1996 Legislative Session: 1st Session, 36th Parliament

HANSARD

The following electronic version is for informational purposes only.

The printed version remains the official version.

Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

WEDNESDAY, JULY 31, 1996 -- 2 p.m

Afternoon

Volume 2, Number 10,

Part 1

[ Page 1229 ]

The House met at 2:05 p.m.

Prayers.

G. Brewin: I am delighted to introduce to the House today four very important people in my life who are here on their annual home leave from work with OXFAM-Canada in Namibia: my daughter, Gillian Brewin; her husband, John Graham; my newly minted ten-year-old granddaughter, Danielle; and her brother Iain. Would the House please make them welcome.

Hon. G. Clark: It's my pleasure to introduce the chief of police from Punjab, India: Mr. Mahil Singh Bhullar. Accompanying him today are some residents of Vancouver: Mr. Dharam Singh Hundal, Mr. Pakhar Singh Sangha, Mr. Dalip Singh Sandhu, Mr. Amrik Singh Sangha, Mr. Kuldip Singh Lekhi and Mr. Manmohan Singh Sangha. I'd ask all members to make them most welcome.

L. Reid: I have two introductions today, if I might. First are four very fine constituents from the riding of my hon. colleague from Delta South: Bill Clark, Donna Clark, and Ryan and Brayden. I'd ask the House to please make them welcome.

If I might, hon. Speaker, I'd also ask the House to please welcome Janet Lynne Ecker. She's a member of Ontario's provincial parliament, and she represents Durham West.

G. Abbott: In the gallery today are Profs. Robert Eisinger and Donald Balmer of Lewis and Clark College in Oregon. Professors Eisinger and Balmer teach political science, which, as you know, is the noblest of all professions, with the possible exception of our own. They regularly bring international college students here for insight into the exotic world of B.C. politics. I'd ask the House to make them welcome.

Hon. A. Petter: I'm pleased to say that in the gallery today are the sons of a member of my staff: Tyler Wickware, age 12, and Scott Wickware, age 9. They are visiting, together with their grandmother, Velma Lanceley. I'd like to ask the House to make them feel very welcome.

R. Coleman: I'd like the House to welcome my daughter Jacqueline Coleman and her friend Wendy Woodhead, whom I refer to as my other daughter. Jacqueline and Wendy will both be attending UVic this fall, taking their second year of university. Would the House please make them welcome.

M. Coell: Mr. Speaker, I'd like to introduce to the House Jack Janzen from Mayne Island, in my constituency. Would the House please make him welcome.

Hon. U. Dosanjh: May I add my welcome to the chief of police from Punjab, Director General Mahil Singh Bhullar. When we were on a trade mission with my colleague the hon. member for Esquimalt-Metchosin -- from the Island here -- and the member for Yale-Lillooet, Mr. Bhullar was extremely hospitable to us. The generosity shown was wonderful, and I want to thank him. Would the House please make them welcome.

Hon. S. Hammell: In the gallery is Janet Gooch, our candidate for Okanagan East in the last election. With her is her daughter Patricia and her son Derek. Would the House please make them welcome.

Hon. D. Miller: Joining us today in the members' gallery is a former member of this House, a former minister and a good friend, Carl Liden, and his grandson Warren Wulff. I would ask the House to make them both welcome here today.

S. Orcherton: I know that every member of this House understands the support that's required from members of their families. My support mechanisms are here in the gallery with us today: my mother-in-law, Madelaine Burbridge; my father-in-law, Kerry Burbridge; our oldest daughter, Caitlin Kolodziejak; my son Mackenzie Orcherton; my other son, who is two years old, Connor Orcherton; and, of course, my wife, Margaret, is with us today. I'd ask the House to make them welcome.

Hon. U. Dosanjh: A friend of mine, Major Mandor, is alleged to be in the gallery somewhere. If he is, I would like the House to welcome him and 20 of his guests from England who are here visiting us.

H. Lali: Visiting from Manitoba is Ms. Toby Moroz, who is soon to be a resident of British Columbia. She is in the visitors' gallery. Would the House please make her welcome.

Oral Questions

PHOTO RADAR PROGRAM

G. Campbell: My question is to the Minister of Transportation and Highways. We understand that there has been a legal dispute with regard to the ownership of the software required to put photo radar in place. Can the minister tell the House if in fact photo radar is going ahead on Friday?

Hon. L. Boone: That was a great question to get; I wasn't expecting it.

I understand that the police received a letter from ATS, the company that we entered the contract with, stating that they did not have the legal right to proceed with the software, to use the software in the cameras. The Attorney General ministry is currently reviewing that. I believe that we do have the right to use that software. Hopefully, we will be proceeding with photo radar on August 2, the worst weekend of the year for accidents on our highways. We want to make sure that those cameras are out there so we can save the lives of British Columbians.

G. Campbell: I'm sure that all of us in the House would like to be sure that we have safety on our highways through the long weekend. Because of that, I'm surprised that this whole issue has been handled so ineptly by the government. How can we get to July 31 and suddenly realize that there is a problem? For the second time, let me ask the Minister of Transportation and Highways this question. The opposition has been unable to obtain the completed contracts that have been entered into between the government and the companies involved in implementing photo radar.

We've also heard that the former Minister of Finance is on contract with one of the companies involved in implementing photo radar. My question to the minister is: can she confirm to the House whether or not the former minister is involved with any company involved in implementing photo radar in British Columbia?

[ Page 1230 ]

Hon. L. Boone: I have absolutely no idea whether the former Minister of Finance is involved with the company in any way, shape or form.

HEALTH CARE

REGIONALIZATION REVIEW

S. Hawkins: When the Minister of Health put a halt to the regionalization program -- that failure that we all read about last month -- she deliberately ignored the opposition's calls to send the review to an all-party committee. Instead, she set up a committee of NDP backbenchers. Well, we have obtained confidential documents that expose the hypocrisy of NDP claims that its review of New Directions would be open and would result in an honest assessment. Only days ago the minister assured us that the hallmark of the review committee would be its ability to provide a comprehensive consultation process.

Instead, the confidential documents we've obtained show that only five out of 82 provincial community health councils are going to be consulted.

[2:15]

The Speaker: Question.

S. Hawkins: How can the minister stand up in the House today and say that thorough consultation is taking place when she knows that only five community health councils are being consulted?

Hon. J. MacPhail: I think the quality of confidential documents is on the wane, just like the question periods are in this House, hon. Speaker.

This is an open process. We look very much forward to hearing from the opposition parties on exactly where they stand on health care. It will be refreshing to get a solid position from them. In the meantime, there is solid consultation going on with the community health councils and the regional health boards, and discussions with them will be thorough and complete.

The Speaker: Supplemental.

S. Hawkins: The NDP have a track record of leaving the people of B.C. out of their decision-making. It's a shame that they are leaving them out of the decision-making and the reassessment of the health care system.

The five community health councils which are being consulted are all from NDP ridings; that's a coincidence. Four out of five of the regional health board chairs being consulted are from NDP ridings as well. Three of the ridings are represented by members on the review committee. My question to the Minister of Health is: why is she playing such blatant partisan politics with the people and patients of British Columbia?

Hon. J. MacPhail: It's interesting how the position of this opposition party on health care changes depending on the week. Just last week, this hon. member was saying that our burgeoning health care system costs were out of control. Now she suggests that an appropriate review that is thorough and complete, but expeditious, is somehow inappropriate. We have four government caucus members, all of whom ran on defending universal medical care, unlike the opposition members on that side. They will be meeting with everyone necessary in order to determine what the next steps are toward implementing regionalization.

G. Farrell-Collins: It is unfortunate that the minister thinks that the only people necessary to meet with happen to hold New Democrat membership cards. According to the confidential documents, Jack Gerow, former HEU business manager and longtime New Democrat member, has been chosen to "provide the caucus committee with an informed, independent perspective." If the Minister of Health really wanted to provide the committee with an independent perspective, why would she hire the former business manager of the HEU, a longtime NDP member?

Did the minister want to find an independent review or did she want to find a whitewash cover-up of one of the worst public policy decisions in the history of British Columbia?

Hon. J. MacPhail: The Liberal opposition has now written off 40,000 health care workers who are represented by the HEU. I guess they don't contribute. But in any event, Jack Gerow.... I hope that the opposition party knows that this information was made public throughout the system last week. Maybe they're a little bit slow in getting that information.

Interjections.

Hon. J. MacPhail: It is summertime, I know.

The reputation of Jack Gerow is well known throughout the health care system. He not only was the general manager of the Hospital Employees Union but he was also a member of a regional health board -- a well-respected member of a regional health board. He has worked with other health care professional organizations, and his reputation is well known. He will be a great asset to this review.

G. Farrell-Collins: Indeed, his reputation is well known; I hardly think he will be providing an independent bit of advice to the government of British Columbia. Hon. Speaker, not only is the advice not independent, but it's awfully expensive. The internal documents indicate that Mr. Gerow is paid a fee of $400 per day, plus expenses. For eight weeks of work, he's going to take home $25,000. Can the minister confirm that the new fair-wage rate for patronage appointments in her ministry is $12,500 a month?

Hon. J. MacPhail: The reputation of Mr. Gerow is extremely well known. There will be value for money in every single payment that is made to Jack Gerow. Other people will be assisting in the reference group, as well -- well-respected people with the same reputation as Mr. Gerow; people from throughout the province: Jack Altman, Rick Roger and Lucy Dobbin, all of whom are adequately compensated, as well. And you know what? The investment is excellent; they'll be good value for the money. We'll move on and take the final step toward regionalization, and have universal, accessible and affordable services in this province.

G. Farrell-Collins: Can the minister tell us why the people of British Columbia -- why the government of British Columbia -- have to pay $18,000 to $25,000 to get their point of view?

Hon. J. MacPhail: I know that the hon. member is relatively new to British Columbia politics, but Mr. Gerow hasn't been the secretary-business manager of the HEU for a fair number of years. In fact, I think it was in the late eighties that he last served as the secretary-business manager. But you know what? We actually value the work that unions do in this

[ Page 1231 ]

province. We actually value the work that front-line workers in this province do, just as we value the management of hospitals. Lucy Dobbin, Jack Altman and Rick Roger make a contribution based on their experience. So does Jack Gerow.

HIRING OF NEW POLICE OFFICERS

AND PHOTO RADAR PROGRAM

J. Weisgerber: My question is to the Attorney General. The NDP's pre-election promises and the throne speech proudly trumpeted the hiring of "100 new police officers patrolling our neighbourhoods." [Applause.] Don't get too excited. One hundred and four police officers have left their local communities to work in the photo radar regional offices. Can the minister confirm that these 100 new officers simply replaced 104 people hired by the Attorney General to man the white elephant known as photo radar?

Hon. U. Dosanjh: I'm really proud to be part of a government that's injecting 100 new police officers into the police forces, for the safety of British Columbians.

Interjections.

Hon. U. Dosanjh: It's important for the opposition and the other parties to understand that we have announced many initiatives that go towards public safety: the DNA lab, the gene sequencer, the forensic dentistry lab that we've funded. We've also hired 25 new police officers for the unsolved-homicide squad. We are extremely proud of all the work we've done in public safety initiatives, and there will be no reduction in that work.

The Speaker: The member for Peace River South on a supplemental.

J. Weisgerber: I assume that the short answer is yes, the 100 officers do replace the 104 people working in photo radar.

Interjection.

J. Weisgerber: Photo radar is still snapping pictures. It's not being implemented; the government can't get it up and off the ground.

Can the Attorney General advise us whether his ministry will continue to pay the 104 officers and all of their expenses, regardless of the Minister of Transportation's inability to get photo radar operating in this province?

Hon. U. Dosanjh: Policing in British Columbia is independent of the Attorney General in terms of the day-to-day functions of police forces. The Ministry of Attorney General does not directly pay police officers to do the work they do in British Columbia; various forces across British Columbia pay their police officers.

HEALTH CARE

REGIONALIZATION REVIEW

M. de Jong: Returning to the memo and the Minister of Health, I'm tempted to say that the government is erecting obstacles in the path of the opposition. When you read that memo, it's obvious that the government has no intention of undertaking a meaningful review of the fiasco that New Directions and Closer to Home have become. This is about an NDP government taking an NDP committee to NDP ridings to hear submissions from NDP members for a report that's going to be written by an NDP hack who's reporting to the NDP's chief spin doctors, Mr. Speaker. It's going to be a failure.

Maybe that's what they'll call it: the McFailure report. Will the Minister of Health reconsider this sham of a review and provide British Columbians with what they really want and deserve -- a truly accessible opportunity for them to capitalize on their experience and expertise in building a health care system that puts patients first?

Hon. J. MacPhail: Actually, what the opposition fails to recognize is that what the people of B.C. want is universal, affordable and accessible medicare, not another committee of Liberal Party hacks. That is what they don't want. This review will be thorough. This review will be complete. This review will talk to the people who need to be talked to. It will be done by government caucus MLAs who believe in a universal, affordable health care system, and they will deliver a report that moves forward a fully funded system -- unlike the one that that party campaigned on in the last election.

Tabling Documents

Hon. D. Miller: It's my privilege to table the 1995 and 1996 annual reports of B.C. Hydro.

Petitions

J. Weisgerber: I rise to present a petition signed by 1,139 residents of the Prince George area, many of whom live in the constituency of the Minister of Transportation and Highways: "We, the undersigned, are opposed to the government's use of photo radar and want the government to discontinue its use on B.C. roads immediately."

Orders of the Day

Hon. J. MacPhail: In the House, I call Committee of Supply. For the information of the House, we'll be debating the estimates of the Ministry of Finance and then the Ministry of Forests. In Committee A, I call Committee of Supply. For the information of the House, we'll be debating the estimates of the Ministries of Employment and Investment, Municipal Affairs and Housing, and Small Business, Tourism and Culture.

[2:30]

The House in Committee of Supply B; G. Brewin in the chair.

ESTIMATES: MINISTRY OF

FINANCE AND CORPORATE RELATIONS

AND MINISTRY RESPONSIBLE FOR

INTERGOVERNMENTAL RELATIONS

(continued)

On vote 29: minister's office, $348,000 (continued).

Hon. A. Petter: Before we get into the debate, I thought I would just introduce some of the staff who are with me for this component of the estimates. Seated next to me is Thom Thompson, who is CEO of ICBC; and on the other side, Greg Basham, who is manager of strategic planning and policy at ICBC; and seated behind me, Lawrie McFarlane, who is

dep-

[ Page 1232 ]

uty minister for the Crown corporations secretariat. I'm very appreciative of them joining me, in addition to some of the other staff who have been here previously to assist in this estimates debate.

D. Jarvis: First of all, I would like to compliment the minister for getting his financial report and business report on ICBC out some eight months after the end of the year -- not quite as deficient as other ministries. That's a good start anyway. There is a lot of information in there I was worried that I was going to have to ask about, but I think I can dig it up from the financial report.

Madam Chair, we're not too excited about looking at some of the things in the ICBC annual report. There's the fact that Autoplan policies, as we were saying earlier, have increased by about 2 percent over 1994, and the total cost of claims during that same period has increased by about 10-1/2 percent. The government contends that ICBC spent approximately $29 million on traffic safety initiatives during 1995. Clearly, this money has not been targeted that well, as the total cost of claims has increased approximately five times faster than the number of Autoplan policies.

It gives one reason to wonder whether this money is being directed at the right source and to the right spot. I'm not too sure whether it is part of the insurance company's policy to be so involved in all these extra plans, like the Road Sense program -- or what the government would have us think are theirs. Are these ICBC's position, or are they more the responsibility of the Attorney General's office or perhaps of the Highways ministry?

In any event, we know that accidents result more from chance than from true fault. There are statistically unavoidable accidents; we know that. As the minister knows, accidents are a fact of life that will occur, as driving is a very complicated activity. We can modify them through education and legislation, but so far it appears that this is not being done at this time. The last thing we want to see is the accidents up, so let us hope....

On page 4 of the report, it is stated -- which rather perturbed me -- that ICBC has changed their thinking as to who they are:

"We've become a loss-prevention company rather than 'just' an insurance company. The difference may not be obvious outside ICBC yet, but it is noticeable within. We have changed our focus from fixing up broken lives, broken bodies and broken vehicles to getting right to the causes and stopping claims before they happen. We're basing the premiums of B.C. motorists on significant anticipated savings."

So there, probably, will be my first question: what do they mean by "anticipated savings"?

We are faced with a great change that's coming in the insurance industry. We can see it shaping up. ICBC is...I wouldn't say necessarily in deep trouble, but they're certainly being attacked from outside, and that fact has been reported to us. We can see it, in that we have the Hongkong Bank and Canadian Direct Insurance going after ICBC's policyholders with lower rates. They are, ostensibly, cherry-picking the good risks and leaving ICBC with the poor risks.

At this point I would ask the minister if he could give me a basic idea of how they are planning to pay for all these.... Where are they going to get these anticipated savings from, given the evidence that Road Sense doesn't seem to be performing that well and that we are still having increases in accidents?

Hon. A. Petter: I very much appreciate the member's question. The Road Sense program that has been undertaken by ICBC is not an altruistic program, although it certainly has tremendous benefits for the public. It is a program designed to achieve savings by investing in prevention in particular areas where that investment will pay back in savings to ICBC.

I can give the member an example. In the case of the enhanced drinking-driving CounterAttack campaign this summer and fall, which ICBC is funding, over two million motorists in the lower mainland and lower Island will be checked. It is expected to reduce alcohol-related crashes by 10 to 20 percent, based on past experience. The costs for the enforcement activity are about $5.4 million -- about double last year's, incidentally -- and the expected savings are almost three times that amount, in the range of $15 million.

What ICBC has been doing is identifying key areas in which, by targeting dollars toward prevention, they can reduce the amount that they would otherwise have to pay out in the form of claims. The same is true of the intersection improvement program. By looking at key intersections that have historically produced high volumes of accidents and, therefore, high costs to ICBC as an insurer, they have been able to produce savings for themselves by targeting investments into improvements on those intersections.

This is an obvious and very laudable benefit of an insurance company, particularly a public company, being able to assist in prevention in a way that produces real economic benefits to the corporation and therefore, in the long term, to its customers.

D. Jarvis: That was a rather interesting explanation, but the minister doesn't seem to be aware from my statement at the start that things are changing drastically. The massive savings they have.... As a result of the freeze they put on, if they hadn't invested the money this year, it looks from the statement like they would have made something like $12 million; that's all they would have made. They made another $50,000 on the investment, but they are being attacked by independent insurance companies, if that's the correct way to present it. The private insurance companies are taking away the cream.

It's going to leave ICBC with a high percentage of policyholders who are accident-prone or have had accidents in the past. ICBC does not run its company on an actuarial basis. As we said before, it runs it on the basis of government interference; hence we have this freeze on now.

I was looking at some of the stats that came out in regard to alcohol-related speed, without-due-care and failure to yield the right of way. That's broken down into deaths, injuries and collisions. In alcohol, the deaths are up very little. In speed, they're up minimally; deaths are up seven. Without-due-care deaths are actually up 40, and that's quite a bit. That's a good size. In failing-to-yield, they are not up. When you get into the collision-and-injury aspect.... I wonder if the minister could explain this to me: injuries in all four of those related things have jumped approximately 60 percent. Now, why would that be?

Hon. A. Petter: Let me say that the accident rates and injury rates would have risen far more dramatically had there not been initiatives of a preventive nature undertaken by ICBC in the past year.

An Hon. Member: You think that.

Hon. A. Petter: The member is heckling that I think that. No, that is the basis on which ICBC has made these investments. I believe there are reports and studies that have been undertaken to back that up, and these investments are in fact paying dividends. But the question, then, is: why is there

[ Page 1233 ]

greater growth in the dollars paid out than would be suggested simply by the number of accidents? The reason is that the damages, particularly soft-tissue injuries and general damages awards, have increased exponentially in that same period, and that has added greatly to ICBC's costs.

D. Jarvis: Vehicles, it's been told me, supposedly are engineered nowadays a lot better to avoid some of these smaller accidents. I was kind of shocked to find out that in one year we've had a 60 percent increase in injuries. The vehicles haven't caused it; the number of accidents isn't up 60 percent overall. Why are the injuries suddenly jumping up to that high figure? Can you explain that, or do you have an idea?

[2:45]

Hon. A. Petter: I'm advised that there are a number of factors that are contributing toward this. One is that the number of claims seems to be rising relative to the number of accidents. Perhaps we're becoming a society in which we have a higher expectation of compensation, or our threshold level for compensation has diminished. The awards themselves have increased, perhaps in part as a function of court-ordered awards, but also, again, as a function of societal expectations.

In addition, some of the increase may be a result of the fact that there is a greater survival rate of accidents, due no doubt in part to medical advances. This is good news, of course, but it means that there are added costs in terms of the compensation and support required for those who survive accidents who in the past might not have survived those accidents.

D. Jarvis: I don't know about survival; the deaths are up a bit. Nevertheless, I wanted to get into another aspect of this and throw a few questions at the minister regarding the freeze of ICBC -- the two-year freeze that was reported. As I said earlier, when I first started, it's rather disturbing that ICBC would have frozen their rates. Obviously it was from political interference. How they're going to come around it, one doesn't know. It just doesn't make economic sense.

We have the highest rates in Canada; we have the highest claims per capita, they say; we have the highest repair rates in Canada; our cost of living is higher; we have more precipitous roads, etc.; our claim volume is going up and up. Can the minister tell us: is he expecting more premiums in this next year?

Hon. A. Petter: First of all, I just want to advise the member that the information I have is that we in fact do not have the highest insurance rates in the country. I think that if you go to Toronto or Montreal, you will find that the rates are higher.

We do have among the highest incidence of accidents, it's true, and that is, of course, a major concern. We have seen a pattern over recent years of rates continually climbing at a level that I think the public has been concerned about and that I know that government has been concerned about.

I see the decision to freeze rates not in any way as being political interference but as being a challenge to ICBC from government -- which is ultimately responsible for ICBC, which is why we're having this debate today -- saying that these problems, which the member quite correctly identifies, these unacceptably high accident rates and the costs that flow from them, cannot continue to simply be solved by passing the cost along to the consumer. The consumer ultimately will not support a system that does that.

Therefore we've got to find other ways of tackling these problems, through safety initiatives, cost savings and other measures.

In terms of the question of premium growth, yes, there will be some relatively modest premium growth. There is not a rate increase, as the member indicates; the premium growth will come about as a result of people perhaps buying more insurance and more people buying insurance -- but not, obviously, as a result of any increase in rates.

D. Jarvis: Would the Premier or his staff be in a position to advise us if there has been a significant drop, or any type of drop, in premiums in the first half of 1996?

Hon. A. Petter: No. In fact, I'm advised that if one uses the freeze as the baseline, there has been a growth in premiums in the first six months. That may be due in part to some of the innovations in marketing that ICBC has brought about in their Autoplan 12 program, through which people can now purchase on a monthly basis, etc. So, in fact, there has been a growth in premiums from the assumed base of the freeze.

D. Jarvis: Well, then, the direct writers really are not telling us the truth, saying that they're out there signing up ICBC people and cherry-picking, as I said earlier. The Hongkong Bank and Canadian Direct are doing very little underwriting, then, because if they were doing the underwriting that they suggest they're doing or that you hear in the rumour mill, your volume should actually be going down.

Hon. A. Petter: First of all, I want to say that I share the member's concern about insurers coming in and skimming. If that's what he's suggesting, I share it. To this point, the impact of the introduction of some of that new private insurance has been minimal, but I will say for myself -- and I think on behalf of the corporation as well -- that there is a concern. Obviously, this new insurer that has come into the market is targeting itself very specifically, both geographically and in terms of the potential clients it will service.

It is taking only those who have the most minimal risk, those who fall in the lowest-risk categories. To this point, there has not been a huge impact. But obviously there's a concern that as this insurer establishes itself and becomes better known, and if it continues to focus on essentially creaming off the low-risk end of the market, it could become a more significant and detrimental factor for public insurance.

D. Jarvis: Going again to the freeze, I would like to ask the minister.... I understand that in 1995.... Looking at figures and comparing the claims ratio of the first quarter of '95, we had a $208 million amount; now, in the first quarter of '96, we are up to approximately $232 million. It would seem to indicate that our claims ratio is rising faster again this year than it was even last year. I find it very difficult to accept the fact that premiums will stay where they are, unless we have a large infusion from outside British Columbia, and that, with other direct writers coming in and affecting the premium base, the Premier would basically freeze the rates for two years.

We've got a monopoly here that is not being run like a business. It should be run like a business, actuarially, and that's not being done. I noted, back on May 23, that the Premier said that changes in ICBC rates required approval of cabinet and that he had responded to their demands by freezing them. Does the minister have any idea whose demands those were? Was it the CEO of ICBC? Was it the board of ICBC that made those demands? And why did he freeze them? Or is he just listening to the general public, trying to get elected?

[ Page 1234 ]

Hon. A. Petter: First of all, with respect to the growth in the claims ratio the member refers to.... Gee, I hesitate to pass on the advice I'm given by staff, but what can I do? It's the weather.

Interjection.

Hon. A. Petter: There we go. I'm very leery of using weather explanations in this House. Apparently the first quarter was somewhat higher than projected, but not hugely higher -- about 2 percent higher than projections. But it was a very bad period in terms of wetness, road conditions, etc. The hope -- the expectation -- is that with the introduction of photo radar and other safety measures, that ratio will start to fall. We'll have to monitor that -- and the corporation will, as well.

The member's other point.... Gee, to say: "Were the Premier and the government just listening to the general public...?" I thought that's what we were elected to do, hon. member: listen to the general public. I'm not sure I would want to put the word "just" in front of that phrase. I'm sure the Premier, when he made his announcement, along with government, was indeed listening to the general public. And what the general public has been saying for some time is that their tolerance for increased premiums, as a way of dealing with the concerns around insurance, is running out.

Having said that, my understanding is that the board of Hydro also had been looking at a potential rate freeze strategy, basically to send the same message that the Premier wanted to send. That message was that we have to deal with these problems and these concerns differently; we cannot continue to simply pass on the cost to consumers. What we have to do is to find other solutions in the form of traffic safety, in terms of efficiencies, in terms of product improvement. We can't simply continue to do what has been done in the past.

So I think it was a combination of taking some advice from ICBC and some of the suggestions ICBC itself was considering, but certainly listening to the general public and responding to the general public's concern -- which is what we as politicians are supposed to do and what I hope we continue to do.

D. Jarvis: Thank you very much for your explanation, but the minister and the Premier were elected to handle the finances of this province in a very prudent manner. It's obvious that when I say "just" listening to the people, I don't mean to say that the people out there don't understand what's going on. But neither do the Premier or the minister, because they wouldn't have frozen the rates if they had acted in a prudent manner. ICBC is a Crown corporation, and they should look after it in a responsible manner. The responsible manner would be to have it run on an actuarial basis, not on the whim of a Premier who is trying to get elected. That's the simple truth of it all.

The Chair: Hon. member, I caution you -- please, hon. member -- on personal references to ministers. "The government" is a fair statement to make, but not individuals.

D. Jarvis: All right. I shall not mention the Premier again on that.

I just wonder if the minister could now give me a breakdown on the reserves that are being held for ICBC. Could he give me a breakdown -- do they have that available, or is it privileged information -- in regard to reserves for bodily injury, property damage, collision and comprehensive?

Interjection.

D. Jarvis: Yes. I just want to know if I can get a breakdown.

[3:00]

Hon. A. Petter: Let me see if I can give a general answer. Then, if the member wants more specific information, I can try to provide it.

My understanding is that the corporation is fully, adequately reserved. That is reviewed by external actuaries, to ensure that that is the case. Total reserves are in excess of $4 billion, and they cover all outstanding liabilities.

D. Jarvis: We have the figure for the total annual premiums for 1995. I wonder if it is possible to get a breakdown as to what those premiums are, as far as bodily injury, property damage, comprehensive and collision are concerned. I'll just leave it at that.

Hon. A. Petter: Staff does not have a breakdown with them, but I'd be happy, if the member would like such a breakdown, to ask staff to provide it to him in writing and to ensure that he gets it in a timely way.

D. Jarvis: I wrote to the minister's ministry some three weeks ago and asked them for that breakdown, but I haven't received it yet. I'll drop another memo, just to refresh your memory.

Interjection.

D. Jarvis: No, I always like to refresh your memory.

I wonder if the minister could tell us if premiums are on a geographical basis. In other words, are the people of Victoria...? Are you doing that now? You didn't used to do it, and I didn't know whether you were doing it now -- between, say, Prince George and Vancouver.

Hon. A. Petter: I understand the rate structure is broken down geographically in a way that tracks the risk and accident records of various regions.

D. Symons: I have a couple of questions. I may be revisiting some of the topics covered.

During question period we were discussing the officers involved in the photo radar program. Can you tell me whether the roughly 100 officers who are operating the photo radar program are paid through ICBC? I believe the photo radar program is being sponsored by, and run through, ICBC. Are they also paying for the officers on the road who are handling that program?

Hon. A. Petter: I understand that it's somewhat complicated by the transfer of the motor vehicle branch, etc., which is, happily, not yet the responsibility of ICBC and of me for the purpose of this debate. But yes, the actual funding of the operation and of the officers is the responsibility of ICBC, as I understand it.

D. Symons: After that final transfer is through, it will be perfectly clear how that's happening, then? Then I guess we can say that during the election campaign.... Some of the news releases put out about the addition of police officers in

[ Page 1235 ]

the province for public safety seemed to be a bit skewed for misrepresentation, because indeed this isn't for general public safety; it's simply for highway safety that those 100 officers are being added. Is that not the case?

Hon. A. Petter: I think those were the questions that were directed in question period to the Attorney General, and they relate to commitments that I'm not directly familiar with, as to how they're being fulfilled. So all I can speak to is the fact that in this case, the funding for these officers is coming from ICBC. How that relates to the provision of additional police officers through the Ministry of Attorney General, the RCMP and stuff is way beyond my purview.

D. Symons: I wonder if you might clear up some confusion on my part. Back in April, when the ICBC rates were frozen, it seems that there were some categories where people were being charged an increase in rates. At that time the Premier stated: "That's one of the problems of things like ICBC. They make everything more complicated than it should be. Only a corporation like that would think that an 8.5 percent increase would qualify as a freeze." But the Premier was darn well going to set them straight: "I said freeze. I mean freeze." That's from a newspaper column at that time.

What brings this question up is that apparently on April 3, which is only a matter of a week or so prior to all this taking place, the then Deputy Premier of the province, along with the then Minister of Finance, signed a cabinet order that wiped out the previous November's ICBC rates, instituting the new rates ICBC was instituting, which the Premier was saying were wrong. So who was right? Indeed, they seem to be following the cabinet order. Was the Premier incorrect in saying that they had made a mistake, or was ICBC incorrect?

Hon. A. Petter: Oh, I think the Premier is usually correct, hon. member. But I don't think it's a question of anybody being wrong; I think there was some miscommunication or confusion around the nature of the freeze that the Premier and government intended, and around the way in which that was implemented, both by cabinet and by ICBC. I think the member understands the confusion. The freeze was interpreted as being a freeze that allowed adjustments to be made within an overall revenue cap. But that was not the

interpretation that the Premier had intended. An adjustment was then made, so that the common understanding of the freeze and the one that the Premier intended were then reflected in the rate structure.

D. Symons: Thank you again for clearing that up. Apparently, then, it was a misunderstanding on the part of the cabinet members who signed that OIC, I assume.

Just going back a little to Canadian Direct, I think the hon. member for North Vancouver-Seymour used the term "cherry-picking." I'm just wondering if that is an appropriate term to use for an alternative insurance company that comes along. Don't your rates that you set for the various categories depend upon the accident or the claim rate for that particular category? So if you are claiming that some company is cherry-picking or taking off the cream of the crop, indeed that cream should already be getting lower rates because of their driving records. Is that not true?

Hon. A. Petter: I prefer the term "creaming" to cherry-picking, but I accept cherry-picking. The fact is that insurance is about spreading risk and providing insurance to people through the distribution of that risk over a population base. Companies that come in and pick such narrow categories of low risk geographically, so that someone in east Vancouver can't get coverage and someone in another part of the province can, or only certain drivers can and others can't....

There is a real danger in that kind of approach, which I would call creaming -- undermining the ability to provide general insurance and spread the risk in a way that insurance is intended to do. It is a legitimate concern. I certainly subscribe to the comments made earlier. The previous member said cherry-picking; I say creaming. I'm happy with either pejorative term.

D. Symons: Then I guess the minister is at least clarifying that indeed there is cross-subsidization between the various groups, it would seem. As one who's had better than a 25-year clear driving record, maybe I'm one who would object and maybe I should be looking at Canadian Direct.

I'm wondering if we might look at another area that ICBC gets involved in, and that's the business of claims investigation. I'm wondering if you might be able to give me an idea of how many claims you had during your last year that you might have the figures for. How many of those were assigned to private investigators?

Hon. A. Petter: Again, those numbers are not available to me at this time, but I'd be happy to try to get them for the member, if he seeks them. I just want to say one thing: I do not accept the member's terminology of "cross-subsidization." I prefer to use the term "spreading risk," which is what insurance is all about. But he can characterize it in his way. I do not believe that is a fair characterization.

D. Symons: I thank the minister if he would get those figures to me and thank him in anticipation of receiving them.

One last question relating to this sort of thing: during the process of owning a car, if you're involved in an accident, you have an arbitrary figure you choose that will be noted on your insurance and car registration, indicating that that car has been involved in an accident. Unfortunately, with the rates of repairs nowadays.... You can have a superficial accident, so that it's just bodywork being done, or you could have the frame of the car bent, if there are frames in cars anymore.

You can have some serious things cosmetically repaired, so to speak, and still the resale value of that car could be considerably different because of the type of accident it's been involved in. So you could have two cars that both have, in writing, that they've had in excess of a $2,000 damage claim.

With one of them, the damage claim and the repairs in no way affect the value of that car as a resale vehicle. In the other case, the value of that resale could be quite badly impinged upon. Yet when the car goes up for sale, the person buying it -- not knowing anything other than it's just had that much damage to it -- has no way of knowing. So the person who has a car that wasn't damaged -- to the extent of its being a danger or having future problems -- suffers at resale time. Is there maybe a better way of identifying those cars that have been damaged, so that the purchaser will have some idea of what type of damage it was, rather than arbitrarily lumping them all in the same barrel?

[3:15]

Hon. A. Petter: I appreciate the member's comments and concerns. There are some responses that are in fact being taken to try to ensure that the difference between ephemeral body damage and structural damage doesn't become a problem.

[ Page 1236 ]

First of all, dealers are all legally obliged, as I understand it, to disclose the nature of damage when they sell a car. There is also a vehicle damage information line that ICBC has which directs people to the nature of the damage. And, of course, ICBC is very concerned that when repairs are conducted, they are quality repairs that do in fact deal with structural issues. They have an accreditation program that seeks to achieve that end.

Then, of course, when buyers are aware that there is some damage, they will presumably make whatever efforts they can, through inspection or otherwise, to advise themselves fully as to what that damage was. The member makes a good point, and those are some of the responses that speak to that point.

D. Jarvis: In the last two years, how many ICBC managers who required severance pay were fired or terminated as the result of a judgment?

Hon. A. Petter: I'm told that in 1995 there were approximately 12, and all were handled within the context of PSERC guidelines.

D. Jarvis: Could the minister then advise us as to the cost of the severance packages and judgments, if there were any?

Hon. A. Petter: We do not have that information here, but if it's important to the member, I'll have representatives of the corporation provide him with the aggregate cost of those severances.

D. Jarvis: I thank the minister for doing that for me.

I would also like to add that the media report that there is -- how do I put it? -- a lot of internal.... Internal sources have told us that an inordinate number of people have been laid off, retired, fired or terminated from ICBC, and who require compensation. If you can't do it now, could you explain to me later the reasons they were terminated?

Hon. A. Petter: I'm informed that seven of the 12 were due to restructuring within ICBC of some of its divisions. Even if that's discounted, 12 out of 3,900 is not an inordinate number of people.

D. Jarvis: Maybe the minister missed my first question when I asked it, but I was referring to managers.

Hon. A. Petter: Fair point, hon. member. Twelve out of 450 managers in total would still not be an inordinate amount.

D. Jarvis: I wonder if the minister could tell me how the record in this area compares to other Crown corporations.

Hon. A. Petter: No, I couldn't tell the member how it compares with other Crown corporations. But there's a meeting down the hall, and the minister there may be able to shed some light on how other Crown corporations are in this regard. I don't have that kind of comparative data.

D. Jarvis: Now that ICBC has discontinued the traffic safety programs in the elementary schools, there is a great reduction in the involvement. Why would they do this? How is it going to affect accident rates, etc., in the future if you cut the safety program out of the elementary schools?

Hon. A. Petter: The information I have is that there has been a shift of resources within the school program but no reduction of resources. The decision was made to target more resources at the 13-year-old-and-up category because of the greater benefits that would result from having staff interacting with that age category. The information that was previously provided for elementary school classes is still provided; it's just that there's been a shift and retargeting of some of the additional resources at age categories where it is felt that the information and education will provide a greater benefit in terms of road safety.

D. Jarvis: I wonder if the minister could tell us.... ICBC moved toward pay equity. What was the cost to the corporation? How much of it was on an annual basis?

Hon. A. Petter: I'm informed that the negotiations concerning the implementation of pay equity are ongoing, and therefore I don't have a number to hand. But even if I did, I'm not sure it would be prudent to share it at this time, given that this is still a matter of negotiation. I'm told it's a very small component of the overall salary and pay that is likely to be involved. Perhaps, once the negotiations have been resolved, I could release the numbers to the member.

D. Jarvis: The Pacific area, as we all hear and have been informed by experts, is going to be subject to great earthquakes and catastrophic problems any day or any month or any year. Does ICBC have catastrophe coverage for an event like that? Do they have adequate amounts to protect the interests of all British Columbians? There would be a large percentage of damage to automobiles insured in the lower mainland. Most of the drivers in British Columbia would find themselves without insurance. Could you answer that for me?

Hon. A. Petter: The corporation, I'm informed, does monitor and try to assess the potential risk, as best one can, of some kind of catastrophic event and has determined that it can absorb that risk within itself -- or self-insure for that risk. Obviously, it's an ongoing matter that needs to be monitored. If there were a concern, I suppose there would be other options open to the corporation, but at this time the corporation does not have any specific.... It doesn't reinsure for this risk, for example. It feels that the risk is one that it can provide for within its capabilities.

D. Jarvis: One last question, and then I'll turn it over to my colleague from the Peace River. The cost of photo radar: what portion of ICBC premiums paid for that?

Hon. A. Petter: It is $16 million.

J. Weisgerber: I've long been intrigued by the rationale of ICBC for paying capital costs on road construction. It's always been an interesting argument -- to hear the government, particularly.... I've never quite heard ICBC argue that they should pay for intersection repairs; however, the government seems quite keen to see expenditures by ICBC for road capital expenditures. Can the minister tell me, first of all, how much ICBC spends annually for road repairs? Can the minister tell me at the same time whether there is a budget -- perhaps a five-year budget, some forecast? Or is it as directed by government?

Hon. A. Petter: The budget last year -- and it's likely to remain the same this year, as I understand it -- was in the category of $2 million to $3 million. That provides both for planning and consultation with municipalities, for example, to

[ Page 1237 ]

identify key intersections that could, through a small investment, be upgraded in a way that would produce a benefit to ICBC in terms of claims. The savings from that vary from intersection to intersection, but as I understand it they can be as high as 6 to 1, in terms of the reduction in claims as a result of the investment, and no less than perhaps 2 to 1. They're done in consultation with local communities and others as a way of providing improvements that have a direct benefit to ICBC by reducing the dollars they would otherwise have to pay in claims.

[3:30]

J. Weisgerber: Can the minister advise me whether there are any capital projects that are the primary responsibility of the province? In other words, are there capital projects undertaken by ICBC outside of municipalities -- roads that would normally be maintained by, and that are the responsibility of, the province?

Hon. A. Petter: I'm informed that the majority would be municipal, but there are some examples where the corporation has made contributions to improvements on the provincial highway system. The only two I've been made aware of are two such projects on the Sea to Sky Highway.

J. Weisgerber: It is very hard for me to rationalize a provincial government recognizing that there was a risk that caused traffic accidents and which also put British Columbians' lives at risk -- that somehow there would be the inference that the province was unwilling to go ahead without the contribution of ICBC.... If that's not the inference to be taken, then one must assume that the only other rationale can simply be a tax shift away from provincial taxpayers to ICBC customers.

I'm prepared to accept, grudgingly, the argument that, with municipalities, there needs to be a contribution from ICBC to make the improvements or to allow the improvements to proceed. I would argue that that may well be a more primary responsibility of the province. But I think it's entirely wrongheaded of the province to start looking to ICBC for capital contributions on roads and highways, and I can tell you I'm absolutely opposed to it.

Hon. A. Petter: I hear the member's concern. I don't necessarily agree that it's quite so clear-cut. Frankly, I think it makes some sense for a corporation that benefits economically from improvements to contribute towards those improvements, whether it does so municipally or provincially. I would agree to the extent that this should not be viewed as a way of off-loading expenses. But if it can mean that improvements that would otherwise not go ahead in a particular year or on a particular

schedule because of budgetary limitations -- and the member is aware that while it would be nice to improve every highway and road in the province so that we reduce accidents, that isn't always possible.... If a contribution from ICBC can assist in that improvement going ahead in a way that produces a definable benefit back to ICBC, then I don't think that's problematic at all.

This is a pilot-type initiative, a very small investment. I think we should monitor it, and I'm sure the member will scrutinize it to make sure that it's not being abused. But I don't think there's anything irrational or untoward. In fact, from what I understand, the evidence suggests it's producing tremendous benefits for ICBC, and from that point of view, it makes a lot of sense.

J. Weisgerber: I'm curious to know the budget that ICBC has for safety education, public relations and assorted expenditures -- primarily media and school safety initiatives.

Hon. A. Petter: Road safety and auto crime prevention programs are about $5.5 million.

J. Weisgerber: The next item I have in this line of questioning is photo radar, and there have already been a couple of good questions asked. Listening to the responses to the members, I understand now that ICBC is contributing to the costs of 100 police officers -- I expect the number is probably 104 -- and that overall, a contribution of $60 million annually is being made toward photo radar. Did I understand the minister's response correctly, with the figure of $60 million being the annual contribution?

Hon. A. Petter: The figure was $16 million, and that includes the cost of the police officers.

J. Weisgerber: So the number is $16 million annually, and that covers the annual salaries of 100 police officers. The minister can confirm if that's the case, but perhaps he could tell us what other costs.... I'm trying to get a sense of the overall contribution by ICBC to photo radar. Perhaps the minister could tell me what the overall contribution will be on an annual basis, how much of that for is the 104 police officers -- if that's the correct number -- and what the remaining expenditures are for.

Hon. A. Petter: I'd be happy to get a breakdown for the member. Because the administration of this is currently handled by the Ministry of Transportation and Highways, the member could get that information from that ministry. But I'd be happy to get that breakdown and pass it on to him.

J. Weisgerber: One of the great joys of having the Minister of Finance's estimates up is that it seems to me a very hard argument for the Minister of Finance to make, to say that he doesn't know what the expenditures are. Indeed, almost any other minister can claim that this is the purview of some other ministry and shrug off knowledge of the expenditure. But let's all understand that the Minister of Finance should have his finger on every expenditure of every ministry.

Now, I know we're setting a very high standard here and one, perhaps, that the Minister of Finance wants to step back from. But the reality is -- and I'm being very serious -- that I don't think that the Minister of Finance can reasonably come to this House and say: "I don't have knowledge of expenditures." The fact of the matter is that the minister has knowledge of expenditures; that's his job. I know that from somewhere behind the minister, some documents were passed, so if he now has that information and would share it with us, fine.

I think it's an important issue to pursue. The province has forecast somewhere between $70 million and $100 million a year in annual revenues from photo radar. In his capacity as Minister of Finance, I'm sure the minister is well aware of what those projections are. I'm sure he is looking forward with some anticipation to the money coming in and with some frustration, perhaps, as the implementation is delayed month after month and as those revenues appear to be less and less tangible.

But it would seem to me, in all fairness to British Columbia motorists, to customers of ICBC, that the cost of photo radar should be offset against those revenues. It seems patently unfair to me to pass off the responsibility for 100 police officers -- plus, we're led to believe, additional photo radar expenses -- while the province continues to be the beneficiary of the fines that come in as a result of photo radar. I just don't think you can have it both ways, nor should you have it both ways. To do so, in fact, is to shift taxation away

[ Page 1238 ]

from British Columbians as taxpayers and to put it instead on British Columbians as motorists. I'm not sure that I can support that kind of tax transfer.

Hon. A. Petter: I don't know whether I'm flattered by the faith that the member has in my command of the detailed figures of each and every activity of every agency of government, or whether I'm humbled that I have let him down in this pursuit. But I do think it's reasonable for me to say that while I don't have the detail to hand, I will be happy to make sure that he's provided it -- and that's what I have said. Who knows? Maybe next year at this time, I'll be able to live up to his exalted expectations of a Minister of Finance.

In regard to the other question he raises, I think the justification for the financial arrangement is quite straightforward. ICBC stands to benefit tremendously from the introduction of photo radar, as a result of the reduction that will occur in claims because of improved road safety. That's a benefit that will continue; it's an ongoing benefit. The revenues from photo radar that result from ticket enforcement may well diminish over time; hopefully, they will diminish over time as people become persuaded to slow down and to drive more safely.

If they do so, those revenues will go down, but the benefits to ICBC will increase. Therefore there is a direct benefit, a direct relationship, between the investment that is being made in photo radar and being contributed towards by ICBC, and the ongoing and continuous benefits back to ICBC, that I think makes perfect sense. The member, presumably, disagrees with that. That's what this place is all about; I accept it.

J. Weisgerber: I have to remind the minister of the experience with photo radar in Alberta. Photo radar has been operating in Edmonton and in Calgary for years. There has been no appreciable reduction in accident frequency. The minister might be encouraged to know that photo radar revenues in that province have grown dramatically and have grown each and every year. The thing that hasn't depreciated, hasn't fallen off, has been the rate of accidents related to speed.

So, with that, I acknowledge that it is a fundamental difference of opinion, but I would argue that the Canadian evidence suggests that indeed it would be overly optimistic for ICBC to start projecting drops in accident frequency, based on photo radar. First of all, the province, as of July 31, hasn't been able to implement it. So one must assume that no benefits have yet accrued. I expect that ICBC, through some blind faith, have been making their contribution toward the program, perhaps without any benefit at all.

I'd certainly be happy to allow the minister a rebuttal, if he wishes.

[3:45]

Hon. A. Petter: It comes as a shock to me to learn that the member is not a fan of photo radar. But let me assure him that ICBC has not pursued this in blind faith. In fact, they have their eyes open. They have been looking at jurisdictions around the world, tracking the experience there and undertaking studies. I understand that, in fact, they have been rather conservative in the way they've approached this. They've looked at.... I guess the best example is the state of Victoria, in Australia. Based on that experience, they have reached their conclusions.

But just to be on the conservative side, they have discounted the potential savings by 75 percent. We'll have to monitor it and see. I know the member doesn't like photo radar, and fair enough. We'll see who's right over time.

J. Weisgerber: We'll be back next year and will certainly have an opportunity to see who's right and who's wrong.

There are two other areas that I'd like to pursue. One is the whole issue of rates and rate structures. There's a longstanding argument around how competitive B.C.'s insurance rates are, how competitive the monopoly is versus the competitive market. I heard the minister talk about "creaming" and reflect on that as being somehow unfair. I happen to disagree. I think that the whole notion of rates based on experience and geography should be structured in such a way that no one is able to cream any one segment of the market. I would agree with the member from North Vancouver that, in fact, any time that happens, it is because a segment of the market is being charged too much.

Where I find a fascinating opportunity for comparison is in my own part of British Columbia. In the Peace River region -- Alberta and British Columbia -- there are about the same number of people living on either side of the border. The geography is almost identical; weather conditions are almost entirely identical; the communities are about the same size, and road conditions are almost, again, identical. So if there ever was a case where you could compare all of the variables and come up with a true comparison of insurance rates, it would be in the Peace River country.

Every indication I have is that rates on the B.C. side of the border -- taking out the licence fees and making those kinds of adjustments -- are substantially higher than they are in Alberta. I wonder whether ICBC has done some analysis of their rates in that region of the province, to rationalize the difference in insurance rates.

Hon. A. Petter: I appreciate the member's observation. I know, in addition to his not being a fan of photo radar, that he is not a big fan of ICBC, either. So I'm not surprised at the thrust of his questions.

In comparing, I think you have to compare not only the rates but also the coverage. In many respects, ICBC's coverage is superior to that provided in Alberta. The fact is that accident rates in Alberta are substantially lower than in B.C. I know the member says that may not be true of these particular regions, and it may be cause for us to look more closely at the particular region of the province he's concerned about. I understand that ICBC is looking at perhaps moving to a more regionally sensitive rate structure. If the member has evidence to support his view, he might want to feed that into ICBC or myself as minister for the purposes of assisting in that review.

J. Weisgerber: For the information of the minister, as a matter or question of background, in another life I worked for an automobile insurer, a company that underwrote automobile insurance, so I understand at bit about the variables that exist in the market. I can tell the minister that as recently as the last campaign, when we campaigned for privatization of ICBC, we compared specific rates with similar automobiles, similar drivers, similar coverage and similar driving rates. We did it through insurers in Alberta and came up with differences running as high as $300 a year for a two-car family with identical circumstances and identical coverages.

I don't think ICBC needs me to go out and find that information for them. There's a corporation that has an organization which surely must be in a position to take the pulse and take those measures. I challenge the minister to have ICBC look at some specific examples, because I genuinely believe it represents the best comparison. It suggests to me that what's happening is that either these rates are higher because of a lack of efficiency in the corporation or there must be regions and classes of drivers that are being undercharged.

I've heard the member for Kamloops, who I know is reluctant to enter into these debates, talk about the amount of

[ Page 1239 ]

premium dollars raised in that community versus the overall claim costs of drivers in that community, which suggests to me that something is out of whack in terms of the way rates are structured or that ICBC's overall operating costs and claim costs are way out of line with those in the private sector. I quite honestly think it's the latter; my friend from Kamloops favours a different explanation. I encourage the minister to have ICBC look seriously at their competitive position in communities such as Dawson Creek vis-�-vis Alberta, where there is a very real and everyday comparison available.

Hon. A. Petter: As I say, the corporation is certainly prepared to and is undertaking a review of rate structures. If the member feels he has nothing he can add to the knowledge base of the corporation, then I accept that. In some ways, I guess, that is a testament to his faith in the corporation's ability to evaluate these things.

I accept the member's statement of his expertise in this area. But if he examines the no-fault accident benefits and underinsured motorist protection provided in British Columbia, he'll find that those benefits, for example, are significantly superior to those provided in other provinces. I also understand that there are some agencies that do comparisons and make adjustments in terms of comparing, on a common basis, auto insurance rates across the country. In those comparisons, British Columbia does relatively well. I'd be happy to try to provide that information for the member as well.

J. Weisgerber: I feel somewhat motivated now to go out and do some comparisons. I expect that I will probably wind up providing the minister with some very specific examples.

The final thing I want to talk about this afternoon is the issue of no-fault insurance. I'm sure that it has been debated and will be debated in these estimates for some time. Can the minister confirm for me that the possibility of introducing no-fault insurance is under consideration by ICBC and/or government at this particular time?

Hon. A. Petter: I think it's fair to say that the issue of no-fault, as part of a general review of product at ICBC, has for years been an ongoing issue when ICBC has been discussed and examined and studied, and it has been of interest provincially, as well. But I've said that, as we as a province are committed to doing a program review including Crown corporations, we will be looking at ICBC and looking at ways in which we can improve the product provided by ICBC and lower the cost to consumers, as part of that review, and that, yes, no-fault and other options will no doubt be considered and reviewed as part of that exercise.

I anticipate that there will be some opportunity to seek public input on that range of issues in the fall, but certainly the government has not made any determination at this time to move towards no-fault, although it is an issue that I think should be looked at. Other jurisdictions, as the member will be aware, have moved towards no-fault fairly recently, and I think it behooves us to consider that as one of a range of options that might be examined in light of this program review.

J. Weisgerber: My knowledge of the situation is that over the last decade more jurisdictions have been moving away from no-fault than moving toward it. In line with the minister's comments, would he commit today that there will be no move to introduce no-fault insurance in British Columbia without a broad public consultation process that is well-defined?

Hon. A. Petter: Yes, I'll certainly commit to the member that before we make any decision in respect of changes at ICBC, including the possibility but certainly not the inevitability of a change in this direction, there will be a process in which the public can express its views and be consulted. I don't want this program review to take forever in this respect, but I think it's absolutely essential that we have an opportunity for the public to be consulted, and for the views of the public at large, as well as the views of those who have special concerns and interests in ICBC and the coverage it provides, to be heard.

D. Jarvis: Following the last conversation that you had with the gentleman from the Peace in regard to rates and all the rest of it.... The Insurance Bureau of Canada shows in their consumer price index that from 1979 to 1993, B.C., when it was compared to the rest of Canada, showed the largest increase of any province. Our rates in that period of time went up 348.63 percent, and the next closest to us was up 185 percent for that same period. That was Alberta, and it was a private company. Those comparisons are also with the other public-generated insurers such as Saskatchewan, Manitoba and Quebec.

So the average of the four public insurance companies compared to the others with private plans was up 140.4 percent above them for that same period of time. Clearly British Columbia public insurance was increasing faster than private insurance.

From '93 to '96, those figures come close to being more balanced when you compare B.C. to the rest of Canada, and that was because of the injection of the no-fault insurance coming out of Ontario. That threw all the figures askew and brought them all way up. Now Ontario is changing, but.... Don't get me wrong. I'm not saying that B.C. should be private now. I think ICBC over the years has been a relatively good monopoly and also probably a good insurance company in North America.

But times change, and with the question of no-fault that was brought up, I wonder if the government has given any thought to the government staying in the PLPD end of it and getting rid of what you call the non-compulsory end of the insurance industry.

Hon. A. Petter: I guess I could react in a number of ways, but let me react in just two. First of all, I think one of the measures of ICBC's ability to contain costs is the fact that in terms of its administrative costs, ICBC is second to none in the country. It keeps very low administrative costs. What the member says is absolutely true: the costs of providing the insurance have gone up dramatically, and therefore the rates have gone up dramatically. That, of course, is a serious concern.

Indeed, it is the concern -- that very experience -- that has motivated the Premier to announce the rate freeze and to put a challenge to ICBC that alternatives must be explored to ensure that this experience the member referred to does not continue unabated into the future. We simply cannot have that pattern of increase continue in the future and maintain an insurance plan that the public will support. Hence the decision to impose a rate freeze; hence the challenge to ICBC -- and to the public, I might say -- to find alternative strategies and solutions to keep rates down.

[4:00]

D. Jarvis: Hon. minister, you have to appreciate that you've got a problem here. If you were run on an actuarial basis -- a proper way of running an insurance company -- you could probably control your rates better, rather than having the so-called political interference come in and/or

[ Page 1240 ]

having the consumers out there paying for the cost of all those Road Sense problems. You're using the consumer again to draw up their own rates. In other words, you're saying: "Okay, the premium has to pay for Road Sense, so that has to be included in there." That is included in it, so that's keeping the rates up.

Plus there's the fact that you've got photo radar. You're going to use photo radar to keep the rates down. You've got a problem there, because the consumer.... It's robbing Peter to pay Paul; it comes in one end and goes out the other.

Truly, ICBC should be a properly run insurance company. You've got all the experts there; they know how to do it. This is where the government has to stay out of the picture and run it in a proper, prudent manner.

F. Gingell: Just continuing for a moment on ICBC, could the minister advise the committee if officers and experts within ICBC briefed or advised the Premier in any way about the effects of a freeze on insurance premiums prior to the announcement?

Hon. A. Petter: I'm informed that the Premier was indeed briefed by staff within government and staff within ICBC. As I mentioned earlier, ICBC staff themselves had been contemplating the introduction of such a freeze -- for similar reasons, perhaps, to the one that motivated the Premier, but I've already referred to that.

F. Gingell: I think I misunderstood the answer by the minister earlier. I thought he referred to B.C. Hydro. I didn't hear him refer to ICBC with respect to....

Interjection.

F. Gingell: Okay. Well, I'm glad I've now got my hearing aid, so I can....

I didn't rush down to get from my desk a photocopy of a $1 refund cheque, but I assure the minister that it is there. If you want to see it, I will go down and get it. Can the minister advise the committee on the costs to ICBC of each refund cheque?

Hon. A. Petter: I assume the member is talking about the processing costs. I'm informed it's around 52 cents per cheque mailed out.

F. Gingell: Clearly we have a difference. There has to be a whole series of costs that went through -- recalculations, adjustments for the amount of premium that had been paid, and adjustments for the cost of the piece of paper, which is the cheque, and for the salaries of the people that were given this job. Perhaps there were some overtime costs involved because this was work outside. There are mailing costs. Mailing costs alone would be 45 cents, and an envelope. Do you know what an envelope costs? It's got a clear Perspex thing. Perhaps the minister could reconsider his answer.

Hon. A. Petter: Let me say, first of all, that the cost I quoted, as I understand, is the cost of the actual production of the cheques and the mailing of the cheques. I suppose I could instruct staff to go back and do an extensive study of all the other associated costs, but then next year in estimates I suspect the member would stand up and question why we had spent all the time and energy trying to find out what those costs were. I don't know what they were. If the member is trying to make the point that $1 refund cheques ought not to have been mailed, I suppose one can argue it either way. You're damned if you do; you're damned if you don't. I'm glad we did.

F. Gingell: I would think that your going back and doing all that study to answer my question is as stupid an exercise as ICBC's was to make $1 refund cheques -- absolute nonsense. Is this the way we spend our taxpayers' money -- to waste people's time?

It was quite simple for ICBC or for the Premier to make a commonsense starting point. Instead of the freeze being January 1, all our premiums expire at different times. You just happen to be lucky if your premium happened to come in in January. Mine is in July, so I didn't have the advantage of this freeze for premium-saving.

It seemed to me and to the people that phoned me -- and my office phone rang off the hook -- that this wasn't thought out with any care. It was a precipitous announcement that could have been handled in a lot better fashion. I know the minister hasn't advised me on the costs, so I'm surprised that ICBC, after all the fuss that was made, didn't sit down and actually calculate the amount of those cheques, including everything. Certainly if you haven't done it, then we shouldn't worry about it.

In the various reports that have come out -- and it was very nice to receive the December 31, 1995, statements the day before these estimates -- there are a series of statistics. I wonder if the minister could advise the committee how we're stacking up in the first six months of 1996. We've gone a full month after the first six months, so I'm sure you have some pretty good ideas on the current profitability.

[J. Pullinger in the chair.]

Hon. A. Petter: I understand there is an operating loss to this point, something in the range of $50 million.

F. Gingell: Looking back to previous years, do you have any weightings in your mind as to what the second six months of the year will do in relation to the first? If you're in the dry goods business, you have 30 percent of your sales in the month of December. I wonder if there was any thought, if it's a $50 million loss in the first six months, of what that might be for the whole year.

Hon. A. Petter: I don't think I'll speculate as to the future at this time, hon. member. I think it's fair to say that there will be an increase beyond what we now have over the next year. Fortunately, we have a well-funded rate stabilization fund and a clear determination, both as a government and through to the corporation, to find ways in which we can achieve a savings so that the corporation can become self-supporting over the next year without having to increase rates. We can anticipate that there will an increase in the operating loss over the next year, but one that can be accommodated within the finances of the corporation, including its rate stabilization fund.

F. Gingell: So at this point you say, "Okay, there's a $50 million loss for the first six months or thereabouts," and you anticipate that amount being higher than $50 million for the second six months.

There is going to be a $16-million-a-year cost related to ICBC's subsidization of photo radar. I was listening to the earlier questions, and it seems to me that that cost is going to

[ Page 1241 ]

be $6 million to $6.5 million to $7 million for policemen's salaries and $8 million or $9 million for the other costs. Have any costs of this $16 million per year been incurred yet, or will they commence after July 1? Are any of them prior to July 1?

Hon. A. Petter: I understand that they have been incurred. In fact, about half have already been incurred and are accounted for in the numbers that ICBC has already taken into account. The rest will be incurred during the remainder of the year.

F. Gingell: So if it's $16 million, it's about $1.4 million a month -- somewhere around $1.3 million a month. Do I understand you to say that you have incurred, in six months, $1.3 million a month for the period ended June, and you anticipate incurring a further $1.3 million for six months until the end of December?

Hon. A. Petter: No. As I understand it, the information I've been given is that this is a very small portion of the overall administrative costs of the corporation. Sixteen million dollars is just being costed by the corporation throughout the year on an even basis, so there's no huge separate calculation or whatever. It is simply factored into the overall operating costs of the corporation.

F. Gingell: There's a misunderstanding here. Fifty million dollars is lost for the first six months. We know about an additional $16 million per year that's going to be incurred through the subsidization of photo radar. If we are projecting and thinking about what the results are going to be for the second six months of the year, do we have to add anything to the expenses for the subsidization that's going to take place in the second part of the year, which didn't take place in the first part of the year? When did you start paying the salaries of 100 policemen?

[4:15]

Hon. A. Petter: It's a two-part answer. First, if the member is looking for the actual accounting of how funds flow from ICBC to Motor Vehicles, or whoever, for the payment of the officers and things, we'll have to provide that to him. ICBC can do so.

F. Gingell: Just roughly.

Hon. A. Petter: I don't even have it roughly, because I take it that it's transferred from agency to agency, and then there's payment out, etc. The expectation is, however, that far from there being additional costs as a result of that $16 million, there will be savings in the form of reduced numbers of accidents and deaths that result from the photo radar operation. One would hope to see those savings reflected.

F. Gingell: I would hope to see those, too. In the end, the only way we're going to keep insurance premiums down, other than a short-term blip because of an election promise, is by reducing your major costs, which is the claims.

That brings me to another question that was asked about what your reserves are. The minister gave the number at something like $4.5 billion or $4 billion.

Hon. A. Petter: Over $4.5 billion.

F. Gingell: Well, $1 billion of that is premiums you've received in advance. I've paid my premium, but you have to insure me for 12 months. So that's hardly a reserve.

The second item is not a reserve. It is ICBC's estimate of the liability for unpaid claims -- claims that have happened. The actual accident has taken place, but the process is going on toward settling that claim. Going through these things, the only real equity that ICBC has is some $364 million. You call it a rate stabilization reserve.

We're facing a loss this year in excess of $100 million, I would suggest to you quite sincerely. That is going to reduce that rate stabilization reserve, so you're going to be down to $250 million. ICBC's annual premiums are in the region of $2.8 billion, or thereabouts, so you've now got a reserve that's equivalent to less than 10 percent of your total annual premiums.

You're going to wash away a great chunk of that rate stabilization reserve this year just as you were beginning to get it built up to give ICBC some stability. You're going to wash away a great chunk of it this year because of this freeze. It may not happen, because there are some hoped-for savings that will arise as the result of photo radar, but they haven't happened yet. They are conjecture, and that's all they are.

What we do know to be fact is that the corporation has lost $50 million in the first six months. It anticipates -- and that's not fact yet -- losing more than $50 million in the second half. I don't think anyone on your side of the Legislature, Mr. Minister, is going to argue that that will bring your rate stabilization fund, which is the only true reserve, or equity, down to $250 million, and that's only about.... Oh, sorry. Your premiums are in the region of $2.5 billion, so you're down to about 10 percent of your annual premiums. It doesn't seem to me that that's much of an equity or much of a reserve.

I would have thought you wouldn't have thought this was an appropriate time to be taking action that endangers that rate stabilization fund.

Hon. A. Petter: With respect, hon. Chair, I think the member is confusing two different notions. One is the notion of holding reserve funds that cover known and anticipated liabilities, so that there is clear liquidity on the part of the corporation to satisfy its known obligations. That's what reserve funds do. In excess of $4 billion is being held to cover the outstanding costs that flow from known liabilities -- and that is what a reserve is.

F. Gingell: No, it's not.

Hon. A. Petter: Well, that's what ICBC's reserves are, hon. member. A rate stabilization fund is just what it says. It's a rate stabilization fund; it's not a reserve in this sense of offsetting against liabilities. It is a fund which builds up in time in order to assist in the stabilization of rates over time. That fund has been as low as $5 million three years ago; it has now built up to $364 million.

I agree with the member's analysis that it will likely be drawn down over the next year by whatever amount is incurred by ICBC as a loss over the next year, while ICBC, along with the government, goes through the necessary changes and initiatives in order to ensure that we can live within a structure in which rates don't constantly rise.

That is the function of a rate stabilization fund. If the rate stabilization fund just kept growing and growing and growing, it wouldn't be doing the function of helping to stabilize rates. It's here to help stabilize rates, and therefore, yes, it will be there to assist in the stabilization of rates this year. It is performing its function, and for that we should be grateful.

F. Gingell: Well, I would suggest to you in all sincerity that the word you're looking for in respect to the fund is just

[ Page 1242 ]

"investment." These are funds to pay known liabilities. Reserves are normally referred to for the purpose of covering future happenings and contingent liabilities. But these are unpaid claims. You've also got an amount of money, a billion dollars of premiums that you have received, for which you have not yet provided the service, and it is called deferred revenue. It isn't a reserve; it's a liability. If I were to cancel my policy tomorrow, you would have to refund me the amount of the unearned premium.

Earlier in the discussion, the question came up about earthquakes, and in the response from the minister, we discovered that ICBC no longer reinsures for excess claims. I think that's in the report. You have a fund of $360 million, which I know you've called a rate stabilization fund, that's going to come down to $250 million. Yet the Insurance Corporation truly believes that it would be in a position to meet its responsibilities if there were an earthquake? Now, this is just the damage to automobiles. The Insurance Corporation at the moment bases its premiums on historical evidence.

We haven't had an earthquake here that has caused damage to automobiles for many, many years. The last one I can think of was when Port Alberni got flooded from an earthquake up in Alaska. But we haven't had one in the lower mainland like they've had in Los Angeles. I don't know why they answered so confidently and so quickly that they felt they would be in a position to meet the liabilities that would arise from a massive earthquake in the lower Fraser Valley.

Hon. A. Petter: Well, on the member's first point, I'm not an expert in insurance -- I don't know if the member is -- but I'm informed that the term "claims reserves" is well understood within the industry, that these kinds of funds are referred to as reserves. The member doesn't like the nomenclature, I'm sorry; we could argue about nomenclature, but that, I understand, is the term. So I won't disagree with those who are more expert than I on this matter.

In respect of the earthquake risk, again the advice I received from staff is that the studies -- looking at the automobile component of damage resulting from an earthquake -- that are done by ICBC suggest that it's not justified to take extraordinary steps by the corporation or to provide for that risk, if that risk is one that can be satisfied by the corporation. What that would entail at the time and what would have to be done, I can't speculate.

But the rate stabilization fund.... If the member is suggesting that a separate fund should be established to provide for the risk of insurance, that re-insurance should be sought, I think there are a number of potential strategies. But I don't think that's the function of the rate stabilization fund. The function of the rate stabilization fund is to provide a cushion to ICBC in terms of trying to enable the corporation to pursue strategies that will stabilize rates. That's exactly why the fund is there.

That's why the fund will be of assistance over the next while, as ICBC and the government come up with strategies to try to reduce this steady increase in claims and rates that has occurred in the past. I agree with the member that we'll have to watch that. We do not want to see the fund drawn down to a level that's unacceptable. But certainly it is there to assist in rate stabilization; that's what it's doing.

F. Gingell: I think you will agree that the rate stabilization fund is, in other accounting terms or business terms, what we think of as being equity, its retained earnings. ICBC has retained the earnings year after year to create this fund, which you happen to have put a name on called rate stabilization reserve. But other people think of it more in terms of equity. I wonder if ICBC has, recognizing that.... I'm sure they would find it unsatisfactory for there to be no equity whatsoever, that their unpaid claims were equivalent to the money that they've got in the bank to pay them.

I wonder if ICBC have any target that they would like their rate stabilization, their equity or the difference between their assets and their known liabilities to be. You know, we get terribly concerned at Workers Compensation Board, and I'm sure ICBC was terribly concerned four years ago in 1992 when the rate stabilization fund was down to $5 million. I mean, action was taken to bill them quite substantially. Do they have any target, any number, that they're after?

Hon. A. Petter: I don't think there's any magic number here. The board policy, as I understand it, is to aspire to reserve funds in the range of 6 percent to 10 percent of total liabilities. The fund right now is about 8 percent of total liabilities -- somewhere in the middle. Remember, the dollars that come into ICBC that go into this rate stabilization fund are paid by current drivers and motorists against future risks or occurrences. There is some cross-subsidization there that perhaps might be of concern.

In addition, remember that this is a public insurer that has, in many aspects of its coverage, a monopoly. That provides certain advantages in terms of not having to have the same kinds of hedges that would exist if it were a private insurer operating in a competitive environment in the marketplace.

I think that provides some of the context and information the member was seeking. Historically, of course, this rate stabilization fund has dipped as low as $5 million. It's now up, relative to recent years, in a fairly high range, although the mid-range is what the board aspires to.

F. Gingell: The Select Standing Committee on Public Accounts, the council of deputy ministers and the auditor general, as you know, have been working on this report on enhancing accountability in the public sector, the intent of which is to hopefully free up management to act in a proactive manner and improve the operations of both ministries and Crown corporations.

[4:30]

When one looks at a Crown corporation like ICBC, their employees are covered or protected by -- and I'd like to use that word -- union contracts. Then there are a whole series of employees -- quite a large number -- who are not covered by union contracts, as I understand it. There is some risk in any of these programs, and one can understand that the people who are standing on the front line of such projects feel that risk. We don't want to do anything in any way that's going to discourage them from supporting these types of projects with enthusiasm and dedication.

I wonder, to assist in that feeling of comfort in relation to these types of projects, whether the minister would encourage the corporation to bring in or designate a -- what shall I call it? -- middle-management ombudsman so that middle managers had some representative they could go to -- not a union exercise, but some individual -- so that if they had concerns about some of the ways these things may work, they would have someone they would go and talk to, someone who would have the responsibility of ensuring that their interests were spoken for.

There's always a fear amongst non-union middle management that the people above them can do what they will with them, and the people below them are protected by contracts. I wonder if the minister could give me some assurance on this issue.

[ Page 1243 ]

Hon. A. Petter: I'm informed that there is a procedure -- harassment advisers, external to the corporation -- where there's any form of harassment in the broader sense; not just sexual harassment but other forms of harassment. There are avenues for managers and others to seek the intervention of those advisers.

I think the member is suggesting perhaps a slightly broader role for an individual or official, and all I'd say is I think it's been noted by myself and the members of the corporation, and we'll take it under advisement.

The Chair: I recognize the member for Delta South for some final comments on vote 29.

F. Gingell: Well, some final questions, hon. Chair. I was very pleased, when we were talking to ICBC, to ask them one month after the end of their six months how they've been doing. We got a good number. Perhaps we can ask the Minister of Finance the same question with reference to the consolidated revenue fund one month after the first quarter. Are we ahead of budget or behind budget? How are we doing?

Hon. A. Petter: I think we're all going to have to await the outcome of the first quarterly report to evaluate where we are at. I know that the ministry is evaluating numerous indicators, and that information is normally made available at the time of the first quarterly report -- about a month hence.

F. Gingell: There is one minor item that I've tried to deal with through the office of the legislative comptroller and the office of the comptroller general, without any success.

Someone, Mr. Minister, within your ministry, in the past year, has changed the makeup -- not the amounts, unfortunately -- and the information on our paycheques. The changes are a disaster, and I cannot understand how it managed to get through any committee group within your ministry. It's terribly difficult to understand exactly what the deductions are and what the gross calculations are,

whereas the previous form worked out fine. We all understood it.

Through the legislative comptroller and the comptroller general, and also having spoken to the person who's in charge of these things, I failed to get any agreement that they will re-evaluate the use of this new form. I wonder if I could get the minister to ask them to re-evaluate it.

[G. Brewin in the chair.]

Hon. A. Petter: Well, I guess the short story on this, as I understand it, is that the ministry, in an effort to move towards a more effective and efficient system, adopted what's called the CHIPS program, which it acquired from private industry. Wanting to save money, it acquired an existing software program. I understand that there are some shortcomings with the system originally introduced as of January, I believe. Some information that the member and others would like to see on the pay stub is not there.

My understanding is that there is now work being done to upgrade the software to ensure that this information will be provided, while retaining the benefits and efficiencies of this new system. Hopefully that information will start to present itself in the near future.

F. Gingell: Good. I'm really pleased to hear that, because I felt I was beating my head against a brick wall.

I know the auditor general must be feeling that he's beating his head against a brick wall. We have been talking in this House about a revision to the Auditor General Act, and we've been talking about it in the Public Accounts Committee on various occasions. The act is some 20 years old. My understanding is that the bill has passed all the exercises, and I would imagine it will be introduced by the Minister of Finance. I appreciate that estimates is really not the time to talk about future policy, but I believe that the policy issues have been dealt with.

So I would encourage the Minister of Finance to get the revisions to this act, which I believe have been drafted in pretty final form, brought forward. In fact, it would really be nice if it could be brought forward in this session of the Legislature. We've got things to do and the people's business to look after.

Both sides of the House are interested in the issue of accountability. We've just been through an election, and I would suggest that accountability was a big issue. This would be a tangible way for the government to show that they, too, care about accountability as much as the opposition does. I don't think any citizen in British Columbia questions our commitment to accountability. This would be your opportunity, Mr. Minister, to show that this government can also show some effort and energy towards this subject.

Hon. A. Petter: This is future policy, obviously, hon. Chair, but I appreciate the member's sentiments. I have been briefed in a very rudimentary way about this, and I have had a chance to meet with the auditor general. I want to be frank with the member: I think it's unlikely in the extreme that it will be introduced in this session. But I'm certainly aware of the issue and the member's concern, and I will bear that in mind as I pursue my responsibilities as the new minister.

F. Gingell: There is also another act which is past time for being reviewed, and that's the Financial Administration Act, a much more complex and wide-ranging subject. It would seem to me that an all-party committee, perhaps the committee on finance and whatever else is included within that category, would be the appropriate body. I would suggest that a revision of the Financial Administration Act should go through an all-party committee process first.

It will be a long time between the end of this session and the start of the next session, I would imagine -- four or five months -- and perhaps it might be an idea to get this review going. The starting point is perhaps to give that to a select standing committee of the House. They're all important subjects; they affect the way government operates. I would encourage you to do that.

The Chair: Hon. members, I might take this opportunity to remind all of us about standing order 61, page 107, which says: "Only the administrative action of a department is open to debate but the necessity for legislation and matters involving legislation cannot be discussed in Committee of Supply." I appreciate many ministers being open and generous about their time and all that work, but that is what the rules of order suggest. Minister, do you wish to say something at this point?

Hon. A. Petter: With that in mind, I'll simply say that I appreciate the spirit of the member's comments and have noted them.

F. Gingell: Thank you, hon. Chair, and I appreciate your generosity in allowing me to complete the statement, get it into Hansard , and allow the minister to hear it before you advised me I wasn't doing the right thing.

It's a quarter to five, and having got to this point, I'd be quite happy for the minister to call the vote.

[ Page 1244 ]

[4:45]

The Chair: Shall vote 29 pass? Oh, I'm sorry, Mr. Minister. You wish to address...? We don't need any more votes introduced at this point, because vote 29 is on the agenda.

Hon. A. Petter: No, I understand that. I just want to, in very brief form, thank the members of the committee for their questions and the constructive engagement. As a new minister, I think I have benefited tremendously from the experience of going through estimates. It's sometimes a bit of an excruciating experience, but obviously the Ministry of Finance and Corporate Relations is a large and complex ministry, and the associated agencies don't make it any less so. I very much appreciate the contributions made by members towards this debate. It's been of tremendous assistance to me.

I also did not want to allow the debate to close without noting -- and I'm sure members noted -- the number of officials who came and participated with me. This is indicative of the kind of support and talent that exists throughout government agencies. At times we, both from the opposition side and the government side, say things in this House that can be misconstrued as being critical of policy. But I hope it's never misconstrued as being critical of staff.

I've been very impressed, generally, in my time as minister in government, with the professionalism of the public service. I'm certainly impressed by the professionalism of the staff in the Ministry of Finance and the other associated bodies I'm responsible for. I very much appreciate their expertise, their integrity and their advice, and I look forward to continuing to rely upon those in the years ahead. I didn't want this debate to pass without acknowledging their efforts and contribution, as well. With that, I look forward to the vote.

Vote 29 approved.

Vote 30: ministry operations, $102,247,933 -- approved.

Vote 31: registries, $8,297,129 -- approved.

Vote 32: pensions administration, $10 -- approved.

Vote 33: British Columbia Utilities Commission, $10 -- approved.

Vote 34: product sales and services, $10 -- approved.

Vote 35: information technology services division, $10 -- approved.

Vote 57: management of public funds and debt, $1,001,000,000 -- approved.

Vote 58: contingencies (all ministries) and new programs, $51,000,000 -- approved.

Vote 59: B.C. Benefits, $143,149,000 -- approved.

Vote 60: corporate accounting system, $12,890,000 -- approved.

Vote 65: Public Sector Employers Council, $2,107,000 -- approved.

Vote 66: Public Service Employee Relations Commission, $12,450,000 -- approved.

Hon. A. Petter: I move the committee rise, report resolutions and ask leave to sit again.

Motion approved.

The House resumed; the Speaker in the chair.

Committee of Supply B, having reported resolutions, was granted leave to sit again.

Hon. P. Ramsey: I call Committee of Supply to consider the estimates of the Ministry of Forests.

The House in Committee of Supply B; G. Brewin in the chair.

ESTIMATES: MINISTRY OF FORESTS

On vote 36: minister's office, $432,868.

Hon. D. Zirnhelt: I'd like to introduce the staff with me: Gerry Armstrong, the deputy minister, and Harry Powell, the assistant deputy minister of revenue and corporate services.

It's a pleasure for me to make this presentation for the first time as the Minister of Forests. This portfolio has enormous responsibilities. Forestry, as we know, is the driving force in B.C.'s economy, yet it is an industry that is in a time of rapid change, facing complex issues and conflicting demands. My ministry's job is to work with a diverse range of stakeholders in the province to meet those demands, resolve those issues and cope with that change.

If the issues are complex, then the goals are simple: a growing industry, a sustainably managed resource, healthy ecosystems and more jobs for British Columbians. In my presentation today, I'd like to talk about our accomplishments to date in meeting those goals. I'll discuss some of the complicating factors the industry and my ministry must deal with, and I'll address some of the specific points in our new allocation. I'll look at some of the challenges and opportunities that lie ahead for forest workers, companies and communities.

I believe what emerges from this overview is a dynamic industry that is doing well for British Columbia and is poised to do better in coming years; a ministry that is determined to get the most jobs possible out of that industry, both for today and for generations to come, by managing the resource responsibly and sustainably; and a province of stakeholders working together in communities across B.C. to find new solutions to the industry's changing needs and to make the most of our natural wealth.

First, the accomplishments. The Forest Practices Code is probably the most important progress that we've made in the last year. The new body of legislation governs all aspects of forest management on provincial Crown land. According to an independent study, the standards and procedures the code lays out give B.C. the most comprehensive forest practice law among the 14 leading international jurisdictions in the survey.

The code is helping to secure four things for British Columbia. First, it's securing forests for the future by requiring practices that keep the forests sustainable and productive. Second, it's securing other industries, such as fisheries and tourism, by ensuring that the forest practices in B.C. protect riparian habitat and viewscapes. Third, it's securing a healthy environment by protecting ecosystems and non-economic values. Fourth, it's securing markets in Canada and abroad for B.C. forest

[ Page 1245 ]

products, because the Forest Practices Code is rebuilding international confidence in our province and in the way we manage our forest resource.

That's why I'm pleased to see that so much progress has been made to date on implementing the code. The act and its 18 attendant regulations are now in force. Some 15,000 people have been trained in the code's requirements, and we've published almost two-thirds of the guidebooks on management standards.

As members may be aware, the code requires substantial compliance as of late last year and full compliance by 1997. The code means substantial changes, and we're committed to working with the industry and with workers to ensure a smooth transition. The Forest Service is working to implement the code in a way that limits its impact to a maximum 6 percent reduction in B.C.'s timber harvest over the next ten years.

The timber supply review is nearing completion. It's the first ever comprehensive review of every tree farm licence and timber supply area in British Columbia. For the first time, we'll have up-to-date, accurate information which will ensure that cut levels truly reflect what the resource can sustain. The code and the timber supply review are providing certainty by securing the resource. Our land use planning process is providing certainty by securing a land base. There are now land use plans in place on Vancouver Island, in the Cariboo-Chilcotin and in the Kootenays.

There is also a subregional land use plan for the Kamloops area, and land and resource management planning processes are underway in 13 more areas. The result is greater certainty for industry, less conflict and a more secure future for the people and communities that rely on forestry.

I'm also pleased to say that this government has been working hard to revitalize the industry itself through our forest renewal plan. This plan has resulted in the creation of Forest Renewal B.C., an agency composed of representatives from government, industry, workers, communities, first nations and environmentalists. Forest Renewal B.C. is making investments in everything from reforestation to retraining, from watershed restoration to value-added processing.

The government is proud to be a partner in Forest Renewal B.C. It's part of our commitment to keeping the industry at the forefront of B.C.'s economy and a leader in the global marketplace. We've taken steps to minimize the impact of urban development on forest land. In 1994, we established a forest land reserve to protect the province's forest lands from conversion to non-forest uses. Subject to the Forest Practices Code, the reserve includes private lands classified as managed forest lands. We have established the Forest Land Commission to review and assess requests from owners of private reserve lands who wish to remove lands from the reserve.

[5:00]

We have made important progress in our relationship with B.C.'s first nations. My ministry has provided important advice and information to government as it negotiates with first nations. We've also provided training on the Forest Practices Code to first nations peoples. My ministry has worked hard to develop a healthy working relationship between the Forest Service, first nations and affected third parties while agreements are being negotiated.

The recognition of the rights and valid interests of first nations is a relatively recent development, and it's only one of the many changes and challenges facing forestry in British Columbia today. We now manage our forests for a wider variety of values -- economic, but also cultural, historic, recreational, social and environmental. That has meant big changes in the industry and equally big changes for the ministry.

Despite those changes, our staff is committed to ensuring the wood continues to move from the forest through the mills to markets. I know that there are those who think the change is happening too slowly, but the reality is that we must ensure sustainability. When we don't, B.C. has learned the hard way that we pay a steep price in lost jobs. Sustainability demands careful planning, input and preparation before the cutting permits are signed. The ministry has changed to meet the changing needs of forestry in B.C. and to reflect the new realities of the Forest Practices Code and other initiatives.

We are one of the most decentralized organizations in government. About three-quarters of our staff work in the forest districts and regions rather than in Victoria. We face an additional challenge on the fiscal front. People have made it clear that they are concerned about the cost of government. The Premier has responded with initiatives to bring that cost down, and my ministry will play its full part. We've streamlined our forest fire fighting capability, and we've used our reforestation resources more effectively. We're focusing resources in areas that offer opportunities to generate revenues.

One of these areas is the small business forest enterprise program. We've recently retuned this program to put greater emphasis on creating local jobs. I'm optimistic that as the program adjusts to that change, we'll soon see more timber heading out the door and more sales processed.

I mentioned the fiscal challenge, and that brings me to the spending allocation for 1996-97. Members will note that it is reduced a little this year, by some $56 million. Twenty-three million of that amount is in imposed reductions -- savings that the ministry is already working to find. But a bigger share -- $33 million -- is as a result of the end of FRDA, which is the forest resource development agreement that British Columbia has with Ottawa.

Most of our needs under FRDA have now been met. We've changed legislation to improve the way we manage our forests, and the code is bringing further improvements. We will continue to meet stand-tending goals, and Forest Renewal B.C.'s enhanced forestry program is making a major contribution. We've made a solid dent in the reforestation backlog, and we'll keep making progress. It requires tough choices in regard to balancing investment and maintenance, but we are committed to putting resources where they're most needed.

We do face significant fiscal, administrative and policy challenges in the coming year, but I have to say that I feel tremendously confident and optimistic about the future. The new five-year agreement on softwood lumber exports holds out the prospect of smooth relations with our trading partner to the south. Our improvements in forestry practices are helping us secure markets at home and abroad. Now we have to join the domestic and global efforts to develop an international system of certifying sustainable forestry to make it clear to every jurisdiction that good forest practices are also good business practices.

There are important new initiatives coming on line in progressive forestry management. We have new, innovative harvesting techniques like underwater salvage; I had the pleasure of announcing such a project only a week or so ago for the Nechako reservoir. Bill 7, which recently passed third reading in this House, encourages pilot projects that offer companies an increase in their allowable annual cut in exchange for enhanced forestry commitments -- meaning a healthier resource, a greater yield and more jobs. We have

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exhibits travelling the province that showcase innovative forestry products, from model homes to fine furniture and musical instruments. It's an exciting time for forestry in British Columbia, and full of opportunities and possibilities. I intend to see our province make the most of those opportunities, because the most valuable product that comes out of the forest isn't timber, but jobs, and these jobs sustain families and support communities throughout B.C. There are 15,000 more jobs in the forest sector today than there were five years ago, and we've gone from about 1.2 jobs per thousand cubic metres to 1.4.

That's an impressive record, but it's only a start. British Columbians expect us to get more jobs out of each tree harvested on public land. That's why earlier this year the Premier set out a target of 21,000 new forest sector jobs in the next five years. To help us reach that goal, we are laying the groundwork for a jobs and timber accord through the Forest Sector Strategy Advisory Committee. That committee is a partnership between our government and B.C. forestry stakeholders -- the same partnership that helped create Forest Renewal B.C.

Our government's commitment to an expanded value-added wood manufacturing sector will help us reach that goal as well. We've announced a strategy to address the three issues that have helped back the value-added sector's growth: access to wood, skills training and business development. That strategy will allow us to process more B.C. resources in more B.C. plants and create more B.C. jobs. Forestry has long been the driving force for the B.C. economy, and now we're poised on the verge of a whole range of new opportunities for sustainable growth and good, family-supporting jobs.

We're making solid progress in renewing the resource and revitalizing the industry, and I look forward to building on that progress in the coming year with a valuable resource, a dynamic industry and a government that's committed to jobs, growth and sustainability.

T. Nebbeling: I too look forward to some good dialogue and question periods in order to see how we are dealing with the future of our forest. I tried to make some notes during the brief statement by the minister. First of all, I should say that I don't know if it is a tradition, but when the Minister of Finance presents his budget, the first thing he does is show us his new shoes. I noticed that the Minister of Forests had a haircut and a newly trimmed beard. Had I known, I would have had a haircut, too.

Interjection.

T. Nebbeling: So that nobody will recognize you.

The first statement made by the minister was that the forest and the forest industry are in transition. Obviously the objective for the ministry must be that it will create stability and sustainability for the forest, the communities and the people working in the forest industry. I do not necessarily agree with many of the mechanisms, which the minister has quickly explained will be part of how these goals will be achieved. The one thing I have in front of me all the time when I talk about the forest industry is: where will the Forest Practices Code, as the minister spoke about, take us in the long run?

The opinions in the communities are certainly different. While the minister feels that it's an exciting time and many good things are happening, in the communities that rely on the forest industry, or on the resource industries, there's a lot of uncertainty about their future. I hope, as we go through the exercise in the coming days, that we can give these communities and the people working in the industry a level of more comfort than they have today.

The Forest Practices Code. We hear a lot about the Forest Practices Code, and in the industry there is a tremendous number of questions. No doubt we will spend a lot of time on the basis of these questions, why people are concerned and what kind of direction we can give to answering these questions. Without answers, I don't think we are going to find that harmony and peace and feeling of certainty that people are looking for.

The timber supply review. Again, that's an area the minister very proudly talked about -- that this is indeed going to be part of securing a long-term future. But if there is one thing wrong with the timber supply review, it's that there is very little focus on the presentations of the cuts that have to deal with the people who are affected by it today. I hope we can spend a considerable amount of time dealing with the social and economic consequences that will affect the communities in these areas where the timber supply review clearly projects serious cuts.

The Forest Land Commission. I hope I can ask a fair number of questions on that one, because that commission obviously plays a major role in dictating the land uses and everything. I'm not fully aware of how that all works, and I hope we can spend some time on that as well.

First nations. There is no doubt that the treaty discussions that are taking place are going to have a tremendous impact on how our forest industry will continue to flourish in this province, with the consequences of land claims. I hope that we are going to get some answers from the minister there, as well. Again, in that regard, I hope that the voices of the communities that are affected by these decisions will somehow be heard -- something that is not happening, I believe, by the system which is excluding communities from speaking up about their own concerns.

Physical challenge. Yes, there will be a physical challenge, and in particular there will be a physical challenge for a group of people that was not mentioned. But the minister did mention the program that has sustained that group of people over the years, and that is the FRDA program. I believe you stated that $30 million will no longer be available through the FRDA program. I take it, then, that Forest Renewal B.C. will take over that funding.

We discussed the bill last week, where forestry workers who are out of work will be given preferential treatment in jobs that are financed by the Forest Renewal B.C. program. If FRDA is not going to come up with that money, then I can see all the silviculture activities in this province being under Forest Renewal B.C., thereby putting the traditional workforce in the silviculture area under tremendous pressure, with a big chance that many of these people will no longer have jobs.

I should tell the minister that in the last two or three weeks I have received a fair number of letters and phone calls from small companies, employing 20 or 25 people, which this year have not had one contract. What the reasons are, I