1986 Legislative Session: 4th 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)

THURSDAY, MAY 29, 1986

Afternoon Sitting

[ Page

8415 ]

CONTENTS

Oral Questions

U.S. shake and shingle tariffs. Mr. Rose –– 8415

Pentachlorophenol plant. Mrs. Wallace –– 8415

Public opinion polls. Mr. Hanson –– 8416

Tourist information centres. Mr. MacWilliam –– 8416

Counterattack program. Mr. Lockstead –– 8416

Committee of Supply: Ministry of Finance estimates. (Hon. Mr. Curtis)

On vote 28: minister's office –– 8417

Mr. Stupich

Mr. Blencoe

Mr. Williams

On vote 81: management of the public debt –– 8420

Mr. Williams

Mr. Stupich

Committee of Supply: Ministry of Industry and Small Business Development estimates.

(Hon. Mr. McClelland)

On vote 44: minister's office –– 8421

Hon. Mr. McClelland

Mr. Williams

Mr. Lockstead

Mrs. Wallace

Mr. Rose

Mr. Cocke

Tabling Documents –– 8441

THURSDAY, MAY 29, 1986

The House met at 2:06 p.m.

Oral Questions

U.S. SHAKE AND SHINGLE TARIFFS

MR. ROSE: Mr. Speaker, I have a question for the Minister of

Forests. This is from one Mission boy to another. It concerns the red

cedar countervails, a danger far too serious for petty partisanship. I

think this Legislature should present a united front, if possible, on

this issue.

Is the minister prepared to support the request made today by the

Leader of the Opposition at the Peace Arch rally of concerned shake and

shingle workers and mill operators that the Prime Minister recall Simon

Reisman from the talks in Washington and instruct him not to proceed

until the threat of the shake countervail is removed?

MR. SPEAKER: Hon. members, question period must relate to the

ability of a minister to function within his ministerial

responsibility. With the greatest of respect, hon. member, you are

asking a member to do something that is the jurisdiction of another

body. You might wish to rephrase part of the question, hon. member.

MR. ROSE: Has the government considered such a request to the

federal government that Simon Reisman be recalled until the threat of

the countervail has been removed?

HON. MR. HEINRICH: Mr. Speaker, the answer is no, the

government has not. The position of the government has been very clear.

As a matter of fact, the position of the government and the position of

the opposition with respect to the enhancement of free trade on the

issue of lumber and forest products is very clear. It seems to me, when

I listen to the critic.... The member for Skeena (Mr. Howard) made it

abundantly clear, as did government, that in the matter of free trade

the free flow of lumber on a competitive basis between our countries,

particularly British Columbia and the U.S., should remain.

MR. ROSE: I hope that might be communicated to the federal government, because the Sun story today quotes Crosbie, the Minister of Justice, as threatening retaliation

I wonder if I could ask the minister another question.Since the only

type of compensation provided for is tariff relief on other Canadian

products sold in the United States, could the minister tell me if the

B.C. government has endorsed this type of compensation for shakes and

shingles?

HON. MR. HEINRICH: As you will recall, the Premier forwarded

a letter to the Prime Minister dated May 7. That letter, I believe, was

filed in the House. Attached to that letter was a copy of federal

legislation. The purpose of that legislation is to assist any industry

within Canada that is detrimentally affected arising from the

imposition of a tariff. As a matter of fact, the request from the

provincial government was that we would want the federal government to

review that particular possibility.

But it's interesting to note, as well, that the shake and shingle operators,

who visited Ottawa and were well covered by the press, made it abundantly clear,

as did the leader of the IWA, that they are not interested in compensation.

They believe and have maintained that they are entrepreneurs in the purest sense

and do not wish any form of subsidy or compensation, but they want to exercise

the right for free trade.

MR. ROSE: Supplementary. The minister mentioned the Premier's

letter. In that letter to the Prime Minister the Premier asked for a

retaliatory trade package to be applied against the United States in a

way that benefits British Columbia. I would like to ask whether or not

this is still the position of the government.

HON. MR. HEINRICH: The Premier's letter is abundantly clear.

The object is if there is to be any form of countervail imposed on the

Canadian side, the benefit flowing from that form of duty would be used

to assist those in our shake and shingle industry who are affected.

MR. ROSE: I understand that officials, including the mayor of

Mission, were to be here today to discuss with the government their

very serious problem. I wonder if the minister is prepared to tell what

measures of assistance the provincial government is prepared to offer

the community of Mission and others so affected, should there be a

failure to resolve this very serious problem.

HON. MR. HEINRICH: Mr. Speaker, it seems to me that the

member is asking a question about future actions of government, and I'm

not so sure that that is in order. But I would like to make reference

to a document circulated, I presume, to all members of the House,

entitled "Provincial Participation in the Canada-U.S. Trade

Negotiations." It is presented to the Western Premiers' Conference. The

author is the Premier of the province, and he is in Manitoba today at

Swan Lake discussing these particular issues.

PENTACHLOROPHENOL PLANT

MRS. WALLACE: My question is to the Minister of Environment.

Is the minister aware that the machinery for the proposed

pentachlorophenol plant in Lone Butte is actually from the old Uniroyal

plant in Edmonton that was known to be one of the most contaminated

plants in Canada?

HON. MR. PELTON: No, the minister is not aware that the

equipment is old and contaminated and comes from another province.

However, I am aware of the situation in Lone Butte, that we've called

an inquiry on the situation at Lone Butte, and that we are in the

process of setting up terms of reference for that inquiry and

appointing three members to look into it.

MRS. WALLACE: I'm surprised the minister is not aware of

this, because that plant was closed down some 30 years ago and the

equipment being used is the same, with a few changes. Is the minister

aware that if this plant is built, it will be the identical operation

to the Reichhold operation in the U.S., which was shut down for

environmental reasons?

HON. MR. PELTON: I'm not too sure about things that happened

30 years ago, because I'm not quite as old as the member opposite.

[Laughter.] Sorry, I couldn't resist that. I'm not necessarily assuming

that anything is going to happen at

[ Page 8416 ]

Lone Butte, so I don't see any point in responding to the last part of the member's question.

MRS. WALLACE: A question to the Minister of Industry and

Small Business Development. Can that minister confirm that the B.C.

Development Corporation has agreed to loan Bradbury Industries, the

outfit that's proposing the PCP plant, funding once the permit is

approved?

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

PUBLIC OPINION POLLS

MR. HANSON: Mr. Speaker, in the last seven years $1.4 million

has been itemized in public accounts as being spent on public opinion

surveys. In the Social Credit leadership campaign, some of the

potential candidates would have access to those taxpayer-paid surveys,

and others would not. The public certainly has been left out. The

voting delegates would not have access. Would the Minister of Finance

agree to disclose those polls to this House so that there is a level

playing-field in the province of British Columbia?

HON. MR. CURTIS: First of all, Mr. Speaker, a number of

theories were advanced in the

preamble to the question which are not

necessarily correct. Unless the member has been skulking around our

caucus room.... That's not an attack on another member; if he wants to

skulk, he couldn't find a better place to skulk. But I am not charged

with the responsibility for the issuing of polling material or

government surveys. I would refer him....

Interjection.

HON. MR. CURTIS: Well, we said that in Committee of Supply.

I'm responsible in one way or another for every dollar that is spent or

received, but if we continue in this approach, then I will be

responsible for all estimates.

MR. HANSON: Mr. Speaker, I would like to point out to the

Minister of Finance that he is the backup for the Provincial Secretary

(Hon. Mrs. McCarthy). He does have the second responsibility. Now if

you're not prepared to disclose it.... There are principal secretaries

who have been in the Premier's office, there are people who've worked

in cabinet or have been attached to key committees of cabinet who would

have access to those attitudinal polls. So other candidates would not

be treated fairly.

Mr. Speaker, my second question is: is that minister prepared to assure this

House that there will be no taxpayer paid opinion surveys by Goldfarb, Gallup

or any others before the leadership convention?

HON. MR. CURTIS: Mr. Speaker, if we were indeed in a period

where the Provincial Secretary was going to be absent for a prolonged

period of time, then as her first acting minister I would feel obliged

to look into the matter, but the Provincial Secretary was here

yesterday and I'm sure will be here tomorrow.

MR. LAUK: Where is she today?

HON. MR. CURTIS: She's in your law office, Mr. Member, which was her first serious mistake.

Mr. Speaker, I'll take the question as notice for the Hon. Provincial Secretary.

TOURIST INFORMATION CENTRES

MR. MacWILLIAM: Mr. Speaker, I have a question to the

Minister of Tourism. On Tuesday the minister told the House that my

information regarding the closure of the Osoyoos tourist information

centre was totally wrong. He replied that he had an excellent

arrangement with the chamber of commerce in Osoyoos for the operation

of the facility. My question to the minister is: has the minister

reconsidered his statement?

HON. MR. RICHMOND: The answer is no, Mr. Speaker.

MR. MacWILLIAM: For the minister, the president of the

chamber of commerce offered a two-letter response to the minister's

statement. He said: "B.S."

In light of the response of the president of the chamber of commerce....

Interjections.

MR. MacWILLIAM: I'm sorry, those aren't my words, those are

the words of the president of the chamber of commerce. In light of this

information, I would like to ask the minister whether I have been

misled or whether the minister has misinformed the House or whether he

has failed to get competent advice on this situation.

HON. MR. RICHMOND: Mr. Speaker, I didn't hear the very last

part of the question. The answer to the first

part is that I guess I

understand what the member meant, but all the information I have is

that we have a very fine arrangement with the chamber of commerce

provincewide and especially in Osoyoos, where the subject of the

information booth did come up. We have an arrangement with the trailer

that is there, and, as I informed the member the other day, at the end

of the season ownership of the trailer will revert to the chamber of

commerce and they will acquire an excellent facility for next to

nothing.

MR. MacWILLIAM: A supplement to the minister. Regardless of

the circumstances, the city of Osoyoos is left without an information

services centre. It is inoperable at this time. I wonder if the

minister has decided to look into the matter and do something about it,

because what appears to be the situation is at odds with the minister's

statement.

HON. MR. RICHMOND: Well, the statement that the city is left

without an information centre is just totally incorrect. It is

pointless to comment beyond that.

COUNTERATTACK PROGRAM

MR. LOCKSTEAD: Mr. Speaker, I have quite a short question for

the Minister of Transportation and Highways. In view of the minister's

proposal to increase penalties for people caught driving under the

influence of alcohol, is the minister aware that the Attorney-General's

department has

[ Page

8417 ]

cancelled the Counterattack program held throughout

the province each year at this time, because of the unknown demands, as

they say, that Expo would place on the RCMP?

HON. A. FRASER: Mr. Speaker, I'm not aware.... I'll take it as notice, but maybe you should ask the Attorney-General (Hon. Mr. Smith).

HON. MR. RITCHIE: Mr. Speaker, may I have leave to make an introduction?

Leave granted.

HON. MR. RITCHIE: Visiting Victoria today are a large number

of students from the Abbotsford Christian School in my constituency. A

number of those students are in the gallery with us now. Would the

House please make them welcome.

Orders of the Day

The House in Committee of Supply; Mr. Strachan in the chair,

ESTIMATES: MINISTRY OF FINANCE

(continued)

On vote 28: minister's office, $209, 220.

HON. MR. CURTIS: Mr. Chairman, just before the adjournment

for lunch, the member for Nanaimo (Mr. Stupich) raised the issue of

corporate income tax revenue and the reduction in the tax rate

announced in the 1986 budget.

There are two issues and I would like to deal with them. May I touch

on the latter first. The phased reduction in B.C.'s corporate income

tax rate from the current 16 percent to 14 percent by 1988 is a key

element, as I said on a number of occasions, in the government's

economic development policy. It is crucial for us to have a tax system

in the province which is competitive with those in other jurisdictions,

both in Canada and elsewhere.

More than ever before investors around the world, including those

now based in the province of B.C., are looking at the option of

locating their business wherever they like. They have that option, and

British Columbia has many advantages, such as our relationship to the

Pacific Rim, favourable climate and lifestyle, and our skilled

workforce. But we also have the disadvantage, as the member will know,

of being considerably far from major markets. So the effort over the

past couple of years has been to bring our tax regime into a more

competitive environment and to ensure that our tax system is not a

disadvantage which impedes investment in the province.

On the member's other point regarding the revenue derived from corporate

income tax, he is correct in noting that revenue from this source has been relatively

low. That is the subject of the last two budget speeches in one form or another.

This, of course, reflects the profits weakness which has existed despite three

years of recovery; they remain well below historical averages as a percentage

of GPP. But I point out that the 1986-87 estimate of corporate income tax revenue

is more than double the amount received in 1982-83. I expect to see more revenue

generated by the corporate side of the economy as the economy improves further

over the next few years. At least the trend is in the right direction.

There was another matter raised on Tuesday, if I could just deal

with it briefly. The member for Nanaimo wanted to know what is

considered commercial versus non-commercial debt. I don't have my note,

but I would refer the member to the relevant page, the number of which

escapes me, in the Financial and Economic Review of last August. I refer you to pages 146 to 148, Mr. Member, table 7.10 of the Financial and Economic Review . I think that will tell him all he needs to know about that. I did not cover that on Tuesday.

MR. STUPICH: I appreciate the minister's comments about the

corporate income tax and the fact that it is low. My concern is about

his whole economic program and what he described in that press release.

I have it; it is just a matter of finding it. This is the end of the

program, sort of. My concern is that we'll just have to differ on this.

He has been giving relief, assistance and aid and succour, if you like,

to those who have made it and are making it very well. The ones who are

new and haven't proven that they are making it are not getting that

particular relief; they are getting other forms of it. Those that have

fallen by the wayside, of course, are getting nothing.

I would just like to ask the minister about a question that has been

asked several times in the past, and I wonder what the current

situation is. The minister did tell us on previous occasions that with

respect to the Canadian Commercial Bank we put up $13 million in the

form of a debenture. The Workers' Compensation Board had $5 million of

its funds in a debenture, and B.C. Rail had a $500,000 note. I am

wondering whether we are any closer to knowing whether we should write

off the whole total, or whether some portion of it may be received at

some future date, if he has any more current information on a total of

$18.5 million.

HON. MR. CURTIS: Mr. Chairman, I was just checking one point

with respect to the British Columbia Rail note. That matured, and that

wasn't in at the time of the severe difficulties at the bank.

Yes, it had matured, so....

Interjection.

HON. MR. CURTIS: Well, I would have to check just which

statement. My understanding, and I was double-checking with officials,

was that the B.C. Rail note matured.

With regard to the $5 million WCB and the $13 million of provincial

funds, not a great deal has changed in the interval in that I have made

it very clear to the federal government, the Minister of Finance and

the Minister of State for Finance, the Hon. Barbara McDougall, that we

consider that money to be repayable to the province. The committee will

know that the Estey commission looking into the Canadian Commercial

Bank and the Northland Bank, the latter of which we had no association

with at the time of its difficulty.... The Estey commission report is

not yet available to anyone in Canada. That is very much a current

topic, Mr. Member. At each appropriate time I mention it, and I shall

continue to pursue it.

[2:30]

MR. BLENCOE: I have two things I wish to bring up with the minister. One is very serious, one that I think

[ Page 8418 ]

concerns all British Columbians, and that is the

destruction of sensitive material that is no longer used by the

government and should be destroyed. As we all recall, some months ago

this issue was a fairly major controversy here in Victoria and in the

province of British Columbia. It was discovered — and I won't go into

the tangential issues — that here in Victoria literally tons of

sensitive material were being stored in an unsecured warehouse. Indeed,

a number of people I talked to or met over this issue when it achieved

public attention told me that they had seen that material many times;

many times the doors of that warehouse were wide open and these

sensitive documents were blowing in the wind — incredible documents of

business transactions, mining, all sorts of things that were very

sensitive. The public would, and should, be amazed at how this material

was kept.

There were a number of controversies around that particular

incident. There have been reports from various sources that there is

concern about how sensitive material is collected for destruction.

There have been reports that material is collected in open trucks which

make the rounds of various ministries, that there aren't secure systems

in place for material collected, and that material is transported to

Allan Paper Co. for shipment, I believe, to Vancouver. I want the

minister to perhaps respond as to what actually happens to this

material. It can sit in a yard which is unsecured over in Victoria

West, and that material can sit for days, either in bales or in the

back of trucks, waiting for shipment to Vancouver for destruction.

Given these disclosures and sometimes a feeling that the process is not

as tight as it could be, I'm wondering if the minister can report to

this House — and he may indeed have done so during these debates on his

estimates — and tell us whether new processes have been put in place,

whether there are new procedures and whether the public can be assured

that sensitive documents are being taken care of in the province of

British Columbia.

HON. MR. CURTIS: I will refer the member to the Provincial

Secretary (Hon. Mrs. McCarthy). Her estimates have not yet been

presented to Committee of Supply. A relatively recent development

following my lengthy statement in the Legislature last November is that

destruction is now overseen by the records management branch of

Provincial Secretary and Government Services to ensure the tightest

possible control. The member will have an opportunity to canvass that

topic with the responsible minister when those estimates are called.

MR. BLENCOE: I recognize that the minister said in question

period that he could be responsible for a number of estimates, but of

course — with respect, through the Chair — many of these documents

pertain to financial arrangements within the purview of his ministry. I

am sure he must be concerned, and indeed he made some statements in

this House. I thought it would be useful for the Minister of Finance to

share with this Legislature, and therefore the people of British

Columbia, that he has indicated some concern or has been witnessing

some new procedures for retention and destruction and for removal of

these documents from ministry offices to Allan Paper Co. and then to

Vancouver. I would think it would be useful for the Minister of

Finance, despite the fact that the Provincial Secretary has the

ultimate responsibility, to share with this House anything that has

been happening in this area, certainly since November, and to assure us

that as Minister of Finance he is concerned.

HON. MR. CURTIS: Clearly, as a member of the executive

council, I am concerned. I have indicated to the member and to the

committee that earlier this year — to be as precise as I can, in early

March — the Ministry of Provincial Secretary and Government Services

issued a government wide policy entitled "Standards for the Disposal of

Government Records" — not only those from the Ministry of Finance; from

any other ministry where sensitive material is dealt with, the Ministry

of Finance complies. I refer the member to the Provincial Secretary,

who administers that program.

MR. BLENCOE: I will, of course, take it up with the

Provincial Secretary. There are a number of others, Mr. Chairman, that

I will take up with the Provincial Secretary. One of them which would

I'm sure concern the Minister of Finance is getting value for dollar,

in terms of companies that are charged or given a contract for removal

and ultimate destruction of very sensitive documents. It's my

understanding, Mr. Chairman, that the tendering of this,

particularly.... Allan Paper has had this contract for a number of

years, and we've had no tendering process introduced on this particular

situation. I know that this is the Provincial Secretary's department,

but the minister should be concerned in terms of the potential

financial savings to the taxpayers of British Columbia. Here is an area

that really should be tendered; and Allan Paper, for a number of years,

automatically got this contract — a very lucrative contract, I might

add — and I would think that the Minister of Finance, for whatever

reasons Allan Paper has got this, may wish to indicate to this House

that he is concerned about Allan Paper getting this contract year after

year after year.

MR. CHAIRMAN: Inasmuch as the question could deal with the

Purchasing Commission, which the minister is responsible for, it would

be in order, but really with respect to the administration of another

ministry the question is out of order.

HON. MR. CURTIS: Mr. Chairman, thank you, I note your

caution. Through you to the member, the Purchasing Commission is not

involved in this, It's not quite correct to say that this firm has had

the contract year after year after year, because if the member traces

back objectively the difficulty, he will know that, before it became

the responsibility of the Provincial Secretary under the standards for

disposal of government records, the contract was with another firm;

that was the genesis of some of the difficulties which were experienced

then. Mr. Chairman, I must refer all these questions to the Provincial

Secretary, particularly in view of the fact that the Committee of

Supply will be dealing with that minister's estimates.

MR. BLENCOE: I will indeed do that, but thank the minister for his indulgence.

I have one other item. It may have been brought up by another member

on this side; I'm not sure. The one that constantly comes to my office

and my attention is the whole question of the restaurant tax, which the

minister in his wisdom introduced a number of years ago. I don't think

I have to go into the details of the concern. The minister knows enough

restaurateurs in this community. I constantly hear, Mr. Chairman, of

the problems with that tax: the paperwork, the restaurateurs being

forced in some way to try to find ways

[ Page 8419 ]

around it. It has created all sorts of problems,

and the minister is aware of that. I'm sure he's had delegation after

delegation. Has the minister considered cancelling the restaurant tax?

HON. MR. CURTIS: I at the outset confirm that that is an area

for which I am responsible, Mr. Chairman. The experience that we've had

in my office and in the ministry recently — and I realize I may be

inviting more mail — is we haven't had much in recent months, a good

number of months.

MR. BLENCOE: We can soon change that.

HON. MR. CURTIS: Well, I appreciate that anyone around can

change that. But each year I review those tax measures which are in

place, or which should not be in place, or which should be, perhaps,

considered to be brought in. Certainly the British Columbia branch of

the Canadian Restaurant Association soon after the introduction and for

a number of months thereafter made it clear that they didn't like it.

But I think one of the tests, Mr. Chairman, is that in this year

particularly, with a significant number of visitors from jurisdictions

where a tax along those lines is in place, we've had no increase in

difficulty, no measurable increase in complaints, either from the

operator of the restaurant or from the consumer of the restaurant meal.

But I recognize, as with other tax measures, that it's not terribly

popular. However, as I explained at the time, it was seen as a revenue

source where some discretion was permitted on the part of the consumer,

particularly with the threshold of $7. But the experience in recent

months has been quite quiet in that regard.

MR. CHAIRMAN: With respect to this, we are really

recanvassing a former budget. Debate in Committee of Supply must be

strictly relevant and pertain to the estimates of this year.

MR. BLENCOE: Mr. Chairman, I'm just going to finish off

because other members wish to speak. I gather from the minister, then,

that there's no intention in the near future — perhaps in the distant

future — for this government to remove the restaurant tax.

HON. MR. CURTIS: Mr. Chairman, any such consideration would

only be given in the several weeks prior to the preparation of a new

budget. We are just now starting a new budget for '86-87 fiscal. It's

in our files as an issue, but no tax changes are contemplated at this

point in the budget year, or any budget year.

MR. WILLIAMS: Mr. Chairman, I wonder if the minister could

reflect on how liquid assets are currently distributed between

different banking institutions in the province.

HON. MR. CURTIS: We have a rating system which is handled by

the treasury division of the ministry. It is not done in absolute

isolation. Banks, trust companies, credit unions, other financial

institutions are rated in terms of the relative safety, one to another,

of the taxpayers' money that is placed on deposit there, whether it be

short term or long term.

MR. WILLIAMS: In these days, when there's a so-called flight

quality, whatever that could be called in terms of the big five — which

I personally don't consider quality; I might apply some different

judgments to them — and when we have provincial institutions that this

administration is responsible for, how can one really justify that kind

of an approach? If there are problems with those institutions, this

administration has the power to deal with them; it has monitoring

agencies to deal with them. Why then should that kind of limited

criteria be placed?

HON. MR. CURTIS: I trust that in my response a moment ago I

didn't suggest that the rating system was so narrow as to force us to

the so-called big five. That's not the case. It's a matter of relating

a rating with respect to the amount of money that might be placed with

any financial institution.

He speaks of those financial institutions for which the province has

responsibility. Some responsibility; one can argue whether it's all or

most. If we are speaking of credit unions, I meet often with credit

unions and have officials present with me at that time. We discuss if

they are growing, reorganizing, seeking more deposits from the province

or some deposits where none have existed. The rating system does not

drive all decisions that we make, but it's a guide that we follow quite

closely. There have been exceptions, and there will be in the future,

I'm sure.

[2:45]

MR. WILLIAMS: What you place currently is probably different

than what you placed a few months ago in terms of the so-called flight

quality and the problems of the Alberta institutions. There really was

a drying up or a shifting of provincial funds from many of these

institutions, including smaller chartered institutions, or at least the

threat thereof. Can the minister confirm that in fact there was very

little available to these institutions at the time of so-called flight

quality?

HON. MR. CURTIS: Mr. Chairman, I'm not sure that I would

agree that there was very little, and I'm not engaging in semantics

here. There was perhaps for a while less than there had been before the

difficulties in Alberta, but one of the other considerations, as 1~m

sure the second member for Vancouver East would know, Mr. Chairman, is

that we are not necessarily the least expensive depositor in terms of

the rate which is paid. We have good placing power, and there are

smaller institutions which often can attract other deposit amounts at

less than we are prepared to place for. It might be ten basis points or

five or even two or one. That's very much a factor of the marketplace.

We're ready to place, but if they can attract deposit money from

another source and pay a slightly lower rate — even, as I say, a very

few basis points — then that's the end of a very pleasant telephone

conversation between our money managers and the people at the other end

of the line.

MR. WILLIAMS: What have we generally placed with the Bank of British Columbia over the last year?

HON. MR. CURTIS: Over the last year? Oh, Mr. Chairman,

through you to the member, it has varied quite dramatically. I am not

prepared today or at any point in Committee of Supply to give precise

numbers, other than to say that it has ranged from virtually nothing to

relatively large sums, and that is very much a factor of our available

funds and what we wish to place with any financial institution.

[ Page 8420 ]

MR. WILLIAMS: Has it been as high as, say, $250 million with the Bank of British Columbia?

HON. MR. CURTIS: Mr. Chairman, I am not prepared to discuss

specific numbers, nor to reach an approximate range by saying: 'Is it

as much as this or as little as that?"

MR. WILLIAMS: I suggest, Mr. Chairman, it was, and the

question is: was the threat of moving that money ever there with the

Bank of British Columbia? I leave it at that.

HON. MR. CURTIS: I'm sorry, I don't completely follow the

member's questioning. The threat to remove the money? I don't

understand that, Mr. Chairman.

MR. WILLIAMS: You said that your money managers are always

looking at the rate of return, and one would assume then that that

would happen in the normal course of business in terms of the rate of

return.

HON. MR. CURTIS: Then I think the member has answered his own

question, Mr. Chairman. We don't use the moneys we have available for

deposit in any way threatening to any financial institution.

MR. WILLIAMS: It's clear that there has been a lot of funds

removed at different stages from this bank by various depositors. If my

memory serves me right again, it's as much as $800 million in the last

short period of time. So they've had to rely on the Bank of Canada to

replace those funds. My concern is that British Columbia should not

have been a timid player with respect to this significant

provincially-based institution. Or it shouldn't certainly have been

worse than a timid player. That's my concern.

HON. MR. CURTIS: Mr. Chairman, I don't think we have

approached that circumstance nor any other in a timid fashion, with

timidity. The extent to which the Bank of British Columbia or any other

bank accesses the Bank of Canada, of course, is a matter that is

reported on a fairly regular basis.

MR. WILLIAMS: I find it very interesting, Mr. Chairman, that

in this recent time period and through these difficulties — and I

mentioned the kind of role that Mr. Kaiser has played in British

Columbia in the past in terms of benefiting from our lack of rigorous

concern with respect to resource revenues. He benefited again in terms

of naive management and board at the B.C. Resources Investment

Corporation, wherein he capitalized those rents that I discussed this

morning. At the same time, I wonder if a belated government didn't have

all this in mind in recent months in dealing with the Bank of British

Columbia.

HON. MR. CURTIS: Well, no, Mr. Chairman. Insofar as the

Ministry of Finance relationship with any number of financial

institutions, personalities do not enter into it.

I have had discussions recently with the heads of a number of banks,

and would have met with Mr. Mulholland, the chairman of the Bank of

Montreal, the other day if events had not prevented that. We will

reschedule that. As of ten days ago I met with Mr. Parker of the Bank

of B.C. That was the second meeting I have had, possibly the third,

since he assumed responsibility for the bank. I hope we can keep

personalities out of it.

Vote 28 approved.

Vote 29: government financial support, $61,562,461 — approved.

Vote 30: Provincial Capital Commission, $555,000 — approved.

Vote 31: compensation stabilization program, $715,773 — approved.

Vote 32: critical industries commission, $511,830 — approved.

On vote 81: management of the public debt, $457,900,000.

MR. WILLIAMS: I just can't let this modest item go unnoticed.

Let's face it: for an administration that is supposed to be called

businesslike, this administration has borrowed more than all of the

administrations of British Columbia in history. Imagine! In Bill's ten

short years, you have had that job of going and borrowing all over the

place, having to go to Europe, having to go to New York, having to go

to Japan, borrowing more and more from more and more places than any

administration in the history of British Columbia. And all at a time of

costly money.

Given the base of this province, it is absolute economic madness

that we should have borrowed on the scale we did. And then to have

borrowed for lemon projects! That's what we have been doing: borrowing

for lemons that can't pay for themselves. Northeast coal, the biggest

industrial project in the history of British Columbia, as the former

MLA was wont to say. Imagine, all stuff that can't pay a rate of

return. Absolutely nobody in private business could do these things,

and it is very difficult for governments to do them as well.

Governments can take it out of people's pockets, out of lunch bucket

folks and all the rest that can little afford it. But in the end, this

chunk here represents a cost of the mismanagement of this province over

this past decade. It is an extraordinary story of a quadrupling of the

public debt of this province on projects that can't pay for themselves.

It is an extraordinary story, and the bill now comes in annually.

HON. MR. CURTIS: Mr. Chairman, we spoke about public debt the

other day and covered a number of aspects of that. I think, however,

since the second member for Vancouver East has raised the topic again

today under this vote rather than my office, that I have to point out

just six figures. The provincial debt per capita in the province of

Manitoba in 1981 was $4,796 and rose to — this isn't an old chestnut,

this is 1985 — $8,170 in 1985. That's a 70 percent increase. In British

Columbia, 1981, $3,940 rising to $5,564 in '85. That's a 41 percent

increase. Mr. Chairman, not all of the debt, as the member knows — nor

did he suggest it — can be attributed to capital projects. Much of it

was for the continued operation of government, and that relates back to

the discussion which the member for Nanaimo and I had the other day. On

a province-by-province basis, while I am not pleased that we have any

debt other than commercial — to use the phrase in the context that I've

attached to it in these discussions — I

[ Page 8421 ]

take comfort in looking at our debt level and our decreasing deficit in comparison with other provinces in Canada.

MR. WILLIAMS: I guess when we have to compare ourselves with

Newfoundland and places like that, it may be. As always with these

things, it's a matter of when you saw it off, when you take the date

and how you look at the numbers and relate them.

I think you said a 41 percent increase since 1980 or something like

that in B.C. The more interesting figure would be after 1975, to tell

you the truth. At that point, there's a significant break in terms of

prudent management, despite all the rhetoric, despite all of the stuff

we got after 1975. There was prudent management of this province up

until the end of 1975; there has not been prudent management

thereafter. Never did we contemplate commercial projects publicly

financed that could not pay for themselves during our administration,

and never previously, other than some of the stuff the first Mr.

Bennett spent time on.

[3:00]

What saved the first Mr. Bennett, really, was inflation. Inflation

buried his mistakes through his 20 years. That luxury of inflation is

not there for us today to bury your current mistakes in this

administration. In fact, we are going through a deflationary period in

some areas. You have invested on the basis of continuing inflation in

terms of your quasi-commercial projects like northeast coal. We're

going through very different circumstances indeed. We're going through

a deflationary period that is constricting the world and British

Columbia's economy in some ways. We have to pay on the basis of the old

prices and the new lower returns ' Unlike former administrations of

this province, there is this problem of deflation and so you're not

going to have the problems covered up by any current changes such as

inflation as the first Mr. Bennett had. Looking at it that way, the

picture is fairly dismal in terms of some of these debts that we've

incurred for ourselves.

MR. CHAIRMAN: The Chair, in recognizing the member for

Nanaimo, reminds the committee that the vote clearly specifies

management of public debt in this current year, and that discussion of

other ministries or how debt might have been incurred would not be

relevant on this vote. Also, extreme latitude was allowed during the

minister's vote, and I think we must be quite specific to this vote

with respect to the management of public debt, which is the vote title.

MR. STUPICH: Mr. Chairman, in cautioning me I think you've

taken longer than I intend to take in responding. But the minister's

comment about Manitoba invites at least a few words in reply.

With respect to the management of the public debt itself, may I

simply say that one thing that concerns me as much as anything else

about our public debt is the fact that in 1985, according to my

analysis of public accounts, the people of British Columbia had to

export $673 million worth of something to pay the interest on that

portion of our debt that is in the form of American dollars. Now that's

a lot of exports simply to pay for the foreign part of our debt.

With respect to Manitoba, I'd like to quote from a speech by the

Minister of Finance in Manitoba, sentiments that I can endorse, and I

would invite the minister to comment on these sentiments just briefly.

'As a politician, I don't see the aim of economic

policy as simply balancing a set of books. My interest in economic

policy is not only how it affects the government's coffers, but also

how it affects the people it touches. For me, the importance of

economic policy is how it helps us to improve the quality of life,

whether it redresses economic imbalances. Economic policy should work

for those who have less in our society, not for the benefit of those

who already enjoy more than their fair share."

One of my arguments consistent through these estimates is that the

minister, with respect to his policies, is doing it just exactly the

other way around, and he's done it presumably to try to put British

Columbia, as he might say, back on its feet. But by almost every

measure, British Columbia has gone further and further behind compared

with most other Canadian provinces while we have been doing just the

opposite of what his counterpart was doing in Manitoba.

[Mr. Ree in the chair. ]

HON. MR. CURTIS: Speaking strictly to the management of the

public debt, the member for Nanaimo may care to look at some of the

material that I have had from time to time. Manitoba's foreign debt is

disproportionately high. The provinces together have raised about

two-thirds of their funds in Canada or in Canadian dollars, with no

exchange exposure, obviously. Less than half of Manitoba's borrowing

has been domestic. Manitoba's U.S. dollar debt, Mr. Chairman, is also

excessively large: 37 percent of its obligations are in U.S. currency,

compared to 30 percent for the provinces in aggregate. Mr. Chairman, I

trust that, as we decrease our deficit and as the economy improves, I

will have been seen, with others in this government, to have managed

the public debt in a responsible fashion.

Vote 81 approved.

Vote 82: contingencies (all ministries), $50,000,000 — approved.

MINISTRY OF INDUSTRY AND

SMALL BUSINESS DEVELOPMENT

On vote 44: minister's office, $215,347.

HON. MR. McCLELLAND: Maybe I'll make a couple of brief

comments, Mr. Chairman, before we get into this vote. I'll be very

brief. Most of the operations of the ministry are pretty

straightforward.

I'd like to say to the House, though, that in my opinion this

ministry is the best job in government. It offers a person the

opportunity to meet with dynamic, far-seeing and innovative businessmen

around British Columbia, and to be able to help them to develop the

economy of our province, and that's a very positive feeling to have.

We do, of course, have as our objective the responsibility to

encourage and to facilitate the expansion and the diversification of

the province's economic base — industrial and small business — of

course in conjunction with the British Columbia Development

Corporation; to develop financing packages; to assist many kinds of

operations.... Some of them include the very exciting construction of

Moli Energy's rechargeable battery plant at Maple Ridge; a biomedical

[ Page 8422 ]

research centre on the campus of LJBC devoted to

the discovery, development and study of disease control, particularly

cancer; one which we will be celebrating with the commissioning of a

new aircraft very soon — Conair Aviation of Abbotsford, in its major

project to convert used Fokker F-27 airplanes into firefighting air

tankers; and a number of other projects.

I will, Mr. Chairman, just coincidentally, be releasing today a

press release regarding some opportunities which have been delivered

under small business incentives that have been developed in my

ministry. We'll be announcing that 16 British Columbia firms are

receiving government loans under the small business incentive

subagreement, the small manufacturers incentive program, the industrial

development assistance program and the aquaculture incentive program.

Those programs and those industries, since they're all small

businesses, Mr. Chairman, are all over British Columbia. They're well

represented in every member's constituency.

We, of course, were successful in negotiating the seven

subagreements under the broad ERDA agreement which was signed, which

committed $575 million, jointly funded by the federal government and

our government, over a five-year period for various kinds of industrial

opportunities, a major one, of course, being in reforestation

opportunities of $300 million.

The small business venture capital program is now in place, designed

to attract new equity capital into British Columbia businesses. During

the first three months of operations 17 venture capital corporations

were registered, representing about $13 million in approved equity

capital. Our next step — in fact the step we have recently taken — in

conjunction with the small business venture capital program, is really

a marriage service almost, in which we have a matching service

available within the ministry to take people who want to invest, and

have money to invest, and other people who are looking for money, and

try to put them together. So far, Mr. Chairman, it's working very well.

We are administering, in conjunction with the Ministry of Municipal

Affairs, the community organizations for economic development program.

During the past year that program has supported the operation of 29

municipal and regional economic development committees, and 19 special

projects, including the establishment of a northern B.C. communities

promotional office in the World Trade Centre at the Canada Place.

During the past year, in our small business services branch, our

counsellors responded to over 30,000 direct inquiries, while the

business information network handled an additional 80,000 requests for

advice and information.

So it's been a busy year, which only says, Mr. Chairman, that a lot

of people are looking at a new way of providing their livelihood, and

that way is in enterprise. Rather than going and looking for a job,

they're making their own jobs, and some of them are being extremely

successful at it.

With the Ministry of International Trade, Science and Investment we

have developed a further agreement with the federal government to

extend the cooperative overseas market development program, a program

funded by my ministry, the federal Department of Regional Industrial

Expansion and the Council of Forest Industries of British Columbia.

This program has now received a further five-year extension, and is an

excellent example of the way that people can work together. Its aim is

to extend the use of British Columbia forest products around the world.

We have now agreed to a similar kind of program with the Fisheries

Council of British Columbia. That will be the Fisheries Council of

British Columbia market development program, announced late last year.

It is a three-year domestic and export market program, and it's funded

again by the federal and provincial governments. Its aim is to expand

our fisheries products both here at home and around the world.

Mr. Chairman, I'd like to pay a brief tribute to the people who have

worked so hard in my ministry — my deputy and his staff and all of the

others and those in the British Columbia Development Corporation as

well. So far we've had a very busy year, and I'm looking forward to

continued steady activity within the ministry. I'd be happy to answer

any questions.

HON. MR. CURTIS: Mr. Chairman, I waited until my colleague had concluded. I wonder if you could advise if there's a quorum here.

MR. CHAIRMAN: There does not appear to be a quorum at the moment.

There now appears to be a quorum.

MR. WILLIAMS: Mr. Chairman, it was a fairly short speech from

the Minister of Industry and Small Business Development in opening the

debate on his estimates; I guess rightly so, because the achievements

have been so modest.

We're still a resource-based province, and that is something that we

have to deal with in our evolution as a more mature economy. But we

have not pursued effective courses of action during this past decade

under this minister or the ministers before him in this portfolio.

The story is dismal. It's one of significant massive failure in the

projects they have entertained and in the goal of diversifying the

economy of the province. That has not happened during this past decade

at all. We have not effectively developed a value-added industry for

our basic products. I don't want to spend too much time today on that,

because last year I spent some time on the whole question of

value-added in our primary industry, particularly in the forest sector,

and the minister is fully aware of that speech. I guess by now he is

fully aware of the kinds of studies that have been undertaken by

top-notch professionals like Woodbridge Reed and others on how we move

that major industry of ours out of the doldrums and into the new

sophisticated era.

In the wood sector, we are still a province that turns out 2-by-4s

instead of more finished wood products. We turn out market pulp and

newsprint instead of fine papers and higher grade newsprints and the

like. We send the bulk of our product out of this province in a

semi-finished or unfinished form, particularly in the case of raw logs.

We're now sending out raw logs, 12 percent of volume on this coast,

and, I suggest, 25 percent of value.

Despite the fact that further processing would provide jobs in B.C.,

we don't apply simple principles to our industrial goals, and that's

the problem. The minister will hire all kinds of so-called experts,

really little more than mumbo jumbo people that aren't dealing with

fundamentals. Take a simple thing like weight-losing, which I should do

and the minister should do. If we applied that principle....

[3:15]

[ Page 8423 ]

AN HON. MEMBER: Me too.

MR. WILLIAMS: Okay, all of us. But if we applied that

principle to our industrial sector, it's really worth thinking about.

What we need is an industrial sector that starts losing weight. We turn

out heavy products, costly-to-move heavy products. That's basically

what we produce in terms of our primary products in British Columbia.

We should be producing lighter products, more valuable products, rather

than these heavy, less valuable products which are our staple.

We should be talking in these simple straightforward ways, Mr.

Chairman, because there's too much gobbledegook around in this economic

development area, and the Third World has paid a terrible price for

that, but we in some ways are like the Third World and still swallow

some of that nonsense. This ministry ends up spending hundreds of

thousands of dollars annually on consulting studies and bringing in

experts. I wonder if the minister could tell us the number in terms of

what you spent and what your predecessor spent on special economic

zones, and all of those studies carried out with respect to special

economic zones. That's the kind of gobbledegook I'm talking about. How

much did you spend in hiring consulting engineers in looking at the

Delta-Roberts Bank area, looking at the farmland in the ALR and the

possible industrial development of that, looking at Tilbury Island and

the possible development of that, in terms of engineering consultants,

in terms of economic consultants and all the rest? How much did you

spend in consulting fees on northeast coal? I think on northeast coal

alone it was $10 million-plus just in consulting fees.

MS. SANFORD: Look at the advice they got.

MR. WILLIAMS: Exactly, and for all that is there a rate of

return on the project? No, there isn't. So here's a department we've

had around for how many years — what, about 13 years? It was basically

established as a new agency in about, what, 1973 — rather than just the

old department of economics and statistics and that kind of gathering

of information. Yet for all those years — 13 years — as a basically

so-called economic development department, the results are just

abysmal, and you are still at the same level in terms of

diversification in this province as the Maritimes.

No, you can shake your head; you can throw it back to the pillar.

Interjection.

MR. WILLIAMS: Well, it's true, and it's nothing to laugh

about. It is true. The diversity that you seek has not been achieved.

Our level of diversification, according to the best academics that I've

seen from our own universities in this province, is still at the same

level as the Maritimes. That's a reality. That's the end result of 13

years of having this ministry.

So you spent hundreds of thousands — we don't know what the total

number is — on the special economic zone idea, and whatever happened to

that? That's something you were giving speeches on for a good 18 months

or a couple of years. It's clearly as dead as the dodo, because you

needed the feds to play along. You needed the feds to give the

concessions on a scale like you were willing to give in British

Columbia, and they've proven unwilling to do that. They've proven

unwilling to give those kinds of subsidies, because they see it as an

endless waste of public money. So for 13 years you've been pursuing

will-o'-the-wisp kinds of new ideas instead of dealing with the

fundamentals of the British Columbia economy. It's always stuff like

special economic zones or it's stuff like.... Well, we know what they

are.

It seems to me that at this point in time after more than a decade

of chasing projects that don't work essentially, it's a time for major

reassessment of what you've been doing. It is indeed, as others have

said, a time for renewal. It's a time for renewal in terms of the

talent you've got, the backup you've got, and the whole way we look at

the province's economy. That has not occurred. This is a standstill

department. It's an economy that stands still, and in fact is sliding

backward in far too many sectors. It's sliding backward in our

historically sound sectors. That's a great, great loss.

This morning in the Finance estimates I showed that the

non-collection of economic rent of resources has had a negative impact

on provincial income needless to say, as we're not collecting

legitimate revenue but beyond that it's had a negative impact in the

private sector as well. I don't want to elaborate on that in great

detail, but I'm saying that our non-collection of public revenues and

rents with respect to our basic resources has allowed the corporate

sector to not perform as efficiently as it otherwise would. They

historically have been used to the non-collection or under-collection

of rents in terms of our natural resources, be that minerals or other

products; it doesn't matter. There is a consistency there at the

provincial level in not collecting these revenues.

If we look at our wood sector and compare the coast with the

interior, we find that the most efficient industry is in the interior

of the province. Our least efficient industry in the wood sector is on

the coast. You can again shake your head and say: "Oh, that's not

really my department." The problem is that it is nobody's department in

this administration. The efficient wood-producing plants in British

Columbia are in the central and northern interior, and some of the most

efficient ones in the world are in the Prince George area. However, if

we look at the difference in terms of the fundamentals that they both

face, we find that the interior had to face more competition for supply

than the coast. The people in the interior of this province have had to

face competition for their raw material historically and more recently

than the people on the coast.

So the lack of competition on the coast has meant an incredibly

inefficient basic resource sector in terms of sawmilling, pulp, paper,

whereas in the interior we have an efficient industry. I suggest that

the reason is the greater collection of rent in the interior and the

need to compete for what used to be called not too long ago third-band

wood: a third of the wood supply was withheld and then reallocated on a

regular three-year basis — or something like that — on the basis of

performance and efficiency. That's the difference. The coast got

rewarded for performance and efficiency in public wood supply. Those on

the coast remained with their public wood supply regardless of

performance and regardless of efficiency.

I'm suggesting that what we need in British Columbia is something

like the Japanese are calling for in their more sophisticated economy.

They're calling for lighter, smaller, slimmer, or whatever it is, and

we should be calling for the same in British Columbia's industrial

sector. The benefits would be even greater than those in Japan. Just

think about that simple idea of producing lighter products. If we all

lost weight collectively, if we lost weight in terms of our products,

[ Page 8424 ]

it would automatically mean more regional

development. If we reduce the weight of the products we sell abroad, it

means more work where the products are harvested. That would apply to

every sector.

Like most important ideas, it's a simple one. If we simply produce

lighter and with less weight we would be turning out more valuable

products and creating jobs in the regions of the province where we

desperately need them and where we don't have them now. In the

southeast part of the province the unemployment rates hover constantly

at 20 percent. They hover regularly in the Prince George area around

that level and very close to that in the Kamloops region as well. The

policies of this administration have essentially been geared to new

mega projects in the urban Vancouver area, and the price tied to that

is the underdevelopment of the hinterland. Ironically, under this

administration we have had a continuing underdevelopment of the small

towns of British Columbia and the hinterland. I say that as an urban

member who has some sense of the scale of this province of ours. So I'm

arguing for products that will lose weight because we will get more

jobs, and we'll get more jobs in the region.

I'd like to refer to one small plant which happens to be in Surrey,

called Kaywood Industries. It used to be Dashwood and Kayline, and it's

down sort of southeast of Newton along the B.C. Hydro right-of-way

there. They turn out products that are lighter, not heavier; products

that are more valuable, that benefit the economy and create more jobs.

Mr. Stusiak, the main owner, happens to be a Burnaby alderman. They

turn out a product that's basically worth $1,200 per thousand board

feet. So they're turning out lighter products that are worth $1,200 on

average per thousand board feet, instead of two by fours worth about

$200 per thousand and raw logs that are a fraction of that. It's a

wonderful example of lightweight production that we need. Lighter is

better; it's creating jobs and adding value. They turn out doors,

window materials, cupboards and other finished products, and after some

restructuring and consolidation of ownership they're doing okay.

They and a handful of others in the province are a model we should

be pursuing. Ironically, they've been squeezed in terms of supply, in

terms of raw materials. They've been squeezed because of our excessive

export of raw logs — that's been a factor — and because during the good

market for our cheap products like two by fours the availability of

supply for them has not been as easy as in the past. So they've been

squeezed.

I'm suggesting, Mr. Minister, that, you should play an activist role

with respect to operations like that, encouraging more operations like

that and making sure that there's not log exports and that there is

availability of raw material supply for those kinds of producers.

Beyond all this we're still more and more in this province a branch

plant economy: a branch plant economy to the United States; a branch

plant economy for eastern Canada; a branch plant economy for owners

abroad.

MR. CHAIRMAN: Time, hon. member.

MR. WILLIAMS: I think I'm the designated speaker, Mr. Chairman.

MR. CHAIRMAN: The hon. member is aware of practice recommendation 9 in the Standing Orders ,

presumably. The Chair will read it. "A member who wishes to speak as

designated member should advise the Chair as early as possible after

the commencement of his or her speech." That would save the Chair the

embarrassment of interrupting the member in the middle of his speech.

MR. WILLIAMS: Thank you, Mr. Chairman. I wouldn't want you to be embarrassed and I apologize for not advising you earlier.

So beyond that, we're a branch plant economy. In the end that means

an outflow of capital — capital that could be used for renewal,

reconstruction and for new plant.

If we look at the overall figures in terms of negative capital

outflows in this country, between 1950 and 1976 the outflow was

negative in terms of capital. We tend to think of Canada as a positive

importer of capital, but in fact that has not happened. It's caught up

with us. We actually lost $9.6 billion. So we have a negative outflow

of capital.

The branch plant problem that we face in this province and in much

of the rest of Canada has very real regional implications. We tend to

lose the head office jobs. We lose the head office jobs that go to the

senior offices. That applies to companies from abroad. We lose the head

office jobs even in terms of Canadian enterprises. So you get a company

like MacMillan Bloedel, for example, significant as it is, whose real

head office is still Noranda in Toronto. And that applies to far too

many other enterprises in the province as well.,

We lose the research and development work as well. If you check the

R and D expenditures in British Columbia as compared to other

jurisdictions and administrations, or even indeed in other

jurisdictions in Canada, you'll find that we are about the lowest

anywhere in the western world in terms of the chunk of our gross

provincial product that's spent in research and development.

[3:30]

Those then, too, are jobs that we lose because of the branch plant problem that we have.

If this ministry wanted to look at things in a fundamental way, they

would look at this staple economy of ours, i.e. our natural resource

economy, and they'd start looking more seriously at forward and

backward linkages in terms of at least the resource sectors. But we

don't do that.

There is the whole question of the machinery that we need for

extraction of raw materials and resources. We should and could be a

world-scale producer of machinery in the forest sector. We are not. We

simply are not. We could be a world scale producer in terms of

machinery for the mining sector. We are not. Had there been a conscious

policy on the part of this ministry in terms of those backward linkages

and the exploitation of natural resources, we would have had more

machinery operations in the province working and developing new

machinery both for forest exploitation and for mineral exploitation.

But this is not the case. We do not compare with other jurisdictions.

Given the nature of our natural resources, the percentage of our

production in those areas is very, very modest indeed.

Beyond that, I've mentioned value-added. Again, it's a slipshod kind

of approach to the question of how we can really move in the

value-added sector. You know, who did the last guy hire in terms of

value-added production in the woods sector? Can the minister tell me?

I'm sure his deputy can.

[Mr. Strachan in the chair.]

[ Page 8425 ]

Going through public accounts of the last fiscal year, there was a

$100,000 contract with respect to value-added in the woods industry and

furniture production — $100,000. And who was the person hired? It was a

lawyer in West Vancouver.

Interjection.

MR. WILLIAMS: Hugh W. Cooper; that's the one. But you know,

the question is, don't we have existing industries and existing

industrialists that are very experienced? Do we need to send people to

the Royal Museum in London to look at that kind of question? That's

what's happened under this ministry.

We keep looking for the glitzy stuff. We got the same sort of thing

from another minister, talking about high-tech as our great future,

when in fact we haven't rebuilt the basic provincial economy that we

have to retool and rebuild on a constant basis. What we've got to do,

Mr. Chairman, is do what we do better and more efficiently and more

productively; and we've got to do it lighter and make it more valuable.

In the pulp and paper sector, I wonder if this minister has ever

looked at the most recent data with respect to the public pulp and

paper sector; I suspect not. There's data now out that shows that

we.... I wonder if the minister might guess: in terms of our efficiency

in the pulp and paper sector, are we the most efficient, the second

most efficient, the third most efficient, the fourth most efficient,

the fifth most efficient? I ask the minister. Just nod your head. Do

you think we're number one? No. Number two? Number three? I think it's

clear, Mr. Chairman, the minister doesn't know. I think it, s clear

that he doesn't know.

The reality is we are the least efficient producers of pulp and

paper in the world, despite the fact that we supply the wood at a lower

cost than in any other jurisdiction in the world. Just think about

that: we sell our wood to the pulp and paper industry....

HON. MR. McCLELLAND: Could you give me your source for that?

MR. WILLIAMS: Sure. I'll develop it. I'll give you the figures.

HON. MR. McCLELLAND: You'll give me the source.

MR. WILLIAMS: I'll give you the figures.

HON. MR. McCLELLAND: You don't have a source.

MR. WILLIAMS: Indeed I have a source, Mr. Minister.

Our problem is that we're still basically using 1960 technology. The

minister says that I don't have a source. I'm saying that studies have

been undertaken internationally, looking at the Norscan countries. He's

changing his tune; he's now nodding his head. I'm saying that studies

have been undertaken with respect to Norway, with respect to Finland,

with respect to Sweden, with respect to eastern Canada, with respect to

the United States. Relative to all of those international producers in

pulp and paper, British Columbia is the highest-cost producer in the

world. The people that carried out the studies were Price Waterhouse

Associates, international people in the field of accounting. They

carried out the studies I referred to. The minister has millions of

dollars worth of staff to advise him, and he doesn't have this kind of

basic information.

The problem in our pulp and paper industry, Mr. Chairman, is that

we're basically still using technology of 20 years ago. That's when the

bulk of our investment was made in this industry — or earlier. We have

the oldest plant, generally, of any of the western economies: 1960

technology. We are a generation behind.

The numbers from this international study by Price Waterhouse are as

follows, in terms of market pulp: Sweden, $383; Finland, $438; the

American west, $500; U.S. south, $504; eastern Canada, $504; B.C.

Interior, $513; B.C. coast, $557 per unit. So the differences between

the B.C. coast and these other jurisdictions is $174 between B.C. and

Sweden; $119 between Finland and the B.C. coast; $57 between the U.S.

west and our coast; $53 between the U.S. south and our coast; $53

between eastern Canada and our coast; and $44 between the coast and the

interior, in terms of the cost of producing market pulp.

Those are real figures. That, put together by Price Waterhouse,

looking at plant and equipment in pulp and paper in the Norscan

countries, in the United States and in eastern Canada, is the most

up-to-date information currently available. It is a measure of the

disastrous problems we have within our traditional basic industry in

this province. It is a measure of your and this administration's

failure over the last decade, as well as the private sector's, in terms

of not making funds available for plant and improved production and

better technology in this field in British Columbia. Those numbers are

the measure of our general collective failure in this field in British

Columbia. That burden is primarily yours, Mr. Minister.

Our labour costs to produce pulp and paper in British Columbia are

four times what they are in the Norscan countries. That is not a factor

of wage rates; that is a factor of plant, equipment and technology.

Interjection.

MR. WILLIAMS: Yes, that's what it is, and if you find that

puzzling, that is an indication of the depth of the problem we have in

this province.

Our energy costs in this industry are, again, four times what they

are in the Norscan countries. That is also a reflection of the

technology and the inefficient plant we have in British Columbia.

But what about newsprint? Here are the numbers, again carried out by

Price Waterhouse, and the measurement is cost per foot: Norway, $388;

Sweden, $411; the U. S. west, $450; the U.S. south, $472; Finland,

$475; Canada, $506 — a $128 difference with Norway, Mr. Minister, in

terms of the cost of producing newsprint. That's the measure of the age

and inefficiency of our newsprint capability in the province of British

Columbia.

As I said, that's despite us having the lowest wood costs in the

world in terms of wood delivered to pulp-and-paper mills in the

province. In case you're not aware, the pricing is generally about half

of what the roundwood log supply.... All the other jurisdictions in the

world charge the same as roundwood supply costs, in terms of the fibre

for these particular mills. Our mills have this additional benefit of a

[ Page 8426 ]

lower-cost fibre supply for a range of

quasi-monopoly reasons in the province. Despite that, the difference in

efficiency between us and the Norscan people is on this huge scale.

What does the future look like? What about proposed capital

investment in this industry? The last figures I saw, and they were of a

year ago, were projections to 1989. The projections for spending in

this particular sector were: Quebec, $2.5 billion in capital spending

for modernization, new plant and equipment, before 1989; Ontario, $686

million; B.C., only $430 million; New Brunswick — little New Brunswick

— $422 million, virtually the same as the province of British Columbia.

We have to remember that in British Columbia we have one-half of the

forest resources of the country. On any ratio basis we should have half

the capital spending in this sector. What we're doing, up until 1989,

is 10 percent of the proposed capital spending. It simply doesn't make

any sense. What that means is that right up until 1990 we will continue

slipping behind more. We are already the highest-cost producer in the

world in pulp and paper, as documented by Price Waterhouse. We should

be spending more than anybody in this nation or in the rest of the

world in terms of improving plant and equipment. We are not.

MR. MICHAEL: I ask leave to make an introduction.

Leave granted.

MR. MICHAEL: I'd like to introduce a couple visiting the

Legislative Assembly today: Mr. Barry Prouty and his wife, Valerie.

They're from the constituency of Shuswap-Revelstoke and live in the

area of Chase Creek. Would the House please make them welcome.

MR. WILLIAMS: I just told him that we are in disastrous

straits in terms of our basic industry, that we're the highest cost

producer in the world, that all of the projections indicate that we

will slip behind even more until 1990. What has the minister to say

about that?

[3:45]

HON. MR. McCLELLAND: Mr. Chairman, the member also said that

we have four times the labour costs in our mills. Just looking at a

graph of pulp and paper production in British Columbia, in 1975 we

produced about four million metric tons of pulp. In 1985 it was very

close to six million, record levels last year as a matter of fact, and

a similar thing is true for paper.

Mr. Chairman, that member, in every estimate, uses it to debate

forestry issues. I don't think he's ever been in order, except maybe in

the forestry estimates. I'm not going to debate with him on forestry

issues in my estimates.

I can tell you that he doesn't know what he's talking about most of

the time when he talks about making this a leaner economy, losing

weight in our economy, manufacturing lighter products. I'd invite him

to go to more than one plant in British Columbia. Perhaps he should

start his visit with Vancouver East, his own constituency, because he

continually talks about the opportunities that we have in British

Columbia to be world leaders in the manufacture of equipment related to

the forest industry.

What he doesn't know is that we already are world leaders in the

manufacture of forestry equipment, and one of the best manufacturers is

right in his own constituency — CAE Machinery. At one point in this

House, he even accused a company of not buying any equipment from that

company, and it turned out that most of the equipment that that

particular company bought was in fact from that company. So first of

all, I suggest he start with a visit in his own constituency. Then I'd

like him to go around the province and see what really is happening to

industry in British Columbia and the way in which diversification is

taking place.

We are no branch plant economy, Mr. Chairman. Nothing of the sort.

If you look at what's beginning to happen in British Columbia with

added value to our wood products, you'll be excited, as I am, and I'd

really like you to get excited for once in your life.

We are remanufacturing wood into other products. There's more than

one company. I realize the company which the member refers to in his

comments is a very good company, but there are lots of them all over

British Columbia remanufacturing wood into other products — doors and

windows, furniture. The Minister of Education will be opening a new

furniture manufacturing plant in Penticton on June 24. We are

manufacturing chopsticks from wood in Prince George, and I expect that

there will be several more. We are now manufacturing diapers in British

Columbia from wood products. We soon will be manufacturing tissue of

all kinds and a number of other products in British Columbia from wood

waste. That is the exciting thing that's happening, and all that is

happening, Mr. Chairman, right under that member's nose, except he

won't look. What is more exciting is the way that this province is

diversifying.

The fastest growing sector of our economy over the last ten years

has been the manufacturing industry — nothing else — and the service

industries that service the manufacturing industry. The three fastest

growing segments of our economy, all through the period of the

recession, growing at rates of something like 30 percent per year, are

the motion picture industry, the software manufacturing industry and

the electronics manufacturing industry, today our fourth largest

industry in British Columbia and growing very fast. Do you know that?

It is the kind of industry that we need and want to diversify the

economy of our province.

I think that member better get out around this province and find out what's going on.

MR. WILLIAMS: If you want to see the numbers in terms of the cost in the pulp sector....

HON. MR. McCLELLAND: It doesn't mean anything.

MR. WILLIAMS: Price Waterhouse doesn't mean anything? You say that those aren't real labour costs?

HON. MR. McCLELLAND: It doesn't mean anything.

MR. WILLIAMS: It doesn't? It means enough to the

international people in the field of pulp and paper to hire Price

Waterhouse to go around the world and compare efficiencies, and we fail

on all counts.

Interjection.

MR. WILLIAMS: What's volume got to do with it?

HON. MR. McCLELLAND: For heaven's sake....

[ Page 8427 ]

MR. WILLIAMS: The difference is profit. There simply isn't

the profit in the industry in British Columbia, and when price goes

down, then we're in trouble.

HON. MR. McCLELLAND: What do you want me to do about it?

MR. WILLIAMS: Become informed.

MR. CHAIRMAN: The member has....

MR. WILLIAMS: If you want the numbers for administration and

supervisory staff costs in the market pulp sector, it's $6 a unit in

Finland compared to $24 and $26 on the B.C. coast. These are 1983 and

1984 figures and data. It gives you an idea of the kinds of difference.

That's the fourfold kind of thing that I'm talking about.

What we haven't heard about today from this minister is the biggest

project of his department in this decade — northeast coal. That was the

brainchild of this ministry and your staff and your former ministry.

Interjection.

MR. WILLIAMS: Northeast coal is your biggest exercise in

industrial development during your decade, the biggest exercise ever in

the history of British Columbia. And its future looks worse and worse.

It's impinging more and more on the southeast part of the province in

terms of cutbacks and layoffs and ultimately, I'm afraid, closures.

It is a tragic story — a 50 percent cutback in the southern interior

where they are more efficient producers. What kind of wrong-headed

policy is it that would have us focus on the high cost producing area

in the northeast rather than the southeast, to everybody's loss? Your

policy, that's what.

We never hear a word about this one. I'd like to see a copy of the

film and videotape that you did on northeast coal. Is it available, Mr.

Minister? It was through your various slush funds of one kind or

another. It's called "Take a Giant Step." Maybe they've had to change

the title since it was originally produced. That was Doug Heal and Dave

Brown and all those guys. The last number I saw for just a part of that

one was $150,000 for that film in the public accounts. But maybe that

can be corrected. I think they have had so many hundreds of thousands

of dollars, Mr. Heal and Mr. Brown, that it is hard to keep up in terms

of their propaganda effort. But I wonder, is that film available? Is it

available to the opposition? Because we would like to take it around

the province and show it to everybody.

Now the CBC did one film called "Megadream," "Megabust," or whatever

it was called. That clearly indicated that this was a massive,

monumental failure. It would be interesting to compare it with your

propaganda film called "Take a Giant Step," and we could see how these

many hundreds of thousands of dollars spent on your propaganda film

compare with the CBC's effort in terms of the same exercise. Is the

film available, I wonder? It would be interesting to see.

MR. CHAIRMAN: On this note, hon. members, the committee notes

that in the 1985-86 estimates there was a reference in these ministry

operations to northeast coal development. However, in the current

estimates there is no reference to this ministry nor any expenditures,

so I would find that discussion to be not relevant. Debate in Committee

of Supply must be strictly relevant.

MR. WILLIAMS: I find that if you dial the northeast coal

number that is in the book and wait for a response — and you have to

wait longer for telephones to be answered in British Columbia since

restraint — you find that when you dial the northeast coal number on

Hornby Street, the answer is: "Industry and Small Business

Administration." That's certainly what you get when you dial the

number, Mr. Chairman. I certainly can understand the department wanting

to abandon this project as quickly as possible. It looks like the other

players are about to do the same.

Maybe we could look at another interesting project, and that is

Louisiana-Pacific. which this ministry has provided a bundle for, $25

million at zero percent interest. Can the minister advise if the

cabinet was advised that there was concern about the lion's share of

the funding coming from the Crown when this project was proposed?

HON. MR. McCLELLAND: Well, there are a couple of questions in

there, I guess, Mr. Chairman. If you would like to have that film to

show at your annual meeting, Mr. Member, why, just call our library and

we'll make it available to you.

As far as the Louisiana-Pacific, the Chairman is right. I have no

money in my budget for anything to do with northeast coal at this

present time. But as far as Louisiana-Pacific goes, I don't know what

the member means by was there concern given to cabinet about the amount

of the funding being done for Louisiana-Pacific. I don't understand the

question. Obviously, before preparing a paper for cabinet a whole lot

of things would be considered, and we were very thorough in making

those considerations available as points to begin discussion with

cabinet. That was done in this instance. I would be very unhappy if it

wasn't done in every instance in which government funds were being

provided.

MR. WILLIAMS: What I asked was: was the cabinet advised in

terms of concern over the fact that the lion's share of the risk with

respect to the waferboard project in Dawson Creek would be borne by the

province rather than the private sector, and that this was contrary to

all provincial policy heretofore.

HON. MR. McCLELLAND: Mr. Chairman, the cabinet knew every detail of the loan that was being made to Louisiana-Pacific.

MR. WILLIAMS: So the minister, Mr. Chairman, is saying that

the cabinet was advised that the lion's share of the risk was being

borne by the Crown?

HON. MR. McCLELLAND: The cabinet knew every detail of the

loan that was made or is being made to Louisiana-Pacific. I would be

very unhappy if they didn't.

MR. CHAIRMAN: Before recognizing the member, I will remind

the committee that discussions regarding cabinet are not relevant to a

minister's estimates. Only the voted expenditures are discussed.

[ Page

8428 ]

MR. WILLIAMS: The minister is not answering the question, Mr.

Chairman. That's very clear. He is not answering the question. Will

funds have to be provided by this administration for the B.C.

Development Corporation to meet the shortfall in terms of your generous

loan terms provided by BCDC?

HON. MR. McCLELLAND: The answer is yes.

MR. WILLIAMS: The minister didn't know until he checked. What

more can one say? Here is a $10 million subsidy just in terms of

interest, and the minister doesn't know if the money has got to be paid

by the Crown to BCDC or not. It does have to be paid by the Crown to

BCDC, so for the next six years the public, the taxpayers, of British

Columbia have to cough up that $10 million. For the next six years, we

have to cough up that $10 million in terms of interest subsidy, and

we're giving them tax holidays at the municipal level and at the

provincial level that total millions more again. The minister didn't

know that that was going to be the case. Of course he knows now, he

says. Of course he knows now, but he had to check with his deputy to

see for sure. That's simply extraordinary.

What we have here is a deal that the Minister of International Trade

and Investment cooked up and that this minister was saddled with. It's

clear he doesn't have a handle on all the details. It's clear that the

former member from South Peace saddled him with this deal and he had to

swallow it whole. That's what's becoming more and more clear as time

goes on. He had to swallow whole a deal pulled together by a minister

who did not have the authority to pull the deal together. BCDC had to

swallow a deal in terms of a $10 million interest lump that they would

have to pay by requiring that this government cough up the $10 million

for them. This man wasn't even aware of the kind of mess he's had to

swallow. He's not aware of the kind of mess he's had to swallow with

respect to the Louisiana purchase, or the Louisiana-Pacific deal.

That's extraordinary.

[4:00]

The cabinet was advised in the following words, and I quote: "The

cabinet was advised that this arrangement would clearly burden the

province with the lion's share of the project risk," — I quote from a

cabinet document — "risk which is contrary to established policy, and

the cost to the provincial treasury would appear to be excessive —

approximately $10 million in present value terms." The modest civil

service in your own department sent that report to cabinet stating

those words, that the risk would appear to be excessive, the cost to

the province would be excessive, and the lion's share of the risk would

be borne by the people of British Columbia. That's in a document from

your department to cabinet, Mr. Minister. It's an extraordinary deal.

We have never seen the equivalent in the history of British Columbia in

terms of that particular deal. Your staff essentially were blowing the

whistle on it. They essentially were saying: "This is not justified."

They were essentially saying: "We've never, ever done this before in

the history of the province." They were saying that it wasn't

justified, and they were saying that the private company should be the

risk-taker in an exercise like this.

The problem is that this is a profitable sector for the

Louisiana-Pacific company. You check their annual reports, and you find

that they say this has been their most profitable sector and that's why

they've been expanding it as quickly as they have over the last decade,

because it's a profitable sector for them. If it's that profitable for

them, then we don't need to put money on the table. We simply don't,

and didn't, need to put money on the table in terms of this kind of

proposition.

It's very clear. The cabinet was warned. The minister was warned.

They were told that this was excessive, that they were taking too much

of the risk. Despite all that, they went ahead with the project. The

same earlier minister of this department that gave us northeast coal is

the minister who gave us Louisiana-Pacific. What kind of track record

is that anyway?

This minister simply had to swallow it whole. He was given a fait

accompli by a minister who didn't have jurisdiction or authority and

had to swallow the deal whole. That's the mess he's had to deal with.

And there is no way he can excuse it away. The information is there.

The cabinet was warned.

HON. MR. McCLELLAND: Mr. Chairman, I told the member earlier

that the cabinet was aware of every part of the deal with

Louisiana-Pacific, and all of the discussion papers which led up to

Louisiana-Pacific's loan were laid before the cabinet. The cabinet made

a decision, and this is the result of that decision.

It's not extraordinary for the government to indemnify British

Columbia Development Corporation on loans. We do it all the time. It's

not extraordinary in any way at all. So this is no different. We can't

expect a development corporation to be responsible by itself for the

costs of incentives which are at the request of and for the benefit of

the government. So we do it. We indemnify the British Columbia

Development Corporation.

The size of the loan, if that's what bothers the member.... We've

made other loans that.... We've got $20 million into Moli Energy, which

is developing a revolutionary new product that very likely is going to

be the product of the future, in terms of rechargeable batteries.

LouisianaPacific has been subsidized in every waferboard mill they've

ever built. The Alberta government has heavily subsidized two

waferboard plants in Alberta. I'm told that they offered

Louisiana-Pacific $27 million.

Mr. Chairman, I don't apologize for going out and actively

soliciting something that will provide 375 jobs in a community that

badly needs them. I don't apologize for having the opportunity to use

what is presently an underutilized resource in this province — aspen

wood — which is just waiting to be tapped. As for the way in which we

arrived at the decision to grant this loan to Louisiana-Pacific, I

don't apologize for that either. It was all straightforward. It went to

cabinet and cabinet approved it. That's the way it usually happens.

MR. WILLIAMS: When did cabinet approve the loan?

MR. CHAIRMAN: The question really is not applicable to the estimates before us.

MR. WILLIAMS: They are supplementing funds to BCDC. The question is: when was the loan approved, Mr. Chairman?

HON. MR. McCLELLAND: I don't have the exact date with me. I'd

be happy to get it for the member and the approximate date of when it

was approved. But it was a little while ago.

[ Page 8429 ]

MR. CHAIRMAN: Just before I recognize the next member, with

respect to what I said earlier, the minister is responsible to the

committee for decisions that he has made, but a question dealing with

the executive council is not in order. The minister can respond on his

own behalf, but not on behalf of other members.

MR. WILLIAMS: That is absolute nitpicking, Mr. Chairman. It's

very clear that this is this minister's responsibility; this is the

department responsible for BCDC. The loan was granted. It went through

a process. When was this matter put to cabinet by your department?

That's the question, Mr. Chairman.

Interjection.

MR. WILLIAMS: It's the administration of this department.

Interjections.

HON. MR. McCLELLAND: I can tell that member quite clearly that that matter was never put before cabinet by my department.

MR. WILLIAMS: The matter was never put before cabinet by this

minister's department; that's what he's saying. So it was put by the

Minister of International Trade. Is that correct?

Interjection.

MR. WILLIAMS: Come on now, don't be coy. I'm interested. It's a very intriguing question.

Interjection.

MR. WILLIAMS: You mean this never was put forward to cabinet by your department. That's what the minister has said?

HON. MR. McCLELLAND: I've answered this question before in

the House. When that member asked why the Minister of International

Trade and Investment put forward this proposal, I told him why: because

it was an investment and because it came from outside the borders of

our country, which makes it international investment. So the

responsible minister was the Minister of International Trade and

Investment. However, Mr. Chairman, my ministry did a great deal of work

on the proposal with the Ministry of International Trade and

Investment, as we always do when we work extremely closely together,

and we did in this case. I am the minister responsible for the British

Columbia Development Corporation, so I would have done an additional

amount of work on this as well. There's nothing sinister about it, or

even interesting as far as I'm concerned. Normal practices were carried

out.

As that member probably will know, once cabinet approval is

achieved, under the British Columbia Development Corporation Act an

order-in-counciI it must be passed by cabinet on any loan over a

million dollars. That was done. That order, of course, would be carried

by me, with my responsibility to British Columbia Development

Corporation, and all orders are public.

MR. WILLIAMS: Is the minister saying there was no report to cabinet by his department on this project?

Interjections.

MR. WILLIAMS: What? You said no? You say there was no report

by your department to cabinet? When did your department report to

cabinet on this project, Mr. Chairman?

HON. MR. McCLELLAND: It was sometime during the course of the

debate on whether or not there would be a loan to Louisiana Pacific. I

think the important date is when did cabinet approve an order-

in-council, and that's a public document, Mr. Chairman.

MR. WILLIAMS: I submit, Mr. Chairman, that this minister's

department essentially made a recommendation to cabinet to not approve

this proposal. I submit to you, Mr. Minister, that that indeed was the

position of your staff and your advisers; that this was excessive risk,

excessive cost and was simply unjustified, and you got stuck with the

burden of the former minister's activities.

It's very clear, from the reports your department sent to cabinet,

that your department was against this proposal because of the excessive

cost and excessive risk. That is abundantly clear. You simply were

saddled with a player and a decision by a person who should not have

made the decision, who should not indeed have been involved in the

process to the extent that he was.

MR. LOCKSTEAD: I want to discuss with the minister the matter

of Ocean Falls. I understand that the minister visited Ocean Falls

recently. I've gone through this exercise in regard to Ocean Falls

every year for the last 10 or 12 years. I don't want to go through the

history of that but just say that the community was shut down as a

vindictive move by this government. The present minister was not the

minister at that time.

Over 500 direct jobs were lost. The pulp and paper produced in that

community was sold totally in the United States, which brought revenues

into this province. However, the fact is that this government, in spite

of a study done by H.A. Simons Ltd., a very reputable firm in terms of

pulp and paper around the world, a report commissioned and received....

By the way, it was never made public, although I happen to have a copy.

I've asked on many occasions for that report to be made public. It's

water under the bridge now; the community is dead, is closed.

But there are some questions I have for the minister in regard to

the future of that community. Before I pose this question I might add

that there was a point back in August 1985 when the government, through

B.C. Cellulose Company/Ocean Falls Corporation, started ripping down

houses and apartment buildings and these kinds of things, and there was

a great public outcry — and not only from the residents of Ocean Falls.

I wrote to the minister, and the destruction of the community was

halted. I hope that I played some small

part in that. At least the

minister did listen, and through his intervention stopped the

destruction of a possibly viable community.

[4:15]

However, to more recent events. I'd like to ask the minister, first

of all, about Central Coast Power Corp. The one question I have about

that corporation is: who are they?

[ Page 8430 ]

Nobody has ever heard of them. Who are they and where do they come

from? This government has granted them the right to produce electrical

energy for the community of Ocean Falls, and they have a further

undertaking to construct a transmission line to a community some miles

away in Bella Bella, which is currently being served by a very

expensive diesel-operated plant in that area. I have no objection to

that. But who are they, and how much money have they put up front for

the four generators, the dam and related facilities in Ocean Falls? How

much did they pay for that? And to whom does that money go? What is the

cost, and who is paying for the power transmission line? This is

extremely rugged country. As a matter of fact, I had the opportunity to

see a study commissioned, I believe, by B.C. Cellulose Company of that

proposed transmission line to Bella Bella — an extremely costly

undertaking.

I am not opposed to that undertaking, primarily because the people

in Ocean Falls and Bella Bella are not opposed to it. But I wonder why

this private corporation.... What were they given for these

undertakings? Who is paying for all of this? How are they financing

these projects? Why didn't B.C. Hydro, the major Crown corporation in

this province, who not too many years ago constructed a $1.2 billion

transmission line from Cheekye to Dunsmuir here on Vancouver Island,

have the ability? Of course they have the ability to build that type of

transmission line.

So this private company is going to supply energy to Bella Bella and

sell it to Hydro at Bella Bella. That's okay; fair enough. But who is

bearing the cost? Are there large interest-free loans being extended to

this company, and why when we do have a Crown corporation? I know the

generators in that community need repairing. Is this corporation going

to be responsible for repair of those generators? Or is the government

once again paying for repair of those generators, writing the cost off

and turning the whole thing over holus-bolus to this corporation? There

is considerable cost involved in this transaction.

One more thing on this very costly hydro study that I believe was

undertaken by B.C. Cellulose Company, if not by Ocean Falls Corporation

itself. Does this private corporation — CCPC as it is referred to in

this

article — receive free of charge this very costly study that was

paid for essentially by taxpayers' money? Was it just given to them, or

did they have to purchase this study? All the groundwork for this new

corporation has obviously been done by somebody. So I would ask the

minister that question.

I'd like to ask the minister as well if he has any idea.... The

minister, I know, was present at a ceremony in Ocean Falls. There was

an auction in the community. A great deal of equipment was sold off at

the auction to some 300 bidders, I believe, who attended that auction.

How much money was raised out of that auction? Where did that money go

to? I don't need precise figures, but approximate figures would do.

Particularly, is that money going to stay in that community and go to

the new improvement district that has been formed, is it going into

general revenues, or where is that money going? Some of the prices....

But I'm not going to get into that.

In the publication that I have before me, Mr. Chairman, the author

who attended the auction gives us the bid price for some of the very

expensive equipment that was bid on, and some of it went extremely

cheaply. However, since I have no control over that, the decision has

been made, the auction is over, the community sold out.... At least the

industrial part of the community has now been sold and is gone.

Well, one more question: I understand as well that the hotel has

either been sold to a private buyer or is in the process of being sold.

People who, of course, haven't been there wouldn't realize that it is

in fact a six-story hotel, a large hotel. At the time it was

constructed it was either the largest hotel or the second-largest hotel

in British Columbia, and a centre of many community activities.

My question to the minister is: if the hotel is being sold my

information is that it is, or has been — how much money is the

government or the B.C. Cellulose Company receiving for that facility?

Or is that money staying in the community to stay with the new

improvement district that has been formed?

HON. MR. McCLELLAND: Mr. Chairman, I hope I didn't miss any

of the member's questions. But first of all, with regard to the power

generator, Central Coast Power Corp. Is a private corporation which was

started for the purpose of negotiating to do what they're doing now. We

did have a proposal call from people who may be interested in providing

that power to.... Primarily our interest was in keeping power provided

to Ocean Falls. A secondary interest to us would be any other provision

of power anywhere else. But the proposal came in to build a

transmission line to Bella Bella, and we accepted that proposal, Mr.

Chairman.

The cost of developing that transmission line is all paid for by the

corporation; no government money is involved in that. In fact there is

no government money involved in any part of it — not in any

refurbishing of the generators or anything else. There is a requirement

in the agreement with Central Coast Power that their first

responsibility is to provide power to Ocean Falls. So there's no

government money in that, Mr. Chairman.

I do want to say, though, that in terms of the destruction of the

community, as the member pointed out, the member knows, I'm quite sure,

that there was never any plan to demolish Ocean Falls. There was a plan

and there was a map, which could have been available and probably was

available to that member, of the houses and structures which were going

to be demolished. The first ones that were demolished we felt were

demolished for safety reasons, because they were in that area of very

unstable soil condition, and there had been other slides in that same

area in the past with the resultant loss of property.

Mr. Chairman, the member is correct: the community asked if they could sit

down with us and talk about the map — what we were going to be demolishing. We

did sit down with the community, to the point where we got an agreement, a signed

agreement, from the community for a plan for the demolishing of some of the

buildings. The rest will stay. There's no plan to do any more than that.

The auction. As you know, once an decision is made to have an

auction, prices go as the prices go, pretty well. There may have been

some low prices, there may have been some high prices. I believe that

Maynard's Auctioneers, whom we contracted with to conduct the auction,

did give us a guarantee of about $1.25 million or something in that

neighbourhood, after which we would share in the proceeds of anything

above that. We do not have at this point the final accounting from the

auction, but I know it's well over $2 million. There will still be some

accounting coming in from my staff, which I will share with that member

the moment I have it, if he'll remind me about it.

[ Page 8431 ]

As far as the hotel goes, I don't know if it's been sold yet or not.

I know there has been interest in it, as there.... I believe, however,

if I'm not mistaken, that the old hospital has been sold, and there is,

I think, one other building in Ocean Falls which somebody has expressed

interest in buying.

AN HON. MEMBER: The school.

HON. MR. McCLELLAND: I guess it's the school, yes.

So I'm not positive about the fate of the hotel, but I know that there has been active interest in it.

I think I've answered all his questions.

MR. LOCKSTEAD: One of my questions was, is this all the money

— $2.5 million — that eventually somebody will be receiving for the

hotel? I do believe it has been sold. I'm not sure if the transaction

is totally complete; but my information is that it has been sold.

Anyway, the money for the auction — does that money go into general

revenue, or does that money stay in the community with the residents?

HON. MR. McCLELLAND: The first charge on the money, or the

debts, which B.C. Cellulose has. and any money that's left over after

all of B.C. Cellulose's responsibilities are taken care of, I expect

will go into general revenue. However, the member must know, too. that

we have given a commitment to the Ocean Falls Improvement District for

an annual grant from the government to keep them whole, in terms of

what they have to do to keep the town running in a normal fashion. So

there will be money coming out of consolidated revenue, but anything

that's left over when we finally get whatever gets done at Ocean Falls

will go to general revenue.

MRS. WALLACE: I want to deal with a different facet of the

minister's responsibilities. There's a saying, something about being

penny wise and pound foolish. We've been hearing a lot of remarks that

indicate that perhaps the policies of the ministry have been pound

foolish. I want to talk about some of the penny type of programs that

the ministry has for the small operators. I'm wondering whether or not

they are really wise, or whether some of them are rather foolish too.

I'm always pleased to get from the minister — this is, I think, the

second or third year he's done this — a breakdown of what kind of

moneys have come into my constituency and for what purposes. It's

always interesting to look at this to see the amount of dollars and the

number of jobs. For example, the assistance to small enterprise

program, ASEP, from the first loans in 1977 through to 1981 — they're

still being recorded here. It's a bit discouraging when you realize how

many of those people are no longer operating, and how many of those

loans have had to be written off, in effect. It's an excellent program

to be able to assist those businesses, but the problem seems to occur

that either there aren't sufficient funds, so the program can't make

it, or else there isn't sufficient review of the actual situation to

indicate that the program can go ahead.

[4:30]

I notice one here, an operation that received $3,000. They were

going to create three jobs. Now $3,000 certainly isn't very much. They

are not operating, and they are likely going to be written off. Another

one that also received $3,000 was a boat-building outfit. It was going

to create 19 jobs. There's something wrong with that kind of

mathematics, that for $3,000 you're going to create 19 jobs. It seems

to me that obviously there must have been a problem there in the

beginning. That operation is in the hands of the receiver. So again,

it's not very much but it's written off — and a lot of heartbreak.

Even more important, I think, than the taxpayers' money written off

is the investment of the small operator who invests money into those

enterprises with the assurance from government and the support from

government that this thing is going to go. They are the ones who really

suffer in this, even more so than the taxpayer.

Another one is Hidden Valley, a most unfortunate situation. I'm very

familiar with that one: a sawmill that was financed. It had a much

larger loan and it went down as well. The unfortunate part about that

one was that the owner had put up the property as security and his home

was on the same title. So he lost not only his mill but his home. It

seems to me that in making these loans and grants it's the

responsibility of that ministry to ensure that that doesn't happen,

that a small business person doesn't get into the situation where his

home is on the same title as his mill. There has to be some assurance

or some advice, because those kinds of things are pretty traumatic for

a small business operator. That's one that I happen to know about very

well.

We actually got one in '82 under the small business program. But

with so many of them, now the comments are there that they're no longer

operating.

Small manufacturers — that seems to still be going, the one loan

that was made there. A couple of grants to the local governments for

studies: those are commendable. Also to the Forest Museum, a marketing

study, and that Forest Museum of course is a very valuable asset to our

area. I've spoken to the minister before about the travel, the TIDSA

loans, and I see that there is no change in the statement this year

from the preceding year. There have been no loans made since then,

There were five loans made, four of which went into bankruptcy and

receivership — large loans — which meant that the government lost the

money. The people who had invested their money lost the money and some

opportunist came along and picked that operation up for a very small

portion of the cost involved. The only one that succeeded was a very

small one over on Thetis Island, a farm resort. But the major tourist

resorts that received funding in my constituency certainly indicate to

me that there was something wrong, and I think the minister agreed last

year when we talked about this that perhaps that program did need to be

reviewed a bit more. I notice there are no more loans under that

program in my constituency, and I'm wondering whether the minister has

reviewed that and whether or not there is a different approach now

towards that, or whether or not the loans are still going forward.

[Mr. Ree in the chair.]

The student venture loan is an interesting one, and I'm particularly

interested in the fact that they don't all seem to be students. There

seem to be some business concerns here — a fitness centre, a marketing

concern, some outfit that's going to make house calls, and a dance

production. There are, I think, $15,200 in loans that went out to those

students loans; only two of them indicate they're going to make any

employment at all. That was one job in each; for the others, it was not

applicable — the creation of new jobs. So I'm a bit surprised

[ Page 8432 ]

about this, and I wonder whether the minister could

give us a little more information on just what the criteria is for

those students loans.

The other thing that I would like to know — I have been told that in

order to get those loans, you have to have a co-signer. Some students

who were applying for them have indicated that to me. I'm wondering

whether or not these loans were all paid back by the applicant. I don't

expect the minister will have this information at his fingertips. Were

they paid back by the applicant, or were they in fact paid by the

co-signer, if that's the case, and, if not, were they not paid back at

all?

I guess what I'm saying is that while certainly we need assistance

to small business and we need it very badly, there seem to be problems

in ensuring that those concerns remain operative. I guess one of the

most outstanding ones recently was the fibreglass boat manufacturer in

my constituency, Cowichan Fibreglass Ltd., which had 30 employees and

seemed to keep going from one crisis to another until finally the only

answer seemed to be foreclosure there, and bankruptcy is now

proceeding. That was, I think, the major employer, the major

job-creator of all the grants that went out, and yet that one is now

closed down and in bankruptcy.

It sounds good when you give the figures about the number of jobs

you've created and the loans that you made, but when you look at the

fine print and really analyze it, a lot of those jobs that were

supposedly created are just not there anymore. What's happening is that

a false impression is being given of the effectiveness of your

ministry, because those jobs, while they're added up into the totals as

being jobs created, and the money is going out as being assistance to

those operators....

MR. WILLIAMS: A revolving door.

MRS. WALLACE: That's right. Those people — and I've said this

before — who face bankruptcy as a result of the fact that they've

expanded perhaps beyond the economic viability of the particular

operation, encouraged by that government loan, lose even more than do

the taxpayers, because they sometimes lose everything they have and

wind up in receipt of social assistance. That's a very sad commentary

on a government program. Certainly the jobs created that are espoused

by the ministry are far from accurate, because so many of those jobs

have faded into oblivion long since.

HON. MR. McCLELLAND: You know, I take a little issue with the

member in terms of the numbers. I'm sure some of those firms have gone

bankrupt, but what we've tried to provide you with is a complete list

of the activity in your own constituency with the numbers of jobs which

were created at the time. I mean, you've gone back to, I think, 1979

over that period of very severe economic recession in our province. I

have not added those numbers up and used them for anything. I'm simply

trying to provide you with factual information. If you think I'm giving

you misleading information, I won't send them out anymore. I don't want

to send you misleading information.

You and I are pretty well protected in this House from the economic

realities of life. We didn't have to face what a lot of businessmen in

the community had to face — and there were failures. I would say to you

that the evidence I have is that the businesses which have had

assistance from government, particularly from the ministry for which

I'm responsible — and I don't take credit for it; I give the credit to

my staff — probably have a better track record than those who have not

had assistance from my ministry, for the simple reason that one of the

first things required by the ministry, before we'll consider any kind

of assistance, is a very strong business plan from a small businessman.

If the small businessman doesn't have the resources to put a good

business plan together, we'll help him to do it, and make business

counselling available to him. It's a very active program — I quoted you

some of the numbers today — and we think it's one that's well

worthwhile.

As far as TIDSA goes, the loans to small tourist operations were

stopped, I think, after the second or third year of TIDSA, at the

agreement of both the federal and provincial governments. There is a

son of TIDSA, I guess, in the subagreement under the ERDA agreement

right now. It is being used only for large destination-type projects. I

don't know whether anyone has applied from your constituency or not.

I'd be happy to try to find out.

The last question you raised had to do with the student venture

program. Those are all students, but they form companies for the

purpose of applying for the loan under the program. If it says in the

material you have that one job was created, that means that the student

who applied for the loan is hiring one person. But we don't care, as

long as.... The idea is to give the student a way to make some money

during the summer by employing himself or herself. But if we get extra

jobs out of it, that's even better.

As far as repayment of loans is concerned, you're right, there is a

requirement that there be a co-signer. I've had no complaints about

that. I haven't found it to be onerous. At the present time I do not

have the rate of repayment. We have certainly not called any loans or

anything like that at this time. I am told, though, that the rate of

repayment is very high. I will likely have that in next year's annual

report. If it comes out sooner, I'd be happy to file it with the House,

when we find that out for sure. But I'm told it's very high.

MR. WILLIAMS: The minister says that he's told the payments

are fairly high. How does it compare with commercial banks in terms of

bad loans — the relative position with respect to our lending? What is

the actual loss in terms of bad loans and the various lending

activities under this minister? Maybe he could provide us with that for

this last fiscal year, or a little earlier, so we could have a picture

of what percentage of the value of the loans is non-performance.

HON. MR. McCLELLAND: If I don't have the rate of failure, I

can't answer that question, because I have nothing to compare it with.

That material should be available quite soon. I've said that I believe

it's a very high repayment factor. I believe that in Ontario, the first

year or two of their program, the failure rate was somewhere in the

neighbourhood of 15 to 20 percent. I'm not saying that it's the same

here, because I don't know yet; but as soon as I do, the House will

know with me.

MR. WILLIAMS: Normal lending institutions keep very close

track of this kind of information, Mr. Chairman, in terms of failure

and non-payment. It's reasonable that prudent financial managers would

do so. That data should really be at your fingertips, or should at

least be available from your department and deputy on a pretty ready

basis. It's a fundamental measure of success or failure in lending

activities.

[ Page 8433 ]

While one accepts that lending from BCDC or a group such as that

should automatically be higher because higher risks are involved in the

program, it's still a matter of comparing it with other agencies — as

the minister suggests, Ontario and so on. It would be most worthwhile

to have that data. One would expect, in a normal review of departmental

estimates, that that kind of data would be here now.

HON. MR. McCLELLAND: This isn't a normal lending

establishment. I hope the member knows what he's talking about. We were

talking about the student venture loans, not anything to do with BCDC

or any of the normal lending functions that we perform as a ministry,

These loans aren't repaid in the normal way. They all come due at one

time. They don't pay them back at $38 a month. They are loaned by the

Royal Bank of Canada for us. We pick up the interest on the loans. So

they are not normal loans, Mr. Chairman.

But we will have most of that material on computer at the present

time, and I will be happy to have my staff pull it out of the computer

and make it available to the House.

[4:45]

MR. WILLIAMS: Just to clarify, we are not just talking about student loans.

HON. MR. McCLELLAND: Yes, we were.

MR. WILLIAMS: No, we're not. The member for Cowichan-Malahat

(Mrs. Wallace) was talking about TIDSA lending with respect to tourist

facilities and that sort of thing. I am really expanding that to the

whole broad question of all of these various programs under your

umbrella ministry in terms of non-performance.

You can say what

you like about payments every month or different arrangements. It is

pretty easy to determine what non-performance is: if they are not

paying back under the terms agreed to, it is non-performance after a

short period of time. Now the banks do this after 30 or 60 days. That's

not a heck of a lot to ask from you.

When we have had detailed questions of other ministries, Mr.

Minister, such as Health, which is a far more complex organization than

your ministry, the data is there right at the fingertips of the staff

of the minister, if not of the minister himself. It is a measure of the

level of competence of most ministries in terms of that delivery of

information. We don't get this delivery of information from you as we

do from other ministries. It simply is not there. We have had the same

problem in Human Resources. The data isn't there. It shows a kind of

attitude in terms of analysis of the programs and policies of the

department that is disturbing. If you are really on top of it, if your

staff is really on top of it, that data is here ready and now. Because

it is a measure of your problem areas. It is a very obvious measure of

where you are getting into trouble. No bank or lending institution

wouldn't be on top of that every day of the week. It is the essence of

their operations in order to remain solvent.

But you know, you're going to have to go back to the computer and

get the data and then come back. That's the kind of information that

should be reported here in estimates. It is not unreasonable to have

that kind of basic data here available no