LEGISLATIVE ASSEMBLY OF MANITOBA Tuesday, 13 May, 1980 Time - 8:00 p.m. MR. SPEAKER, Hon. Harry E. Graham (Birtle­ Russell): The Honourable Minister of Finance. HON. DONALD W. CRAIK (Riel): Mr. Speaker, I move, seconded by the Min ister of Communi ty Services that this House approves in general the budgetary policy of the government. MOTION presented and carried. BUDGET ADDRESS MR. CRAIK: Mr.

Speaker, before addressing this Motion I want to first of all pay tribute and thanks to the great numbers of people who have spent a large portion of their time and their efforts to the preparation of the remarks and the policy development, which I want to talk about tonight. Mr. Speaker, some six months ago at a special First Min isters' Conference on energy policy, the Premier of our province concluded his opening remarks with a statement about the future of Canada which was timely then - on the eve of a new decade - but which is perhaps even more timely now.

He stated and I quote: Our nation is unique in the industrialized western world - we have the potential to be self-sufficient in energy. But, we sometimes lose sight of this and become preoccupied with our problems, forgetting the potential that is ours. We have the time to develop long-term solutions to serious problems. We have the chance to realize at least the opportunities that were predicted for our country a century ago, and I believe we have the spirit and the will.

But, we can succeed only if we face up to reality now, and take the hard decisions, and make the adjustments which are imperative to ensure our self-sufficiency and our economic well-being. Mr. Speaker, that statement was made in the context of a discussion of national energy matters, but it was and remains an accurate and forthright assessment, both of our count ry's overall development prospects, and of our here in Manitoba, for there is no province in Canada, none, that offers its citizens more solid, long-term opportunities than we enjoy in Manitoba today.

We are on the threshold of a period of potentially unparalleled achievement, and unlike certain other jurisdictions, we have already made some of the most critical adjustments necessary to ensure it. After two years of consolidation and transition, we can once again take pride in an economic and budgetary base, which is sound and secure and which will support the kind of concentrated, co­ operative effort all sectors of our economy must make to ensure success in realizing the prosperity our heritage offers to us and to future generations of Manitobans.

This Budget, the third it has been my privilege to present on behalf of our Progressive Conservative Government, will sustai n our recovery and the important economic and fiscal gains of the last two years, and it will address the major immediate and longer-term challenges facing our economy in a realistic and positive way. In my last Budget a year ago I stressed our government's determination to do all we can to make the 1980s a decade of recovery and stability, a decade of opportunity and of promise for the people of Mani toba. This year's Budget will play an important

part in the attainment of these goals. It will prove the value of fiscal responsibility and accountability by making possible far-reaching improvements in social and economic programs; improvements which simply could not have been made if the runaway deficit we inherited from our predecessors had not been dealt with in a decisive way. Second, it will provide welcome new protection agains t inflation, particulary for fam il ies with children and for the elderly - those who are most in need of additional assistance.

It will carry on the process of tax reduction and tax reform we initiated in our first days in office, and It will continue the sound financial management policies and procedures which are so essential for ensuring confidence in our economy, and thereby for expanding further the wide range of productive new investments and permanent job opportunities which have highlighted the rebuilding process of the last two years, and ultimately for ensuring a steady rate of growth in the standard of living of our citizens.

Finally, it will show that this is a government which is acutely sensiti ve to Manitoba's underlying economic and demographic trends, a government that is building not only for this year, but for the decades to come. Mr. Speaker, at the same time it is important to acknowledge what all of us in this House recognize to be true, that this Budget is being presented against a background of political and economic circumstances, which may well be the most ominous yet to confront Canada and the rest of the free world in the second half of this century.

In the coming months we will be witness to watershed events in the histories of our Confederation and of the community of nations - events whose outcomes will far outweigh in significance this or any other Budget. We can only hope the benefits we so often take for granted, but for which out forefathers sacrificed so much to pass on to us and to our children, will not be lost to the blind ambitions of demagogues. But important as they are we cannot allow ourselves to become unduly preoccupied with events over which we have virtually no control.

We have major responsibilities here and it is essential that we get on with the job. On the economic side, the job of revi talizing our economic base is under way. Over the past two year the Manitoba economy, with relatively few except ions, has demonstr ated renewed strength across the broad spectrum of our 3623

Tuesday, 13 May, 1980 most important industries with the private sector reassuming its traditional leadership role, a role which, in cooperation with government, is imperative for the optimum effectiveness of our economic system and for the long-term growth of this province. No where has the re kindling of priv ate sector confidence been more apparent or more important than in mining and man ufactu ring, two of our strongest growing sectors in 1979.

As the Minister responsible for mineral resource development, I am gratified by the resurgence in virtually all aspects of mining activity in the province during the last year. Although world market conditions have played a significant part, industry leaders themselves have emphasized repeatedly that the new investment climate in our province, including the taxation reforms introduced in our last Budget, have been key determinants of their decisions to make Manitoba once again a focal point for mineral exploration and develop ment, in stead of a jurisdiction to be avoided.

The members are no doubt familiar with the key statistics of the performance of the mining industry in 1979, but for the record I will repeat them here: Following a year of decline in 1978, the value of mineral output recovered last year by over 28 percent to a total of 600 million, the largest in Manitoba's history. Some 14 million were expende d on new exploration and development and a substantially higher total is planned for 1980. Mr.

Speaker, I think perhaps the most important comment that can be made in this regard is the following one: Exploration investment now stands in constant dollars at the highest level in Manitoba's history. Major new long-term investment commitments were made by lnco, Hu dson Bay Mi ning and Smelting Co., and Tantalum Mining Corporation of Canada during the year. As members will see when our preliminary 19 79-80 year-end statement is completed in a few weeks, a significant increase was also recorded in the direct contribution by the mining sector to the costs of public services in our province.

In recent weeks, attention has also been drawn to a number of promising new prospects - first, involving a potential major potash development, and secondly, in a joint ve ntur e agreement further securing the future of the mining industry in the Flin Flon area, and developments in our largest sector, manufacturing, have been no less encouraging. Following a period of serious slack which culminated in 1977, with only 3 percent growth in the value of shipments and a drop-off of some 6,000 or 10 percent in manufacturing employment, there has been a dramatic rebound.

Shipments have increased 39 percent in the two years since 1977, with 20.2 percent growth last year alone, well above the national average. Manufacturing employment also recovered to an average of 63,000 jobs in 19 79, up 9,000 over the 1977 low point.

Perhaps most encouraging of all, given current in terest rates, is the fact that man ufact uring investment estimates for 19 79 and 1980, in aggregate, indicate an increase of nearly 60 percent in 2 years, again well above the national average, and the expansion of productive capacity is taking place in a reasonably balanced way across the entire sector, it is not confined to a few firms or a few industries.

A few days ago the Min ister of Economic Development outlined the government's strategy for insuring continued expansion of the manufacturing sector throughout the 1980s, a strategy which was worked out in close consultation with industry, and which has their endorsement. An important part of the province's efforts will be focused through the Enterprise Manitoba Program. But as I said earlier, manufacturing and mining are just two examples of the success Manitobans have achieved in rebuilding our economic base.

At the conclusion of this Address I will table a review of recent major economic statistics which will provide further evidence of the breadth of the recovery which has taken place since 1977, and I can run down through these, Mr. Speaker: 24,000 new jobs in two years, including 13 ,000 last year alone, all of them in the private sector and so on. A drop of over a full percentage point in the unemployment rate between 1978 and 1979, from 6.5 to 5.4. Renewed and steady expansion in total output from near zero real growth in 1977 to just under 3 percent in 19?8 and close to 2 percent in 1979.

The latest estimate of the value of our gross provincial product in current dollars for 1979 is 10.5 billion, an increase of some 11 .6 percent over 1978, the best performance, Mr. Speaker, for three years. Personal income growth was about 10 percent to 8.5 billion. Continued strength in agriculture despite a number of weather, marketing and transportation problems, and so on, Mr. Speaker. In 1979 the tourist industry had its best growth year in the 19 70s, recording total expenditures of approximately 374 million, up 9 percent over 1978 and to repeat again, the best increase of all of the 1970s.

Following the largest percentage increase of any province in 1978, private investment continued to grow last year to over 1. 4 billion, for a two-year increase of about 25 percent, and prelimina ry intentions for 1980 indicate that Manitoba will be one of only a few provinces where the percentage increase in private investment this year is expected to be larger than last year. Mr. Speaker, for some time we have been forecast ing that real growth in the Mani toba economy this year will be in the 2 percent range, close to our estimate for 1979. Mr.

Speaker, during the recent Federal Election campaign I heard the now Prime Minister refer to Canada's real growth rate as being 12 percent. It told a lot about the hands by which our country is controlled, Mr. Speaker, when that was stated, that for all these years you were expecting somebody to know the difference between real growth rate and inflationary growth rate, we suddenly discovered that there was something wanting. In contrast to the decline to near zero growth expected in the national average, we are now looking at a roughly 2 percent in 1980, which it was roughly in 1979.

Recent private forecasts support our projection and suggest that Manitoba's real growth in 1980 will 3624

Tuesday, 13 May, 1980 be not only above the national average, but also the third highest in the country, ahead of all provinces, Mr. Speaker, with the exception of Al berta and Saskatchewan. In that regard I'd refer you to the economic tables, to one table in particular that tells it all at a glance. This is encouraging news, I am sure, for all members of this House and for every Manitoban. Mr.

Speaker, it reflects the diversity and renewed strength of our economy and demonstrates the plain fact that despite the doom and gloom . predictions of the members opposite, primarily the Member for Brandon East, and given a fair chance, Manitoba and Manitobans will thr ive and develop and over time Manitobans will enjoy a standard quality of living above the rest of this continent. However, the fact that our economy is expected to show greater strength than those of most other provinces in 19 80 should not be any cause for complacency.

A protracted slowdown in the national economy would inevitably affect Manitoba in a major way and undercut our recovery efforts. Unfortunately, in the face of some bleak forecasts for the international and national economies for the balance of this year, as well as some increasingly pessimistic signs for 1981, the newly-elected federal government has shown little apparent interest in addressing our most fundamental problems including excessive government expenditure growth and the unacceptably high federal deficit.

It's been over two years since Canada has had a Budget whic h has received the approval of Parliament. We believe it's essential that a full-scale Budget be introduced at the earliest opportunity in the interests of Canada. We bel ieve it is also essential for the government of Canada to reaffirm its commitment to the process of federal/provincial consultation on economic and fiscal policy.

At the Conference in Lethbridge in April, the four western Premiers set out six major proposals as a basis for joint federal/provincial action to develop an effective national economic strategy, a strategy whose key objectives would include the reduction of current unacceptable interest rates. I am sure that two of the recommendations must have been particularly interesting to the likes of the members opposite. First, the Premiers agreed unanimously that A realistic energy pricing policy is a key to achieving Canadian energy self-sufficiency.

And more specifically, their communique stated: Canadian energy prices must rise to reduce the disp arity between domestic and international prices. Now that is not a self-interest western position. Self-sufficiency is an essential requirement in the national interest. Those who would argue that a price increase can be avoided are del udin g only thems elves and furthermore, selling Canada and Canadians short of an obtainable target of self-sufficiency.

It is interesting to note that from the heartland of industrial Ontario, the organization best representing the manufacturing sector has stated unequivocally that the best interests of the economy would be served by a self-sufficiency Canadian oil pricing policy. As far as the position of our government is concerned, actions speak louder than words. We can and will point with satisfction to the Hydro rate freeze as a clear demonstaration of what this government stands for on energy pricing issues in which it has full domain. Mr.

Speaker, that decision taken last year was also based on the principle of energy self-sufficiency as applied to electrical energy. Mr. Speaker, we would be less than honest if we tried to tell the people of Manitoba that we thought Canada could be self-sufficient ·in oil and Manitoba secure in supplies at present domestic pricing levels. We still have to absorb price increases, but we remain confident self-sufficiency can be attained at prices below world levels .

At the Lethbridge Conference, the Premiers of all four provinces also stated, and again I quote: An essential part of developing a national economic strategy requires the federal government to reduce the size of its budgetary deficit and ultimately to balance its budget over the economic cycle. Their statement went on to note that large-scale, viable capital projects could help offset any short­ term adverse effects caused by reduction of the federal deficit.

Our government stands ready to co-operate fully with the federal government in implementing a mediu m-term national strategy wh ich wou ld encompass the recommendations of the four western provinces and which would address itself to other key challenges for the years ahead. Mr. Speaker, I want to speak to the fiscal period through 19 79-80.

My colleagues and I take pride in the resurgence in economic activity which has occurred in our province in the last two years, but I believe it is fair to say that our greatest sense of accomplishment results from our success in restoring the principles of fiscal respon sibility and accountability in the government of Manitoba.

In my first budget I set out four specific fiscal policy objectives: First - A reduction in the public sector's share of gross provincial product over time to lessen the government's demands on the economy; Second - Greater efficiency in government prog ramming to insure that imp roved and expanded services can be provided for those who require them; Third - rationalization of taxation measures to simpli fy our tax structure and make it more competitive, and Fourth - improved financial reporting to insure that the citizens of Manitoba have up-to-date factual and understandable information about the government's budgetary position.

Mr. Speaker, every one of these objectives has been achieved. Despite the increased expenditures associated with such measures as the new Hydro Rate Stablization Program, the major reduction in the provincial government's share of our total output, which I announced last year, has been largely maintained. Provincial expenditures as a percent of gross provincial product remain close to 17-1/2 percent in 1979-80, compared to record high percentage of 19 percent only two years ago. Provincial government emplo yment has been reduced significantly without perceptible disruption in government services.

This has been made possible by two pri mary factors: Fi rst, imp roved management, guided by accountability principle and, second, and equally important, a significant boost in morale. The natural result of a sense of direction and 3625

Tuesday, 13 May, 1980 purpose, and the understanding that merit, not political philosophy, has been restored as the basis for advancement in our civil service. - (I nterjections) MR. SPEAKER: Order, order please. I would like to listen to the remarks of the Minister of Finance. The Honourable Minister of Finance. MR. CRAIK: Mr. Speaker, I was going to repeat that but I'll hold it for a later date.

These figures also reflect our efforts to update and streamline programming and our recognition that there are limits on what provincial governments, indeed governments at all levels, can do effectively, and should attempt to do with the hard-earned tax dollars entrusted to them. The improvements in our financial reporting system are already well known, and it is gratifying that a number of the innovations we have introduced in Manitoba are now being considered for adoption in other jurisdictions. We have regular training courses, Mr.

Speaker, for the legions that are coming through from other jurisdictions at the present time, to now consult with us on this turn around. It is interesting that over the last two years, our system of issuing quarterly financial statements has now become accepted routine and it's almost taken for granted. I should remind members that before this government took office, this Ass embly sometimes had to wait as much as a year after the close of a fiscal year, and two years after the initial es tima tes were tabled to get even a partial accounting of the province's financial position for that year. An accounting, Mr.

Speaker, which I must add, the Provincial Auditor, on occasion, refused to endorse. Now, however, the people of Man itoba are receiving up-to-date and accurate information at three-month intervals during the year, and as we become more experienced with the new system, we intend to make further improvements. I am pleased to note that up to now, our new financial information system has had a great deal of good news to report.

Members will recall that when we took office, the initial projections we received indicated a potential 19 77-78 deficit of at least 225.1 million and 11 0 million more if uncommitted projects happened to be included.

By the end of the year the situation had improved somewhat, but the deficit still stood at an unacceptable record level of 191. 3 million, excluding sinking fund payments and the improvement only occurred because we invoked very severe measures of control, which first stopped the huge ·hemorrhage of taxpa yers' dolla rs, and secondly, gradually reversed the worst plunge into financial imprudence ever wit nessed in this province. That legacy of financial irresponsibility has been reversed in two­ and-a-half-years, but it remains a clarion example, Mr.

Speaker, a clarion example to taxpayers here and elsewhere of the damage that can be inflicted on a province and its people by a government unrestrained by accountability and uninstructed in the constant need for prudence in the use of its taxpayers' dollars. By the end of 19 78-79, our first full year in office, the deficit had been reduced by approximately 56 percent to 84.3 million. I wish to announce this evening that in 19 79-80, the deficit has been cut by almost half once again, to just under 45 million, according to the preliminary unaudited figures that are now available.

The primary reason for the reduction during the year was a series of reve nue improvements, particularly equal ization adjustments. Details of the year-end results for 19 79-80 will become available when the preli min ary un aud ited statement is completed in a few weeks' time. Mr. Speaker, the unaud ited statements always come out early and the audited ones are always out six months ahead of the time they were ever out before. Mr.

Speaker, for the cost of the Hydro rate freeze, which cost in the last fiscal year 37 million, the Budget of the last fiscal year would be virtually balanced, even on the new combined accounts basis. Under the old accounting system which was followed in this province until we took office, our Budget has been in balance for the last two years. Mr. Speaker, the deficit which shows in our books is in fact entir ely for capital investment, for acquisition and construction of physical assets, and fortuitously we have been able to avoid borrowing in the high interest rate bond markets for the last year. In

summary, in our first two full years in office, the deficit we inherited from the previous government has been reduced by more than three-quarters, to be exact, 76.5 percent. The lifting of a burden of this magnitude from the shoulders of the taxpayers of our province may well be the single most important contribution any government could hope to make to the economic development of Manitoba in this decade or beyond. Mr.

Speaker, our government's first priority, our most urgent priority, has now been met and the budgetary improvements we are able to introduce this year, and those which will follow in years to come, will be a direct result of our government's determination over the last two years to restore a secure financial base in this province. Mr. Sp eaker, I want to refer to the Main Expenditure Estimates of 19 80-81, current year. Early in this Session, the government presented its Main Estimates of Expenditure for the 1980-81 fiscal year.

Those estimates totalled approximately 1. 99 billion, or an increase of 9.86 percent over the est imates for the previous year. Si nce those Estimates were tabled, members have been advised that the total will be increased to provide for a major expansion of property tax credit benefits this summer. Later in my address, I will discuss further tax credit reforms and additional supplementary expenditure requirements.

I can state, however, that even with the sup plementary authority being requested as of tonight, our provin<:: e's actual expenditure growth by the end of the current year is expected to remain in the 9 to 10 percent range. We feel this is an appropriate rate of growth at this time. It permits the dedication of additional financial resources to key priorities without placing unduly heavy pressures on our bottom line position. At the same time, it is consistent with the general spending 3626

Tuesday, 13 May, 1980 growth guidelines which the federal government and all ten provinces agreed to at the First Ministers' Conferences in February and November of 1978. We believe that it is essential for all governments at all levels to continue to observe those guidelin es, particularly when the economy is facing growing inflationary pressures. We remain convi nced and we feel the Main Estimates offer plenty of evidence tha t sound financial management and responsible fiscal policy are keys to genuine program improvement. I will just touch on some of the highlights tonight, Mr. Speaker.

They are contained in detail in the Budget Address which is being distributed. First of all, there was 65 million or a 12 .5 percent increase in the Health field. There was significant improvements in economic development programming in support for municipal services, and there was a 29.5 million addition for the Department of Education. In total, the main estimate provisions, and new measures to be announced tonight, will increase public school finance assistance by 18 percent on a per pupil basis this year. On the revenue side, I want to turn now to those estimates for 19 80-81.

Throughout the past year, our government has continued to examine ways and means for improving the overall revenue-raising system in place in the province. A process of continual review is essential to make our tax structure more competitive with those of other provinces and also to ensure that it is fully consistent with our budgetary objectives. Si nce taking office, we have been able to implement a number of changes to assure Manitoba taxpayers significant continuing reductions in their taxation levels, whisle preserving a satisfactory base for financing program improvements.

Among our more important permanent initiatives have been, first of all: The 2-point reduction in the personal income tax and termination of the personal income tax surtax imposed by the mem bers opposite. These measures have returned the personal income tax rate borne by individual Manitobans closer to the mainstream among the provinces. Then the elimination of succession duties and gift taxes. A measure which as been of particular benefit to farmers and small business operators.

Reductions for small business in the corporation income tax rate and in the corporate capital tax through increased exemptions measures which have improved the overall competitive position of these important contributors to the Manitoba economy. Major reforms in resource taxation which are proving to be extremely effective in encouraging rather than inhi biting new activity in this vital sector. A wide range of new ex emptions un der the provincial sales tax for in sulation materials, children's clothing and so on.

The elimi nation of a number of nuisance taxes including the Mineral Acreage Tax and the Mining Royalty and Tax Act applicable to small quarry operators and so on. It is estimated that in 19 80-81, the value of the potential revenue foregone through these measures amounts to at least 36 million. And, Mr. Speaker, if you take the cumulative tax revenues over the last three Budgets that have been foregone in this regard to leave the tax money in the taxpayers pocket including the sales tax reduction in 1978, this total would come now to roughly 160 million.

This year, we are proposing a number of additional modifications to provincial taxes; both to supplement revenues and to continue the process of needed reform. First of all, gasoline and motive fuel taxes. Traditionally, provinces have applied volumetric tax rates to liquid fuels of a certain number of cents per gallon or, more recently, per litre. As a result, unlike the provincial sales tax, the yield in these taxes, in real terms, deteriorates markedly over time.

For exam ple, the Man itoba gasoline tax in 19 72 represented a rate of approximately 48 percent of the average sale price prior to the application of the tax. However, today, as a result of petroleum price increases and other factors, the tax represents about 20 percent of the retail selling price of gasoline before the tax is applied. Unfortunately, however, as members recognize, the province is faced with the task of finding revenues sufficient to meet increased costs related in part to these petroleum price increases.

These increased costs are reflected in the price not only of gasoline itself, but also of certain petroleum-related products, including asphalt, as well as in general transportation costs and ultima tely in the costs of, government purchases. Whil e there has never been an attempt by governments in Mani toba to equate fuel taxes precisely to the costs of operating our high way system, it is noteworthy that at the present time, these taxes would cover less than half the budget of the Department of Highways and Transportation.

Earlier this year, the governments of Princ e Edward Island and Quebec decided to take action to protect the real value of their fuel taxes by converting their taxes to percentage or ad valorem rates. As well, in the federal government's April 21 policy announcements, the regular federal sales taxes on gasoline and motive fuels were converted from literage rates to a general 9 percent rate on the sale value of products. In our view, it is essential to deal with the erosion of the provincial share of these taxes at this time.

We therefore intend to convert both our gasoline and motive fuel taxes to a 20 percent rate. The preferential rates applicable to off-highway use and railways will be converted to 15 percent. The rates applicable to aviation gas and turbo gas will be converted to 10 percent and the present rate of tax on heating fuels used for purposes other than a domestic dwelling will be converted from the present 112 cent per litre to 5 percent of the purchase price.

This latter change also assures that the taxation on heating fuels other than for domestic dwellings will be subject to the same 5 percent tax rate as is applied to electricity, natural gas and coal, etc., under The Revenue Act of 1964. These changes will not impact in any way the heating costs for domestic dwe llings. All residential accommodation will continue free of any tax on heating. To protect current provincial gasoline and motive fuel tax revenues, the literage rates currently in effect will be maintained as a floor until the percentage levies require them to be increased. 3627

Tuesday, 13 May, 1980 To facilitate retention of the current tax collection procedures and to assure equitable application, the percentage rate of tax will be assessed on a uniform basis across the province. More specifically, it will be based on the average price of gasoline and diesel fuels in Winnipeg. The resulting tax will be converted to cents per litre and those rates will be applied uniformly throughout the province.

The litre rates of gasoline and motive fuel tax will be the same, for instance, in northern Manitoba as in the south, since the rates of tax will be based on the prices as determined in the Winnipeg area. To complement our general energy conservation efforts, the government has decided to encourage the use of gasohol as a fuel for automobiles. Members will be pleased to know that interest has been expressed in converting existing facilities for the production of gasohol, and certain gasoline distributors have expressed interest in marketing this product.

However, at existing gasohol production costs,s the resultant gasohol blend of at least 10 percent alcohol is not competitive with gasoline. In our view, the production of gasohol can make a significant contribution to reducing Canada's overall reliance on non-renewable energy resources and more par ticul arly, red ucing our imported oil requirements and improving the national balance of payments in the long run.

Accordingly, in recognition of the currently higher costs entailed in producing gasohol and to provide an incentiv e for its production, our government proposes to exempt gasohol produced from Canadian-made alcohol from all gasoline taxation. This is in tended as an immediate incentive to encourage gasohol production. This incentive will of course be reviewed in subsequent years as gasoline prices rise and production of gasohol becomes more cost competitive with gasoline.

In proposing this measure, it is our intention to ask the Federal Government to re-examine its sales tax on gasohol to complement the Manitoba incentive. As wel l, in li ght of the fact tha t the Federal Government is provi ding a dir ect subsidy on imp orted oil suppl ies and non-conventional petroleum production to bring the retail price of such products down to a level competitive with the administered domestic price, we will be pursuing discussions with the Federal Energy Minister with a view to having those important national benefits extended to the production of domestic gasohol. Mr.

Sp eaker , I don't want to unde r-rate the potential on this, out of the whole western region, west central region of Canada, the best potential area for production of gasohol is Manitoba, and I am sure that if we can see other provinces making moves such as this, we can see an in·dustry based here and in the long-run presenting a very viable ec onomic un der taking for this part of central Western Canada. All these changes under The Gasoline and Motive Fuel Tax Acts are effective midnight, May 31s t.

Memb ers will be interested to kno w the full implications of these important changes in provincial gasoline and motive fuel tax policy. At the outset, Manitoba's fuel tax rate will remain at levels below those in effect in Ontario and our revenue will not be affected signif icantly. However, as national non- renewable energy prices rise, the province will retain its percentage share of revenues from that source. Of course, if increased prices have a positive conservation effect, we could, over time, realize reduced revenues from fuel consumption taxes. In many ways, this would be desirable.

Canada's per capita energy consumption is virtually the highest of all the OECD countries and our use of petroleum products continues to escalate at a rate which is completely inconsistent with a rational energy policy. Mr. Speaker, I should also mention at this time that one other province has at this time moved to place a differential sales tax rate on automobiles, having a higher rate on the higher gas consumption automobiles and a lower rate on those with a lower gas consumption rate.

That sort of differential tax rate is a very effective incentive to encouraging people to go to more efficient automobiles, but given the current problems in the Canadian automotive industry, it is not a very good time to be looking at that sort of a differential tax rate or a tax incentive, but it is one that ought to be looked at in another year when conditions stabilize. Mr. Speaker, on tobacco taxes - at present, Manitoba's tobacco tax of 25 cents per package of 25 cigarettes is 5 cents per package lower than the rates applied in Saskatchewan, Ontario and Quebec.

Our government proposes to align the Manitoba tax with those provinces by increasing the rate by 1/5th of 1 cent per cigarette. That takes the rate from 1 cent to 1-1/5th cents per cigarette, and that is for the Member for Seven Oaks. This change, which will be effective midnigh t, Ma y 31s t, will produce revenues of approximatey 4.4 million in 1980-81 and 5.3 million annually. -(Int erject ion)- You can smoke until May 31s t.

Resource Taxation - Last year the government implemented changes in The Mineral Taxation Act to equate returns from production of freehold land with the returns from Crown land and to provide freehold mineral operators with incent ives for increased exploration efforts. Since that time major increases in oil exploration activity have taken place in our province. However, the process of adjusting The Mineral Taxation Act levies to provide equal returns on freehold land with those on similar Crown land was not completed last year, and it was completed today, not qu ite comple ted , almo st comple ted .

The Resolution that was passed in the House today was a large measure towards the culmi nation of this undertaking and that move will provide roughly 200,000 a year from freehold title holders to the Crown over the 1980-81 year. Water Power Rentals - Currently, Man itoba's water power rental rates are the greater of 50 cents per installed horsepower and 1. 25 per horsepower year of output. These rates have been in effect since 1952.

While at least one other jurisdiction has arbitrarily related its water power rates to the Consumer Price Index, we submit that they should be related to the increased market values of the electrical output. Accordingly, it is out intention to increase water power rental rates effective June 1, 1980, from 1. 25 to 3.25 per horsepower year of output. The base rate of 50 cents per horsepower year of installed output will be incr eased to 1. 30. Under our freeze on 3628

Tuesday, 13 May, 1980 domestic Hydro rates, these changes will not impact on Manitoba consumers. These changes will yield an additional 7 million annually to the province for the use of our water resources. Political Contributions Tax Credit - Currently, British Colum bia, Al berta and Ontario provide specific incentiv es in the form of polit ical contributions tax credits to encourage increased public participation in the electoral process. Manitoba is now in the final stages of a review of issues involved in election financing in this province and will be introducing Legislative changes this Session.

In line with those election financing reforms, we are proposing to implement a Manitoba Political Contributions Tax Credit administered through the National Income Tax System. Under this program, taxpayers will be permitted to deduct from Manitoba personal income taxes otherwise payable a portion of their contributions to recognized Manitoba political parties, recognized Mani toba constituency associations and candida tes for election to the Manitoba Legislature.

The Political Contribution Tax Credit will be the same as the Federal Credit and involve a deduction of: 75 percent of the first 100 of total contributions; 50 percent of the next 450 in total contributions; 33-1/ 3 of total contributions exceeding 550 and the maximum allowable credit will be set at 500.00. It is estimated that in an average year the effect of this plan will be a reduction to provincial revenues of 200,000.00. Mr. Speaker, I trust that most of that will not go to the NOP.

Corporation Capital Tax - Small Businesses - In 19 78, our government provided a major increase in the corporation capital tax exemption for small businesses from the punitive 10 0,000 imposed by the NOP on taxable capital up to 500,000.00. In the interests of providing a further degree of assistance or relief to small Manitoba business operations, effective July 1st, the exemption will be increased by 50 percent from the current 500,000 to 750,000 of taxable capital. This measure will reduce the corporation capital tax borne by small busine ss by approximately 375,000 in 1980-81 and about 500,000 in a full year.

This assistance is being rei nforced by the reintroduction of two national measures to assist small businesses proposed by the former federal government and announced once again by the new government on April 21, the deductibility of salaries paid to spouses by unincorporated businesses and the introduction of small busine ss development bonds. Honourable members may not be aware that these measures also affect Manitoba's income tax system.

We estima te that in combination with these two measures, that these two measures will provide our small businesses with a reduction in Manitoba taxes otherwise payable of in the order of 5 million this year. Mr. Speaker, that's why I mention at this time that there is a 5 million implication for Manitoba in 1980-81 by the federal move in this regard. On the other hand, the small businesses will also be subject to the new temporary 5 percent federal surtax but that measure only affects federal revenues. Sales Tax - In our first two Budgets, our government introduced some important sales tax improvements.

Tonight I am pleased to announce a number of additional selective sales tax reductions effective at midnight. First, a series of exemptions will be provided to encourage safety both at home and in the workplace. An across the board exemption will be provided for safety items of special design worn by workers to prevent bodily injury. This exemption will cover a broad range of items from specially designed safety devices and apparel worn by production workers, to police helmets, ear defenders worn by airport workers, and so on.

This extension of the current restricted exemption reflects our government's continuing concern for the safety of working people in all industries throughout the province. Chil drens safety seats, which are designed and approved for use in motor vehicles, will be exempted. A full exemption will be provided for first aid kits, bandages, dressings and fever thermometers, etc. This exemption complements the exemption in the current legislation for drugs , orthopaedic applia nces and equ ipment for the physically handicapped. The sales tax also will no longer apply to self­ contained household smoke alarms.

A comple te exemption will be provided for ambu lances and related equi pment which is carried in ambulances. Second, consistent with our increasing emphasis on energy conservation, we are proposing major additional exemptions to encourage greater energy efficiency.

More specifically, the current sales tax exemption on energy saving devices will be extended to include: Storm windows and storm doors, Heat pumps, Heat recovery units, Solar cells, solar furnaces and related equipment, Windmills and wind-powered generators and related equipment, Timer-controlled thermo stats, similar automatic controls for electrical lighting systems, Woodburning stoves and furnaces, and Wind deflectors for trucks.

Third, to assist in our farm community, the sales tax will no longer apply to farm water systems, drainage tile, ventilation fans for farm buildings, and in addition, on May 31s t, the current exemption for domestic heating under The Revenue Act, 1964 and Motive Fuel Tax Act will be extended to include the heating of all farm buildings. Fourth, to assist fur trappers, the sales tax as it now applies to fishermen, farmers, and so on, will no longer apply to items used directly by licensed fur trappers for commercial trapping of fur-bearing animals.

This exemption will parallel, as I said, those now in place for farmers and fishermen. It will not apply to items such as canoes, paddles, outboard motors, snowmobiles, which are used for general transportation, it will not apply as they have in the past on those items. In addition, a number of other minor changes will be made. The refund qualifying period allo wed between the purchase and sale of aircraft will be extended from 30 days to six months, patterns for sewing clothing at home will be exempted and the 3629

Tuesday, 13 May, 1980 sales tax exemption for diplomatic corps offices will be provided directly rather than through the current refund procedures. Last year, our government simplified the sales tax collection remittance procedures which face small retailers throughout the province. To complement those measures and to acknowledge the invaluable services small retailers carry out in collecting taxes on our behalf, we propose to increase vendors' commission from the present 5 percent of the first 200 in monthly collections to 10 percent effective June 1st.

There will be no change on the 1 percent amount allowed on collections in excess of 200.00. This doubling of the low volume commission rate is the first adjustment in the commission structure since 1974. In total, we estimate that the net effect of the provision of these exemptions will be a sales tax revenue reduction of approxi mately 2. 7 million in 1980-81 and 3 million in a full year. Mr. Speaker, in total the taxation measures I have annou nced tonight will increase revenues by approximately 8.5 million in the current fiscal year and 8.9 million in a full year, that is the net.

Our overall estimates of revenues for 1980-81 total 1, 882.6 million, an increase of 193 million or 11. 4 percent over the in itial estima tes for 19 79-80. However, because actual revenues exceeded original estimates last year, the final 1980-81 revenue growth rate is expected to be considerably less than the print-over-print that I have given you here. I should add that members will note a change in the Revenues Estimates format this year, which you will see shortly. We have adopted a system of presentation which is closer to that used by other provinces.

It provides a simpler and more easily understood split between the province's revenues from its own sources and federal transfer of payments, that is to facilitate the Member for St. Boniface. -(I nterjection)- Mr. Speaker, I am sure that anybody except those members across the way will be able to understand it. In my 1978 Budget Address, I announced our intention to conduct a full and complete review of Manitoba's Property and Cost of Living Tax Credits and related programs.

Completion of that review was deferred last year so that possible federal property and mortgage interest tax credits could be taken into account. On maturity, those federal measures were to deliver up to 250 in annual property tax assistance and 1, 250 in annual mortgage interest assistance to all eligible homeowners. Unfortunately, the election of the new federal government has meant the abandonment of those significant measures, and thanks to the friends of the people opposite, these were fori;igone in their non-confidence motion, which they so judiciously moved at the federal lev el.

I would like to stress that in initiating our general review on tax credit and related programs, our intention was and contin ues to be to imp rove porvincial programming. Ultimately, our objective is to ensure that these programs make the most meaningful contribution possible to the overall security and opportunity of all Manitobans and direct assistance to those genuinely in need. Full details of the review and the reasons for the proposed changes are included in a White Paper on Tax Credit Reform, which will be tabled at the conclusion of the Address here tonight.

However, I would like to take this opportunity to highlight the most important changes for the members of the Legislature. First of all the general maximum Property Tax Credit will be increased by 100 to 475.00. This major increase in maximum assistance will complement the 100 increase in the minimum to 325, announced by the First Minister on April 9th. Second, the maximum Property Tax Credit for senior citizens will be increased by 150 from 375 to 525. In addition, as announced by the Premier on April 9th, the Pensioners' School Tax Assistance Program will be expanded from 100 to 175.

The enhanced levels of assistance under that program will apply on top of the new basic Property Tax Credit of 325. In this manner, we are responding to the concerns expressed by pensioner homeowners about their school taxes and about the method of application for the rebates. Effective this year, all pensioner homeowners in Manitoba with school taxes un der 500 will have their full school tax obligations offset by provincial assistance, delivered at the time they are required to pay their property taxes.

The Property Tax Credit increase means that senior citizen homeowners will also be eligible for an additional 200 in assistance through the income tax system in relation to their needs and incomes, bringing the total assistance available to 700.00. Tenants who are senior citizens currently do not receive assistance under the Pensioner's School Tax Assistance Program , which is restricted to homeowners only. Accordingly, we propose to extend similar assistance to senior citizen tenants.

This new measure will provide them with di rect provincial payments of up to 17 5 to cover 10 percent of their rent over 1, 625 annually - the rent level at which t"e basic 325 Property Tax Credit applies. Combined with the 525 maximum Property Tax Credit for senior citizens, this measure will provide senior citizen tenants also with up to 700 in property tax assistance. Third, the more comprehensive combined family income measure used for federal Child Tax Credit calculations will replace the current measure - taxable income of the higher income spouse.

In our view, this combined family income measure provides a better standard for relating supp lemental assistance to needs. Fourth, the Cost of Living -(Int erjection)- Mr. Speaker, we're getting comments from somebody across the way who kno ws. That means he's probably collecting it. Fourth, the Cost of Living Tax Credit will be retained at three percent of personal exemptions reduced by one percent of the new combined family income measure.

This redefined income will reduce the incidence of Cost of Living Tax Credit payments to higher income Manitobans generally, and also to secondary and tertiary income earners in higher income families, and direct a higher proportion of benefits toward those with a genuine need. I should point out, Mr. Speaker, that all of these are now in discussion and arrangement with the federal government which will req uire their agreement with regards to the federal tax forms. 3630

Tuesday, 13 May, 1980 Fifth, a new Manitoba Supplement for Pensioners will replace the Manitoba Supple ment to the Elderly. Existing maximum payments will be doubled and benefits will be extended to pensioners over 55 rather than 65. Sixth, the Manitoba Shelter Allowance for Elderly Renters, which we implemented effective January 1st this year, is making a real contribution to the security of our senior citizen community. We are proposing to enrich the benefits available under SAFER and to extend SAFER benefits to pensioners over the age of 55.

Seventh, SAFER benefits will be extended to low income families with children. This will involve the delivery of substantial rental assistance to a broader range of Manitobans than is possible under the current program. Eighth, funding for Day Care services will be augmented to permit an expansion in the number of facilities providing care for pre-school children. The additional funding will also be used to extend Day Care to meet the needs of families with children of school age.

More specifically, funds will be allotted to noon and after school care, as well as to a general augmentation in the numbers of pre-school Day Care services. Current Day Care charges, including provincial subsidies on a needs-related basis will be retained. These are already among the best available in Canada. Ninth, the provincial . . . MR. SPEAKER: Order please. There will be lots of time for debate in the ensuing days. The Honourable Minister of Finance. MR. CRAIK: Ninth, Mr.

Speaker, the provincial social allowance system will be adjusted to include all forms of support regardless of source, in the assessment of an applicant's resources and needs. Specifically, Property Tax Credits, Cost of Living Tax Credits, SAFER payments, Family Allowances, federal Child Tax Credits and other forms of assistance will be included in the calculation of the resources available to the individual. But, Mr. Speaker, social allowance rates will be incr eased at the same time to ensure that the current levels of support paid to Manitobans in receipt of social allowances will be maintained.

We believe this integration of existing support payments in the resources of the individual, and similar adjustments in current social assistance levels will make it possible to target subsequent increases in provincial social allowances where there is most need. Mr. Speaker, I should give the Leader of the Opposition a chance to cool off his pen before I announce Number Ten.

Tenth and finally and most importantly, in further recognition of the pressing needs facing low income families with children and more particularly the needs of single parent families, a new Child -Related Income Support Program (CRISP) will be implemented in 1981.

Under this program families with annual incomes under 7 ,500 will qualify for maximum provincial support at a rate of 30 per month, or 360 per year, per child and to ensure that benefits available under this program more accurately reflect the costs and obligations involved in child-raising, a 500 deduction from total income will be permitted for each child. Maximum payments will be reduced by 25 cents for each dollar of additional income above the threshold levels.

Members will recognize that this more selective and targeted approach will guarantee much more substantial support to families, and more particularly singl e-parent fam il ies with chi ldren, than those possible up to now under the scattered approach of the Cost of Living Tax Credit Program. For example, Mr. Speaker, for a family with four children, the new program will provide up to 120 in provincial support payments monthly or 1, 440 per year. Taking into account the 500 per child exemption, this full level of support will be available to all such families with total incomes of 9,500 or less.

In addition, as noted earlier, as total incomes exceed this level, the provincial payments will be phased out at 25 cents for each dollar of additional income. Thus, for a family with four children, Mr. Speaker, to give you the illustration, they would receive, at a family income of 9,500, the full 120 per month, and then it would scale down after that threshold, until at 15 ,000 in family income - at 15 ,260 it would phase out, so they would get the full amount of the 30 per month for child at the 9,500 threshold and from thereon in it would scale down.

Throughout the process leading up to the White Paper, our government paid close attention to the actual benefit del ivery mechanisms and to the adminis trative requirements fac ing Manitobans in need. The review showed clearly that the procedures for obtaining benefits should be kept as simple as humanly possible. Therefore, in line with the general integration of benefits principle, our government proposes to coordinate inf ormation on the new provincial programs and related assistance measures through a single province-wide information system.

This will ensure that all Manitobans will have simple access to all necessary information. Some program details and admin istrative procedures have not yet been established, but will be worked out between now and the commencement of the new programs on January 1st, 19 81. In a full year we estimate that these reforms to the existing Property Tax Credit, Cost of Living Tax Credit and related programs, together with the implementation of new programs, will deliver an additional 29.6 million in provincial shelter and needs-related support to Manitobans.

That is the net new amount of cash flow that will be going into these programs. Moreover, the proposed changes involve a sign ificant reorientation in the existing benefit structure towards those in most need. The Supple mentary Estima tes include 28. 6 million to meet the costs of these White Paper initiatives in 19 80-81. In

summary, it would be safe to say that the reforms announc ed tonight represent our best estimate of where real needs for these kinds of programs currently exist, and how these needs can be best met under combined federal, provincial and municipal programming. Of course, changes at any of these three levels would change the emphasis of the needs, and adjustments may be required as time 3631

Tuesday, 13 May, 1980 goes by, as well as extensive monitoring during the initial period of the implementation. Our review pursuant to preparing the White Paper on tax credits led to two important general conclusions: The first was that the original intent of the Cost of Living Tax Credit Program was not being met. It had become essentially a shotgun program and a program that was leaking like a sieve. It was not providing target-directed financial relief to those in real need.

While no system can be devised which is ideal, we believe that our new proposals will impr ove the situation dr amatically and also address real needs in a new and better way. To give you an example, Mr. Speaker, of what was happening under that program, you would find, I am sure, that a number of people in this room, in this Chamber, would be in receipt of a Cost of Living Tax Credit, and I don't think it would be the intention of any members in this Chamber to have that happen. You would find, Mr.

Speaker, I am sure, that if you got beyond that investigation that there were even a greater number of the spouses of the people in this Chamber who were receiving that credit, and that I don't think was intended either, and that is the sort of problem we encountered in exam ining this program. When I say it was leaking like a sieve, it was a shotgun program and it was not doing what it was intended to do.

The second conclusion was that the Property Tax Credit method can only partially accommodate the financing of the public school system, but it is an important program to retain as a counter-balance to total provincial control of education, which would necessarily come with total direct provincial financing. It is recognized, however, that all the methods of public school financing by the provincial government must now be addressed comprehensively to overhaul a system which has not been fundamentally changed for fifteen years. Mr.

Speaker, regard ing Education Financing, although enrollments have been falling while per pupil assistance has been increasing substantially, we recognize that the public school system is in 'a difficult period of transition and the problems which accompany the process of a contraction can be very different from those which accompanied the expansion pressures of the 19 50s and the 1960s. Our government remains committed to upgrading direct provincial support for public schools in the coming years.

The major focus of that support will be to ensure that high quality education continues to be available to all our children, without undue burdens on local ratepayers. We recogniz e that special transitional assistance will be required to meet the problems of adjustment and to ensure 1T1ore effective programming over the long term. The Property Tax Credit increases contained in this Budget reflect those concerns, as does the general review of property tax assessment issues and procedures which is already under way.

By the end of this fiscal year, we hope to be in a position to complement these initiatives with proposals for improvements in direct support through mechanisms such as the Foundation Program. Whil e a number of options are under consideration, I can say that a key objective of our education finance reform proposals will be the maintenance of a significant degree of local control over the operations of local schools, with continuing local tax support.

We believe that the local autonomy principle would be jeopardized if the province were to provide all or nearly all of the financing for education on a direct basis. As I said before, we also recognize the importance of ensuring that improvements in direct provincial support for education reflect the new challenges facing school di visions, including decl ining enroll ments and emerging excess capacity as a result of the changing age di stribution of the population.

These challenges will incr ease even more the importance of school boards throughout our province and, of course, throughout much of Canada where exactly the same trend is occurring. It has been, and will largely continue to be the responsibility of locally elected officials to rationalize the public school system in light of reduced enrollments. In some cases, class sizes are becoming too small. In other more serious situations, the total school enrollment is declining to a level where it is difficult to provide the curriculum with the teachers and other resources which have been assigned.

In these circumstances, school boards will have to face unavoidable decisions to close some schools and amalgamate classes in others, not only to achieve gr eater efficiency in the delivery of education services, but also, and more importantly, to assure the continued avai labil ity of the best possible educational environment for our children. In recent months the school divisions have faced some major uncontrollable interest costs, which have been aggravated by high rates.

These interest costs have occurred in part because the provincial gove rnment's payments of Foundation Grants to school divisions have not flowed in relation to school division req uir ements, and in part because municipalities have been permitted to retain special levies collected on behalf of the divisions and to lag the actual transfer of those collections. These factors led the Provincial Auditor to express concern in a number of his reports.

In his 19 78 Report, for example, he observed, and I quote: The method of financing school divisions resulted in the divisions' working capital requirement being financed substantially by way of bank loan and overdrafts, thereby creating an excessive interest expense. The cash flow in accordance with the present regu lation improperly in creases the cost of education in order to imp rove the financin g expenditure amounts of the province and the municipal corporations. That's from the Provincial Auditor.

Our government proposes to deal with this problem by accelerating the payment of Foundation Gr ants to school divisions. We intend also to ensure gr eater equitability in the cash flow between municipalities and school divisions after discussions with both levels of local government. On the provincial side, the present sched ule involves the payment of 20 percent of the estimated spring term grant in each of the four months from April to July, with a final 20 percent balancing payment in September, and the payment of 20 percent of the estimated fall term grant in each of: 3632

Tuesday, 13 May, 1980 October, November, December and January, with a final balancing payment in March. Under our cash flow acceleration proposal, 40 percent of the school divisions' Foundation Grant entitlements will be paid in April, followed by equal 10 percent payments in each month of the academic year. This measure is expected to reduce the uncontrollable interest expenses facing school divisions by approximately 4 million in a full year. Since provision for interest costs under the old

schedule is included in school division budgets for 19 80, this change may enable divisions to achieve modest surpl uses this year. In considering a more equitable flow-through of the school taxes collec ted by municipalities, our government is mind ful of the fact that the municip alities are also faced with sign ificant borrowing costs from time to time to provide general local government services prior to actual payment of municipal taxes by property taxpayers.

However, under the current payment schedule, 20 percent of Special Education Levy Funds are transferred to school divisions in each of the months of July, September and November, and the remaining 40 percent are retained by municipalities until the following January. In many cases this means that school taxes have been paid by the ratepayer to support school services, but are being retained by municipalities until the payment

schedule requires them to be transferred. At the same time school divisions are faced with the necessity of borrowing to meet their expen diture oblig ations. However, as noted earlier, budgets on both the municipal and school sides are already set for this year. Accord ingly, it is our intention to init iate early consultations with municipalities and school divisions so that revised payment schedules can be effected. The Member for El mwood, Mr. Speaker, says it's overdue and he's dead right. Mr. Speaker, the members opposite would not know it, but it was a problem during their eight years of tenure.

The Sup plementary Estima tes I'l l table at the conclusion of my address total approximately 31.3 million. In addition to the 28.6 million provision for tax credit reform, the largest item in the Supplementary Estimates is an allowance of 2 million for additional forest fire suppression costs. Members will note that there is also provision for an increase in statutory indemnities and allowances, as well as salary and representation allowances in line with the recommendations made by Justice Hall earlier this year.

The Supplementary Estimates in combination with the Main Estimates tabled earlier in the Session, result in a total expenditure authority request of 2,022, 200,000.00. This amount is approxima tely 139.6 million greater than the estimates of total revenue for the year. We believe a deficit of this size is manageable and acceptable for a number of reasons. Mr. Speaker, the dramatic improvement in our year-end positions over the last two years has given us a great deal more flexibility, and a great deal more breathing room in assessing our budgetary options.

While the estimated deficit is larger than the actual year-end figures in 1978-79 or 19 79-80, it is in line with the earlier estimates for those years, both as a percent of the gross provincial product and as a percent of total provincial expenditures, and of course is still well below the 1977-78 record. In addition, the deficit continues to be entirely for capital purposes as opposed to current operations. Mr. Speaker, nobody in this province will ever equal their record for a deficit unless they ever end up back in office. Mr. Speaker; by the time they end up back in office, there'll be a one percent deficit.

Having said this, however, I want to emphasize, as I did in my Budget last year, that our long-term objective will continue to be a balanced Budget on a combined basis, as and when economic conditions permit and, Mr. Speaker, I guarantee we'll get to it. Mr. Speaker, re Capital Financing - as I indicated in my Budget Speech last year it is the intention of our government to reduce the need to borrow in the capital market as much as possible, but, when necessary to borrow in the Canadian markets or as a second choice, to borrow in US dollars if it appears to be in our favour to do so.

During the past year one issue payable in a European currency was repaid. When the borrowing took place in 19 70, the proceeds of that European units of account issue were 12. 5 million in Canadian funds, and the nominal interest rate was 9 percent, but the principal repayment in March of this year cost 27. 1 milli on and the effective interest rate turned out to be 29.6 percent. Mr. Speaker, it would be interesting to read the press release that went out at that time, which I've done.

In June of this year, an issue payable in Swiss Francs will come due and again I anticipate repaying the issue using Canadian dolla rs borrowed in Canada. When the initial borrowing took place in 19 70, again, the nominal interest rate was 8-1/ 8 percent and the proceeds were some 40 million. Now, the princ ipal amount repayable is approximately 72 million. The difference plus regular interest costs has transformed an illusory interest advantage ten years ago into an effective rate of 24.7 percent today.

These two examples illustrate why we believe it is essential to reduce our exposure on off-shore currencies at this time, and a comparison, included with the financial statistics I will table later, will demonstra te the com plete debt picture. At exchange rates in effect on May 1, our outst andin g debt was 592.5 milli on high er in Canadian dolla rs than in the amounts that were initially borrowed. Mr. Speaker, they even make the Hydro mistakes look small. Later this evening I will be tabling 19 80-81 capital authority requirements from Crown agencies totalling 24 million.

I should add that the amounts requested do not reflect the total capital programs of the two large utilit ies, Mani toba Hydro and Man itoba Telephones, since both utilities have available capital authority already voted by the Legislature in past years and since both will use internally generated funds to finance a portion of their programs. Hydro's capital expenditure programs total 124 million, and those of the Telephone System, 90 million. Combined provincial public sector capital expenditures for 19 80-81, including those of Crown agencies and departments, are estimated, in aggregate, at around 534 million.

Over all, we estimate our budgetary and non­ budgetary borrowing requirements at about 310 million this year. Mr. Speaker, that's with a capital 3633

Tuesday, 13 May, 1980 program of 534 million. Since off-market sources, such as the Canada Pension Plan, are expected to provide around 11 0 million, our total public market requirements in 19 80-81 for direct provincial and gua ranteed self-sustaining pu rposes will be approximately 200 million. At the conclusion I will table updated information on the province's overall debt position. It will show that during the last year the rapid acceleration of total debt in our province caused by the former government's capital program has levelled off.

The outstanding debt at the end of 19 79-80 fiscal year was marginally above 4 billion, up only 1-1/2 percent over the previous year, and the provisions in our 19 80-81 Estimates for debt charges, including Hydro Rate Stabilization, are down from a preliminary-final of 11 8.6 million for 1979-80 to 93.8 million, primarily because of the decrease in the rate stabilization costs this year. But while these improvements are welcome, they don't change the fact that Manitoba is still burdened with a high total debt load and will continue to be for some time.

Our outstanding debt, now close to 4,000 for every man, woman, and child in this province, is still the second highest on a per capita basis in Canada. Mr. Speaker, I hear a lot of noise across the way, but if they really want to make noise, they can stand up and explain the 600 million that isn't even included here that they borrowed in their off-shore markets. Nobody has talked to the boys across the way about that yet. They can answer for that when they're answering about some of the other nonsense mistakes that they carried on with. The average Manitoban, Mr.

Speaker, will never really know how expensive those fellows were, and they didn't know themselves and they still don't know. They were a ship out of control. In these circu mstances it is essential that the province and its agencies guard against unnecessary over-extension. Some would argue, and we hear it from across the way, roll over the debt, as if there were some magic in that procedure, but there isn't. It just postpones the inevitable.

Evenutally the debt has to be repaid or an even larger and more difficult burden will be left for the next generation to add to the other legacies they will inherit from a society which only now is beginning to recognize the need to look further ahead than the next year and to appreciate the absolute necessity of prudent use of our resources now and in the future.

That, of course, was the kind of advice our predecessors ignored when they embarked on the sequence of irres ponsible and near-disastrous decisions which were documented in the report of the Commission of Inquiry into Manjtoba Hydro, decisions which will cost the province dearly for many years. The Tritschler Report showed how short-term expediency and political influence came close to jeopardizing much of the future development of Manitoba and how our prospects have been set back and the returns to the people of Ma nitoba permanently reduced. Now, however, the situation is beginning to turn around.

The foreign exchange element has been removed from Hydro's debt load and we have frozen Hydro ra1es. Market prospects are improving as well and we are confident that following the completion of other negotiations and studies now underway, that further development of Hydro resources, development stalled by the actions of the former government, will proceed in a fashion that is in the best interests of Manitoba Hydro ratepayers and thus the taxpayers of Manitoba. Our renewable energy heritage gives Manitoba a development advantage which is matched in few other regions of the country or the world.

This government recognizes that fact and is determined to make that advantage work for the people of Manitoba and for all Canadians. Let there be no mistake. We believe our Hydro resources belong to the people of Manitoba in the same way as non-renewable resources under the Canadian Constitution, and it follows that we will resist any effort by the federal government to divert revenues from Hydro exports away from Manitoba. But, as I said earlier, we are prepared and indeed committed to share the long-term benefits of our resources with all Canadians in the national interest.

In fact, it is the long-term national interest which has caused us to pursue actively the possible sale of firm power thr ough a western Canad ia n grid, in preference to North-South firm power agreements of a similar type. Mr. Speaker, I want to say in conclusion on that, we have made an attempt to have a long-term national, rational and provincial plan with regards to our Hydro resources, and it is the first time such has ever been proclaimed. Mr. Speaker, finally in conclusion.

Two years ago I concluded by first Budget Address with at attempt to sum marize, as clearly as I could, the principal challenge facing our new government. It stated that our challenge was not to restrict essential government services for the people of Manitoba, but rather to help build and maintain the economic base, which would make those services possible. I am proud to say that our government has met that challenge.

The citizens of Manitoba are already realizing the benefits, the dividends if you like, of the restoration of fiscal responsibility, and this Budget adds a broad range of further improvements: First, major direct tax reductions for homeowners, renters, and small business operators across the province, Increased and more effective program benefits, particularly for our elderly citizens and families with children, who are most in need of assistance, and Substantial and long-needed program reforms, designed not only to improve the quality of our public services, but also to ensure effectiveness and genuin e value for the tax dol lars which support them.

This could not have been possible if our government had not acted in a decisive way to restore a secure financial and economic base. In future years this foundation will permit us to undertake major new commi tments and it will guar antee that we can deliver on tho se commitments, without subjecting our taxpayers and our economy to onerous dir ect tax burdens or massive, hidden future obligations. 3634

Tuesday, 13 May, 1980 In many respects, Mr. Speaker, our government is very much where we hoped to be in the first year of the 1980s. The initial transitional adjustment period is behind us; our economy is back on track, and we have blue sky ahead of us, Mr. Speaker. The task now is to maintain and where possible to accelerate the rebuilding process. Although this is our government's third Budget, in some ways it is really our first.

It marks the start of a new stage in our development process and it opens a decade of new opportunities in our province with a set of policies and program reforms, which recognize tho se opportuni ties and respond to the m with responsibility and realism. Some have argued that it is not possible to have both hu mane government and resp onsible government. That is totally false and this Budget proves it.

What it does show very clearly is what good government, competent, dedicated, effective and honest government can do, and it also shows what a moderate, common-sense government, but a government with an aggressive commitment to the development of our province can do to provide a receptive environment for the widest possible range of people, institutions and enterprises. That is the kind of government, Mr. Speaker, that we must have to realize the opportunties now before us, and that is the kind of government we intend to keep on providing for the citizens of Manitoba in the years ahead. MR.

SPEAKER: Are you ready for the question? The Honourable Member for Kildonan. MR. FOX: Mr. Speaker, I move, seconded by the Honourable Member for Rupertsland that debate be adjourned. MOTION presented and carried. MR. SPEAKER: The Ho nour able Min ister of Finance. MR. CRAIK: Mr. Speaker, I have a message from His Honour, two messages from His Honour. MR. SPEAKER: The Lieutenant-Governor transmits to the Legislative Assembly of Manitoba Estimates of sums required for the service of the province for capital expenditures and recommends these Estimates to the Legislative Assembly.

The Lieutenant-Governor transmits to the Legislative Ass embly of Mani toba Estima tes of further sums required for the service of the province for the fiscal year ending the 31s t day of March, 19 81, and reco mmends these Estimates to the Legislative Assembly. The Honourable Minister of Finance. MR. CRAIK: Mr. Speaker, I move, seconded by the Minister of Health, that the said messages together with the Estimates accompanying the same be referred to the Committee of Supply. MOTION presented and carried. MR. SPEAKER: The Ho nou rable Min ister of Finance. MR. CRAIK: Mr.

Speaker, I wonder if I could be given the opportunity to mention that there is, in addition to the Capital Estimates and the Supplementary Estimates, the Tax Book Comparison of the various jurisdictions of taxes is also available for the members of the House and will be distributed as well. MR. SPEAKER: Is that agreeable? (Agreed) The Honourable Government House Leader. MR. MERCIER: Mr. Speaker, I move, seconded by the Minister of Government Services, that this House do now adjourn.

MOTION presented and carried, and the House was accordingly adjourned and stands adjourns until 2:00 p.m. tomorrow afternoon (Wednesday). 3635

Tuesday, 13 May, 1980 APPENDIX A MANITOBA ECONOMI C REVIEW AND STA TI STI CS 3636

Tuesday, 13 May, 1980 MANIT OBA ECONOMIC REVIEW NAT IONAL AND INTERNATI ONAL DEVELOPMENTS During the past year , most of the maj or O.E.C .D. countri es witnessed a sl owdown in real growth, an accelerat ion of inf lati on , risi ng interest rates and deter iorat ing cirr ent accounts in the ir ba lance of in terna tio nal payments , res ul ting in part fr om a renewe d round of world oil pr ice inc rea ses in 1978 and 197 9 and growing in te rnational politi cal tens ions in the Per sia n Gulf ar ea.

The mild re ces sio n which had be en wide ly an ti cipated in the North Ame rican ec onomy di d not arriv e in 19 79 , la rgely beca use of str ong bu siness inves tmen t spe nd ing and un ex pected str ength in consum er expe nd i tures . The se ex pendi tu res , however, along with the im pact of the oi l pr ice incr ea ses , drove in flat ion to new highs in the Un it ed St ates · The Un ited St ates has now enter e d a re c essio n which some obse rve rs cons ider could be more pr ol onged and more se vere than the down tu rn in 19 74 and 19 75 .

In Cana da , gr owth in re al Gross Nat ional Pr od uct de cl ine d to 2.9 % in 197 9 from 3. 4% in 19 78 . Business inves tment in pl ant and equ ipmen t increa sed by a str ong 10 .4 % in re al te rms , up fr om 1.0 % in 19 78, res ulting in a mo der ate in crease in gr owth in final domestic deman d. At the same ti me , the st rengt h in the fore ign sec tor which led growth in Canada during 19 77 and 19 78, was somewhat er oded in 197 9 and the cur ren t account de fi cit in the ba lanc e of payment s remain ed above $5 bi llio n.

The Can adi an ec ono my has not ye t adj us ted to the full impa ct of world oi l pr ices . The domestic wellhea d pr ice , at $1 4. 75 , is curren tl y about half of the ave rage world pr ice . In 197 9, the Consum er Pr ice Ind ex in crea sed 9. 1% , margin all y fas te r than the 197 8 in crea se of 9.0 %. However, und erl ying infla tio nar y forc es intens if ie d qui te sharply with the Gross Natio nal Pr od uct pr ice ind ex rising 9. 9% in 197 9 compare d with 6. 4% in 19 78.

Much of the acce le rat ion was due to in flatio n imported via Canad a' s in ternatio nal tr ading re lati on ships and is continuing to af fect final pr ices in the cur ren t ye ar . Infla ti onary expe ctatio ns are be coming ins ti tutio nalized and self -r ein forc ing, leading many ec ono mic commen tator s to pr edict ris ing rates of in f latio n in the current year even be fore the effe cts oi domes tic oil pr ice incr eases ar e ta ken into account . 3637

Tuesday, 13 May, 1980 MONET ARY POLIC Y AND INTEREST RATES In 197 9, monet ary pol i cy was again di rected towards the twin obj ec tives of main ta ining the ex ternal valu e of the Canadi an do ll ar re lativ e to the world' s maj or curren cies an d curta i ling in fl atio nar y pr ess ures from domestic and for eign so urces .

Exc han ge Rate Polic ies Su ccessiv e an d compe ting rotmd s of inte res t rate incr ea se s in mos t weste rn indus tr ia li zed natio ns con tinu ed thro ugh 19 79 and acce le rat ed during the fir st quar ter of 19 80 in respo nse to per sis ten t bouts of world -wi de in fl atio n and ser io us ba lance of pa ymen ts adj us tment pr ob lems . In Canada , for the 197 9/8 0 fis cal year , for eig n ex change transactio ns , tmd er ta ken to mode rate fl uctu atio ns in the ex change rate , re su lted in a $2 22 mill ion add it ion to th e fe d�ral governme nt 's to tal fi nanc ial re qu ir ement s.

Total fore ign exchange assets , inc lud ing assets re qu ir ed for of f icial exchange mar ket tra nsac ti ons , incr ease d by $5 25 mil lion in 19 79, fol lowing subs tanti al de cl ine s of $5 .5 billion and $986 mil li on in 1978 and 1977 re spe ctively . The improv ement in 1979 has been att ribu te d mainly to the mor e st able per formance of the Canadian dollar foll owing its downward tr end in 1977 and 1978 .

Inte re st rates in the Un ite d St ates main tai ned a gradual upward tre nd un til the third quar te r of 19 79, when a sh if t to more re st ricti ve monetary pol icy brought abo u t sharp incr eases . For examp le , the Fed eral Rese rve Bank of New Yor k di scount rate increased fro m 9.5 % in January to 12.0 % in Dece mber , 1979 and to 13.0 %, with an ad dit ional 3% su rcharge for frequ ent borro wers , at the cl ose of the first qua rter , 198 0. The Bank of Canada increased its bank rate five ti mes in 1979 , raisi ng it by 325 basis poin ts , fr om 10. 75% to 14 .0 %.

In mid-March , 198 0 the bank rate was al lowed to float at 0.2 5 percenta ge poi nt s above the weekly rate on 91- day tr easury bills and by early April , the rate had reached 16 . 20% , a further increase of 220 basis point s. In recent weeks, the bank rate has fall en , to 14 .17 %.. on May 8. However , the decl ine has be en more gradual than the decl ine in short-t erm Ameri can ra tes and Canad ian rates are once again gene rally above tho se prev ail ing in the United St at es .

While shor t and lon g-te rm Canad ian rat es have fol lowed pa ce, th ey hav e at ti mes in rece nt months st ood only mar gin ally higher , and occasi on all y lo wer than similar Amer ican rates , in contrast to di ff erent ials of fr om two to th ree perce nt age points dur ing the mid- 1970' s.

Des pite the narrowing of di ffe re nti als in late 19 79, th e Canadian doll ar , buoyed by improve ment s in the bala nc e of payments and dis cover ies of new oi l and ga s rese rve s, showed some improvement , only to come un de r fur the r press ure over the la st two months when Can adia n int ere st rates were well belo w th ose in the Uni te d St ates .

Tuesday, 13 May, 1980 Canadian and U.S. Bank Rates Int erest Rate 15 14 13 12 II 10 9 7 6 5 Quarterly Averages 1975-80 I I I r-• --1 I L __ 1-- -- ' ---- , r-� ... - ... ---- ·- ..... --- .:-.. I I I Canadian Bank Rate r-- r- • I U.S. Discount Rate ., ___ .. (Federal Reserve Bank ..I of New York) 2 3 4 2 3 4 2 3 4 2 3 4 2 3. 4 1979 1975 1976 1977 1978 1980 Source: Bank of Canada Review. March. 1980 Interest Rate Weekly Rates March-May 1980 16.0 ------------- .... ------ ... ---•--------- U.S . Discount Rate with Surcharge 15.0 Canadian Bank Rate 14.0 U. S.

Discount Rate 13.0 .. • • • • • • •• • • • • • • •. • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • (Federal Reserve Bank 12.0 March 6* 13 20 27 April 3 IO 17 24 May I 8* •A surcharge of 3 percentage points was applied by the Federal Reserve on frequent borrowings by large banks between March 14, and May 7, 1980. Source: Bank of Canada. Weekly Financial Statements McLeod. Young. Weir Money Market Letter 3639 of New York)

Tuesday, 13 May, 1980 Domestic Mone ta ry Po li cies Sinc e the fall of 19 75, the Bank of Canad a has pu rs ued a poli cy de sig ne d to contr ol in flatio n "by br inging ab out a gradual sl owing in the tr end ra te of domes tic monet ary gro wth with the pr imary fo cus on the money supp ly de fine d in te rms of curren cy and char te red ba nk deman d de posits , or Ml . " A ta rget range for Ml was ini ti all y set at 10% - 15% , and was re duce d in successi ve ste ps to the 6% - 10% range in ef fect for most of 197 9 .

The growth of Ml remained well within the ta rge t ranges un til the four th quarter of 1979 when it dropped belo w the range . In Dece mber 1979 the targe t was adj usted downwards to 5% - 9% . In contras t, growth of the br oader mone tary ag greg ate s , such as M2 and M3 , has remained at the rapid doubl e-digit rates pre vai ling in the mid- 19 70's . The substa nt ial divergence be tween Ml and M2 growth rates has led to speculat ion that effecti ve control of Ml may not pr ovide an adequa te check on li quidit y , and hence in flat ion , in the ec onomy .

Total esti mate d fe de ral government financing require ments of $1 1.7 billi on are proj ecte d for 1980/ 81 . To da te , the inc rease in the public 's hold ings of federal governm ent marketable sec urit ies has kept pace with the increase in ne t financing requi re ments . However , the pa r value of out sta nding Ca nada Sa vings Bonds dro pped by $1.3 bill ion during 1 97 9 with a furt her decl ine of some $1.3 billi on fr om January to April, 19 80 .

The Bank of Canada ha s warned of the danger that the abso rpti on of dome sti c sa vings by the fi scal deficits of governme nts can militate agai nst in ve s tment in pl ant and equ ipment and aga inst the in creases in pr odu cti vity and incomes that in vest ment makes po ssi bl e . Al though lower Ml gro wth rates ar e antic ipa te d fo r 19 80 , fe de ra l financing requi rement s , if acco mmodate d throu gh the sal � of fed er al gove rnmen t se curi ties to the Bank of Canada (i .e. mone ti zing the debt) , could re sult in rene wed expansion of the money supp l y.

Wh il e monet ary res tr ain t and hig h in te res t rates are cons is ten t with the Ban k's domestic an d ext ern al pol icies , the hig h in ter est rates as sociated wi th the de fense of the Cana dian do ll ar may them se lves be in fl atio nar y , at le ast in the short run .

At the ir con ference in Le th brid ge in Apr il , 1980 , the Wes ter n Pr emiers emphas ize d the fe deral govern ment 's re spo nsi bi lit v for in terest rate pol icy and noted that : " Curren t hig h in te rest rat es are sympt oms of much more se riou s st ructural prob le ms in the Canadian eco nomy , na mely , the ba lance of paymen ts de fi cit an d the fed er al bu dge t ary de fi cit.

To addr ess these de ep ly roo te d st ructural pr ob lems , they su gges ted a num be r of pr opos als which could fo rm a maj or part of a na ti ona l econ omic strate gy to avoid au to ma ti c tr ack ing ot Canadian int er est rate s with th ose in the Un ite d St ates . " 3640

Tuesday, 13 May, 1980 The Wes te rn Pre mie rs recog n ize d that "an es sential part of developi ng a nat ional economic strate gy re quires the fe de ral govern ment to re duc e its budgeta ry def icit and ulti ma tel y to balance its bud get ov er the econ omic cycle ." The shor t-te rm ef fe cts of a re duc ti on in the fe de ral de fi cit coul d be of fset by un de rt aking cert ai n la rge vi ab le cap ital proj ects .

The Pr emier s' propo sals als o included the on-go ing coord ina ti on of fo re ign bor rowing by government s and Crown corpo ratio ns and a variety of ta x mea sur es to mob ilize domes ti c savings and ther eby re duce Cana da 's re li anc e on fo r ei gn capital .

Accor d ing to the Bank "t he accele rat ion of th e rate of price and cost inf la tion in Canada in 1979 was due in par t to the fact that the Canadian eco nomy has re cent ly been operat ing at ve ry cl ose to its ef fe cti ve capacity to supply the go od s and se rv ices that are in demand in Canada and abroad ." However , inf la ti onary pre ssures do not mount equall y in all re gi ons ; ra ther they beco me ser ious in cert ai n re gion s and indu st ri es while others may be operat ing well belo w capacit y .

Monetary restrai nt , even when nec ess ary at the na t ional le vel , may dampen econ omic ac tivit y to a gr eate r ex te nt than is nec es sary or de sirable in some re gi ons and/o r sectors which ar e highly dep endent upon ex ternal financ ing .

In this conte xt , the West ern Pre mi ers ind icat ed their de ep concern "a bou t the un acce ptable and unf ai r impact of the high (inter est) rates on homeowner s, small busi ness men , fa rmer s, forest workers and the devel opme nt pote nti al of the We st ." Ins t rumen ts of contr ol which are so mewhat more sel ectiv e in thei r ef fe cts might be emplo yed to off set some of the ef fe cts of mone tary poli cy withou t fr ustrat ing its in te ntio n .

To this end , Mani toba has argued that cl ose r consu ltati on and informat ion-shar ing bet ween the Bank of Cana da , th e fe deral govern ment and the prov inc es coul d assi st in the desi gn of more cl osel y-int egra ted mone tary and fi scal policies which are se nsiti ve to economic deve lopme nts in the regions and at the same time , serve the nat ional inte re st . 3641

Tuesday, 13 May, 1980 DEVELOPMENTS IN MANI TOBA S tmUUa ry Acc o rding to recen t es timat es , Mani to ba' s Gr oss Pr ovincial Pr od uct re ached abou t $1 0.5 bill ion in 19 79, an incr ea se of 11.6 % from the 1978 lev e l of $9 .4 bi llio n . Growth in real output last year is est imated at about 2% , a slig ht reduct ion fro m the 1978 gro wth rate of close to 3% mainly be caus e of lo wer agri cultural crop pr od uct ion , an d a de c line in hou sing st arts foll owing the re cord num ber of sta rts in 1978 . Desp it e these dampening factor s , many areas of the econ omy ex pand ed shar pl y.

Renewe d vigour in Manito ba' s manu fact uring sector was re flected in st rong incr ea ses in inves tmen t, emp loym en t an d fin al ship men ts of manufa ctu re d good s . Uti liti es , tr ans por tat ion an d communicatio ns record ed a yea r of str ong gro wth in output and , by year end , an upswing was underway in mining prod uct ion . Cons idera ble inve st ment and employment in creases also took pl ac in the tr ade an d commercial ser vi ces sec tor of the ec onomy las t year. Over a ll, the unemp loym ent ra te was re duce d by more tha n a full pe rcen ta ge poin t in 197 9.

Inves tmen t Inves tment ex pen di tures in trad e , finance and commercial ser vi ces an d in the manuf act uring se ctor were par ti cularl y str ong in Manito ba in 197 9 with in crea ses of 48. 4% and 24. 6% resp ec t ive ly . Inve st ment in pr imary an d cons tr uct ion indus tr ies was up by 10 .9 %. Off setti ng par t of the se gains were de cl ines in inves tment spend ing by ins tit utio ns an d gove rnmen t depa rt men ts (d own 2.8 %) , inves tmen t in utili ties (d own 5.9 %) an d in the hou sing sec tor (d own 28. 4%) .

The res ult was an over all in crea se in inv es tment ex pen di tures of a modest o. 4% . Among the maj or inve st ment pr oj ects in 1979 were se veral sho pping cent res (se e retail tra de sect ion) , and a num ber of off ice buil ding comple xes inc lud ing the Trizec deve l opment at Porta ge and Main in Winnipe g, the York Centre Deve lop men t, Colo ny Sq uare. and preparatory work for Great West Lif e's new headquart ers . In the manufactur ing sector , pl an t expa ns ions or new fa cili ti es were un derta ken in most ind ustri .es , both in Win nipeg and in other centres in the Province .

So me of the maj or in vest ments included tho se of Vers atil e Manu fac tur ing Company , Boe ing of Canada Lt d. , Tan Ja y Inter nat ional Li mited , Burro ws Business Mach ines Lt d. , CSP Foods Lt d., (i n Al tona) , AA DeFehr Manu fa cturing Lt d., Dominion Br idge Co . Ltd . (in Selk irk) , Dunn -Rite Food Produc ts Lt d. , Herita ge Foundry Ltd . (in Win kle r) , Monarch Ind ustrie s Lt d. , Sc reen Pri nt Displa y Adver ti sing (Wes tern Ltd., ), Wescott Fashions Lt d. , and Woodstone Foods Ltd . , (i n Porta ge la Prairie) . 3642

Tuesday, 13 May, 1980 The pri va te sector share of total new capita l inve st ment increased dr amat ically in the last two years br inging the pri vate share to around 70% from about 60% where it had be en for most of the 1970 's and virtu ally eli minating the gap be tween the pri vat e shares in Canada and Manito ba .

The annual level of pri va te se ctor expen di tures increase d by $2 85 mill ion between 197 7 and 1979 . 'While some of the �change in pr ivate and public shares of inve st ment oc curred as a result of the slo wdown in pub lic secto r expen di tu res , pri mar ily reflect ing the phase -down of Mani toba Hydro const ruct ion ac ti vity , it is felt that this has created a more hea l thy balance in the overall total .

Private Sector Share of Total New Capital Investment Canada and Manitoba Pcn.:cnt agc uf Total 70 1\0 --------- � - -- - . , -- · · · · · --- -- - - - - (.ANAD A , , , , ·- - --- -- --- - - --- • • • • , , , , , , , , " ;i - ;u.:luaL p - prcliminar}': 1 - tnlcntio n'. Soun.:c: Stali,Ut.:' Co1natl;,1 an<l M;.mi1oha Derartmcnl of hm1m :c . The out look for 198 0 is for improve d inv es tmen t expe nd i tu res in all se ctor s of the Mani to ba ec onomy ex cep t for housing where a furt her de cline is an tic ipated as in mos t othe r pr ovinc es .

Man ufact uring is ex pected to be the leading inv es tment sector with inve st men t intent ions up 27 . 7% , the thi rd la rges t inc rea1;1e of all prov in ces . In ves tment in ten tio ns for ins ti tu tio ns and government depart men ts , up 8. 6%, are also expe cted to exc eed the natio nal ave rage . The pr eli minar y out look also calls for inv es tment incr eases in the pr imary and cons tr uctio n indus tr ies (up 12 . 8%) an d in the tr ade , finance an d commerci al se rvi ces sec tor (up 5.0 %) .

Total pr ivate sec tor new capital spend ing is ex pe cted to increase 7. 0% in 198 0 incr ea sing it s share in tota l inves tmen t to 71 .6 %, ve ry close to the natio nal share of 72 .5 %. However, the su rveys from which these sta tistic s were de rive d were conduc ted be fore the re cent pea k in in ter es t rates an d could be su bjec t to some rev isions . 3643

Tuesday, 13 May, 1980 Price s The cont inuing ef fe ct of inflat ionary fo rc es in the inter­ natio nal and Canadian economies was evident in the rise in consumer prices in Manitoba last year . The Winnipeg Consumer Pr ice Index advanced by 9.2 % last year , up fr om the 1978 incr ea se of 8.5 %, but about the same rate of incr ease as the nat ional index which was up 9.1 %. In March , 1980 the Winnipeg C. P.I. was up 9.6 % from March , 197 9 while in Canada the C. P.I . was up 9.3 % fo r the same period .

Food prices in Winnipeg cont inued to in cr ease somewhat less quickly than the national incre ase with the increa se to March , 1980 fro m a year earlier being 7.4 % compar ed with 8.4 % fo r Canada . Populati on The general wes tward shif t of populat ion in Canada in the 1970' s has aff ecte d populat ion growth in Manito ba . For the la st si x years Manito ba 's populat ion has been augmented by net in-migration fl ows fro m provinces to the ea st - a rever sal of the net outf low which had been typical for many years .

At the same time , net flo ws to the west ern provinces have increase d mainly as a re sult of lower in-migrati on . In the last two years , a further sharp increase in migrati on from all parts of Canada to the west , and in par t icular to Alber ta and B.C. , has contr ibuted to an increased net negati ve total for Manito ba . Preli minary Stat istics Canada esti mates now indica te that Manitoba 's total populat ion de clined in 1979 , to 1, 026 , 200 on January 1, 1980 .

However , St ati sti cs Canad a re cently rev ised it s intercensal esti mates upwards for Manitoba , and the next "benchmark" populati on count will not be available unt il the June , 1981 Census . In the last Census the popul at ion of Manitoba is acknowledge d to have been underc ounted by 4, 000 to 18 , 000 persons .

INTERPROVINCIAL MIGRATION Migration Flows In From and Out_]'.£_:_ Eastern Canada Western Canada -1.!!_ � � _!E_ � Net 1970 11, 930 15 ,497 -3,5 67 16 ,087 21 , 728 -5,6 41 1971 10 ,904 15,452 -'4 '548 17 , 176 19,977 -2,8 01 1972 ll ,46 6 15 ,0 40 -3,574 15 ' 13 5 19,872 -4,73 7 1973 12,8 95 1�,974 79 15,9 66 21 ,6 59 -5,693 1974 14,5 78 12,4 74 2, 104 18 ,402 22, 103 -3,701 1975 14 ,83 3 12 ,879 1,9 54 15,3 55 24 ,21 9 -8,8 64 1976 13 ,075 10 ,7 91 2, 284 13 ,491 20,012 -6,521 1977 13,591 11 ,455 2, 136 14 ,7 08 21,0 08 -6, 300 1978 11 ,812 10 ,996 816 13, 129 21, 103 -7, 974 1979 12 , 153 11 ,13 2 1, 021 11 ,4 79 23 ,4 34 -11,9 55 Years ending May 31 .

Source : Stat ist ics Canada.

Tuesday, 13 May, 1980 Emplo ymen t an d In comes Total emp lo ymen t i� Manito ba increa sed by 13,0 00 or 3. 0% to average 453 ,0 00 in 1979 . ·A s in the previous year , the fastest employment growth oc curred in the manufact uring sector; st rong incr ea ses were also re corde d in whol esale and re tai l tr ade , agri cult ure , and tr ans po rtatio n , communicat ions an d ot he r utili ties . In the pr ivat e sect or, emp loym en t in creas ed 19 ,0 00 to an ave rage of 35 9, 000 in 19 79.

In the two year s 19 77 to 19 79 , pr ivate sec tor emp loym en t in crea sed 33, 000 or 10 . 1% fol lowing gr owth in the pr ev ious two year s of only 1,0 00 or 0. 3%. The entire net increase in employ ment of 24 ,0 00 from 1977 to 1979 is attri butable to the pri vat e sector . Private Sector Employment Thousands 360 350 340 330 320 310 300 0 1975 1976 1977 1978 1979 SOURCE: Statistics Canada . 3645

.!ill. Tuesday, 13 May, 1980 PRIVATE AND PUBLIC EMPLOYMENT Annu!l Averages 1976 1977 1978 1979 Pe rcent Change 1976 / 1977/ 1978/ 1979/ (thousands - ) - l2.ZL -121.L ...lilL _!ill_ Private Paid Workers 269 . 272 271 279 295 1.1 -0.4 3.0 Employer s, OWn Account and Family Workers � __?! 55 _g � 0.0 -1. 7 10 .9 Private Sector Employment 32 5 328 326 340 359 0.9 -0.6 4.3 Public Sector Employment (all levels of government ) 92 � 104 100 94 7.6 1.:1- -3.8 TOTAL EMPLOYMENT 41 7 426 429 440 453 Totals may not add due to rounding .

SOURCE: St atis tic s Canada and the Manitoba Depa rtmen t of Finance . 2. 2 0.7 The total labour force in Manitoba averaged 478 ,000 in 1979 , an increase of 7,0 00 or 1.5 % from 19 78. Moat of the labour force 2.6 growth last year occurred among the populatio n aged 25 years or over, reflecti ng the aging of the "baby boom" group and the continuing increase in the parti cipation of women in the labour force .

Although the decline in bi rth rates which occurred in the 1960 's is reflected in the population currently .-reaching working age , a rapid increase in parti cipation rates for young persons in 19 78 and 1979 resulted in growth in the labour force aged 15 to 24 years . ,The labour force parti cipatio n rate for al l persons 15 years of age and over rose by 0. 6 percentage points to 63 . 7% in 19 79. The unemp loyment rate declined from 6.5 % in 19 78 to 5.4 % in 19 79 , its lowest level since 19 76 and more than 2 percentage points below the national rate of 7. 5%.

The seasonally-adj usted unemployment rate in the first quarter of 19 80 also averaged 5.4 %. The increase in employment opportunities in the province is parti cularly evident among young persons , 63. 0% of whom held jobs in 197 9 compared with 60. 1% in 1978 and 59 .5 % in 19 77. Natio nally , 57. 6% of 15 to 24 year olds held jobs in 19 79. The unemployment rate for Manitobans aged 15 to 24 declined by over 2 perc entage points to average 9.7 % last year. 5.7 4.9 5.6 -6.0 3.0

Tuesday, 13 May, 1980 The Pr ovince 's Pr iva te Sec tor Yo uth Employm ent Pr ogr am is un de rway fo r the thi rd cons ec utiv e year in 19 80. In the fir st two year s , 19 78 an d 1979 , the pr ogr am pr ovi de d support for al mos t 9,0 00 jo bs fo r young peo pl e. Unde r the pr og ram, which runs from late April thro ugh Oc tobe r, el ig ib le empl oyer s are pr ovi ded with a $1. 50-a n­ hour per pe rson wage subsid y to cove r part of the wage cos ts in hi ring young peop le in newly crea ted jo bs .

Wo rk st opp age fi gures fo r 19 79 re flect the impr ove d indu s tr ia l re lat ions climat e in the Pr ovince . A tota l of 31 ,1 20 man ­ days were los t in 27 work st oppages las t ye ar. Th is is the equ ivalent of 82 man- days los t for eve ry 1, 000 non- agri cul tu ral pa id worke rs , giving Manito ba the se cond bes t indu s tr ial rela tio ns re cor d in the count ry, after Al be rt a, and rep rese nti ng ab out one-quar ter of the ave rage ann ual losses in Manito ba during the decade of the 19 70' s.

Ave rage week ly earnings inc reased 8. 0% in 1979 , an improvemen t fro m the 5.9 % increase in 1978 . The increase in average hourly earnings in man uf ac tu r ing indus tries was 8.7 % up fro m 5.6 % in 1978 . Prel iminary esti mat es based on Statisti cs Canada data in dicate tha t total per sonal inco me and pe rs onal di sp osa ble in come were each up about 10% . Pr imary Ind us tr ies The valu e of output in Mani toba 's pr imary sec tor in crea sed about 13 % to a total of $2.6 bi llio n in 1979 , main ly as a result of hig her world pric es for pr imary commodities .

The incr ea se oc curr e d despite a de cline in agr icult ura l crop produc ti on which compr ises abou t 40% of the tota l se ct or . Much st ron ger growth was rec orde d in th e value of mineral , fores try , fi sher ies and li ves tock prod ucti on . Agri cult ure The valu e of agri cultu ral pr od uctio n in 1979 in creas ed by 3. 4% to $1. 6 bill ion desp it e sh arpl y lo wer yield s and acreages of maj or pr ai rie gr ains . However, fa rm inco mes remai ned str on g, wi th cash re ceipt s up 16 .1 % to $1 .3 billi on .

Rea lize d net farm inc ome, or inco me re ma inin g afte r al lowanc e fo r op erat ing and dep reciat ion expens es , in cre ase d 22 .1 % to $35 4 mill ion accord ing to esti ma tes fro m the Agr icult ural Outl ook Confe re nce las t Dece mber . To tal net fa rm inco me was up by a more mod est 5.7 % since ther e was almos t no change in 1979 in th e value of in ve ntories which is included in the tot al , fo llo wing subs tant ial incr ea ses in the pre vi ous two yea rs . 3647

Tuesday, 13 May, 1980 FARM CASH RECEIPTS AND NET FARM INCOME 1977r 19 78r 19 79p ($ mi llio ns) Crop Sa les Live stock Sa les Other So urces TOTAL FARM CASH RECEIPTS REAL IZE D NET INCOME Valu e of In ve nto ry Chan ges TO TAL NET FARM INCOME 482 .9 386 .2 21 . 7 890 .8 183 .0 ll4 .0 297 .0 611 .9 49 3.0 13 .8 l ,l l8 . 7 290 .0 46.0 336 .0 r - rev ised; p - pr e liminary Total s may not add due to roundin g. 71 6.5 57 1. 7 11 .l 1,2 99 .4 35 4.0 1.0 35 5.0 Pe rcen ta ge Change 19 77 / 19 78/ 19 79 / 19 76 19 77 19 78 - 1. 7 26 .7 17 .1 7.6 27 .7 16 .0 38 .1 -36 .7 -1 8.9 0.6 25 .6 16 .1 -26 .8 58 .5 22 .1 2.4 13 .1 5.7 SOUR CE : Sta tis ti cs Canada and the Manito ba Dep art men t of Agri cult ure .

In the crop sector, so ring fl ooding and adve rse weathe r condi tio ns as well as grain de liv er y pr ob lems res ulted in a shi ft to gr eater oi l seed pr oductio n from grain crops . Vo lu mes an d pr od uctio n values of rapeseed, fl axsee d. gra in corn an d sunf lo wers in crea sed in 19 79. Among the maj or grains , hig her pr ices for wheat , ba rley , oats , rye an d mixe d grains off set some of the decli ne in volu mes , with the result that the ove rall esti ma ted value of cr�p product ion will show very li ttl e change fr om 1978 .

Ot her crops produced in Mani toba include buck wheat, field peas , potatoes , musta rd seed and ho rtic ultu ral crops (ta me hay , si lea ge corn , sugar bee ts) . Ca ttl e pr ice in crea se s and a subs ta ntial in crease in the vo lum e of hog pr od uct ion acc ounted for mos t of the 19 .5 % in crease in the value of lives toc k pr od uctio n to $51 2 mi llio n in 197 9 . The num be r of cat tl e pr oduce d de clined sl ightl y in the year and hog pr ices so ft ene d somewhat , parti cularl y towards year -end. Pou lt ry and dairy pr odu ctio n con tinu ed to increase in 197 9.

However , the value of sheep and wool pr oduct ion was off margi nall y . 3648

M1lhon' of Dolhtr' 141MI 1� 00 llMMI flCMI -UKI 19711 Tuesday, 13 May, 1980 Farm Cash Receipts by Component 1'17 1 llJ75 197fl. 1977 "H1u1 1,:1.· St.111,111,;' ('am1J.1. 197� 1979 Accord ing to March see ding inte ntio ns publ ishe d by Sta tis tic s Canad a , whe at , barl ey , and rapeseed acreages are ex pected to re tu rn to more nor mal leve ls in 198 0. Acreage of gra incorn which has in crea sed more than 500% in the la st two ye ars is ex pe cted to sho w a furt her incr ea se of nea rly 40% .

Rye acre age is also ex pe cted to be up , and fl axsee d. alt hou gh down fr om 197 9 be cause of a more nor mal gr owing se ason , is ex pected to exceed pl an tings in most ye ars during the 197 0's. Warm Apri l weathe r en abl ed farmers to be gin see ding operatio ns earlier than usual this year . However, mois t ure leve ls are be low nor mal and, if the re cen t dry per iod is not off set by rain fall in coming weeks, perf ormanc e of the agri cult ural sector could be ser io us ly affected.

The Dep ar tmen t of Agri cult ure has noted othe r di ff i cult condi tio ns facing farm er s , su ch as hig h inte res t rates an d hig h inp ut pr ices . The Depar tmen t is moni to ring the si tu atio n an d will en coura ge fina nc ial ins ti tu tio ns to conti nu e th eir support for farmer s , pa rti cularly young pr oduce rs . In Janu ary , 197 9 , Mani toba hos te d a Con fere nce of We ster n Pr emier s and repr ese n ta tiv es of the fed er al gove rnm en t, in dus tr y and labour on the to pic of gr ain hand ling an d tr ans por tatio n.

Sinc e that meeti ng so me pr ogr ess in improving the sys tem has been achieve d, in pa rt thro ugh counn it men ts by the Gove rnm ents of the Pr airie Pr ovinces and at the fed eral leve l to incr ea se the ntmt ber of grain hopp er cars , and th rough the fed er al appoin tm en t of a Grain Tr an sport atio n Coo rdina tor. The se deve lopmen ts were revie wed by the We st ern Pr emie rs at th eir meet ing in Le thb ridge in Apri l, 198 0 when the Pr emie rs cal led on the federal 3649

Tuesday, 13 May, 1980 gove rnmen t to maintain an ef fect ive na tio nal tr ansportat ion sys tem as a part of it s respons ib il i ties in Con fed er atio n . Anwng th eir conce rns regarding furth e r needed coo rdina tio n of eff ort , the Pr emiers noted the nee d for expansio n of capa cit y at all ports in wes tern Cana da inclu ding the new faci lit y at ·P rince Rupe rt , at the Port of Vancou ve r, at Churc hi ll, and at Thunde r Bay .

The Pr emiers expr essed conce rn ab out the inadequacies of an in terc ha nge agreem en t to move grain to Pr in ce Ru pe rt fr om both C.N. and C.P. rai lway lines and requ est ed an agreement exte nd ing to Ch urc hi ll . The Pr emier s also di sc ussed the issu es of rai l li ne ab andon men t, compens at io n and abandone d ri ghts of way . The Government of Man itoba is involved in a number of programs to enhance agr icult ural prosp ects and su pport family far ms in the provin ce .

ThP fir st full ye ar of activ i ties ha ve been su cces sf ull y completed under the Canada -Manito ba Valu e-Added Cr ops Pr od uct io n (Agro-Man ) Agree men t. Fi ft een sepa rate pr oj ec ts ha ve been launched in more tha n sev en ty- fiv e demons tr atio n loc atio ns in all agri cul tural regions of the pr ovin ce .

Mos t of the pr oj ec t· act ivi ties ha ve been es ta blis he d on far ms in co- oper at ion eit he r wi th the Facul ty of Agri cult ure , Unive rs it y of Man ito ba or prod uc er as soc iatio ns in ter ested in the demonst rat io n an d pr odu ctio n of cr ops whic h have po tent ial for pr oc essing in Mani toba. Forages and grass lands are inclu de d as value-added cr ops si nc e better managemen t of the se crops wi ll pr ovi de opportu ni ties for lives toc k pr oduce rs to in crea se th eir eff i cienc y .

Ex pa nde d act iv i ties are pl anne d for 198 0- 81 wi th more empha sis being dir ec ted to the land and wate r mana gemen t pr oje cts . As a good suppl y of qu ality wate r is vi tal for the succ ess ful deve lopmen t o { Mani toba farms an d agri cult ural communi ties , the Agri- Wa ter Pr ogr am has been deve loped as a 10-ye ar, $ 11 .9 mi llio n pr ogram to as si st farmers an d rural communi ties in al levi atin g wate r shorta ges whi ch resu lt fr om droug ht , wa ter supply br ea kdown or an ins uffi cien t su pply of on-f arm wate r.

The Agri -Wa ter Pr og ram emphas iz es the developm en t of of f- far mst ead wa ter so urces an d the ins tal la tio n of fa cil i ties to ob ta in a depen dab le supp ly when on- farm conven ti onal sou rces are inad equ a te . Te chni ca l, de sig n an d financial as sis tance are in c luded. The Mani to ba Agri cult ural Cr ed i t Co rpora tio n pr ovi de d $ 30 mi l lion in loans to farm e rs in the year ended Marc h 31, 198 0.

Of this total $23 mi ll io n was approv ed for land pur chase of whi ch $ 17 mi l lio n was in the form of dir ec t loans and $6 mi l lion in leases conve rte d to pu rchase ag reemen ts . The remaining di rec t loans o·f $ 7 mi ll io n we re approve d for pe rmanen t imp rovem en ts to land and bu il ding s , deb t con solid atio n , liv es tock , equ ipmen t an d ot her mi sc el lan eous pur poses . 3650

Tuesday, 13 May, 1980 Mineral Resources The value of mineral pr oduction , inclu ding metals , indus tr ial minerals and fue ls reached an esti mated $6 00 mi llio n in 1979, an increase of 28 .3 % from the 1978 total of $468 mi lli on . -The increase occurred mainly as a resul t of str onger world metal prices that offset lower production volumes of several metals whi ch was due in part to a st rike at She rritt Gord on Mines Limi ted ope rat ions during the year.

However, during 19 79 mining pr oductio n st arted an upswing and by the end of the year , pr oduct ion was running ahead of the same pe riod in 1978, and employment was up by about 10%. \11l11 tl0' l1l lll)ll,11 ' Value of Mineral Production ... ... :'410 .&Oii �Otl /nh. ''. .'.,'� !������;;; ;;;;;; === ==� '-= """"'""' \lm<o.ol' l '..:1111h :11m 1"170 IY7 1 IY7h Metallic mineral pr oduct ion incr eased 36 .4 % to $461 mi llion in 1979 with Manito ba's maj or metals - nic ke l, coppe r and zinc - continuing to account for nearly 90% of the total value .

Othe r metals pr oduce d in Mani toba inc lude coba lt , ta ntalum , gold , sil ver , selenium , cadmium , lead and tel lurium . 3651 lt.f'l'�l.'

Tuesday, 13 May, 1980 The value of in dus tr ia l minerals was up 8. 2% in 197 9 to $91 mill ion . Cement , sand and grav el , and sto ne comprise most of the value in dus tr ial min er al s . Peat , cla y pr od ucts , quart z, lim e and gypsum are also p"roduced in the pr ovin ce . Petr ol eum pr oductio n re ache d $48 mi l lio n las t year, up 5. 1% from 197 8 due to the increa se in the domestic well head pric e fo r oi l.

VALUE OF MINERAL PRODU CTIO N Per cent a&e Cha nge 1977 r 19 78r 19 79p 1 97 7 I 197 8/ 197 9/ 197 6 1977 197 8 ( $ mi llio ns) Nickel 285 .0 16 0.8 221 .9 7. 9 -43 .6 38 .0 Copper 92 .1 99 .1 139 .3 11 .9 7. 5 40 .6 Zi nc 48 .2 43 .7 44 .6 -4 . 1 - 9.3 2. 0 Oth er Me tals 21. 3 34 .5 55. 6 36 .9 61. 9 61. 1 In dustr ial Me tals 81 .6 83 .7 90 .5 18. 0 2.6 8. 2 Fue ls 40 .4 45 .9 48 .3 20 .5 13 .6 5 .1 TOTAL 568. 7 467 .8 600.2 10. 4 -1 7. 8 28. 3 r - rev ise d; pr e liminary . The value of ta nta lum pr oduc ti on is included for the fi rst ti me with "O ther Me ta ls " . Tota ls may not acid due to rmm din g.

SOURCE : St atis ti cs Canada and Man ito ba Dep art ment of Ene rgy and Min es . 3652

Tuesday, 13 May, 1980 Among the maj or mining inv es tments compl et ed in 19 79 was a $3 6 mi l lio n und er grou nd mine deve lopmen t by She rri tt Go rdon Mines Limi ted at Rut tan La ke which will comple tel y rep la ce the open pit oper atio n during 198 0, an d a $3 3 mi l lio n concen trator bu ilt by Hudson Bay Mining an d Smelti ng Co ., Limi ted at Sno w La ke . Acre age re cord ed for exp lora tion in 197 9 was up more tha n 55% to 78 5 ,0 95 acr es .

Expl oratio n expen di tures totalled �14. 3 millio n, up 5. 1% in 197 9 with expen di t ures ex pe cted to in cr ease a furthe r 22 .4 % to $1 7. 5 mi llio n in 198 0. �mph as is continues to be on the searc h for ba se me ta ls , parti cularl y in and ar ound the maj or mining ar ea s of the pr ovin ce . Ura niu m ex pl oratio n is being carried out in the no rthwestern par t of the pr ovince bu t at a somewhat re duce d rate than pr eviou s ly . A rene wed in ter est in go ld, evi den t during 197 9, is ex pe cted to gain momen tum during 198 0.

In dus tr y spokesmen ha ve ind icated that changes the gove rnm en t made las t year to the mining taxation sys tem contri buted in an important way to the upsu rge in mine ral ex pl or atio n activ i ty . Maj or capi tal pr og rams are also expect ed in the next few ye ars . Huds on Bay Mining an d Sme lti ng Co . , Limi te d is unde rta king a $1 00 mil lion capi tal pr og ram in the next four years to revamp it s me tal lurgi cal fa cili ties at Fl in Flo n as we ll as spe nd ing ove r $4 0 mi llio n on improving or e avai la bi lit y by deve lop ing new mines at Tr out Lake , St all Lake and Sp ruce Poin t.

Inc o Limi te d has an nounc e d a $20 millio n ex pl oratio n pr og ram which will inc lude explor atio n outs ide the Thom pso n are a in the nex t five year s , as well as $1 0 millio n in capita l ex pendi tu res for a commercial evalu atio n of a new ni cke l smel ti ng pr ocess at Thom ps on . At The Ta ntalu m Mining Corporatio n of Canada Limi ted , a $1 milli on expansion pla n is underwa y which will in crea se mi ll capa city by 40% .

Hig her oi l pr ices tog et he r with royalt y and ta x ch ang e s , and su ccess ful ex pl orat ion in neig hbouring North Dakota ha ve all cont ribu te d to a renewal of inte rest in oi l and gas exp lo rat ion in the so uth western part of the pr ovin ce . In 1979 , approxim atel y $10 mill ion was spent on oil �nd ga? explorat ion res ulti ng in the dri !li ng of 25 new wells , 11 of which were in pr od uctio n by year en d. Cr own lease sa les fo r oi l and gas ex plor atio n , which were disco nti nu ed by the pr evious government in 1971, were reint rod uced in 197 9.

Sa les of Crown lea ses , worth cl ose to $1 millio n in 19 79 and a recor d $1.2 mill ion in the first sale for 198 0 ind icate that oi l and gas ex pl oratio n will continu e to improve . Two addi ti ona l sa les are pl anne d for 198 0. Shell Canada has an nounc e d a $1 4 mi l lio n ca pital inves tmen t pr ogr am for it s St. Bonif ace re fine ry involving tec hno logi cal adva nc es in ene rgy conse rvatio n and adde d f1 exi bil it y to suppl y asp hal t, gasoline an d petr oleu m dis ti llate . The St .

Boni face re fine ry has a capaci ty of 28,0 uO ba rre ls a day and cur ren tl y supp lies ab out half of Manito ba 's lig ht oi l pr od uct s. 3653

Tuesday, 13 May, 1980 Prospe cts for the future development of Manito ba 's mineral resources are fur ther enhanced by the possi bility of commercial lrodu cti on of pot ash . A let ter of intent has bee n si gned be tween the Pro vince and Int ernat ional Minerals and Chemical Cor poratio n (C anada) Li mited per mit ti ng the company to und erta ke detail ed exp lor atio n and eval uatio n of known pot ash dep osits in west ern Manito ba . A $2 mil lion explorat ion pro gram to full y deli nea te pot ash de posits is to begin this spri ng .

The province has re tai ned a 25% ri ght of partici pat ion in the de vel opment of these dep osits . Mani to ba Mine ral Reso urces Ltd. , Hudson Bay Mining an d Sme lt ing Co ., Lim i ted and Grang es Expl or at ions A.B. ha ve recen tl v sig ne d a "memo rand um of intent" to deve lop a copper -z inc or e body near Fl in Flo n. Un der the vo llUlta ry jo int -ven tu re , HBM & S would inv est $28 mi l lio n to deve lop the pr oper ty an d earn a 44% in ter es t. Manito ba Miner al Reso urces Lt d. , will hold a 27 % in terest an d Granges Expl oratio n A. B. a 29% inter es t.

For est ry Incr ea sed pr ices for pu lp wood an d a re ductio n of inven to ries on hand led to a 10% incr ea se in wood sal es to ab out $4 4 millio n in 197 9 , altho ugh the vo lu me of wood pr oductio n was about the same as in 1978, acco rding to es timates by the Depart ment of Natu ral Resources . Pr imary wood manufact uring activi ty , including sawmill ing an d pu lp and pape r pr od uctio n , incr ea sed by an es timate d 20 .0 % in 197 9 , to $1 50 mi ll ion .

Str ong deman d fo r pu lp and pape r, especiall y in the norther n Uni ted St ates mark et , res ulted in an incr ease in prices fo r these pro duct s. The valu e of se condar y wood ma nufact uring , inclu ding a wide variet y of pr ocessed wood pr od ucts such as shingles , sa sh an d doo r pr oducts an d insulating board s , increa sed by an esti mated 18. 8% in 197 9 to $1 96 mi llio n. Pr imary and se condar y wood manufac t uring emp loys a total of about 4,5 00 pe rsons .

The total va lu e of sa les in the loggi ng , pr imary an d se condary sector s of the for es t pr oducts ind us tr y in 19 79 to tall ed an es tim ated $3 90 mill ion , up 18. 2% from 1978. Pr oj ec ts ini tiate d i.mder the jo in t Canada -Mani to ba North lands Agre emen t, invo lving the cons tr uctio n of access roads to new timber are as and a pr og ram of re for es tatio n are con ti nu ing in the cur ren t