1988 Legislative Session: 2nd Session, 34th 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)

THURSDAY, MARCH 24, 1988

Afternoon Sitting

[ Page

3621 ]

CONTENTS

Routine Proceedings

Tabling Documents –– 3621

Estimates of Sums Required for the Service of the Province

Hon. Mr. Couvelier –– 3621

Budget Address

Hon. Mr. Couvelier –– 3621

Introduction and first reading of bills –– 3627

Homeowner Grant Amendment Act,1988 (Bill 2). Hon. Mr. Couvelier

Horse Racing Tax Amendment Act,1988 (Bill 3). Hon. Mr. Couvelier

Income Tax Amendment Act,1988 (Bill 4). Hon. Mr. Couvelier

Insurance Premium Tax Amendment Act,1988 (Bill 5). Hon. Mr. Couvelier

Land Tax Deferment Amendment Act,1988 (Bill 6). Hon. Mr. Couvelier

Mineral Resource Tax Amendment Act,1988 (Bill 7). Hon. Mr. Couvelier

Mining Tax Amendment Act,1988 (Bill 8). Hon. Mr. Couvelier

Motor Fuel Tax Amendment Act,1988 (Bill 9). Hon. Mr. Couvelier

Social Service Tax Amendment Act,1988 (Bill 10). Hon. Mr. Couvelier

Taxation (Rural Area) Amendment Act,1988 (Bill 11). Hon. Mr. Couvelier

Tobacco Tax Amendment Act,1988 (Bill 12). Hon. Mr. Couvelier

Tourist Accommodation (Assessment Relief) Act (Bill 13). Hon. Mr. Couvelier

Budget Stabilization Fund Act (Bill 14). Hon. Mr. Couvelier

Education Excellence Appropriation Repeal Act (Bill 15). Hon. Mr. Couvelier

Health Improvement Appropriation Repeal Act (Bill 16). Hon. Mr. Couvelier

Privatization Benefits Fund Act (Bill 17). Hon. Mr. Couvelier

Special Accounts Appropriation and Control Act (Bill 18). Hon. Mr. Couvelier

Provincial-Municipal Partnership (Taxation Measures) Amendment Act,1988 (Bill 19).

Hon. Mr. Couvelier

The House met at 2:03 p.m.

MR. SPEAKER: Hon. members, would you rise for prayers. We're

privileged today to have a former member of our assembly, Harvey

Schroeder, here to say prayers for us.

Prayers

REV. H.W. SCHROEDER: Let us pray.

Our Father, we step into your presence because you have invited us

to come. We stand in your presence not because of any merit of our own

but because of the finished work of your dear Son.

We pray today for the people of British Columbia. May they incline

to your will and walk in your way. And having found that will, may it

find its way into this chamber, in the minds and the hearts of those

whom the people have chosen to represent them here.

Now, as representative of each individual standing in your presence in this room, I bring to you this collective request.

Lord, make me an instrument of your peace. Where there is hatred,

let me show love; where there is injury, pardon; where there is doubt,

faith; where there is despair, hope; where there is darkness, light;

and where there is sadness, joy.

O Divine Master, grant that I might not so much seek to be consoled as to console,

or to be understood as to understand, or to be loved as to love. For it is in

giving that we receive, it is in pardoning that we are pardoned, and it is in

dying that we are born to eternal life, through Christ our Lord. Amen.

Orders of the Day

HON. MR. COUVELIER: Mr. Speaker, I move that the House at its

next sitting resolve itself for this session into a committee to

consider supply to be granted to Her Majesty.

Motion approved.

Hon. Mr. Couvelier tabled the comptroller-general's report in accordance with

section 8 (4) of the Financial Administration Act.

ESTIMATES OF SUMS REQUIRED

FOR THE SERVICE OF THE PROVINCE

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

Estimates of Sums Required for the Service of the Province for the fiscal year

ending March 31, 1989, recommending the same to the Legislative Assembly.

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

Motion approved.

HON. MR. COUVELIER: Mr. Speaker, I move, seconded by the hon. House

Leader (Hon. Mr. Strachan), that Mr. Speaker do now leave the chair for the

House to go into Committee of Supply,

Budget Address

HON. MR. COUVELIER: I am proud to present the second budget of this

administration. In our 1987-88 budget we set out the economic and fiscal policies

that gave a fresh start. These policies have guided our decision-making again

this year. Traditionally a budget reports on the year past and sets a course

for the year ahead. This budget continues that tradition, and it goes further.

This budget creates the structures which help remove the

uncertainties of the future. This budget begins a long-range outlook so

that we have some fiscal flexibility for our children's future. We are

building a long-term economic plan for the province and a strategic

plan for government — a plan forged from the dedication and hard work

of all British Columbians. This budget builds on what we have learned

over the past year.

We have worked with and heard from many British Columbians; people

from business and universities, labour and the professions; people from

every region of the province. One of the strongest messages we have

heard is that we must set a firm and clear course that provides

stability and which will allow us to seize any opportunity with

confidence and appropriate resources.

Last year we identified three challenges: labour relations,

industrial diversification and strengthening our connections with the

Pacific Rim. We introduced the Industrial Relations Act, establishing a

new framework for labour relations in British Columbia. The Industrial

Relations Council is working. Labour and management can achieve the

goals of this legislation.

The second challenge was to broaden and strengthen the province's

industrial base. We are making good progress on a wide variety of

fronts ranging from aquaculture to developing an international

financial centre in Vancouver. Some of the best ideas have come from

people in the regions of the province. Regional decisions are already

making a difference.

The third challenge was to promote Pacific Rim connections. Success

will not come from any one initiative but from many steps. A good

example is the three-year Pacific Rim education initiative which

started last year. Increasing exports to Pacific Rim countries is a

major reason for our excellent economic performance in 1987 and one key

to our future prosperity.

In last year's budget, I cautiously forecast economic growth of 1.5

percent. I'm pleased to report to this House, Mr. Speaker, that our

1987 economic growth rate was 4 percent. That extraordinary performance

reflected sound fiscal management, an element of good luck and, most

importantly, hard work by all British Columbians. British Columbians

were the big winners. They found stable and productive work as the

economy expanded.

Between January 1987 and January 1988, the unemployment rate dropped

by 3.5 percentage points to 10.1 percent. More than 90,000 jobs were

created — an employment increase of 7.3 percent. That's an achievement

unmatched by any other province in this country. That improvement has

been provincewide. Even in the lower mainland, where Expo increased

employment during 1986, we saw further employment growth in 1987. The

record volumes of export sales also

[ Page 3622 ]

contributed to job creation. Exports will remain a

critical element in job creation, and we are optimistic with the

outlook for trade.

Over recent years, business has invested billions of dollars in

replacement and new plant and equipment. Labour and management have

negotiated realistic wage increases. Furthermore, in 1987, the absence

of any serious labour disputes enhanced our comparative performance. We

were also helped by international events. Commodity prices increased,

and United States and Canadian dollars fell against most other

currencies. All these factors helped British Columbia firms regain old

markets, penetrate new markets, increase profit margins and reinvest in

plant and machinery.

Mr. Speaker, business in British Columbia showed its enthusiasm by

investing 19 percent more in this province last year than in 1986. As a

result, we can look to even higher output and productivity over the

next few years.

British Columbia's consumer spending has been strong, stimulated by

the I percent reduction in the social service tax last year. Retail

sales increased 9.8 percent in 1987. Housing starts rose 40 percent,

increasing from 20,700 to almost 29,000 units.

British Columbia's economic momentum is continuing. Let me remind

this House that the prestigious Investment Dealers' Association of

Canada stated about our province just a month ago:

"Access to U.S. markets, combined with the added benefits

of high productivity, international competitiveness and an attractive social

and political environment, will draw substantial amounts of investment capital,

especially from Asia and Europe, to expand the manufacturing infrastructure

in the province."

Our success will last only if we continue to work together. British

Columbia's wage structure was not competitive in the late 1970s and

early 1980s. When world commodity prices fell, our resource industries

were devastated. Subsequently, however, business and labour have

negotiated reasonable settlements. We have regained our

competitiveness. It can be quickly eroded, however, by excessive wage

and price increases. The adjustment to the recent recession was hard.

It would be tragic if these gains were lost.

British Columbians understand that wages in the private sector are

limited by profits. In the public sector wages are limited by the

taxpayer's ability to pay. Wage increases in both the private and

public sector must be tied to productivity and to the maintenance of a

competitive position. Business, government and labour negotiators must

maintain a competitive cost base while developing methods of sharing

gains when the economy is strong.

This year we have an especially heavy bargaining calendar. We have a

choice. Either we maintain this competitive position or we give it

away. This government will take a responsible approach to collective

bargaining in 1988. This budget provides for fair and reasonable wage

settlement for public sector employees.

Almost two-thirds of provincial government spending is for wages of

government employees or employees of agencies funded by government.

There are clear limits on what taxpayers can afford. This government

recognizes that public sector wage settlements can create a domino

effect and trigger excessive demands in the private sector.

[2:15]

1 now want to talk about this government's attitude toward debt.

Politicians are too easily seduced by spending requests. If we haven't

got the money, it's easy to borrow. Interests costs don't seem all that

threatening at first. But as the debt builds, growing interest payments

mean fewer dollars for education and social programs. They also limit

our flexibility to deal with inevitable swings in the economy.

There can be no fresh start for our children if we are to continue

mortgaging their future. There can be no fresh start if we continue an

addiction to spending beyond our means. This government will not leave

our young people a legacy of obligations caused by our own

short-sighted selfishness.

Key goals in our long-range plan are eliminating the current deficit

— reducing the burden of accumulated debt — and stabilizing government

revenues. Development of this plan is being assisted by the Premier's

Economic Advisory Council and by other leaders in the private sector.

Our strengths are the energy and talent of our people, our position on

the Pacific Rim, our natural resources, the variety and beauty of our

geography and the vigour of our institutions.

Let me now describe our immediate economic outlook. Our position in

the international economy will be influenced by the major economic

powers — the United States, Japan and West Germany. They must correct

their trade and fiscal imbalances and fight protectionism. The world

must collectively deal with the debt crisis in many developing

countries. We need a firmer resolve in Canada. The federal government

must put its fiscal house in order. The Bank of Canada, when setting

monetary policy, must look at conditions across the country, rather

than concentrating only on central Canada.

Our British Columbia outlook is strong. We see steady growth in the

economy of at least 2.7 percent in 1988. Our exchange rate will

continue providing an advantage in selling to Europe and Japan. This

will help mitigate any slowdown in world growth. Through efforts by

business and labour, our resource industries can remain competitive.

Interest and inflation rates should be stable. Business capital

investment will continue to stimulate our economy. A 4.5 percent

average growth in employment is expected. Retail sales will show

healthy growth.

This budget is tailored to that favourable economic outlook, and,

accordingly, the efforts of government will be directed to three areas.

First, enhancing social services for all British Columbians. Second,

improving the competitive position of British Columbia business. Third,

continuing responsible fiscal management.

In my last budget, I talked about investing in people. This year

that investment will grow. Contributions to public school operating

costs will increase by $114 million to over $1.3 billion in the 1988-89

fiscal year. This increase will be funded partly by higher school taxes

on business of $46 million, with. the balance being paid from general

revenue. The province will also provide $118 million for school debt

service costs, and $121 million for the teachers' pension plan.

Independent schools funding will increase to $48 million this year

as a result of enrolment growth and commitments made last year. Our

Passport to Education program will receive $8.5 million next year. My

colleague the Minister of Education is providing $15 million to upgrade

and add more computers in the classroom in the first year of a

multi-year program. This is one of the most important initiatives in

our budget, and we expect to attract great interest from the industry

and thereby produce additional value.

[ Page

3623 ]

Property tax relief through the homeowner grant program will be maintained.

New construction, population growth and other factors will increase program

costs 6.3 percent to $299 million.

British Columbia universities will receive operating grants of $332

million this year, an increase of 5 percent. The new University

Foundation Act, unique in Canada, will attract private sector

tax-supported donations to our universities. I am today reinforcing

this initiative with $10 million, and issuing an invitation to the

private sector and universities to participate with matching funds.

Operating contributions to colleges and institutes will total $287

million, a slight increase from last year's estimate.

British Columbia, by virtue of acknowledged expertise, was selected

as the home for a new Commonwealth distance education centre. The

centre will provide university degree and technical programs by

satellite and correspondence to other Commonwealth countries. In

support of this excellence, provincial funding for distance education

will exceed $17 million next year, an increase of almost 9 percent.

My colleague the Minister of Advanced Education and Job Training

will more than double funding for the student financial assistance

program, to $58 million. This student assistance program is the finest

in Canada.

Mr. Speaker, there are many in society who require the help offered

through our social programs. However, the monthly caseload of people on

income assistance has declined by approximately 11 percent since

February,1985. Significantly, the average number of employable persons

on income assistance has dropped by almost 20 percent. I expect

continued reductions in this caseload as a result of growth in the

economy.

Last June we increased GAIN support allowances for families. In

December we increased maximum shelter allowances. These will add

approximately $38 million to the 1988-89 budget.

My colleague the Minister of Social Services and Housing is

restructuring programs to improve the delivery of social services.

These changes will promote equity and consistency across the province.

The ministry will focus more specialized attention on the needs of the

handicapped, families, children and those who require help to achieve

financial independence. We will also ensure that assistance goes only

to those who need it.

Over the next two years, approximately $15 million will be allocated

to enforce court maintenance orders on behalf of income assistance

recipients or others needing the program.

Funding for services to families and children has been increased by

8 percent to $114 million. A foster parent campaign will encourage

British Columbians to become involved. Programs to strengthen the

family will be funded through an allocation of up to $20 million in the

New Programs vote.

Project Reconnect, a pilot project last year, will be expanded. This

program links "street kids" with family, education, medical and

employment services.

In cooperation with the federal government, we will provide almost 1,900 new units of social housing in 1988-89.

Services for the disabled remain a priority. The Ministry of Social Services

and Housing will spend $317 million on programs for the disabled and children

with special needs. The Ministry of Education will spend $195 million for equipment

for special classrooms, and on other measures, including personal attendants,

who make it possible for severely disabled children to attend regular classes.

The Ministry of Health will spend $29 million for special health services to

the disabled.

We will continue our efforts to relocate the disabled, and people

convalescing from mental illness, from institutions to appropriate

community care. This follows extensive consultation with the disabled,

parents, staff, community groups and the communities to which people

are returning.

I now come to a very important issue: health care. This province is

well served by a world-class health care system. We have

well-equipped hospitals and highly trained and committed health care

workers. But rising health care costs and the large percentage of

taxpayers' dollars which health care consumes are major challenges for

government.

This year, Ministry of Health expenditures will total over $3.9

billion, an increase of over 10 percent from last year. That's more

than $1,300 for every man, woman and child in the province. That's

nearly one-third of our total budget.

The irony is that despite spending more and more dollars, we are

still hypnotized by curing sickness rather than keeping ourselves

healthy. We have been coming at the issue backwards. Many disciplines

can be utilized in maintaining health other than just the medical

profession and hospital system. Yet they are consuming all available

funding, and their demands are insatiable. The state of wellness of our

people is a much more important measure than the number of acute-care

beds utilized.

My colleague the Minister of Health is exploring ways to provide

certain medical services better and at less cost by using highly

trained and specialized health care workers, such as nurse

practitioners and midwives. He will be examining the merits of

sustaining wellness rather paying for sickness. We support the proper

use of chiropractors, podiatrists, physiotherapists, orthodontists,

massage practitioners and naturopaths. We will continue to cover these

enhanced medical benefits through the Medical Services Plan, Mr.

Speaker, even though the federal government contributes nothing to it.

Good health is, first of all, a question of personal priority. We

must be prudent users of the health care system. We must cultivate

healthy lifestyles. Health care practitioners must provide

cost-effective care. What factors contribute to high health costs? Our

doctors' fees remain the highest in Canada, more than 20 percent above

the national average, and we have more doctors relative to our

population than other provinces.

In a competitive market, a high number of doctors would be a good

feature. In theory. reduced prices would result. In a totally

subsidized system such as ours, however, no such reduction occurs. In

an effort to inject some small element of common sense into the

equation, effective May 1, 1988, MSP premiums will fund 50 percent of

physicians' fees and 100 percent of the taxpayers' cost of enhanced

medical benefits.

[2:30]

Monthly premiums will range from $29 for individuals to $58 for

families of three or more. These premiums are still lower than the

richest province in Canada — Ontario. This relatively large increase

will nevertheless not impact those unable to pay. We are improving the

premium assistance program to ensure fairness and sensitivity. This

year an additional $12 million will be provided for that purpose.

To increase cost effectiveness and awareness, computerization of the

Medical Services Plan will enable doctors to bill the plan directly and

print a statement for the patient. These statements are not bills that

the patient must pay. They

[ Page 3624 ]

will alert the patient to the cost of services and

encourage responsible use of publicly funded health services. We will

also consider a new computer-readable medicare card. If a subscriber

chooses, vital health care information can be coded into the card. The

cards will speed service and improve quality of care.

As announced in the Speech from the Throne, the Ministry of Health,

supported by the Greater Victoria Hospital Society and the Capital

Regional District, will initiate a project unique in Canada: to deliver

health care through a community-based, integrated delivery system. This

project will be funded through the New Programs vote. Our senior

citizens are valuable members of our society requiring special

attention and services. Over the next two decades the proportion of

seniors in our population is expected to increase significantly.

To provide for that growth and increased costs, government will

increase user fees for clients receiving extended and long-term care as

well as those receiving long-term mental health and alcohol and drug

treatment. These fees will be increased from 75 percent to 85 percent

of the combined old age security and guaranteed income supplement

payments. These new rates, however, will ensure that even the most

needy clients will continue to have more disposable income than those

in seven other provinces.

Our government will ask those who can afford to do so to meet part

of the costs of long-term care by paying a proportion of the cost of

room and board. This budget demonstrates the government's commitment to

health care. The 10 percent increase in the Ministry of Health spending

amounts to $362 million — almost one-half of the increase in the total

budgetary expenditure.

Two significant reports on alcohol and drug abuse have been released

in the past year. This chilling information tells us that 10 percent of

all health costs are alcohol-related. One in five British Columbians

consumes enough alcohol to risk health damage. Over 70 percent of all

male inmates in correctional facilities were under the influence of

alcohol at the time of their crime. One-third of time in provincial

correctional centres is for drinking-and-driving offences. Over 8

percent of social welfare expenditure arises from alcohol-related

problems. In many cases the problem manifests itself in child abuse or

other forms of violence. In an average year, drinking and driving

results in 200 deaths and 7,000 injuries.

Alcohol and drug abuse in British Columbia has immense social cost.

More of this cost must be met from the products whose consumption

contributes to the problem. Effective April 1, 1988, the social service

tax on alcoholic beverages will be increased from 6 to 10 percent. This

rate will also be imposed on draught beer. At the same time the 5

percent liquor purchase fee paid by licensees will be eliminated. Funds

in support of government programs will increase by $80 million in

1988-89 as a result of these changes.

The tobacco tax rate will be increased to the Canadian average to

discourage smoking. Effective midnight tonight, the rate will be $1.13

for a package of 25. This tax increase will bring an additional $20

million in revenue.

Our province already spends $25 million annually on substance abuse

programs. I am pleased to announce an additional $23 million next year,

almost doubling the funds for alcohol and drug education, prevention

and treatment programs. My colleague the Minister of Labour and

Consumer Services will be the focal point for all government programs

in this area.

Helping victims of crime is an essential element in our justice

system, and government will provide $2.1 million this year. We will

also increase funding for legal aid by 11 percent.

Construction of three major correctional centres to replace Oakalla

and the Lakeside women's facility in Burnaby will begin this year.

Mr. Speaker, our government will be spending almost $400 million

next year for capital projects. These will enhance services in health,

education and public protection.

Furthermore, we will spend almost $600 million on highway

construction, upgrading and maintenance. The Vancouver Island Highway

project will receive $6 million for preliminary work.

The Ministry of Municipal Affairs will provide approximately $240

million to local government in revenue-sharing grants. Furthermore, my

colleague the Minister of Municipal Affairs will be reviewing the

upgrading and improvement of municipal water and sewer systems with

local government.

Mr. Speaker, I would now like to outline government's initiatives to

improve the competitive position of British Columbia business. Tax

levels are crucial to competitiveness. On January I of this year we

reduced the general corporation income tax rate from 15 percent to 14

percent, a commitment announced in last year's budget. This will reduce

taxes paid by British Columbia business by $25 million in 1988-89. I'm

also reducing the small business income tax rate from 11 percent to 9

percent effective July 1.

As a result of federal tax reform changes to personal and

corporation income tax rates, effective January 1,1988, there is,

again, an imbalance between the small business and personal income tax

rates. My tax reduction will restore the necessary balance and will

save small business $18 million next year and $30 million the following

year.

Federal tax reform will reduce our revenues because of the linkage

between provincial taxes and the federal tax bases. As a result of

federal changes, I expect British Columbia corporation income tax

revenues to increase by $33 million and personal income tax revenues to

decline by $140 million next year. The reductions I have announced in

provincial corporation income tax rates will more than offset the

revenue increase resulting from the federal tax reform.

We will preserve the reduction in personal income taxes.

Accordingly, the average reduction in provincial income tax for

taxpayers will be $100 this year.

I am pleased to announce two further provincial tax measures to

stimulate small business activity and create employment. The first will

benefit the tourism industry, particularly small operators. Effective

for the 1989 taxation year, there will be a new deduction of 50 percent

of the assessed value of all tourist accommodation, to a maximum

deduction of $150,000. This change means that small resorts will not

face sharply higher property taxes resulting from classification

changes. In addition, over 1,000 properties not covered by the previous

seasonal resort tax classification will have their property taxes

significantly reduced.

The second measure will benefit the horse-racing and - breeding

industry. Government will reduce its share of the horse-racing tax by

one-half of I percent to 3 percent, with a corresponding increase in

the share of tax received by the British Columbia Racing Commission.

This will provide an additional $1 million to the industry.

Our government believes private enterprise works best when it works on its own. Government too often props up the

[ Page 3625 ]

inefficient and artificially interferes with the

marketplace. Accordingly, my colleague the Minister of Economic

Development is reshaping all our business assistance programs.

During the year, we will work with the federal government to change

the emphasis from grants and loans to loan guarantees or equity

participation. We plan to have new programs in place before April 1,

1989. An important reason for this change to guarantees is that we can

lever the dollar commitment four times. Our budgetary allotment, in

effect, becomes the bad debt provision, rather than the full grant

provision.

I am today providing for a regional seed capital program to

encourage private sector financial institutions to get more involved in

regional and small business development. Under this program, government

will guarantee up to 75 percent of individual loans made by financial

institutions to small business, to a maximum of $50,000 per loan. Up to

$16 million will be guaranteed during 1988-89, divided among the eight

regions of the province. This program will be coordinated by my

colleague the Minister of Economic Development.

Continued economic growth depends to a large extent on business

adopting new technology. Our government will support research and

development by industry and universities and provide funding from the

New Programs vote.

Mr. Speaker, forests remain the foundation of our economy. Last

October, we implemented a comprehensive forest policy with a new

stumpage appraisal system, giving British Columbians a fairer return

from this valuable resource. The new policy requires that companies

harvesting Crown land timber must replace it. Accordingly, silviculture

expenditure by industry will increase fivefold over the next five

years. Furthermore, I am proud to announce that my colleague the

Minister of Forests and Lands will spend more than $210 million for

silviculture during 1988-89.

The new forest policy is designed to build a strong, competitive and

diversified forest industry. The small business forest enterprise

program is a key to success. In 1988-89, timber sales under this

program will increase to 15 percent of the overall harvest. This budget

provides $53 million to support this program.

Government will provide $4 million towards the construction of a new

forest research facility at the University of British Columbia to house

Forintek and the Forest Engineering Research Institute of Canada. We

will also contribute an additional $4 million in Crown land.

Higher metal prices buoyed the mining industry in 1987. Accordingly,

we have discontinued direct exploration grants to mining companies

under the financial assistance for mineral exploration program.

To encourage further development of the mining industry, my

colleague the Minister of Energy, Mines and Petroleum Resources will

increase spending by one-third to more than $6 million on base

geological mapping. It will provide support of $25 million to help the

Cassiar Asbestos Corp. develop new asbestos deposits. This will extend

the life of the community of Cassiar for up to 20 years beyond 1991,

when current developed reserves will be exhausted. My colleague will

extend British Columbia Hydro's power grid to Stewart, thereby ensuring

reasonably priced power for existing and future forest and mining

activity. And my colleague will reduce the mineral resource tax rate

from 17.5 percent to 15 percent and the mining tax rate from 15 percent

to 12.5 percent, effective July 1.

These initiatives reflect the government's belief that the future of the

mining industry depends on a competitive taxation system, the provision of basic

infrastructure, and research in key areas.

In support of the agricultural sector, over $4 million will be spent

during the 1987 crop year on the B.C. feed grain market development

program. My colleague the Minister of Agriculture and Fisheries will

consider extending this program to the 1988 crop year.

[2:45]

Mr. Speaker, this budget includes a reduction in 1988-89 spending

under the farm income insurance program. There are two reasons for

this: first, good livestock prices have reduced the need for government

assistance; and, second, the federal government is now contributing to

a price stabilization agreement with apple producers.

The tourism industry has had a very encouraging year. Tourism

marketing in 1988-89 will emphasize partnership programs with regional

tourism associations and private sector entrepreneurs. The Pacific Rim

Institute of Tourism, opening tomorrow, is funded jointly by the

provincial and federal governments. It will develop accredited

education programs leading to jobs and promotional opportunities for

many British Columbians. The institute will also market these training

programs in other countries.

The financial sector is of special importance; over the last 18

months my ministry has worked hard to strengthen it. We've improved

regulation of the securities industry, the insurance industry and the

provincially regulated savings institutions, thereby increasing

confidence and investment in British Columbia. Our captive insurance

legislation has already attracted five new firms to British Columbia,

with many more expected.

We will consolidate and modernize the current Credit Union Act,

Trust Company Act and Insurance Act into a single comprehensive

statute, unique in Canada. This new statute will increase consumer

protection and confidence in the financial sector while making it

easier for firms to do business.

Furthering our international financial centre goal, legislation is

expected to be passed this session. The federal government has now

designated Vancouver as an international banking centre. Mr. Speaker.

international trade is the bedrock of our prosperity. While the United

States will remain our biggest trading partner, we must tap the

tremendous economic potential in other Pacific Rim nations. To assist

British Columbia businesses establishing in the Pacific Rim market, we

are considering the creation of an incubator facility in Hong Kong for

British Columbia entrepreneurs.

British Columbians need to develop skills, experience and contacts

in the Pacific Rim. We will facilitate a Pacific Rim exchange program

involving government and private sector managers. We will continue our

support of groups such as the Asia Pacific Initiative Advisory

Committee and the Asia Pacific Foundation, and we will continue with

the Pacific Rim program in education.

This year government will contribute almost $4 million to fund

exchanges of B.C. students and teachers, to revise the school

curriculum to incorporate Pacific Rim cultural material and to increase

teacher-training in Asian languages. Finally, as announced in the

Speech from the Throne, we will introduce a trade bill to help us

strengthen our Pacific Rim ties.

[ Page 3626 ]

Mr. Speaker, I wish to stress this government's commitment to fiscal

responsibility. We do not want to follow the course charted by our

federal government. For almost 20 years, federal expenditures have

exceeded revenue, creating a massive federal debt with interest charges

close to 25 percent of total expenditure. By comparison, our debt

charges seem modest, at less than 6 percent of total expenditure. But

the $600 million required in 1988-89 would be better spent on education

or social services — or even to reduce everyone's income tax by $210.

Our fiscal policy goals are threefold: elimination of the current

deficit, reduction of accumulated debt and stabilization of revenue. To

help achieve this, I am announcing the establishment of two new funds.

The first fund, the Budget Stabilization Fund, will help us absorb

fiscal shocks. Due to the boom-or-bust nature of the B.C. economy,

government revenues have been difficult to predict. Long-range

financial planning, while desirable, was an unrealizable ambition.

Certainty is needed for any planning exercise, whether in the private

or the public sector. The new Budget Stabilization Fund will assist in

addressing this problem. In years when revenues peak sharply, transfers

will be made to the fund. In years of revenue shortfall, transfers will

be made from the fund. Our objective will be to avoid borrowing or

cutting back from social programs. As a result of our extraordinary

revenue performance during 1987-88, 1 will transfer $450 million into

the Budget Stabilization Fund. This includes $13 million in surplus

lottery funds, and in future years I will transfer other surplus

lottery funds to the Budget Stabilization Fund.

The second fund I am announcing relates to the government's

privatization program. Experience shows that when programs are

privatized, costs fall and service improves. Private firms find better

ways to do business and they expand and create jobs. We intend to

review government programs regularly, discontinue those no longer

relevant and privatize where appropriate. The government will receive

substantial proceeds from privatization and the sale of assets. To

ensure that the one-time proceeds are not used for ongoing programs,

they will be put directly into the Privatization Benefits Fund. The

fund will be capitalized as our privatization program continues. Income

earned by the Privatization Benefits Fund each year will be transferred

to the general fund, initially to reduce the deficit and thereafter to

contribute to general revenue. The Privatization Benefits Fund will be

a benefit for our children and our children's children.

Fiscal responsibility means good public management and getting value

for the taxpayers' dollar. Through improved management and increased

efficiency, we are able to reduce the number of government employees.

Staffing requirements for this year have been reduced by 10 percent.

Individuals and businesses have a responsibility to pay a fair share

for government services that benefit them directly. User fees are

important, because they are targeted to those who benefit, encourage

responsible use, and reduce the burden on the general taxpayer.

Ministries will increase a number of fees this year, resulting in

additional government revenue of $40 million. Matching government

revenues to the cost of services also applies to some taxes.

I am increasing rural area property taxes for both homeowners and

business, effective for 1989. For the average rural homeowner, the

increase will be $39 annually. The average rural tax bill still remains

well short of the government's cost of providing services. This change

will increase government revenue by $8 million in a full year.

The tax rate on all property insurance premiums is 4 percent, except

for motor vehicle coverage. I propose to remove this exception by

increasing the insurance premium tax on vehicle insurance to 4 percent.

This will increase government revenues by $6 million in 1988-89.

Motor fuel tax rates, adjusted quarterly to reflect current gas-pump

prices, are projected to decline by more than 1 cents on April 1. To

increase government's revenue, I propose to increase the tax on motor

fuel by approximately one cent a litre. This measure will increase

government revenue by $45 million during '88-89. Even with this change,

all motor fuel tax rates will decline on April 1.

An extensive set of property, fuel and social service tax benefits

has been established to benefit bona fide farmers. In last year's

budget, I proposed increasing the value of farm sales needed to qualify

for these tax benefits from $1,600 per year to $5,000 per year. Over

the past year many rural residents have expressed concern about the

proposed changes. Accordingly, there will be no change for 1989. A

further announcement on farm tax policy will be made later this year

when a review is completed.

I have made two accounting changes suggested by the auditor-general

to improve the reporting of government revenue and expenditure. For the

Medical Services Plan program, expenditures will be shown in total

rather than after the deduction of premium revenues. Similarly with the

contributions to school districts: expenditures will be shown in total

rather than after the deduction of school-purpose business property

taxes. These changes more clearly report total government expenditure

on health care and public school education, and were, I repeat,

suggested and recommended by the auditor-general.

All existing special funds will become special accounts within the

general fund, with the exception of the two special funds I announced

earlier. This underlines the importance of the two new funds and will

not change the purpose of the accounts in any way.

I would now like to touch on a few highlights of the government's

fiscal plan for 1988-89. The base for this plan was set in 1987-88,

when provincial government revenues were $550 million more than

expected. I propose to use our additional revenue in three ways. I will

use it to fund net program overspending of $51 million; this is the

result of additional health care requirements and the cost of the early

retirement incentive plan. I will contribute $450 million to the Budget

Stabilization Fund. The remaining $50 million will be used to reduce

the '87-88 general fund deficit to $800 million, a decrease of over 30

percent from the previous year.

Looking ahead, I expect total revenue of the province to increase by

7.4 percent, and I expect general fund revenue for '88-89 to total

$11.4 billion. General fund expenditure for '88-89 will increase 6.4

percent to $11.8 billion. We have therefore reduced the general fund

deficit to $395 million, less than one-half of the revised deficit

forecast for last year.

The government will borrow an estimated $191 million next year. The

government's Crown corporations are expecting net borrowing of $216

million. Direct debt of the government and its Crown corporations at

March 31, 1989, will be 28 percent of provincial gross domestic

product, the lowest level in six years.

[ Page

3627 ]

The province and its Crown corporations traditionally borrow in

national and international financial markets. We will consider

broadening this program this year through the issuance of a British

Columbia savings bond.

[3:00]

Mr. Speaker, I've discussed in detail how we will enhance social

benefits for all British Columbians, increase the competitiveness of

British Columbia business and provide responsible fiscal management. 1

want once again to emphasize the importance of our government's

determination to eliminate the deficit and reduce the debt so it does

not burden our children. At the same time, I want to remind everyone of

the basic strength of government's and the province's finances.

Compared to the federal and other provincial governments, our

performance is impressive indeed. We continue to reduce our deficit

while maintaining a high level of government services. Our planning

horizon takes us to the brink of the next century. This budget builds

the economic and fiscal foundation that will see us achieve our

strategic plan.

MR. STUPICH: Well, Mr. Speaker, it used to be Amazing Grace;

now it's Amazing Mel. With sleight-of-hand financing, he raises taxes

and squirrels money away in election slush funds, and thinks that

everybody is going to misunderstand what he's doing.

I'm amused at this deficit talk. The last time we had a deficit in

the province of British Columbia, it was wiped out in 1915 — until a

Social Credit government was re-elected in 1976 and they started it all

over again. The Social Credit government has had a lot of experience

with its profligate spending in piling up deficits. Now they're telling

us they're going to start reducing them.

I'll have a little more to say about that tomorrow, Mr. Speaker. I

think for today I'll simply move adjournment of this debate until the

next sitting.

Motion approved.

Introduction of Bills

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

bills intituled: Home Owner Grant Amendment Act, 1988; Horse Racing Act Tax

Amendment Act, 1988; Income Tax Amendment Act, 1988; Insurance Premium Tax Amendment

Act, 1988; Land Tax Deferment Amendment Act, 1988; Mineral Resource Tax Amendment

Act, 1988; Mining Tax Amendment Act, 1988; Motor Fuel Tax Amendment Act, 1988;

Social Service Tax Amendment Act, 1988; Taxation (Rural Area) Amendment Act,

1988; Tobacco Tax Amendment Act, 1988; Tourist Accommodation (Assessment Relief)

Act; Budget Stabilization Rind Act; Education Excellence Appropriation Repeal

Act; Health Improvement Appropriation Repeal Act; Privatization Benefits Fund

Act; Special Accounts Appropriation and Control Act; Provincial-Municipal Partnership

(Taxation Measures) Amendment Act, 1988.

HON. MR. COUVELIER: Mr. Speaker, these 18 bills implement the revenue

measures that I announced earlier today. In moving first reading of each of

these bills, I will state the purpose of the bills.

Bill 2, Homeowner Grant Amendment Act, 1988, revises the definition of owner under that act.

Bill 3, Horse Racing Tax Amendment Act, 1988, revises the allocation

of that tax revenue between the province and the British Columbia

Racing Commission.

Bill 4, Income Tax Amendment Act, 1988, provides for a rate reduction on income earned by a small business corporation.

Bill 5, Insurance Premium Tax Amendment Act, 1988, increases the tax rate on motor vehicle insurance.

Bill 6, Land Tax Deferment Amendment Act, 1988, widens the definition of eligible property to include a mobile home.

Bill 7, Mineral Resource Tax Amendment Act, 1988, reduces the mineral resource tax rate.

Bill 8, Mining Tax Amendment Act, 1988, reduces the mining tax rate.

Bill 9, Motor Fuel Tax Amendment Act, 1988, increases the tax on motor fuel.

Bill 10, Social Service Tax Amendment Act, 1988, increases the rate

of tax on liquor, removes exemptions for pesticides, limits the

exemption for used clothing, and clarifies the definition of sale.

Bill 11, Taxation (Rural Area) Amendment Act, 1988, improves the administration of the tax.

Bill 12, Tobacco Tax Amendment Act, 1988, increases the tax on cigarettes.

Bill 13, Tourist Accommodation (Assessment Relief) Act, reduces the assessed value of eligible tourist accommodation.

Bill 14, Budget Stabilization Fund Act, creates a fund to stabilize government operating revenues.

Bill 15, Education Excellence Appropriation Repeal Act, repeals the Education Excellence Appropriation Act.

Bill 16, Health Improvement Appropriation Repeal Act repeals the Health Improvement Appropriation Act.

Bill 17, the Privatization Benefits Fund Act, creates a perpetual

fund into which may be paid proceeds from government privatization

initiatives.

Bill 18, the Special Accounts Appropriation and Control Act,

converts all special funds in the consolidated revenue fund into

special accounts within the general fund.

Bill 19, Provincial-Municipal Partnership (Taxation Measures)

Amendment Act, 1988, broadens the eligibility for tax relief to owners

of vacant buildings.

I now move first reading.

Motion approved.

HON. MR. COUVELIER: Mr. Speaker, I move the said bills be

placed on orders of the day for second reading at the next sitting of

the House after today.

Motion approved.

Hon. Mr. Strachan moved adjournment of the House.

Motion approved.

The House adjourned at 3:07 p.m.

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