March 26,

HOUSE OF ASSEMBLY PROCEEDINGS

Vol. XLI No. 14

The House met at 2:00 p.m.

MR. SPEAKER (Lush): Order, please!

The hon. the Minister of Finance.

DR. KITCHEN: I move that the House resolve itself into a

Committee of Ways and Means and that the Speaker do now leave the Chair.

MR. SPEAKER: The motion is that the House resolve into a

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

DR. KITCHEN: Mr. Speaker, today I am pleased to present

to this Honourable House the fourth Budget of this Administration.

This Budget advances further our progress towards ensuring

the financial integrity and flexibility of the Province, while meeting the

special challenges posed by the recession in a manner consistent with our means.

This Budget puts in place more of the building blocks necessary to ensure

sustainable economic recovery and growth.

Mr. Speaker, the Newfoundland economy, like that of the rest

of Canada, has been sailing rough waters. The causes, like the current

difficulties in the fishing industry, are largely beyond our control. The people

and the economy of Newfoundland and Labrador historically have demonstrated

considerable resilience in times of adversity. The current difficulties also

will be overcome. This Government will continue to do everything within its

means to ensure that assistance is provided to those whose livelihoods are

affected, and to instill confidence in our economic prospects by seeking

long-term constructive solutions.

Recovery of the Canadian economy from the recession has been

slower than anticipated. Continued weakness in export markets, the high Canadian

dollar, high corporate, public and personal debt, the restructuring of industry

in response to a more open and competitive international economy, cross border

shopping, and weak consumer spending, all contributed to the economic slowdown

during 1991. It now appears that it will be late spring before the recovery is

firmly in place. However, in 1992, with low inflation and low interest rates,

growth in the Canadian economy is expected to be third highest of the G-7

countries.

In last year's Budget, we projected the economy of

Newfoundland and Labrador would experience in 1991 a modest growth of about 0.7

per cent, after adjusting for inflation. As it turned out, there was a decline

of 0.5 per cent caused largely by the unanticipated deterioration in the fishing

industry and the persistence of the recession. Total employment in the Province

declined by 2.0 per cent, resulting in an average unemployment rate of 18.4

percent.

Mr. Speaker, last year was not a good year for the fishery.

Lower landings by the offshore fleet, and the virtual failure of the inshore

fishery in some areas, resulted in a total volume of landings 24.0 percent less

than the previous year. The value of those landings declined by 14.5 percent.

Weak national economic performance in the last quarter of

1991 has caused most forecasters to lower their expectations for 1992. The

Canadian economy now is expected to grow by 2.0 percent in real terms. The

Consumer Price Index is forecast to increase by 2.3 percent nationally and 1.8

percent in this Province.

Many forecasters had been projecting that Newfoundland would

lead the country in economic growth in 1992. However, in light of recent

announcements regarding the fishery and Hibernia, provincial GDP is now expected

to contract by a further 0.5 percent in 1992, after adjusting for inflation.

Total employment is forecast to be 3.0 percent below last year's level,

resulting in a rise in the average unemployment rate to 20.4 percent.

Mr. Speaker, in 1992 the Newfoundland economy will continue

to be dominated by events in the fishery. The single most important economic

issue facing this Province today is the fisheries resource crisis. For years,

the Provincial Government and the fishing industry have warned that

mismanagement and foreign overfishing were jeopardizing the fish stocks. The

existence of hundreds of communities, and the livelihoods of thousands of people

are threatened.

While Government supports the recent quota reductions, we are

concerned that they will not be enough to revitalize the cod stocks. Further

effective action must be taken. The international community also must be made

more aware of the ecological devastation caused by overfishing. Mr. Speaker,

overfishing must stop!

The many Newfoundlanders and Labradorians directly employed

in the fishing industry should not have to shoulder the responsibility for the

mismanagement of the resource. This Government has offered the Government of

Canada assistance in developing an appropriate economic diversification and

adjustment program that would minimize losses in employment and income. Also, to

build a stronger fishery for the future, the Province has proposed joint

management through the establishment of a Canada-Newfoundland Fisheries

Management Board. This Board would provide a structure to integrate the

fisheries management and development policies of both levels of government. We

vital to the future of the Province.

Mr. Speaker, the recent decision by Gulf Canada to withdraw

from the Hibernia project was unfortunate but not totally unexpected. They

indicated more than a year ago that they wished to sell a portion of their share

of the project. The commitment of the remaining partners in the Hibernia

consortium to the development of this resource remains firm. They would not

continue to spend about $1.5 million daily and continue to transfer staff into

Newfoundland, if they did not believe in the viability of the project or in

their ability to attract new investment.

Despite the announced rescheduling of the Hibernia project to

now produce first oil in 1997 instead of in late 1996, average employment on the

project is expected to increase this year by about 180 person years from last

year's level of about 1,060 person years.

Driven in large part by spending on the Hibernia project,

overall investment in the Province is expected to grow by 4.6 per cent in 1992.

Mr. Speaker, discussions are continuing between Newfoundland

and Labrador Hydro and Hydro Quebec concerning the development of the

hydro-electric potential of the Lower Churchill. If an agreement can be reached,

there would be significant economic benefits to the Province, and to the rest of

Canada. Labrador would be the focus of 15,000 person years of employment over an

eight-to-ten year period. Also, the Province would have an assured, long-term

supply of electricity for its industrial, commercial and residential needs.

Mr. Speaker, a Strategic Economic Plan for the Province soon

will be released. In addition to the challenges facing the Province as the

result of globalization, the Plan will take into account the results of the

public consultations conducted last fall by the Advisory Council on the Economy.

The Strategic Economic Plan will offer a solid framework for focusing

development and will provide a basis for action aimed at economic growth and

diversification.

Mr. Speaker, the formulation of economic and fiscal policies

in the 1990s must be made in response to many new realities. National and

international policy agendas increasingly are focusing upon enhancing

productivity and competitiveness. High levels of past borrowing have reduced the

ability of all governments to sustain high levels of spending. Tax rates in

Canada are relatively high. Fiscal restraint by the federal government coupled

with slow revenue growth in all provinces, has reduced growth in transfer

payments.

Mr. Speaker, the most serious fiscal problem facing Canada is

the high level of public debt. Among G-7 countries, Canada's public sector debt

as a proportion of economic output is exceeded only by that of Italy. This

relatively high debt burden must be reduced if we are to maintain our standard

of living.

Taxes in Canada, while lower than in many G-7 countries, are

significantly above those of the United States, our largest trading partner, and

of Japan, an increasingly important market for our products and services.

Governments must restrain the proportion of economic output taken in taxes, if

the private sector is to be competitive in the international marketplace.

Mr. Speaker, this government has demonstrated a steadfast

commitment to prudent management of the Province's finances. In 1989, our first

Budget set out a realistic, responsible fiscal plan that was within our means.

We adhered rigorously to those principles in our 1990 and 1991 Budgets.

We have made substantial progress towards our priorities,

without imposing an undue burden on future generations. Our fiscal plan is

working. Mr. Speaker, we have no intention of changing our strategy or reversing

that hard-won progress.

To ensure our continued ability to provide quality services

in areas of priority, we have taken initiatives designed to make government more

efficient and cost-effective. In previous Budgets, we streamlined operations by

reorganizing and reducing the number of departments and agencies. We have

reduced the size of the public service. We have made major organizational

changes in the delivery of health care, municipal and educational services, and

economic development programs.

As a result of these initiatives, many of the ongoing

operating expenses of government, including departmental salaries, travel,

supplies, furnishings and equipment have grown at a rate less than inflation.

The purpose of controlling our spending is to reduce our

budgetary deficit, so that we will borrow less. As our reliance on debt

declines, relative debt service costs also decline, freeing up more funds to

spend within the Province on health, education, economic development, and other

priorities. Mr. Speaker, interest payments as a percent of revenue, have

declined from a peak of 17.5 percent in 1986, to 12.8 percent this coming year.

Despite the real improvements, more needs to be done to

control our debt. Government has taken steps to address the unfunded liabilities

of our pension funds, and is considering measures to address the unfunded

liability of our Workers' Compensation Commission fund. The public sector,

including municipalities, Crown corporations and agencies, still borrows to

finance a substantial portion of expenditures on services and capital

infrastructure. Mr. Speaker, the financial viability of all public institutions

must be preserved.

We do not have the luxury of borrowing endlessly, as some

would have us do, for borrowing is simply deferred taxation. If we are to borrow

today at the expense of future generations, it should be to benefit the future,

not to insulate ourselves from the difficult realities of today. The responsible

course of action is to target our resources to established priorities that will

contribute most effectively to our long-term well-being.

Mr. Speaker, the requirement to become more efficient and

competitive does not imply that Canadians should abandon the sharing principles

upon which this nation has been built. Neither can we force change at a rate

faster than that to which our people and institutions can adapt. Before removing

all the barriers to the free flow of goods, services and labour that exist in

this country, we must ensure that there is a level playing field with respect to

taxation, services and infrastructure, so that the goal of increased national

efficiency is not achieved at the cost of increased regional economic disparity.

All regions must be properly prepared to compete successfully in this new

environment.

The principal vehicle through which to level the playing

field with respect to taxes and services is the Equalization Program. Changes to

this program, such as the incorporation of expenditure need, are required to

ensure that all Canadians have access to reasonably comparable services at

reasonably comparable levels of taxation, a commitment enshrined in the Canadian

Constitution.

Other changes also are necessary if our efforts to encourage

economic efficiency and equity are to succeed. We must make available throughout

the country, effective education and skills training that will prepare our work

force and our businesses to participate internationally. We also must ensure

that appropriate adjustment mechanisms are in place to assist those who are

displaced by the changes in the economy.

Federal transfers are a central component in the Province's

revenue structure. While a major portion of our current revenue originates with

recent years. Fully one-half of current revenue was derived from federal sources

in 1986-1987. Six years later, in 1992-1993, the federal component will have

fallen to 45 percent, from 50 to 45 percent.

Federal-provincial transfer programs have been the subject of

extensive review over the past two years. Negotiated formula adjustments will

generate in 1992-1993 an increase in transfer payments of $31 million for

Newfoundland. However, these gains will offset only partially the negative

effect on transfer payments of other factors such as slow economic growth in

Canada.

The Equalization Program is to be renewed for two years,

commencing April, 1992, rather than the usual five-year period. These two years

afford an opportunity to pursue unresolved issues and to link the equalization

review with potential reforms to other major transfer programs and with the

broader constitutional discussions. We are encouraged by the federal commitment

to address the excessive and inequitable equalization tax-backs such as the

dollar for dollar loss associated with revenues from offshore oil and gas. The

federal government also has committed to examine means to reflect in the

transfer programs, the different costs of providing services in different parts

of Canada.

Mr. Speaker, over the past two years, there has been

considerable positive discussion of these matters between the federal government

and the provinces. We look forward to a continued productive review of fiscal

transfers.

In our 1991 Budget, the Government took decisive action to

avoid an unacceptably large deficit on current account, and to bring in an

overall budgetary position that was reflective of our means.

Despite the impact of a significantly weaker economy, both

national and provincial, we will have contained the current account deficit at

$59.5 million, an increase over Budget of only $5.7 million.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: Truly, Mr. Speaker, this is a remarkable

achievement.

Total current revenue for 1991-92 will be $46.5 million below

Budget. Retail sales tax revenue will be $22 million lower than Budget, and

there will be a $47.3 million shortfall in equalization transfers. These and

other smaller revenue shortfalls will be partially offset by higher than

expected revenues from gasoline tax, lottery revenues, Established Programs

Financing (EPF) transfers and other sources.

Current account expenditures for the year just ending will be

$40.8 million lower than the Budget forecast. The most significant saving will

be the cost of servicing the public debt. A higher Canadian dollar, lower

interest rates and changes in our planned borrowing program, all will have

contributed to the saving of $32 million. Included in this amount is $5.2

million in annual savings resulting from the use of early call provisions to

refinance six bond issues at lower interest rates. Increased social assistance

payments and an additional $12.5 million in support of employment generation,

necessitated by the recession and the problems in the fishery, will be more that

offset by savings achieved in other operating expenditures.

On capital account, the 1991 Budget estimates projected net

expenditures of $241.3 million. Adjustments to the original estimates during the

year included a Government decision to assume $14.5 million of the debt of the

Marystown Shipyard, despite the fact that the expected sale of this Crown

corporation to a Norwegian interest did not materialize. As well, a decision was

made to lease-purchase three health care facilities originally included in the

capital Budget. Also, lower than anticipated spending occurred under cost-shared

about $14 million less than Budget.

Despite difficult economic circumstances, Mr. Speaker, I am

very pleased to confirm that the total budgetary requirement of the Government

of Newfoundland and Labrador for the 1991-92 fiscal year will be under Budget by

$8.3 million.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: I am going to repeat that, Mr. Speaker, for

it is a remarkable achievement. We will come in under Budget by $8.3 million

this past year.

Mr. Speaker, for 1992-93 the budgetary deficit would have

been unacceptably high without corrective action. In January it was projected

that the current account deficit for the coming year would reach $114 million.

Subsequent deterioration in the economic and fiscal transfer projections further

increased our expected shortfall.

Mr. Speaker, the measures taken in today's Budget have

enabled us to bring the projected current account deficit down to $29.0 million.

On capital account, gross expenditures of $372.3 million will be partially

offset by related revenues of $161.5 million, leaving a net capital account

expenditure of $210.8 million, $16.5 million less than in the year just ending.

Mr. Speaker, the combined current and capital budgetary

requirement will be $239.8 million in 1992-93, $47.0 million less than in

1991-92.

Mr. Speaker, the fiscal realities which I have outlined today

demand that we continue on the course of getting our fiscal house in order. At

the same time, we must discharge our responsibilities to provide quality

economic and social programs and services for the people of Newfoundland and

Labrador.

In our first Budget we announced that it was our plan to

balance current account. We remain resolved to do so and did accomplish that

objective in our first year. In 1990-91 we experienced a deficit of $103 million

due to the recession and lower than expected transfer payments. Last year,

determined to eliminate that deficit, we developed a plan to cut it to $54

million in 1991-92, to no more than $30 million this coming year, and to balance

current account in 1993-94 and subsequent years. Accepting higher deficits would

mean discarding the progress we have made in improving our finances, and in

moving towards a more secure credit rating.

Mr. Speaker, to achieve our planned objectives, this Budget

establishes spending guidelines for this year and next. A long-term plan for

capital expenditures will be presented in the near future.

Achieving our target for 1992-93 required difficult decisions

and continued restraint, particularly in our operating expenditures. We are

unable to meet many of the requests for new expenditure initiatives. We are

responding, however, to the needs created by the recession by maintaining

significant capital spending.

Mr. Speaker, Government has set the municipal capital works

commitments this year at $59.9 million, including water and sewer projects,

municipal roads and major recreational facilities.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: This $5 million increase over last year is

to advance construction, thereby providing additional employment throughout the

Province in this difficult year. There will be a corresponding reduction in

municipal capital works next year.

In our last Budget it was necessary to implement significant

public sector layoffs. This year, while there is a need for continued restraint,

Government will minimize further job losses within the public service.

On the revenue side, we are continuing our efforts to reform

the Province's tax system, and we are implementing in this Budget revenue

measures necessary to improve that tax system and to reduce the burden of

regulation.

Mr. Speaker, it is a priority of this Government to ensure

that the Province's tax system is fair and equitable. We are continuing a

comprehensive examination of our tax system with a view to implementing reforms

that would be in the best interest of the Province, including analyzing the

prospects for retail sales tax reform in light of the federal goods and services

tax.

During 1991, Government undertook a public consultation

process to solicit input on tax reform options, which resulted in a large number

of submissions to Government by a broad cross

section of interested groups,

businesses and individuals. After due consideration, Government decided to delay

a final decision on sales tax reform pending the completion of further analysis

and public consultation, focusing on whether the Province should proceed to full

sales tax harmonization.

On a matter related to harmonization, governments across the

country recently have been examining their consumption tax regimes in light of

the seriousness of the cross border shopping issue. The federal government

already has taken some positive steps, such as reducing the duty on a wide range

of imported goods and lowering the duty free threshold on packages entering the

country. The effects of the cross boarder shopping problem are being felt here,

primarily through catalogue and mail order shopping and the goods imported by

returning travellers. Such activity is unfair to taxpayers who purchase here and

pay their taxes, and is detrimental to businesses operating here. The federal

and provincial governments are examining options that could see provincial

taxes, particularly sales taxes, collected at border points and on mail orders.

We hope proposals will come forward to address the border collection issue for

jurisdictions which do not share a border with the United States.

There may be an even larger problem for businesses in this

Province relating to goods brought by local residents from other provinces. I

remind consumers that if an item is brought into the Province for consumption

here, then it is the responsibility of the purchaser to ensure that all relevant

provincial taxes are paid. The national effort to address the cross border

shopping issue also should consider a mechanism to track consumer items

presently crossing provincial borders without relevant taxes being paid.

Mr. Speaker, since assuming office one of our priorities has

been to put the financing of education on a fairer and sounder basis.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: We gave a commitment to address the

inequities and shortcomings of the school tax system by either reforming it or

replacing it. The existing school tax is wasteful in its excessive collection

costs and grossly unfair both in the sharing of the tax burden and the

application of the benefits. Our review, therefore, resulted in our decision to

abolish the tax as of June 30, 1992.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: In abolishing the school tax, Government

assumed the obligation to replace the revenue school boards otherwise would have

received. In addition, Government made a commitment to overcome the revenue

deficiency experienced by most boards under the school tax regime. In our first

Budget, this Government increased funding for the school tax equalization

program from $4.5 million to $10 million. Mr. Speaker, our recent commitment to

enhanced equalization will increase this amount by a further $8.8 million in

1992-1993 and $11.5 million in 1993-1994.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: Government's commitment for school tax

replacement and full equalization amounts to $35 million in 1992-1993 and $46

million in 1993-1994. It is Government's intention to fund this commitment from

the same sectors that will be relieved of the school tax burden and, to the

extent practical, in the same proportions.

Mr. Speaker, the school tax system derives about two-thirds

of its revenue from individuals by means of a poll tax, which varies throughout

the Province from $85 to $150 per year for each person between the ages of

eighteen and sixty-four years with an income of more than $7,000. Government

will replace the poll tax by increasing the personal income tax.

We are seeking from the personal income tax system an

additional $21 million in 1992-1993, by increasing our tax rate for 1992 by 2.5

percentage points from 62 percent to 64.5 percent of basic federal tax. The

requirement for 1993-1994 will necessitate an additional 1.5 percentage point

increase for calendar 1993 from 64.5 percent to 66 percent.

The substitution of personal income tax for the poll tax will

make for a fairer, more progressive tax system for individuals. This change will

measurably reduce the tax burden on low income earners, who are presently

required to pay the same amount of school tax as those in the highest income

brackets.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: A single taxpayer in St. John's making

$30,000 a year will pay the same net tax in 1993. Those between $7,000 and

$30,000 will pay less tax after the school tax is eliminated -

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: - while those with incomes in excess of

$30,000 will pay progressively more. All individuals at the same income level,

regardless of where they live in the Province, will now pay the same amount of

tax to support education.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: And all will benefit from the removal of the

$4.5 million administrative cost of the school tax system. Mr. Speaker, we have

replaced a regressive and unfair tax with one that is progressive and equitable.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: The other element of the school tax regime

is a commercial property tax. Government decided against retaining this tax,

because there is a wide disparity in property values between different regions

of the Province, making it difficult to distribute the tax burden equitably.

Further, Government did not feel taxpayers should have to bear the relatively

high administration costs of a commercial property tax system, when other, more

cost-efficient alternatives were available.

Mr. Speaker, in place of the commercial property tax

Government will make adjustments to the payroll tax. This will accomplish our

goal without having to implement any new taxes, and without having to make many

smaller tax adjustments. Our revenue objective is to generate from the business

sector $10 million in 1992-93 and $15 million in 1993-94.

Because the existing school tax has a broad commercial base,

the payroll tax base will be broadened by lowering the current tax free amount

permitted each employer from $300,000 to $100,000. The general tax rate will

increase by one half of one percentage point, from 1.5 per cent to 2.0 per cent.

These changes will apply to government, non-profit organizations and most of the

business sector. The fishing, forestry and agriculture industries, currently

zero-rated, now will be subject to the tax at a rate of 1.0 per cent. While the

changes will add 2,200 businesses to the tax roll, over 10,000 businesses with

payrolls less than $100,000 will remain exempt from the payroll tax and will

have their school tax burden eliminated. The new payroll tax regime will have

effect from July 1, 1992 to correspond with the elimination of the school tax.

I am announcing one additional revenue measure required to

reduce the projected current account deficit to an acceptable amount. The

provincial tax on cigarettes will increase effective midnight tonight by one

cent per cigarette, from 6.78 cents to 7.78 cents, with a concurrent increase in

fine cut loose tobacco of 0.67 cents per gram. This measure will raise about $7

million during 1992-93. With this increase, our cigarette rate is still lower

that four provinces. There are no other measures to raise new revenue contained

in this Budget.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: Mr. Speaker, I am pleased to announce today

the continuation of a significant reform, namely the elimination of a number of

fees and licences and the consequent reduction in the cost, inconvenience and

paper burden imposed by Government on individuals and businesses in this

Province. I will highlight some of the changes.

The Department of Education will eliminate both the $5 per

course public examination registration fee and the $20 GED testing fee.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: The $5 fee for a certified copy of public

examination marks or GED results also is being dropped.

Commencing with the 1992 season, the $11.25 seasonal vehicle

entry permit for provincial parks, as well as the $2.25 daily vehicle entry

permit will be eliminated.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: As well, admission fees to the Salmonier

Nature Park will cease to be charged this year. For hunters, the small game

licence, which was consolidated last year, will have its cost reduced this year

from $15 to $3 to cover only the sales commission paid to retailers.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: All fees charged for the inspection of

sewage systems, including septic tanks, have been eliminated. The $10 fee for

marriage certificates and death certificates will be removed. There will be no

charge for an initial birth certificate or for replacement of MCP cards. The

validation period for a beginner's driving permit will be extended from six

months to one year, eliminating the need for a renewal permit and the second $10

charge. The $10 fee to replace defective licence plates is being eliminated.

There are a number of others.

Mr. Speaker, to benefit the business community, the tourist

establishment licence fees, and hunting and fishing camp licence fees will be

eliminated.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: We will remove licence fees for well

drillers, pesticide users and fur dealers, as well as certificate fees for waste

management systems, and for industrial or processing works. Government no longer

will charge private trade schools registration fees or course evaluation fees.

No licence fees will be collected from fish buyers and fish processors. The

existing nine categories of food establishment licences will be reduced to four,

and the fees eliminated.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: Several changes are being initiated at the

Newfoundland Liquor Licensing Board and the Newfoundland Liquor Corporation that

will affect licensed establishments. The revenues from the 3 percent purchase

assessment, along with the annual liquor licence fee and waiter's licence fee,

are being replaced with simplified levies, one to apply to liquor and wine, and

one to beer. As of April 1, licensed establishments will pay only a 12 percent

purchase levy on liquor and wine, lowering their purchase price to that of other

customers. A levy of 60 cents per dozen will be applied to beer sold to licensed

establishments, an increase of 26 cents per dozen over the outgoing purchase

assessment. The new levies will recover only the same amount of revenue in total

as was generated by those being eliminated.

I am pleased to announce that not only is the annual waiter's

licence fee being eliminated, but also the licence itself, saving about 9,000

individuals the annual inconvenience of having to renew the licence, and about

1,100 licensed establishments the nuisance of having to display them.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: This is an excellent example of what

Government wants to achieve in reviewing the Province's fees and licences

regime.

After March 1993, the only Newfoundland Liquor Licensing

Board fees will be for special events licenses and personal identification

cards.

Mr. Speaker, throughout Government we have eliminated 171

fees, reduced others, and eliminated a number of permits and licences.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: The review of fees and licences will remain

an important part of Government's ongoing effort to improve the overall taxation

and regulatory climate in the Province. I will be reporting further progress in

due course.

Mr. Speaker, last year we eliminated for most businesses the

unnecessary requirement to provide Government with monetary security against

failure to comply with tax legislation. This year we have taken a further step.

Considering the present economic climate and the recent decline in interest

rates, effective April 1, the rate of interest on all tax arrears is reduced

from 1.5 per cent to 1.2 per cent per month.

Mr. Speaker, in light of these positive initiatives, I am

requesting that municipalities consider reducing any unnecessary fees and

charges they might have. It also might be beneficial to business if our

financial institutions would consider reductions in or removal of some of their

miscellaneous charges. We appreciate the efforts of our financial institutions

in providing appropriate lines of credit and other funding in these difficult

times, particularly to small businesses. Governments, financial institutions and

business must continue to work together to create the best possible business

environment in this Province.

Mr. Speaker, not including the effect of the payroll tax

changes on the government sector, the revenue measures announced today will

yield about $38 million in 1992-93. The net impact on taxpayers, however, will

be lowered to $6 million when this amount is reduced by the $32 million they

will save from the elimination of the school tax and the reductions in fees and

licences.

The $6 million net increase in taxes will cause the

provincial-local government tax effort in this Province to increase by less than

one percentage point to 103 percent of the all-province average. Provincial

taxes will remain at about 18 percent of Gross Domestic Product, a figure that

has been constant since the early 1980s. Our relatively high consumption and

income taxes are balanced by the lowest property tax effort in the country.

Mr. Speaker, our overall business tax effort remains at only

86 percent of the all-province average. We recognize, however, that businesses

in this Province often have to contend with more geographic and other

disadvantages than similar operations in other parts of Canada. It is important

that the business tax climate in the Province not only be favourable to

business, but that it be perceived to be favourable. One of the principal

objectives of Government's tax reform exercise is to ensure that the business

tax climate will promote and complement Government's economic development

objectives. Tax reform will continue to be a major initiative. I will be

reporting further progress during the coming year.

Another tax reform issue on which progress should be made in

1992-1993 is the federal-provincial review of personal income tax flexibility.

This review was initiated at the request of the provinces to examine the

feasibility of lessening the constraints that the income tax collection

agreements place on the provinces' ability to adapt their personal income tax

regimes to their priorities.

Mr. Speaker, I am confident that most people will regard the

changes to the taxation and education financing systems announced today as

equitable and necessary; especially given the grossly unfair nature of the

school tax system.

Mr. Speaker, the expenditure plan for 1992-1993 strikes a

realistic balance between the people's need for quality public services and

Government's ability to provide.

Mr. Speaker, I am announcing today the expenditure guidelines

for 1992-1993 and for 1993-1994, whereby net expenditure growth will be limited

to not more than 3.0 percent each year, on current and capital account combined.

In developing our expenditure program for 1992-1993, except for several high

priority areas, government departments and agencies were directed to operate

with frozen, or in some cases, reduced operating budgets relative to 1991-1992

budgeted levels.

For capital expenditures we are limiting construction this

year to roads, schools, municipal works, and projects already started. We are

providing $3.7 million for planning and designing new buildings, to fit into the

long-term capital plan presently being developed.

Mr. Speaker, our total 1992-1993 net expenditures, current

and capital, will be just under $3.0 billion, an increase over our 1991-1992

expenditure of just 2.9 percent.

This increase really reduces to 1.5 percent when allowance is

made for one-time adjustments. These adjustments include the additional $35

million required to replace the school tax and to provide full equalization to

school boards, and the $6 million increase in payroll tax paid to government by

provincial departments and agencies.

Mr. Speaker, public sector wages, salaries and benefits

constitute 65 percent of our total spending on programs and services.

Accordingly, if government is to control its total expenditure while maintaining

essential programs, wage costs must be addressed. In recognition of this,

government initiated, commencing last fall, a series of consultations with the

leaders of our major public service unions to consider jointly ways in which our

expenditures, particularly wages and salaries, might be controlled.

Unfortunately, that process did not produce recommendations for the spending

reductions necessary to meet our fiscal targets.

Government had only two options for reducing the projected

wage bill: reducing the number of employees, or reducing compensation. In last

year's Budget, it was necessary to take difficult measures and to lay off a

substantial number of public employees. The public service has adjusted to those

reductions, but further layoffs at this time, in addition to posing hardship for

many more individuals, could create program delivery problems in certain

sectors. Government felt that this would be inappropriate in today's economic

circumstances, and accordingly chose actions that would have minimal employment

impact.

Mr. Speaker, new wage restraint legislation will be

introduced shortly. The new legislation will cancel all negotiated compensation

increases, will provide no compensation increases for 1992-1993, and a maximum

of 3.0 percent total compensation increases for 1993-1994. Bill 16 will be

rescinded and collective bargaining can occur within these expenditure

guidelines when existing contracts expire. An exception to the new legislation

will be the necessary corrective action to increase the rates of pay for student

assistants. The new policy will apply throughout the provincial public sector,

covering all departments, Crown corporations, agencies and boards, impacting all

unionized employees, managers, executives, Cabinet Ministers, and Members of the

House of Assembly. While this wage policy will not be extended to municipalities

in the enabling legislation, in fairness we expect these guidelines to be

respected by the municipal component of the government sector.

Mr. Speaker, Government will continue with its commitment to

phase in pay equity adjustments over a maximum five-year period as they are

determined, but without retroactivity.

Mr. Speaker, it is the policy of Government not to expand the

public service. For the next two years, no new positions will be created except

where special circumstances warrant. Positions vacant through attrition will be

filled only where essential.

Mr. Speaker, in last year's Budget, Government committed to

study the impact of indexing its pensions. We have consulted with all major

employer and employee groups, as well as those groups representing pensioners,

to seek their input on the design of a suitable and affordable indexing program,

that would be funded equally by Government and its employees. All groups

responded favourably to Government's initial proposal. However, there are

concerns with implementing such a program in the current economic and fiscal

climate.

The program proposed by Government would require that

employees make additional contributions to their pension plans which would be

matched by the employer. Mr. Speaker, as a result of the extension to the wage

freeze it would be inappropriate at this time to introduce an indexing program

that would require further financial commitments by both employees and

employers. Therefore, Government will defer the indexing program and give

further consideration to implementation in 1993-1994. In the meantime, we will

continue to finalize the details of the indexing program through consultation

with the interested parties. Hence, there will be no indexing provided in

1992-1993 for existing pensioners.

Mr. Speaker, Government is continuing to create the right

conditions for a stronger, more diversified economy. By implementing a sound

development strategy we can attract new investment, encourage new and

diversified business, and compete nationally and internationally through

enhanced technological and marketing capabilities. We must balance the strengths

of our traditional sectors with the skills, services, products and technology of

our emerging industries. To be successful, we must promote aggressively and with

confidence ourselves, our products and our services.

Government soon will release its Strategic Economic Plan,

which will help point the way to a sound economic future for the Province.

Funding of $3.0 million is provided to begin the implementation of the Plan.

Enterprise Newfoundland and Labrador Corporation has just

completed its first year of operation under its new structure. The Corporation

has been very active throughout 1991-1992 in support of small businesses

throughout the Province. In 1992-1993 Government will be contributing $46.1

million to the Corporation.

Mr. Speaker, Government must continue efforts to expand the

scope of our fishing industry. Particular emphasis will be placed on secondary

processing, marketing, aquaculture, and the development of underutilized

species. Under the Canada-Newfoundland Fishery Development Agreement

approximately $6.9 million will be spent in the coming year on current and

capital account initiatives.

Approximately $2.3 million will be spent under the Coastal

Labrador Development Agreement on fisheries initiatives in Labrador. This will

complement the expanded Department of Fisheries presence in Labrador announced

last year.

recently announced a $39.1 million licence buy-back program for the commercial

salmon fishery. The Province's share of this program over the next two years

will amount to $11.7 million, of which $7.6 million will be spent this year.

Mr. Speaker, as I stated earlier, this Government has offered

diversification and adjustment program that would minimize employment and income

losses and build a stronger fishery. It may be necessary to seek further

spending authority to meet the Province's share of this program. This

expenditure likely would be offset by the additional provincial revenues derived

from the associated economic activity.

Mr. Speaker, to raise awareness of foreign overfishing and

the crucial importance of dealing with the devastation of the fishery resource,

funding has been provided for a national and international public relations

campaign.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: Mr. Speaker, the tourism industry holds much

promise for further development. More than two-thirds of our travel and tourism

revenues are generated by Newfoundlanders and Labradorians travelling within the

Province. To develop this market, funding is provided to expand the marketing

program entitled "Ours to Discover".

Under the five-year, $20 million Tourism and Historic

travel generators and the development of 10 major historic resource sites

throughout the Province. Also, funds will be provided under the Atlantic Canada

International Marketing Agreement to promote the Atlantic Provinces in Europe,

the United States and Japan.

Funding has been provided to establish the 500th Anniversary

Corporation to administer, market and promote activities in 1997 surrounding the

celebration of John Cabot's landing in the new found land.

During the 1992-93 fiscal year, in the mining industry,

Government will spend $2.8 million under the Canada-Newfoundland Cooperation

Agreement on Mineral Development to assist in the exploration for and

development of new mineral deposits in the Province, and to continue development

at existing operations.

The offshore Development Fund has committed $95 million to

the construction of a dry dock and fabrication facility at Bull Arm, some $52

million of which will be spent in the 1992-93 fiscal year. In addition, funding

of $11.2 million is provided to complete work on the oil rig facility at Cow

Head.

Mr. Speaker, a total of $106 million will be spent in 1992 on

the further development and improvement of the Province's transportation system.

Funding of $25.5 million will be provided under the Provincial Roads Program.

Newfoundland Transportation Initiative, a further $61 million will be expended

on our road network. During 1992 we will finish paving the Burgeo Road, complete

the road to Petit Forte, and continue the work on upgrading to four lanes the

Trans-Canada Highway from St. John's to Whitbourne, and from Corner Brook to

Deer Lake. The Province is seeking additional funding from the Government of

Canada for further cost-shared highway construction.

Many communities in the Province rely on ferry services to

link them with the highway network, and Government will continue to upgrade that

system. Funding is provided for a new provincial ferry service between South

East Bight and Petit Forte. This service will provide eight round trips a week

as opposed to the current two. The separate vessel service to Change Islands is

extended to six months of the year instead of the current three, to Little Bay

Islands and Long Island for the full year.

Mr. Speaker, this Government is committed to preserving and

promoting the richness of our natural environment. Government will provide

additional staff to strengthen our ability to carry out environmental

assessments, to enforce environmental laws and regulations, to administer air

quality programs, and to provide appropriate educational and outreach services.

Under the National Contaminated Sites Remediation Program,

cleanup of contaminated sites at Mackinsons, Come By Chance and Gander.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: In response to concerns about the

effectiveness and safety of our wildlife protection staff, funding is provided

to ensure that additional staff are available during the fall and winter periods

when hunting pressures are greatest. Funding also is provided to improve

equipment for our wildlife officers.

Funding of $1.0 million is provided under a cost-shared

environmental standards.

Mr. Speaker, in light of the current economic difficulties

and high rate of unemployment in the Province, funding for employment programs

will be increased over that provided in last year's Budget. Government will

continue to emphasize the creation of permanent employment and the provision of

training and work experience that will result in a stable attachment to the

workforce. Funding for the Employment Generation Program and the Graduate

Employment Program has been increased, as well as for Job Bridges, a program

designed to assist women in obtaining employment in jobs traditionally held by

men.

New funding of $135,000 has been approved to facilitate the

Province's participation with the federal government in the Industrial

Adjustment Service, which establishes committees to find economic alternatives

and to access existing programs, for communities and industries facing shutdowns

or major layoffs.

The Department of Social Services will be spending $18

million under its employment programs, to enable social assistance recipients to

gain valuable work experience.

These programs, like roads, municipal capital works and other

capital projects, will spread additional employment generating activity

throughout the Province.

Mr. Speaker, Government allocates 29 percent of its total

program spending to providing health services to the people of the Province. In

1992-93, $860.6 million is budgeted on current account, an increase of $22.7

million over 1991-92.

In last year's Budget, a number of changes in health services

were announced, including modifications to the roles of several health

facilities. Many of these changes have been implemented, others are in progress.

Funding is provided to open all 27 beds at the redeveloped Baie Verte Peninsula

Health Centre -

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: - providing more chronic care, in addition

to its primary and acute care roles. Funding is also provided to open the newly

developed 15 bed Special Care Unit for alzheimer patients in Bonavista.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: In light of changing demographics,

Government is taking other steps designed to meet the needs of people requiring

continuing care, either in institutions or in their homes. Funding is provided

to open by the fall of 1992, the remaining 16 beds at the Dr. Hugh Twomey Centre

in Botwood -

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: - and to open the 28 beds at the Agnes Pratt

Home in St. John's.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: Work will proceed on multi-purpose health

centres for Burgeo and Port Saunders and on a new nursing home and medical

clinic at St. Lawrence, at a total capital cost of $24 million, financed through

lease-purchase arrangements.

To strengthen community health services, Government will

establish Regional Community Health Boards to coordinate the organization,

management and delivery of community based services. Government will consider

implementing a single point of entry system for better coordination of the

assessment and placement of people in nursing homes and other programs.

As another step, Government will integrate into the newly

established Regional Community Health Board system the programs and services

offered by the Alcohol and Drug Dependency Commission. These services are

complementary to many of the services to be offered by the new boards, and

Government believes that they can be delivered more effectively through this

structure. This decision will result in operational efficiencies, but will

maintain the same high level of client services provided by the Alcohol and Drug

Dependency Commission.

Mr. Speaker, to help recruit and retain nurses for Coastal

Labrador, and to provide residents of that area with better access to nursing

education programs, funding is provided for a Nursing Access Program.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: The financial position of the Province

dictates that we continue to control expenditures for general health care

programs.

Accordingly, there will be significant changes in the

services insured under the Children's Dental Program. The elective removal of

impacted wisdom teeth will no longer be covered under MCP. The capping of the

medicare fund will continue in 1992-93, with a small adjustment for increased

utilization. There will be no provision for fee increases to physicians.

Mr. Speaker, in reviewing health care programs and

expenditures, we have taken all reasonable measures to support and enhance the

maintenance of a system of quality primary health care services at the community

level, more specialized services at the regional level, and highly specialized

services at the provincial level. That approach, combined with an integrated

approach to community health services, is important to ensure that the health

care needs of the present and the future are adequately provided for.

As another major step designed to improve health care for the

people of the Province, and at the same time to address the significant

budgetary problem associated with the organization of the health care system, I

am pleased, Mr. Speaker, to announce that during the coming year Government will

be exploring ways to reduce substantially the number of hospital boards, from

twenty-five to five.

Mr. Speaker, in an effort to reduce workplace accidents and

injuries, funding has been provided for additional staff and resources in the

Department of Employment and Labour Relations.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: This will enable the Department to adopt a

more proactive approach, and thereby increase the number of workplace

inspections, develop new occupational health and safety programs in the

workplace, and continue to target specific injury prevention programs, such as

those directed at back injuries in the health care sector.

Mr. Speaker, Government is committed to the creation of a

stronger post-secondary education delivery system. Accordingly, we have taken

steps to reorganize the post-secondary system into five Regional Colleges of

Applied Arts, Technology and Continuing Education, and to affiliate the

Fisheries and Marine Institute with Memorial University of Newfoundland.

To enhance the ability of the Province to provide educational

and applied research opportunities, and to position Newfoundlanders to compete

in global technology opportunities, funding of $5 million has been provided

towards the construction of the Centre for Engineering Technology in St. John's.

Mr. Speaker, in replacing the school tax, Government has

provided for full equalization of school board revenues. No board will receive

less funding in 1992-93, and total funding will be $8.8 million greater than if

the school tax had been retained.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: This additional funding will be distributed

in accordance with a new grant system currently being developed by the

Department of Education.

Mr. Speaker, $20 million will be provided in 1992-93 to build

new primary, elementary and secondary schools and to make major renovations. For

1993-94 and beyond, capital funding needs will be assessed when Government has

received the report of the Royal Commission on Education, and the long term

capital plan currently being developed.

During 1991, Government supported the Newfoundland and

Labrador Milk Marketing Board and the dairy industry in introducing a School

Milk Program. Response to the program has exceeded expectations, with 70 per

cent of the schools in the Province now participating. Funding of $150,000 has

been provided for this program in 1992-93.

Additional funding of $150,000 over and above last year's

funding of $350,000, has been assigned to the Literacy Program for pilot

projects and an additional $155,000 to distance education.

SOME HON. MEMBERS: Hear, hear!

DR. KITCHEN: Mr. Speaker, this Government is committed to

the development and maintenance of a quality service system for those young

people who find themselves in difficulty with the law.

Funding has been provided to complete and open the

Newfoundland and Labrador Youth Centre at Whitbourne this summer. This modern

facility will enable the Department of Social Services to consolidate its secure

custody services and to phase out the existing Youth Centres at St. John's and

Whitbourne. This Budget allocates funding for counselling, treatment, and

intervention programs for youth at the Centre.

To enhance the delivery of services by front-line social

workers to social service clients, funding of nearly $2 million is provided for

the ongoing development of a comprehensive computer system. When this is

complete there will be a fully-integrated information system linking all

regional and district offices.

Mr. Speaker, I am pleased to announce that effective April 1,

1992, basic social assistance rates will be increased by 2.2 percent.

Based upon the success last year of a Victim Services Pilot

Program and the federal government's withdrawal of cost-shared funding for

criminal injuries compensation, Government has decided to develop a permanent

Victim Services Program, providing practical support and assistance to victims

of crime from the time of their initial contact with the justice system. The

services presently provided by the Criminal Injuries Compensation Board will be

phased out. That Board will retain funding for compensation awards based upon

applications already received, but no new applications will be accepted after

today.

The Law Reform Commission, which had been established to

inquire into and consider any matter related to reform of provincial law, and,

in particular, statute law, will no longer be funded by Government. In order to

meet our needs in this area, Government will dedicate a staff person to address

emerging reform issues, and will encourage input from the Law Society of the

Newfoundland Branch of the Canadian Bar Association.

Mr. Speaker, the provincial and national economies are going

through a difficult period of uncertainty and adjustment. The problems facing

our fishing industry and the announced rescheduling of the Hibernia project have

diminished prospects for economic recovery this year.

Government's ability to counter these circumstances is

challenged by the realities of declining federal transfers, our high levels of

debt, our tax burden, and the need to adapt to a changing world where

governments will become less intrusive, and people and industry will become more

efficient and competitive. Our response is consistent with our means. Addressing

our current economic difficulties by significantly increasing spending clearly

would have been inappropriate.

Instead, we have chosen to continue seeking and implementing

lasting solutions that build upon our existing strengths, and diversify our

economic base. We have chosen also to continue progress towards restoring the

fiscal flexibility of the Province. That has been the policy of this

Administration since we were elected. This Budget continues on that course.

In this Budget, we have reduced both our current account and

total budgetary deficits despite continued recessionary conditions. We have

maintained or improved all of the basic programs and services that government

provides, and enhanced our commitment to economic development and social

priorities.

In this Budget also, we have continued to make the tax system

fairer and more efficient, and we have taken steps to reduce the regulatory

burden on businesses and individuals.

Mr. Speaker, with this Budget, government has presented a

realistic, responsible fiscal plan for the coming year, a plan that responds to

our current economic circumstances and advances our economic prospects, without

compromising our financial integrity.

Mr. Speaker, I would like to invite yourself, all other hon.

members and our guests to a reception which we will be holding in the cafeteria

in the West Block after this is over.

Mr. Speaker, I move that the debate be adjourned until

tomorrow.

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

until tomorrow.

Those in favour, `Aye', those against, `Nay'. Carried.

The hon. the Minister of Finance.

DR. KITCHEN: Mr. Speaker, I wish to inform the House that

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

MR. SPEAKER: The following message is addressed to the

hon. the Minister of Finance:

"I, the Lieutenant Governor of the Province of Newfoundland

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

ending March 31, 1993 in the aggregate of $3,000,658,300, and in accordance with

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

House of Assembly."

Signed: ________________________________

Frederick W. Russell, Lieutenant Governor.

We will take a few moments to distribute the documents to

hon. members.

MR. SPEAKER: Order, please!

The hon. the Minister of Finance.

DR. KITCHEN: Mr. Speaker, I move that the Message

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

On motion, that the House resolve itself into Committee of

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

with the Estimates, Mr. Speaker left the Chair.

Committee of Supply

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

The hon. the Government House Leader.

MR. BAKER: Mr. Chairman, I move that the Committee rise,

report progress, and ask leave to sit again.

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

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

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

Verde.

MR. L. SNOW: Mr. Speaker, the Committee of Supply has

considered the matters to it referred, has made some progress, and asks leave to

sit again.

On motion, report received and adopted, Committee ordered to

sit again on tomorrow.

Notices of Motion

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

DR. KITCHEN: Mr. Speaker, I give notice that I will on

tomorrow move that House resolve itself into Committee of the Whole to consider

certain resolutions relating to the Income Tax Act.

I also give notice that I will on tomorrow move that the

House resolve itself into Committee of the Whole to consider certain resolutions

relating to the imposition of a tax on tobacco.

I give notice that I will on tomorrow move that the House

resolve itself into Committee of the Whole to consider certain resolutions

relating to the Health And Post-Secondary Education Tax Act.

Thank you, Mr. Speaker.

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

MR. BAKER: Mr. Speaker, I move that the remaining Orders

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

tomorrow, Monday, at 2:00 p.m., and that this House do now adjourn.

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

Monday, at 2:00 p.m.