not fall into

the pattern of perpetual deficits and borrowing, which has been the

experience in so many other jurisdictions.

The expenditure budget for 1984-85 represents an important and an

exciting step in our multi-year plan. For the first time in 31 years,

the budget of the provincial government has been reduced from that of

the previous year. Indeed, it has been almost 20 years since any

government in Canada, federal or provincial, has actually reduced its

budget from one year to the next. Growth in government spending, which

many have considered irreversible, has been stopped and reversed in

British Columbia. That difficult achievement is probably the clearest

evidence to date of the success of our restraint program and associated

policies.

In my pre-budget consultations, I was advised by some groups not to

limit government spending but to raise taxes in order to finance more

expenditure. To repeat, this government was re-elected last year on the

basis of a pledge to reduce government spending, and that pledge is

today being honoured.

[Mr. Speaker in the chair.]

Despite the policy of restraint, the government will continue to

protect our core social programs. In particular, there is one major

area of government for which expenditure will not be reduced. I am

referring to health care, which remains the highest priority of the

government and which will receive an increase of $51 million in the

1984-85 estimates presented today. Later in these remarks I will

outline measures to be taken to obtain more funding for this essential

service.

The total expenditure of the government, excluding the extraordinary

payment from the resource revenue stabilization fund, is estimated for

1984-85 at $7.920 billion. This represents a reduction of 6.2 percent

from the 1983-84 budget and 5.8 percent from the revised forecast for

the current year.

I point out that the current phase of the business cycle is the best

time for government expenditure reductions. Temporary cyclical

pressures on government are now easing. At the same time, private

sector activity is picking up and will absorb resources released by the

reduction of public spending. Because of the delayed impact on the

economy of fiscal policy changes, expenditure reductions will now

alleviate upward pressure on wages and prices later in the current

economic expansion.

The existing revenue base of the government is estimated to provide

total revenue of $7.622 billion in 1984-85, 7.3 percent more than the

revised forecast for 1983-84. Later I shall be announcing a limited

number of revenue measures which will have the net effect of increasing

total revenue by $97 million to $7.719 billion.

After the allocation of $470 million of natural resource revenue for

guaranteed debt retirement, a net amount of $7.249 billion will be

available to finance normal operating expenditure. The deficit for

1984-85 is therefore estimated at $671 million, compared with the

$1.307 billion currently estimated for 1983-84.

Although I am pleased to be able to show this reduction in the

deficit, I must caution all British Columbians against complacency. The

most difficult steps have been taken. The direction has been reversed,

but the road ahead will not be smooth. A deficit of $671 million still

represents almost $650 per household in his province. The interest

payments alone for 1984-85 are equal to the combined budgets of seven

ministries. We shall carry on until the deficit is erased, until

sufficient funds are provided to retire the debt incurred since 1982

and until the government is financially prepared to withstand future

economic slowdowns. This objective will not be easily attained, but it

is within our reach. Should we fail to achieve it, future British

Columbians will pay a heavy price. Let me say again: the outstanding

direct debt for government purposes is forecast to reach $1.9 billion

at March 31, 1984, and $2.6 billion at March 31, 1985. We are

determined not to leave this as a legacy for the future.

The operating expenditure plan for 1984-85 reflects a reduction of

6.2 percent in provincial government spending. With the exception of

the Ministry of Health, budgets for 1984-85 provide less than in the

previous year's estimates. While the specific percentage reductions

vary among ministries, the principles do not. Staff reductions are

continuing on schedule, office space is being reduced, motor vehicle

fleets are shrinking and many programs are being scaled back or

eliminated. Privatization is being achieved where appropriate,

ministries are becoming leaner and more efficient, all activities are

under review and more productive ways of doing the necessary jobs are

being found.

An essential element in this budget, as in the two previous, is the

compensation stabilization program. The revised guidelines and

regulations proposed last summer were issued in final form in November,

following discussions with those affected. It will be recalled by this

House, Mr. Speaker, that the principles of ability to pay and

productivity are now the primary determinants of compensation levels in

the public sector. I emphasize that for the coming year, as for 1983-84

just ending, no compensation increases can be justified on the basis of

ability to pay. This leaves increased productivity as the only way for

employees to earn salary increases.

The recent settlements negotiated with the British Columbia

Government Employees Union and with the Ferry and Marine Workers' Union

exemplify the application of the compensation stabilization program. In

accordance with the government's ability to pay, no increase was

provided to BCGEU members for the first year of the new agreement.

Increases are payable in the second year, but the cost will be offset

by efficiency improvements and staff reductions being undertaken by the

government within the terms of the agreement. As a result, the

government's direct salary bill will be reduced by 8 percent in

1984-85. Similarly, the British Columbia Ferry Corporation is now able

to offset future wage increases negotiated with its employees through

significant productivity measures, including revised work schedules

provided for in the new collective agreement.

In addition to seeking higher productivity within government, we

have again been forced to re-evaluate services. I can tell the House

that my colleagues and I derive no enjoyment from eliminating programs.

Indeed, the primary objective of raising productivity is to prevent

reductions in our most essential programs. Restraint would not be

necessary if our resources were unlimited, but the reality of life in

the 1980s is that financial resources are limited. Just as a family

must make choices in spending its income, a government must decide

among the almost infinite demands on the treasury, remembering always

that public money comes from the hard-earned incomes of our citizens.

In selecting the programs to be funded by the taxpayers, we shall

always consider whether

[ Page 3343 ]

they represent services which British Columbians would wish to buy for themselves.

In preparing the expenditure plan for 1984-85 the government was

determined to scrutinize every spending proposal to ascertain whether

it represented an appropriate use of public money. Ministries have been

pushed very hard to improve their productivity, an essential step if we

are to do more with less. Administrative support groups and regional

offices will continue to be scaled down, as we reduce the overhead

costs of program delivery. New initiatives are underway to increase the

effectiveness of central management functions for personnel, motor

vehicles and government records. Regulatory processes are being

streamlined and automated, both to reduce direct costs and to ease the

burden of compliance on the private sector. I recognize that these

efficiency initiatives require extra effort from our public employees,

and I am pleased to see that they are responding. Attitudes are an

important ingredient in restraint, and I believe that government

employees, from deputy ministers through to junior staff, have accepted

restraint and are to be commended for their efforts to make it work.

[4:00]

Another key element of the expenditure plan is the shifting of

activities from the government to the private and nonprofit sectors.

Some commentators have suggested that this process does not save money,

but I can provide assurance that there are indeed savings. Functions

performed by government ministries create both direct costs in the

ministries and indirect, overhead costs elsewhere in government. In

recognition of this, two major centrally provided services — employee

benefits and telecommunications — will be charged back to ministries in

1984-85 to provide a better indication of the full costs of delivering

each program. When these and other indirect costs are fully accounted,

it becomes clear that savings can often be made by shifting activity to

the private sector. So in these cases privatization should be and is

being pursued.

Specific privatization initiatives for 1984-85 include transfer of

real estate, insurance and securities licensing functions to

self-regulating industry bodies; transfer of travel agency regulation

to the travel industry; transfer of laundry facilities from the

Ministry of Health to private or non-profit operation; transfer of some

forest management functions to private sector licensees; and turnover

of most governmentoperated child-care facilities to non-profit

societies. In addition, a number of privatization initiatives started

after the last budget will be completed in the coming year. Last July I

called for privatization proposals to be brought to my attention by any

interested parties. I've been most encouraged by the response, and I

repeat that suggestion for this year.

Significant budget savings for this year will be realized through a

broad range of measures affecting major expenditure programs. By

directing the funding for these programs more effectively, we shall be

able to achieve our fiscal objectives while retaining the essential

benefits of the programs.

Several amendments will be made to the GAIN program to preserve

benefits for those most in need. My colleague the Minister of Human

Resources (Hon. Mrs. McCarthy) will shortly announce a series of

revisions to the rates and eligibility criteria for basic income

assistance. By limiting payments made to certain types of clients, the

government will reduce the chances of creating a permanent group of

unemployed persons and of attracting potential recipients from outside

the province. At the same time, the core program of assistance to those

most in need will be maintained.

Under the Pharmacare program steps will be taken to restrain costs

by limiting dispensing fees paid to pharmacists. In addition, the

annual deductible amount under the universal component of the program

will be raised from $125 to $175. No change will be made in benefits

for seniors, long-term-care residents or eligible GAIN recipients.

My colleague the Minister of Health (Hon. Mr. Nielsen) is now

addressing ways in which payments under the Medical Services Plan may

be limited. If we are to preserve our health care system in B.C., we

must control the growth of this program. The open-ended nature of the

Medical Services Plan has allowed an escalation in the number of

practitioners and their incomes beyond the ability of the taxpayers to

pay. The fee

schedule for physicians in British Columbia is the highest

in Canada and last year was more than 25 percent above the national

average. In the past five years payments from the plan have more than

doubled, and they are now $296 per capita, again the highest in Canada.

Discussions are taking place now to develop revisions to the Medical

Services Plan which will give the medical profession a positive role in

preserving the provision of high-quality medical care within limited

resources.

In the hospital programs area, funding will be increased to provide

for cost and volume increases, but pressure is also going to be placed

on hospitals to become more efficient in their service delivery.

I repeat, Mr. Speaker, that despite these cost-saving measures,

health care has been given a high priority in the expenditure plan, and

it is the only major program area in which funding has been increased

for 1984-85. At the same time, the federal government has limited its

contribution to health care and is attempting to impose more conditions

on the provinces. I'll have more to say about that later.

Steps will be taken in the coming year by my colleague the Attorney

General (Hon. Mr. Smith) to limit the expenditures of his ministry

while protecting core services of the justice system.

The Criminal Injury Compensation Act will be amended to limit the

government's financial exposure. Provision will, of course, be made to

ensure that persons now receiving payments awarded under this act will

not be affected,

Measures will be implemented to permit the Legal Services Society to

set priorities for providing legal aid within a limited budget.

Discussions with the society are underway, and a task force has been

appointed to hold public hearings as well as to make recommendations.

The provincial government contribution for training of municipal

police and firefighters will be reduced. Municipalities will be

consulted to determine how best to accommodate this reduction.

Functions performed by sheriffs will be carefully reviewed to identify those which can be performed at less cost by others.

Finally, I observe that no provision is made in the budget for the

implementation of the federal Young Offenders Act. The federal

government has been approached to seek a delay in the proclamation of

this act, and a review of cost-sharing arrangements. It is British

Columbia's objective to provide for the orderly and effective

implementation of this new legislation.

It has become evident throughout North America that more teachers and higher salaries do not in themselves raise

[ Page 3344 ]

educational standards. Accordingly, school funding

reductions planned for the next three years are consistent with an

increase in the pupil-teacher ratio to the level which prevailed in

1976. At the same time, my colleague the Minister of Education is

taking important steps to improve the quality of education in our

schools. In this connection, the $12.6 million saved in the school

system during the teachers' strike last November will be applied to a

variety of educational purposes in the coming fiscal year.

Post-secondary educational institutions will also be required to

reconsider their priorities. In the universities, costs can be reduced

through increased efficiency and rationalization of programs, and early

retirement incentives can be used to reduce faculties. I point out that

while the universities were asked to budget for a 6 percent reduction

in operating grants for 1984-85, after reviewing the actions needed to

meet this target the government has scaled the reduction back to 5

percent. Just as the government is avoiding major tax increases, I

would expect the universities to use the extra funds to restrain the

increases in tuition that have been announced.

For colleges, the government has decided to reduce operating grants

by only 3.5 percent. These institutions are closely oriented toward

preparing students for the job market and I expect that they will be

able to absorb students affected by any limitation on university

admissions.

My colleague the Minister of Education will shortly provide details

concerning a restructuring of student financial aid in British

Columbia. Effective April 1, 1984, student aid will be provided

primarily in the form of loans, rather than grants as in the past. This

matches the federal government's approach to student financial

assistance and will improve the balance between government and

individual financing of post-secondary education. In 1982-83 students

paid 12.5 percent of the costs of university education and 10 percent

of college costs in British Columbia. Ontario universities, by

comparison, cover 18 percent of their costs through tuition fees. It is

often argued that education provides public benefits and should

therefore be publicly financed, but there are also significant benefits

to the individual in the form of employment opportunities and resultant

higher income. Surely a public subsidy of over 80 percent is more than

fair. Provision of loans to needy students will ensure access to all

qualified persons, while requiring that the assistance is repaid from

their future earnings.

My colleagues the Minister of Education and the Minister of

Universities, Science and Communications will announce shortly a new

provincial government scholarship program, based on academic

achievement, to be developed in consultation with interested groups. In

addition, to assist young people in supporting themselves during their

education, the Ministry of Labour will fund a student employment

program and a new student venture capital program in 1984-85. The

latter will give students an opportunity to create their own jobs using

loans guaranteed by the government.

Provincial assistance to municipalities is provided through the

revenue sharing formula, under which the amount available for grants is

based on revenue from major provincial taxes and resource charges. The

amount for each fiscal year is determined primarily by the estimated

revenue for that year, plus or minus an adjustment for the difference

between estimated and actual revenue two years earlier. Because of the

large revenue shortfall in 1982-83, there is a substantial negative

adjustment in 1984-85. As a result, the total allocation to the

revenue-sharing fund for municipalities will decline from $210 million

in 1983-84 to $175 million in 1984-85. Fortunately the fund has an

unspent balance, which arose during 1982-83 due to reduced municipal

participation in conditional grant programs. As a result, the total

available for distribution in 1984-85 will be $202 million, only

marginally less than in 1983-84.

Municipal officials have expressed concern about fluctuations in

revenue-sharing because of the difficulties this presents for their own

financial planning. From my own civic experience, I certainly

understand and sympathize with these concerns. I point out, however,

that these fluctuations reflect those in the revenue of the provincial

government itself. When, as Minister of Municipal Affairs and Housing,

I introduced the revenue-sharing program in 1977, I emphasized for the

government that municipalities would share the same growth in revenue

as the province. This meant sharing the bad as well as the good.

Consistent with this principle, the recent recession has now affected

municipalities as it has the provincial government.

Nevertheless, because of the concerns expressed, I am prepared to

consider the development of a stabilization mechanism for

revenue-sharing. Clearly the municipalities of the province will

benefit from the stabilizing effect of the fund balance that I

mentioned earlier, and perhaps a more formal approach could yield even

greater benefits. And so the Ministry of Finance will be reviewing this

suggestion during the next few months, in consultation with the

Ministry of Municipal Affairs and the Union of British Columbia

Municipalities, with a view to developing specific proposals for

1985-86.

Despite the overall reduction in government operating expenditure,

provision has been made for a number of economic development and public

investment initiatives. In comparison with the enormous expenditures on

social programs, these allocations, Mr. Speaker, are very small. But

the programs funded will provide important benefits to the people of

the province through greater economic opportunity or environmental

safety.

The Ministry of Universities, Science and Communications has been

allocated $4.7 million for the discovery enterprise program, primarily

to assist in raising equity for high technology ventures in the

province. In addition, a portion of this funding may be made available

to establish chairs at our universities for experts in high technology.

Establishment of a core of expertise can be an important inducement for

the location here of technology-related enterprises.

The accelerated diking program started last year will be continued

with an allocation of $8.8 million for 1984-85. This program will yield

increasing benefits through flood protection in future years. In this

connection I have also identified a requirement for a new system of

insurance for flood damage. Obviously there are difficulties in

providing private insurance, but the taxpayer cannot be expected to

assume all of the risk on behalf of those in flood-prone areas. So I

invite the insurance industry today to bring to the government

innovative proposals for meeting this need.

[4:15]

The Ministry of Lands, Parks and Housing will make available a total

of $25 million for loans to municipalities under

section 286 of the

Municipal Act. This financing, which is used for servicing new

residential land, should create construction activity and at the same

time help to stabilize land prices.

[ Page 3345 ]

Finance will also be provided for road construction and

reforestation in connection with small enterprise projects sponsored by

the Ministry of Forests.

In speaking of economic development, I want to emphasize again today

the importance to British Columbia of Expo 86, both for the direct

activity it will create and for the favourable attention it will draw

to our province. Planning and development are proceeding rapidly, and

with the recently announced participation of the People's Republic of

China, it is clear that British Columbia shall be hosting a major

world-class exposition. During the construction and operation of Expo

86 over the next three years, an estimated 60,000 person-years of

employment will be generated for British Columbians. In addition, to

ensure that Vancouver's transportation system is ready both to meet the

demand for visitors as well as to be a showcase for the fair, work is

proceeding rapidly on both the ALRT system and the Annacis Island

bridge toward completion dates in early 1986.

1 want to comment briefly today on some administrative reforms being

made in connection with capital borrowing. Under legislation passed

last year, the government now has the option of borrowing funds and

relending them to Crown corporations. Previously, all Crown

corporations borrowed directly under provincial guarantee. With the new

flexibility we now have, the government can obtain better terms by

undertaking a larger borrowing for several corporations, rather than

requiring each to borrow separately. Savings will also be made on the

temporary borrowings required by regional hospital districts, school

districts, universities and colleges in anticipation of their

financing. Under newly developed procedures, the provincial government

will now be able to guarantee these loans in order to reduce the

interest rate charged by financial institutions.

I spoke earlier today about the high priority this government has

given to the provision of health care services. Of all the programs in

government, health care has been treated most generously in this period

of restraint because it is our most essential service.

Many British Columbians are fully aware that the federal government

has been making a political issue of health care services. Ottawa's

approach to this matter has been, to put it in the most favourable

light, mischievous. The Canada Health Act has been introduced into

parliament in an attempt to portray the federal government as the

saviour of medicare and hospital care.

In order to provide some perspective on this issue, may I briefly

review the history of health care funding in Canada. In 1949 British

Columbia became the second province to implement a scheme of universal

hospital insurance coverage. The federal government began a

cost-sharing program in 1958 under the Hospital Insurance and

Diagnostic Services Act, which provided roughly 50 percent federal

reimbursement for provincial costs under programs conforming to certain

standards. In 1968 a similar program was started under the Medical Care

Act, to provide federal cost-sharing for provincially operated medicare

programs. British Columbia and Saskatchewan were the first provinces to

participate in this plan.

The programs proved to be very popular with Canadians. Services

expanded greatly and, not surprisingly, costs increased rapidly. Having

used taxpayers' money to induce the provinces to spend more on medical

and hospital programs, the federal government later decided that it

could not afford to pay its share of the costs. In 1975 the federal

government unilaterally placed a ceiling on the annual increases in its

medicare contributions and gave notice of its intention to withdraw

from participation in hospital insurance funding. In taking these

actions, the federal government blamed the provinces for spending too

much on health care programs. The irony of this in today's context will

be readily apparent to all hon. members.

A year of difficult negotiations produced a new system for the

provision of federal contributions for health care under EPF, the

established programs financing arrangements. Beginning in 1977, federal

payments to provincial governments were determined under a complex

formula based on population, gross national product and the value of a

specified portion of the personal and corporation income tax fields.

Since contributions were no longer related to actual provincial

expenditures, federal exposure to escalating costs was eliminated. In

exchange, provincial governments were to receive a stable and

predictable source of funding and were permitted greater flexibility to

improve the efficiency and cost-effectiveness of their health care

systems. The incentive to structure programs to maximize federal

cost-sharing was replaced by a new incentive to control costs and

maximize the value received for the taxpayers' money. B.C. and other

provinces subsequently took steps to rationalize health care delivery

systems to achieve these goals.

Five years later, in 1982, when EPF came up for renegotiation, the

federal government again decided that its contributions were too large.

Ottawa unilaterally changed the EPF formula to reduce its transfer

payments and to effectively shift part of its deficit to the provinces.

To maintain health care services, therefore, provinces could either

raise taxes or cut back other services.

Incredibly, the federal government decided, at the same time that it

was reducing funding, to start a campaign to force provincial

governments in this nation to spend more on health care. Extravagant

claims have been and continue to be made about so-called erosion of

services. The campaign recently culminated with the introduction of the

Canada Health Act, which would empower the federal government to

withhold a portion of EPF contributions from provinces which impose or

allow fees for health services or which fail to meet certain other

standards.

To further confuse the issues surrounding health funding, Ottawa

claimed last fall that it was paying additional money to provinces for

established programs financing. The fact of the matter is that federal

payments were increased only due to revised estimates of the amounts

already owing to the provinces under the existing formula. Part of the

change is due to new estimates of gross national product, and the

remainder is due to a decline in personal income tax revenues of the

provinces. For the federal government to portray this as increased

funding is at best misleading.

While I can understand the political motivation behind the Canada

Health Act initiative, I have to say that it is extremely irresponsible

of the federal government in this country to limit its own financial

commitment to health care and at the same time pressure the provinces

to spend more. Our analysis shows that since the introduction of EPF in

1977-78, the federal share of health costs in British Columbia has

declined from 43 percent to 39 percent. An increase of $364 million is

required to raise the federal contribution to a more appropriate level

of 50 percent.

It's my belief that the current federal proposals will actually damage rather than secure the health care system in this

[ Page 3346 ]

country. Hospital co-insurance fees have been an

integral part of British Columbia's health care funding for 30 years.

Through these very minimal charges we obtain additional resources for

hospitals, as well as give a necessary indication to the users that

there is a real cost to hospital services. The fees are certainly not

onerous and the government pays them on behalf of those in need. The

result is that direct users of acute-care hospitals contribute only 3

percent of the total cost, while the general taxpayer contributes 97

percent.

concluded that even these minor charges represent erosion of health

care, and has decided to penalize British Columbians to enforce this

view. Beginning in 1984-85, established programs financing payments to

British Columbia could be reduced by an amount equivalent to the

collections from charges for acute care, emergency care and day

surgery. Based on current fee levels, this penalty would represent a

loss of $40 million per year to this province.

British Columbians cannot afford this disruption to our health care

financing system. Loss of this revenue, combined with the earlier

reductions in federal funding, represent the real threat to health care

in British Columbia. The ideal way to remove this threat would be for

the federal government to drop its proposal and to raise its

contributions for health care to an adequate level. Unfortunately the

current federal administration has decided to manipulate Canada's

health care system for its own political purposes, hoping — I think in

vain — that Canadians will blame the provinces for the consequences. I

note that both opposition parties in Parliament have taken positions in

favour of higher federal contributions.

To ensure the continued stability of health care services in Canada,

we need cooperation; we do not need confrontation. Accordingly, I today

call for a federal-provincial conference of finance and health

ministers to address the real issues and to abandon the rhetoric.

We believe that British Columbia's user charges neither impede

access to health services nor place a burden on low-income groups. Our

preference, frankly, would be to retain them. Nevertheless, to advance

an agreement, and in a spirit of cooperation, British Columbia is

prepared to replace all acute-care hospital user charges with a single

charge based on family size, levied through the income tax system. The

federal government would be expected to administer the charge under our

existing tax collection agreement.

At the same time, we would hope to obtain a resolution of the

funding issue. The EPF arrangements are admittedly complex, and

opinions may differ as to the correct

interpretation of the numbers. It

is, however, clear that the provinces — and I say "provinces"; all

provinces in this country — bear the full exposure to rising costs. In

British Columbia particularly we must provide an ever-increasing range

and level of services to a growing and an aging population. The costs

of these services have clearly increased more rapidly than federal

contributions. That is the essential issue today.

I sincerely hope that my suggestion for a conference will be

accepted as an important step in protecting health services. A

resolution of the user-charge question and an increase in federal

funding are both necessary for future stability. I have written today

to my federal counterpart — the federal Minister of Finance — to inform

him of our proposals, and to request his cooperation.

[4:30]

In the interim we must have an alternative source of revenue to compensate

for that federal underfunding. To make up part of the shortfall, I am announcing

a new health care maintenance tax in the form of an 8 percent surcharge on provincial

personal income tax. This tax will be phased in at 4 percent for the 1984 taxation

year and will affect payroll deductions in July. It will raise an estimated

$97 million in 1984-85 and $166 million in a full year. I repeat that this is

a temporary measure which will remain in place while we await an appropriate

increase in federal contributions.

During this year my colleague the Minister of Health and I — the

government, in fact — will be pressing for a new health care funding

arrangement which will serve the needs of Canadians in all regions. If

we can achieve a satisfactory resolution, the new tax I have announced

can be reversed. I recognize there presently appears to be little

prospect of agreement from the current federal administration, but

attitudes and circumstances can change quickly in public affairs. Most

importantly in this whole issue, we have logic on our side.

The ultimate benefit of the government's restraint program will be a

healthy and sustainable economic recovery. A smaller, leaner and more

productive public sector will be more restrained in its demands on the

taxpayer, leaving more room for a vibrant private sector. This

government is firmly committed to limiting the tax burden on

individuals and businesses as the financial position of the province

improves. We also plan amendments to make the tax system fairer, more

balanced and more efficient.

This, however, is not the time for major tax changes, and I have

very few measures to announce. I have already described the temporary

personal income surtax to be levied in connection with health care

funding. In addition, I am announcing the following tax changes:

Effective March 1, 1984, the hotel room tax will be levied at a flat

7 percent rate. I have been persuaded that a single rate would be

easier for the hospitality industry to administer than the existing

split tax rate of 6 percent on accommodation priced at less than $50

per day and 8 percent on accommodation priced at $50 or more per day.

Effective midnight tonight, an additional comprehensive list of

safety equipment including infant car seats, portable fire

extinguishers and emergency locator transmitters will be exempted from

the social service or sales tax. I wish to encourage use of these items

both for individual safety and, frankly, as a cost-saving measure to

the taxpayer through accident prevention.

The net effect of these two changes will be a reduction of $400,000

in provincial revenue for 1984-85. Including the new health care

maintenance surtax, the increase in provincial revenue will be $96.6

million in 1984-85.

1 want to comment briefly on property taxes for 1984. Significant

changes to the property assessment and taxation system have been

introduced in the past two years to stabilize tax burdens and simplify

tax calculations. The essential elements of market value assessments

and local flexibility have been retained. I believe that we now have a

much better system than before and, indeed, one of the best systems

anywhere in North America.

In preparing this budget the government has recognized the impact of

property taxes on individuals and businesses, and has avoided loading

additional costs onto the local taxpayer. Accordingly, school budgets

and grant levels have

[ Page 3347 ]

been set to ensure there will be no increase in

non-residential school taxes for shareable costs. Any increase in

residential school taxes will reflect only local discretionary spending

increases. For most municipalities, budgets are expected to show no

increase in 1984, and, with few exceptions, municipal property taxes

will increase very little. There will be a slight rise in rural

property taxes due to the increase from 12 to 13 mills for 1984, which

I announced in this chamber last July. Nevertheless, property taxes

remain below the cost of providing services in rural areas, and no

change is proposed in the rural tax rate for 1985. In

summary, I can

say that property taxes for 1984 will, for the vast majority, increase

only marginally, if at all, from 1983.

Before leaving this subject I shall announce one minor property tax

measure: The minimum property tax payable for 1985, after application

of the basic homeowner grant, will be raised from $150 to $175. The $1

minimum for recipients of the additional homeowner grant for seniors

and the handicapped is not changed.

The main focus of revenue policy this year will be the analysis of

our taxes on business. If we wish our economy to grow and develop in

the future, providing employment and generating revenue for public

services, we must ensure that we have a favourable environment. If we

try to lower taxes for individuals by levying higher taxes on

businesses, we will succeed only in making our industries uncompetitive

and in discouraging new investment. The result of that will be lost

jobs, lost income and lost opportunities. This would be the road to

economic decline. Significant adjustments have been made in the last

year to restrain charges on business. For 1984, property tax relief has

been provided through a new $10,000 actual value exemption for business

and industrial properties and an increase in the exemption for

machinery and equipment from $1,500 of assessed value to $50,000 of

actual value. These exemptions have eliminated taxes on machinery and

equipment for almost 15,000 small business firms, and significantly

reduced property taxes for many others. In addition, businesses have

been assisted through the deferral of a scheduled increase in water

rental charges and limitations on Workers' Compensation Board

assessments.

Despite these measures, concerns have been expressed to me, both in

my recent consultations and previously, that British Columbia's

taxation of business is somewhat higher than in competing

jurisdictions. To ascertain whether this is the case I have

commissioned a study of the tax burden on a variety of types of

business in several jurisdictions. The analysis is complex and

difficult because of certain differences in tax systems. Nonetheless, I

expect to use the results of the study as the basis for a consultative

process to be undertaken this summer. In conjunction with these

discussions, the government will conduct a thorough review of the

impact of taxation on economic development. Consideration will be given

to innovative tax measures for stimulating new investment by large and

small businesses. The government hopes to develop a series of policy

proposals for implementation beginning next year.

Mr. Speaker, this budget that I have presented today will strengthen

the foundation for British Columbia's future. In the coming year this

government will continue with the necessary task of reducing and

rationalizing government in this province. This certainly does not mean

that restraint will be over, because the highly competitive era now

emerging will require us to remain vigilant in controlling our costs.

But the first and the most difficult phase of our economic recovery

program will be complete. The toughest decisions on government services

will have been made, and the basis for a lean and efficient public

sector will have been established.

The next fiscal year will also mark the beginning of the second

phase of the economic program, which will sustain British Columbia and

her people through the recovery. During this phase we shall strengthen

both government finances and the economy in the province to prepare

ourselves for whatever the future may bring. No one would wish to see

another recession such as that which we recently experienced, but if

one comes we're going to be ready. The current period of recovery must

be used as an opportunity to restore fiscal balance and give ourselves

the capacity to absorb any future shocks. We must also bolster our

economy by identifying and building on successful industries. The best

way to ensure that we continue to enjoy one of the highest standards of

living in the world is to develop a strong and a vibrant business

sector which can compete with the best. As our goal we accept no less.

The success achieved by this government since it received a new and

a larger mandate just nine months ago is a fundamental element of

today's budget. It is a success which the majority of British

Columbians will acknowledge with satisfaction and from which they can

take encouragement. To repeat, there are many circumstances, external

as well as those within the province, which could interfere with our

recovery, but it is appropriate today to pause for just a moment and to

note the improvement that is already evident: less expensive

government, surely unique on an international scale; limited and modest

changes in taxation; a new and more realistic approach to employee

relations in the public sector; emphasis on and maintenance of

essential social services; a continued commitment to encouragement of

individual initiative; and a mature recognition of our individual and

collective responsibility for our future.

The course chosen by British Columbians last year has not been easy.

Difficult choices have been required and sacrifices have been made.

Nevertheless, our citizens continue to support these policies because

they recognize that sacrifices must be made to generate future

benefits. Neither I nor anyone else, in this chamber or outside, can

guarantee that the time ahead will be smooth, but I can provide

assurance that it will be better. Our economy is recovering, jobs are

being created, confidence is improving and British Columbians are

quickly adapting themselves to a new economic environment.

As we become accustomed to this change, we can find satisfaction in

knowing that we have taken steps which others still have ahead of them.

We have been the pioneers, and we can now watch others follow. Mr.

Speaker, I believe that one day we shall look back on this time as a

period of shared adversity in which we together forged a stronger

future.

MR. STUPICH: Just a couple of words. The hour is late and perhaps members have other things to do; I know I will have this evening.

May I say first that there are some curious contradictions in the

minister's speech. He tells us of continued dependence upon the private

sector to take us out of our recession, that in the United States the

earlier stages of recovery were led by increased consumer spending, and

then proceeds to take out of the economy $1.6 billion more than he did

last year — $1.6 billion that will not be in the hands of individuals

to lead

[ Page 3348 ]

us on the way to recovery. Continued dependence

upon the private sector, and yet all he has to offer is further

subsidies to the private sector. Whatever he calls it, Mr. Speaker, the

$470 million is nothing less than a subsidy to those who are exporting

our coal to Japan. It will be described differently — and that will be

argued over the next few days — but there is no question that this is

where the $470 million is going.

[4:45]

You will recall, Mr. Speaker, our being assured in this House that

not a dollar of taxpayers' money would go into that project. We are

trying to attract that will-of-the-wisp high tech, when all around us

in this province we have abundant resources that we are shipping out of

the province in an unprocessed state. The proportion of round logs now

being shipped out of B.C. is higher than ever before. And instead of

working to do something more with the resources, skills and energy that

we know we have in this province, we are running around the world —

cabinet ministers chasing dreams.

I'll have a good deal more to say tomorrow. May I right now simply move adjournment of this debate until the next sitting.

Motion approved.

MR. SPEAKER: Hon. members, prior to the next point of

business, possibly at this time it would be appropriate for a short

recess while our guests make their way from the chamber.

The House took recess at 4:48 p.m.

The House resumed at 4:51 p.m.

Introduction of Bills

INCOME TAX HEALTH CARE

MAINTENANCE AMENDMENT ACT, 1984

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

a bill intituled Income Tax Health Care Maintenance Amendment Act, 1984.

Bill 2 introduced, read a first time and ordered to be placed on orders of

the day for second reading at the next sitting of the House after today.

HOTEL ROOM TAX AMENDMENT ACT, 1984

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

a bill intituled Hotel Room Tax Amendment Act, 1984.

Bill 3 introduced, read a first time and ordered to be placed on

orders of the day for second reading at the next sitting of the House

after today.

HOME OWNER GRANT AMENDMENT ACT, 1984

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

a bill intituled Home Owner Grant Amendment Act, 1984.

Bill 4 introduced, read a first time and ordered to be placed on

orders of the day for second reading at the next sitting of the House

after today.

UNIVERSITY OF VICTORIA SPECIAL APPROPRIATION ACT, 1984

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

a bill intituled University of Victoria Special Appropriation Act, 1984.

Bill 5 introduced, read a first time and ordered to be placed on

orders of the day for second reading at the next sitting of the House

after today.

RESOURCE REVENUE STABILIZATION FUND ACT

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

a bill intituled Resource Revenue Stablization Rind Act.

Bill 6 introduced, read a first time and ordered to be placed on orders of

the day for second reading at the next sitting of the House after today.

ASSESSMENT AMENDMENT ACT, 1984

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

a bill intituled Assessment Amendment Act, 1984.

Bill 7 introduced, read a first time and ordered to be placed on

orders of the day for second reading at the next sitting of the House

after today.

Hon. Mr. Gardom moved adjournment of the House.

Motion approved.

The House adjourned at 4:56 p.m.

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