Volume 2 PROVINCE OF NEWFOUNDLAND THIRTY-SIXTH GENERAL ASSEMBLY OF NEWFOUNDLAND 2nd Session VERBATIM REPORT Friday, March 30, 1973 SPEAKER: THE HONOURABLE JAMES M. RUSSELL Number 41

March 30, 1973, Tape ~24, Page 1 -- apb The House met at 3:00 p.m. Mr. Speaker in the Chnir. !fR. SP~~ Order please! MR. ROBERTS: Mr. Speaker, under the rules of the House I am required to give notice of a question of privilege at the earliest possible opportunity. In view of the fact that the ~inister of Finance will be makinp. his Budget Speech today, I do not propose to press at this time a matter of privile~e but I must give notice now and not have slept on my rights that the Premier's statements made yesterday with respect to the resignation of ~r.

Cheeseman, the former member for Hermita~e, constitute in my view a breach of the privileges of this House and if they were incorrect statements - I do not want to pursue it now but I give notice so that when I do take it up,in as much as they affect my colleague the member for Bell Island, I give notice now so that when I do take up the matter I will not be in a position of having slept on my rights.

ORDERS OF THE DAY: 1-':R. 1-'AASHALL: 1-'otion VI. !'fR • _ _§PF~AKER_:_ ?-fotion VI; the honourable the Minister of Finance to move that the House resolve itself into a committee to consider ways and means of raising the supply to be r,ranted to ffer 1fajesty. HON • . J .r. .CROSRJF. (MINISTER OF FH!ANCF.): Mr. Speaker, it is my honour as Uinister of Finance to present the second Ruclget of the Pro1;tressive Conservnt:lvc C.overnment of Newfoundland and I.abrador. This budget covers the fiscal year that ends Mnrch 31, 1974 and marks a transitional period :In the financ:lnl mannr.ement of this Province.

It reflects the determined and responsible approach which this C.overnment is taking and will continue to take in the management of the Province's finances and resources. 3227

'1-farch 30, 197 3, Tape 924, Page 2 -- apb The past year has been a difficult and often times frustrating period. We have strugr,led h.nrd to hrin~ under control the present financial position of this Province. At the snme time we undertook new programmes and courses of action while attempting to investigate and plan in a meanin~ful w;1y for the future. This Budget will provide the people of our Province with a review of many of the events of the past year and will also provide the framework of this Administration's objectives and programmes for the coming year.

It is presented at a time of great international and national monetary uncertainty and economic and social change. While we have been able to slowdown the growth rates in some of our problem areas, three of the central problems facing us in '. 972 are still with us:

(1) Increasing levels of expectation by the people of Newfoundland.

(2) Rnpidly increasing public ~xpenditures; and

(3) Persistently rising costs and increasing unemployment. ~y first Budget took the initinl. !ltep and a new npproach to financial administration of this Province. Studies hRve been undertRken in our financfal position and pr:forities estahlished for the deployment of our available resources. This Government has placed much emphasis on the restructuring of the vital administration Rector of our economy, the Public Service; and has followed its ob.1ectives of rural economic development, renewed emphasis on our fishinp, industry, and the control and management of our natural resources.

This r.overnment hns also laid important r,round work in the areas of our tourist industry, industrial development and the potentif!.l central thrust of our future ecC'nomic and social dev£>lopmcmt, the offshore oil and p:aR industry. The Buclr,ct documentation consistn of (

i) the ERtimntes for 1973-74, (if) the Snlory rstimntcR of the variouR r.overnment Departments for 197 3--74, nncl (iii) the J\udp,et Speech. Included in the Rudp.et SpE-ech docu~ent are supplements that outline the current stntus of the offr.hore 3228

~arch 30, 1973, Tape 924, Par,e 3 -- ?Pb oil and gas industry, prop,ress on the Come-by-Chance Oil Refineries and Labrador Linerboard Limited. and an economic review and outlook for the Province. First; what was the performnnce in 1972-72? In last year's Budp.et this Administration established a course of action which contained Revera! sirnificant comroncnts. I will briefly r£'vfc-w ancl evnlunte the most importt1nt ones.

(1) Despite many requests for exemptions from various provincial truces, this Administration has maintained its stated policy of ceasing the porlific, costly and inefficient practice of tax exemptions. We have refused to allow additional tax exemptions, a policy that will benefit the Province suhstantially, especially with respect to the sales tax and the rasoline tax. The re-nepotiated Newfoundland Forest Products ap.reement and the agreement for the proposed second oil refinery at Corne-by-Chance are two examples·of this chan~e in policy.

(11) The Government commissioned ~nd has received a report on the status and condition of all Government leased premises in the Province. This important document establishes the current position of Government and provides the basis for evoluatinp all future lease proposals and the possible revision of others as the terms become renewable.

(111) Another area of action has been :In the reviewing of industrial loans, grants and guarantees. The evaluation of previous policies and the compil inp of accurate centralized data has been a major task. This Ad~fnistration has taken constructive steps to ccntr::11.ize sir,ninf', power on these pror,rmr.mes w:f th the 'Minister of F:fmmcc and to expnnd the 1,oan, r.uarnntee nnd Dcht 1'f1mar,eT11ent Division. In addition we· have exnmincd all nreas where defaults hnve occurred and :In each cnsc corrective action has either been taken or is in pror.ress.

A consJstcnt but flexible set of policies for all loans. r,rnnts nnd r.unr:mtees is bcinr. develop <;d. (lV) The co-ordination of prop.rammcs ~nd activities with the nnn9 .,} G '-

~arch 30, 1973, Taned 924 - 5, Pap,~ A -- apb Government of Canada is pror,ressing favourably. The various planning task forces each have Federal representation and various line departments have expanded and improved their communicaticn and relationships with the relevant sectors of the Government of Canada. In addition,we have completed a review of all Federal-Provincial programmes. A catalop,ue of all of these progral'1!lles, the ob_1ectives and major characteristics of each,and the communication contacts with the Government of Canada has been published. (

V) The Newfoundland LiQuor Co111111ission has been thorou~hly reviewed since my last nudr,et and I.ep:islation is now ready to be presented to the House of AsBembly to create the Newfoundland Liquor Corporation, to revise the Alcoholic Liquors Act snd to crtiate the Newfoundland Liquor Licence Board. The top management for the new corporation are already in their positions and they will be respons~ble for the improvement of operational and management activities in merchandising and distribution.

The Licence Board will be responsible for all aspects of licensing in the Province and for the major responsibilities of inspection and enforcement under the Liquor Control Act. (Vl) The final major component in the stated course of action of last year was the review of policies governinp. the grantinp, of permits for oil exploration and the implementation of activities to ensure that this Province will rC'ccive the maximum benefits of the exploration for and the anticipated discovery and production of hydrocarbons.

At the date of my last Budget the Government's review of the situation existent at that time had not been completed. I am pleased to say that the Province has now completed its review and is in the process of seeking to attain its goals. The current status of the offshore petroleum industry with respect to our policies and procedures, the recop,nition of prior claims, the acrrape 11nder intrrim permit, the ultimate potcntinl and the nresent nr~otintion~ J,y thr five rnstcrn ProvincPs with thr rovernment of rnnada is covered in detail :In Supplement Three in the Budp,et Speech. 3230

March 30, 1973, Tape 925, Pap,e 5 -- apb Now I wish to review our finances for last year, the year that will end tomorrow: In my Budget Speech of last year I promised that budgetary procedures would improve with the change of p,overnment. It was stated that the policy of the Pror,ressive Conservative Administration would be to present realiRtic expenditure estimates to the House of Assemt>ly and to control rigourously departmental expenditures durinp. the fiscal year. This would menn a restricting of the use of Special Warrants except in the most serious and urr,ent circumstances.

I further stated that suggestions for increased expenditure on either capital or current account in the 1972-73 fiscal year would receive little sympathy and that the success of this approach would be revealed in the Supplementary Bill for 1972-73. On Current Account in the year just ending: The revised fir,ures, which are subject to review, disclose a current account deficit of $5.9 million as compared with a projected deficit of $3.2 million in last year's esUinates. The following table summarizes the revised expend:lture and revenue estimates for this year as compared to the original estimntes.

This is current account: We estimated that gross current expenditure would be $404.7 million, the revised estimate is $400.9 m:1.llion, that is a difference of $3.8 milHon. We estimated that Approoriations-in-Aid would be $90.3 l'l'lillion 1 our revised estimate is $85.2 million, so that the difference is $5.1 million. Appropriations­ in-Aid were down. We estimated that our net expenditures this year would be $314.4 m:!Jlfon, they were actunJly $315.7 million for a d:lffrrenc<' of only $1.3 million.

On the revenue side, we estimated our revenue at $311.2 million, the rev:lsed ~Atimate of our revenue is $309.8 mJll:fon for a di.ffl'rcnce of $1.4 mill:lon. Thus, we estimated a possible drficit of $3.2 million, ~ur reviRed estimate is that it will be $5.9 inillion. 3231

March 30, 1973, Tape 925 -- Pa~~ 6 Now. Mr. Speaker, the deficit of $5.9 million in current Account Wftft R disRppointment because we hoped lo end the financial year with n smRll aurplus. Thia ob1ective was within reach because revenues and expenditures appeared to he in balance nnd under control. However, durinr. this fiscal year the Province was informed by the Government of Canada that the tax equalization payments for 1972-73 would only be $114,447,000 instead of the $120,000,000 which we had estimated.

This decrease of about $5.6 million represents an adjustment of prior year's payments and virtually eliminated the possibility of an eventual surplus in 1972-73 \1hen we have the final figures. It is important to notice the reason for this ad.1ustment. The ma.1or reason for this lnrge shortfall in tax equalization payments was the strength of the construction sector in the Province in 1971. The Federal r.overnment underestimated conntruct:ion activity and therefore overest1.r.i.1ted the amount of tax equal:fu1tfon for the Province under the sales tax component of the tax e(Jua.l:bmtion formula.

Under normal circumstances increased construction activity would mean a considerable increase in provincial revenue from our o\m taxes ~,hich would offset the decrease in ecualization. (That is the theory the formula is based on.) However, this favourable effect did not occur because the major construction projects includin!!; the lipper Churchill, The Oil Refinery and the Liner~oard Mill had all been ?,iven exemptions from the pnyment of provincial sales tax durinr- construction and the Church1l 1 Fctlls pro .1cct al.so had an exemption from th<' payment of gnsolinl.' t;ix.

Had those pro .1c>cts hcen taxable J est'imate that tnx revcnuP.R would have heen ctbout $10 million more thnn they actunlly were. This woul,l havr more thnn offRct nny unfnvourab]e ('ffects on the • eoualiu1t1on f•ntitlemrnt. This fnct amply 1t,st:1f1cs our policy of .: rcfusinr- such tax exemptions in future. The Province cannot nfford them, Capital Account 1972-73: Our revised estimates reveal an overall expenditure incrense 3232

March JO, 1973, Tape 0 25, rn~e 7 -- apb of $14.3 million compared with the original estimates. A major reason for this difference was an underestimation in last year's estimates with respect to Labrador Linerboard ~ill renuirements. An amount of $40 million was shown for this operation at Stephenville but in fact the revised fip:ure was $67.6 million, or an increase of $27.6 million. In addition, payments for Issues Under r,uarantee increased by $4 million and this combined with the amount for the Linerboard ~ill meant :fncreased expenditures of $31.6 million on these two items.

These increases were partly offset by undercxpenditure of $7 m:f.llion on the l!ealth Sciences Complex, $3 .3 million on Education Development, $2.7 million on Industrial and Residential Servid .nr,, $1 • 4 million on Fishery Capital Works and S l . 4 million on the Twillingate Hospital. The comparison of the orip.inal estimates and the revised estimates are in table (II): In gross expenditure on capital account, we estimated $184.5 million, the revised estimate is $198.8 million, that is up $14.3 million.

In Appropriations-in-Aid, we estimated $48.7 million, the revised estimate is $40.7 million, the difference there is $8 million. We estimated a net capital expenditure of $135,8, the revised estimate is $158.1 million or a difference of $22.3 million. Now I want to speak about our financinp, in 1972-73: The total borrowing reouirel'1ents of this Province in 1972-73 was $204 .1 million.

This amount includes the $5. 9 million deficit on current account, $158.1 million in capital re~uirements, $28.4 million for boncl Tedemptions (that iR to re>decm borrowi ,nr.s incurred in past years) nncl $11.7 mill:lon for sinkinr, fund payments to meet de>ht as it comes due. The re(Ju:lremrnt of ~204.1 111Hl.ion was f:lnnnced in this way; from the Canadn Pension Plan we borrowe>cl ~~9 million, from DREE loans $13.6 million, from special loans $4.7 million, f~om capital market operations $155 ~illion and we had available cash balances of $11.8 million. We 3233

March 30, 1973, Tape 925 - 26, Page 8 -- apb elso ~uaranteed a $15 million bond issue for the Newfoundland ~unicipal Financing Corporation and $15 million bond issue for the Newfoundland and Labrador Power Commission. The Province, Mr. Speaker, borrowed in the capital markets of Germany, Japan, the United States and Canada durinp, the past year. Of this total of $155,000,000, $55,000,000 was borrowed successfully in Canada which is an encourn~'f.np, chanii;e from recent years and showed the confidence of the Canadian Invest·or in this Province and this Government.

However, the debt of the Province durinr, the past year increased by $118,710,000 from $1,026,000,000 (I will ~ive the round figures) from ?-'arch 31, 1972 to $1,144,520,000 at ~arch 31, 1973. (Exhibit 1 contains the situation as of the last five years) During the past year $30,400,000 of outstanding debt was redeemed, approximately $16,500,000 worth of debentures were purchased for the sinking fund, and short term bank loans and treasury bills were reduced by close to $37 million.

It should also be noted that $85 million of the $191 million increase in direct debt resulted from the transfer of guaranteed debt of the Javelin Companies in the Linerboard complex. The net decrease in guaranteed debt for the year was $70,886,000, lowering the total of guaranteed debt at ~arch 31, 1972 of $397 million so that it ended up at ~(arch 31, 1973 at $327 million. Suppletnentary Supply: The Supplementary Supply Bill for 1972-73,which was passed by the House in February, revealed a sip;nificant financial accomplishment durinr, the year. The total Eupplementary supply npnrov~d wns only $7,686,000.

This amount is the lowest supplementary supply requJr~mcnt since lQn0-61 and sn even more si~nificant fact, ~r. SpeskPr, is thnt as a pcrcentar,e of total gross expenditure the ~upplementary Sunnly Bill for 1972-73 was the lowest since Newfoundl;md .1o1ned Conferlerat:1 ,on. It wns a terrible strupple for my colleagues but they nll co-operated. F.xhibit 1\01"1,. .:, (.., ,) Lj

March 3n, 197), T~pc 926, Pa~e 9 -- apb II to the Budget illustrates this point in detail. Table III shows the supplementary supply required for the last ten years and what supplementnry supply was LJ a percentage of gross expenditure. I will not read it all now but,for example, in 1962-63, supplementary supply was $20,527,00 or 15.6 ~ercent of our gross expenditure. In 1966-67 it was $54 million or 21.4 percent. In 1968-~~ it was $22,999,000 or 7.0 percent and so on, so that we this year had only $7,686,000 or 1.3 percent.

I should t>Oint. out that it is my intention to continue to restrict the use of Special Wnrrante except in the most extreme and essentinl circumstances and that ft is my objective to present an even smaller Supplementary f>upply Bill for 1974.

In concludinr, this review of our financial performance last year, I have to say that I am pleased with the accuracy of our estimates, with the Government's ability to control expenditure on both current and capital account as is shown in the Supplementary Supply Bill and with the confidence displayed by the financial markets of the world in the Province of Newfoundland as is evidenced by our successful borrowing pro~ramme. ~r. Speaker, one of the most sir,nificant pieces of ler,islation which will be presentpo to the llouse this Session,in my view, is a new Financial Administration Bill.

This Bill will amend and consolidate the law rPl a tin~ to pubU.c revenue and eXPendi ture, the raising of loans and the auditinr. of the public accounts. In other words, it is to replace the Revenue and Audit Act. A major provision in the new Bill is the restoration of control over the horrowin~ power to the House of AsseMbly, with the re-introduction of an annual Loan ~ill to control Provincial Borrowinr,s within amounts approvC'c.l by the Legislature. This has not been necessary since 1966.

With rcspC'ct to the auditing of the public accounts it has been the cnse durinr. the p:ir:t Aevrral yrars th!lt the Auditor r.eneral's report 3?.35

~arch 30, 1973, Tape 926, Page 10 -- apb ha• been critical of many aspects of the financial rnana~ement of the r.overnment. As the Minister responsible for the two administrative sections of r.overnment most directly involved, that is the Treasury Board and the Department of Finance, it is my responsibility to resolve the issues that have been raised by the Auditor r.eneral.. The new Financial Administration Bill should facilitate the correction of many of these issues, particulArly those resulting from differing

interpretations of the Revenue and Audit Act. The Planning Task Force: I have already stated, ~r. Speaker, that durinp. our first year much emphasis was placed by the Premier and his r.overmnent on the restructuring of the administration of this Province through the ,-- : 0 • Public Service. In addition to restructuring I would like to refer to the work of the Planning Task Force established last sul'lffler. This ad~inistration has deliberately given little publicity to the work of the Provincial Planning Task Force because we believe that publicity about plannin~ is not a substitute for planning.

We are very copnizant of the link between government planning, government policy and pro~rarnme formulation and government financing. The Planning Task Force studies are proceeding favourably w:f.th the following objectives:

(1) We wish to establish a comprehensively planned approach to the development of the Province and each of its ma_1or economic and social sectors, coverinp a five to ten year period; (2) we wish to establish Government policies that will allow the people of Newfoundland to develop their own personnl excellence within the framework of own distinctive quality of life; (3) we wish to encourar,e the highest possible level of employment: (4) we wish to estnhlish a rensonAhly enuitable distribution of risinp. income: inclurlinr the increasinr of earned income to people in t·he lower income j!:roupR: (5) wr t-r.rnt to dc>vc1op all resources of this Provincl' to their 3 ?.')6 ,.., rJ )

March 30, 1973, Tane 926, Page 11 -- apb highest possible point of efficiency with a view to cncouragin~ growth and encoura~inp. rreater returns to labour through increased productivity. These are the objectives of all these task forces. It would be premature to expect this Budget to reflect the final results of this planning effort. Nevertheless, the Bud~et demonstrates the attitude and the direction which the r.overnment has for the broad development oh1ectives which are bein~ planned. It also reflects in a very real and positive way the selectiryn of certain policies and programmes for action, because, Mr.

Speaker, it is quite obvious we cannot do all that is needed at once and we cannot fulfill all that is desired. Our Fiscal Objectives are these: One of the basic objectives of the Government in this Province is to provide the social services that the people expect as citizens of Canada in as efficient a manner as possible. In 111any respects, Mr. Speaker, we are catching up with other parts of Canada. For example, we no lonp:er have the lowest per capita incomes, that is now the role of Prince Edward Island. However, to achieve this objective, Government spending has been extremely hiv;h.

This is evidenced by the fact that the Newfoundland Government thi6 present year spent $1,037 per capita, per person in this Province as compared with the national avcrap.e expenditure of only $824 per capita by Provincial Governments generally. In other words, the Newfoundland Government spends more per capita than any other Provincial Government. We must face the fact that our revenue potential is below the national provincial avera~e because Newfoundland incomes are still below the national avera~e. The net result of this is that the debt of this Province in recent years has increased substantially.

The Fiscal ob_iective of the Government in the next several years is and must be to curtail the rrowth in expenditures and hence horrowinr. Note, ~r. Speaker, that I hAve not said that we are goinr to cease borrowin~, 1-t is to curtail the growth, the rate of growth must be curtailed. It htH1 brc-n curtailed this year.

~Arch 30, 1973, Tape 926, Page 12 -- apb Newfoundland cannot continue to outspend and outborrow, on a relative basis.every other province in Canada, and strict expenditure controls will be imposed to ensure that our financial standin~ is improved. The Provincial Economy: One of the supplements to the Bud~et is an economic review and outlook for the Province. I just want to mention here that all sectors of our economy in 1972, with the exception of the fishery, advanced at a strong pace. Our gross provincial product increased by 11 percent to reach $1,540,000,000.

Once we discount this for price increases, the real gross provincial product increased by, six percent as compared to 5.5 percent for Canada as a whole. This marks the fourth consecutive year that economic growth in Newfoundland has outpaced the nRtional averap,e. I mi~ht say as Rn aside, Hr. Speaker, that the reason why the fishery has not advanced at this strong pace ie that landin,s are down very considerably, although prices are up very considerably. The level of unemployment continues extremely high in this Province.

In February the unemployment rate in Newfoundland was lt-.2 percent as compared to 12.6 percent for the Atlantic Area renerally and 7.3 percent in Canada. It should be noted in this res~ect that the labour force, the number of people in the labour force in this Province increased by 13.8 percent in the 3238

March JO, 1973 Tape no. 921 Page 1 - MRW last year from February, 1972 to February, 1973,while the number of new jobs created increased by 12.4 per cent, During the same period the number of new jobs created in Canada as a whole increased by only 4.5 per cent. In other words, Mr. Speaker, we had a very considerable increase in the number of new jobs created in this province. Our labour force is increasing at an even more rapid rate. The creation of more employment opportunities remains a central objective of this administration and every effort is being ade to create as many jobs as possible.

We have to recognize that a province such as this does not have the fiscal capacity by itself to cope adequately with the unemployment problem. That problem is a national problem and only the Government of Canada has the fiscal capacity and financial and monetary means to deal effectively with unemployment, In Tfrf first Budget I stated our objectives for the economic development of this Province. The industrial base of our econOTlrf has traditionally been small and cyclical while Government involvement in planning and promoting development had been on an ad hoc and overly generous basis.

We are emphasizing development of our natural resources. We realize that in Newfoundland and Labrador the Govetnment often is the only agency with the capital resources or credit, and the expertise to initiate major industrial projects, We have, therefore, become deeply involved in development. On July 17th, 1972, after many months of negotiation, the Agreement establishing the Newfoundland and Labrador Development Corporation was finally signed by the Government of Canada and the Government of this Province.

Since that date the Board of Directors has been appointed and the first President has been selected, This Corporation is to operate as a venture capital agency which will assist financially small and medium size businesses and attempt 3239

March 30, 1973 •Tape no. 927 Page 2 to improve their operating capabilities. lt will provide capital assistance, management advisory services and industrial information. The Corporation has initial financing available from both Governments for projects, if approved, totalling $22,000,000. It is, therefore, up to our small and medium size businessmen to come forward with enterprises that will meet the tests of feuibility,and apply for assistance if they need it.

The Government created the Rural Development Authority in August, 1972,aa a reault of our realization that thia Province ha many individual small business opportunities in the rural areas. The objective of the Authority is to promote, finance and assist to varying degrees the small businessman in labour-intensive industries in the rural areas of the Province. 'We want to develop the rural areas and to help people who live there.

The total approved loans to date amount to $2,279,000 and this has resulted in 1,370 job positions in businesses ranging from medium to small sawmill operations, boat building, cooperage operations, casket manufacturing, handicrafts, and flower nurseries. The initiative of these small businessmen and the success of this service to date has led to our decision to make funds available to the Rural Development Authority in 1973-1974 totally $2,500,000, if necessary and if there are enough worthwhile projects that could be increased.

A further bright spot in the industrial development of our Province is evidenced by the turn around in the prosperity of the Harystown Sh'ipyward. During this year the Government terminated the agreement whereby an Israeli Company I Pan Maritime S .A., managed the _opera.tions of the shipyard. The Government created a Crown Corporation. Maey,town Shipyard Limited, and now entirely owns and operates the shipya ·rd. ,., ') t 0 1) J ' l

Karch 30, 1973 Tape no. 927 Page 3 Under revitalized management the shipyard completed two 165 foot stern trawlers this year and currently has two similar vessels under construction. In addition, the shipyard is constructing three sixty­ five foot steel longliners for the Department of Fisheries. This progress in ship construction has been assured for the foreseeable future by the recent announcement of the Government that a $10,000,000 two-year contract for the construction of five stern trawlers has been secured.

In addition to these successes the Department of Industrial Development is studying the expansion potential of the shipyard. It is significant to note, Mr. Speaker, that during this year the Marystown Shipyard produced a profit before depreciation for the first time in its history. This estimated gross profit of $200,000 does not, however, provide for principal repayment or interest ~s~. On lebruary 26th., 1973, Mr. Speaker, the Premier, hon.Frank D.

Moores.announced to the House of Assembly that the Newfoundland Government had entered into an agreement with Newfoundland Refining Company Limited and with Shaheen Natural Resources Incorporated to provide for the establishment of a second oil refinery at Come-By-Chance to be owned by a company known as Newfoundland and Labrador Edison Company Limited, a subsidiary of Shaheen Natural Resources Incorporated. This oil refinery will be a three hundred thousand barrel~a-day refinery producing low sulphur fuel products.

The crude oil for this oil refinery will come from the Middle East and North Africa and the refined product will be sold largely on the eastern seaboard of the United States. The cost of the entire project is estimated at $308,500,000, including all costruction and equipment coats, site preparation costs, custom duties, excise taxes, sales taxes, financing costs and working capital, 3241

March 30, 19 73 tape no. 927 Page 4 the refinery as member• knov i• to be financed by $230,000,000 from sources other than the Government of Newfoundland, specifically English bankers through the English Export Credit Guarantee Department, and with equity provided ~y Shaheen Natural Resources. The Newfoundland Government will provide a second mortgage loan of $78,500,000. the new refinery will be the largest in Canada by 100,000 barrels per day and will be one of the largest in the world.

Together with the refinery now nearing completion this should form the basis for a major oil refining industry. the details of progress to date on the first oil refinery, Mr. Speaker, and the proposed oil refinery are dealt with in Supplement Rulllber Four of the printed Budget Speech. Up-to-date information is there. During the last year, Mr. Speaker, the Government has been neogtiating with Churchill Falla (Labrador) Corporation Limited (CFLCO} for the development of the hydro-potential of the Lower Churchill liver.

The power potential of the Gull Island site is 2,400,000 horse­ power per year and this is the greatest single hydro resource remaining in the Province. We are therefore determined to ensure that the maximum benefits possible accrue to this Province.from that development. In order for any meaningful discussions to take place with CFLCO it was first necessary for the Government and the Company to make representations to the Government of Canada concerning certain aspects of the tax equalization formula.

I am pleased to state that we have been successful in getting the Government of Canada to agree to certain changes which make it feasible for the private sector to remain in the power industry in this Province. If it had not been changed that would no longer have been feasible. 'nle discussions with Ottawa centred around the new equalization formula in which Ottawa included the public utility income tax revenues in such a way that this Province would lose a dollar in equalization for every ,!ollar it received from the Upper Churchill or any new development. 3~42

March 30, 1973 Tape no. 927 Page 5 Since the Agreement9 entered into with cnco by the previous administration provided that the Government of Newfoundland had to pay over to CFLCO approximately 50 per cent of all of the corporation income tax paid by CFLCO to Ottawa, and rebated by Ottawa to Newfoundland, this provision in the new equalization formula would have resulted in the Province losing revenue on the Upper Churchill Development.

The net effect on the Treasury would have been that we would lose one and one-half dollars of revenue for every dollar we received from Ottawa relating to corporation tax paid to Ottawa by Churchill Falls. Had that provision remained in the tax equalization formula the Province could not have negotiated any arrangement for the development of the Lower Churchill by Churchill Falls Labrador Corporation Limited or any other private developer.

The Government of Canada has now agreed to change the provisions relating to this item in such a way that the Province will actually gain a small amount in equalization each year under that heading. lo addition to this it has been possible to reach agreement on a change which will substantially lessen the adverse impact on our equalization entitlement arising from the Water Power Rentals and Royalties component of the equalization formula. The overall effect of these changes is that it is still possible for a private power company to develop the Lower Churchill so long as satisfactory terms are acceded to.

The Government has been holding discussions with Churchill Falls Labrador Corporation on the terms and conditions that should apply to the developm ent of the Lower Churchill. The Government would like to see an early start on the development of the Lower Churchill but as desirable as an early start may be, it is even more desirable to achieve arrangements that will return to the Government and the people of our Province adequate revenue for the use of one Qf the great resources of the Province. In other words we will not b~ rushed, Mr. Speaker.

March 30, 1973 Tape no. 928 Page 6 We have made it clear that the return• to thi• Provine• from any further development on the Churchill River will have to be aubstantially greater than the retunui obtained fr011 the Upper Churchill Development. While it would not be possible or desirable for me to outline all of the conditions suggested by the Government,since negotiations are still proceeding, there are several conditions which I can state the Province regards as non-negotiable. The Province will not grant any exemption from the provincial sales tax nor from the gasoline tax with respect to this Project.

The Province will not rebate any income tax to the developer either with respect to federal corporation income tax returned to the province under the Public Utilities Income Tax Transfer Act or with respect to provincial income tax or otherwise. To do so, Mr. Speaker, would mean the Project is useless to us from the revenue point of view.

The Province also insists that there must be constructed as a part of the capital cost of the development of the Gull Island site a transmission line from Gull Island to the Happy Valley-Goose Bay area so that hydro power will be made available to that area as soon as hydro power becomes available from the Gull Island site. I am sure that the member for Labrador North will think that desirable. As I mentioned in my Budget last year, Mr. Speaker, the Iron Ore Company of Canada is undertaking a major expansion to its iron ore operation in Labrador.

The Company will be able to produce 22,000,000 tons of concentrate per year, an increase of 10,000,000 • In addition the expansion will include a magnetic separator which will provide 1,000,000 tons of productive capacity per year. This expansion was delayed because of labour difficulties and is now scheduled for completion in November, 1973. Last year, Mr. Speaker, I referred to the legislation which gave Newfoundland Pulp and Chemical Company Limited exclusive rights to explore and investigate the timber resources of all the remaining crown lands on the island. The original Act of 1960 has been amended 3~41

March 30, 1973 Tape no, 928 Page 7 several times and under the amendments of 1970 the Company was required to notify the Goverwnent if it planned to proceed with the construction of the firt stage of the Mill and that construction was to be substantially completed by December 3lt •• 1972, In addition, in 1967 the then Government advanced $2.500.000 to Newfoundland Pulp and Chemical.

That amount haa risen to approximately $3.400,000 in principal plus accrued interest, The Company did not meet the terms of the original legislation by December 31st., 1972 and the rights conferred by that legislation have lapsed, However, Mr. Speaker, should the Company make a proposal to the Government that is both viable and in the best interests of the people of the Province, the Government will give it careful consideration. It should be noted, however, that certain of the terms and privileges of the first Act could not be included in any new agreement because of their obvious inequity. The position is. Mr.

Speaker, that the Government is waiting to receive a submission from the company. We will then see what the situation is. Io reviewing the industrial development programmes, I should also note the action taken to promote and assist the re-opening of the sawmill operations at Hawke's Bay. That mill will use 60,000 cords of wood yearly and will produce 13,000,000 to 15.000,000 board feet of lumber. There are presently 75 people employed at the Mill and another 75 jobs will be created when it operates in two shifts at the Mill.

The Covcrnment has entered into an Agreement with Newfoundland Forest Products Limited and provided direct assistance of $1,750,000. Thia loan is secured and conditioned upon many important changes in the operation of that enterprise. The company is also committed to fully assess the SllWlllill at Stephenville with the objective of either reactivating that or relocating it. Now what is in the prospect for the financial year coming, Mr. Speaker? The Estimates for 1973-74 provide for the largest Government 3245

March JO, 1973 Tape no. ~li Page 8 spending progranane in the history of this Province. The forecasted total of $674,525,000 includes $448,000,000 on current acount programmes and $226,000,000 on capital account, round figures. This is an increase of 12.5 per cent over the revised 1972-73 estimates. Table IV sununarizes the expenditure on borrow-ing estimates of the Province for this year. First the Budgetary Requirements, we will have we hope as Current Account Surplus, $6,722,000. We will have Net Capital Expenditure $180,946,000. Our Total Budgetary Requirements will therefore be $174,224,000.

In connection with Debt Retirement, Mr. Speaker, we have to redeem $21,470,000 worth of previous Government bonds. We have to pay into Sinking Fut.ds, $12,820,000. Our Total Debt Repayment will be $34,290,000. This means that our Total Budgetary Requirement and Debt Retirement total,$208,515,000. In addition to that we have to gua~antee for the Newfoundland Municipal Financing Corporation $10,000,000;Total Guarantee Requirements,$10,000,000; making our Total Borrowing Requirements $218,515,000.

The current account for the year coming up,our aim is that our financial planning must lead to a position where we budget annually for current account surpluses. In the year coming up this aim is achieved as our current account shows a surplus of $6.7 million and this should not be diminished by any actions taken during the year. In the year coming up we forecast on Current Account, Gross Expenditure of $448,000,000 as com.pared to $400,000,000 last year.

Appropriations-in-Aid of $93.4 million, compared to $85 million last year year for a Net Expenditure of $354 million, compared to $315 million the year just ending. We forecast that our Revenue will be $361,6 million as compared to $309.8 million for last year, so that we should have a Surplus of $6.7 million on current account as compared to a deficit of $5.9 million on current account last year. The current account expenditure of $448,000,000 ls a

March 30, 1973 Tape no. 928 Page 9 $48 million increase or 11.8 per cent growth rate for the year. Projected current current revenues will increase by $51.8 million or 13,5 per cent over 1972-73. So that our revenues are increasing at a faster rate than our expenditure.

While the 1973-74 current account expenditure of $448,000,000 is the highest in the history of the Province, it is imperative for me, in fact it is incumbent on me to point out to the people of this Province and for the people of the Province to understand the completely inflexible position with which any government is faced in Newfoundland now and in the foreseeable future with resfeCt to decisions regarding new or expanded expenditure progra111111ea on current account. New programmes, Mr.

Speaker, should only be carried out if existing programmes are reduced·or eliminated, The fact that the Government has little scope for decision-making in considering reductions in expenditure programmes is clearly 3247

March 30, 1973 Tape 929 IB-1 shown by table VI which outlines the major current account expenditures and which shows how flexible they are. I will not read them all but for example, Mr. Speaker: Interest on Public Debt, $66.5 million. Teachers' Salaries this year, $64.0 million. Civil Service Salaries and Pensions, $62,5 million. Grants to Operate Board Hospitals, $54.5 million. Social Assistance $43.0 million, Grants to Operate Educational Institutions, $36.7 million and so on to a total of $401.9 million which are expenditures that nothing can be done about, that are inflexible.

Of the projected current account expenditure of $448.3 million this year coming up, $401.9 million or about 90 per cent is committed to major ongoing government programmes. The remaining $46.4 million can, for all intents and purposes, Mr •. Speaker, be considered as being committed to other necessary existing programmes. Thus the government has little flexibility to consider reductions of expenditure. The Government has, however, Mr.

Speaker, Ul'ldertaken to examine all expenditure programmes with the objective of reducing or eliminating low priority programmes in an effort to consider realistically new expenditure items of high priority. It is quite clear that this Province would have been in an extremely difficult position with reference to the current account in the year 1973-1974 had not the budget brought down by the Government of Canada on February 19 reflected acceptance by the Government of Canada of arguments presented by the Provinces for the past several years with respect to the system of equalization payments.

The Government of Canada has at last agreed to broaden substantially the system of equalization pAyrnents by adding to the equalization formula grants based on municipal taxes for local Rchool purposes. This results in an additional e~ualization payment of $190 million by the Government of Canada to the seven provinces of r.anada who receive equalization payments. It is not just Newfoundland, 1-lr. Spe11ker, that received these

March 30, 1973 Tape 929 as some people would want you to believe, seven provinces. Table VII shows the seven provinces and the amounts they are going to receive additional this year. Newfoundland, $24.2 million. P.E.I., $4.8 million. Nova Scotia, $23.8 million. New Brunswick, $21.4 million. Quebec, $78.6 million. Manitoba, $10.8 million. Saskatchewan, $26.4 million For a total of $190 million.

IB-2 If the Government of Canada had not made this change in the equalization formula as a result of our representation and those of the other provinces, which resulted in a projected increase of $24.2 million in tax equalization payments to the Province, then the Government would have had to contemplate tax increases and expenditure programme reductions or deletions for the coming year. There is no point, Mr. Speaker, in attempting to obscure the position. If this had not happened, we would have had to consider that.

The demands of the people of Newfoundland and their expectations with regard to these demands are fast reaching the point where expectations are not in accord with the realities of the financial position of this Province. In addition, within the Public Service the great demands which are placed upon r.overnment for salary increases year after year have reached the point where a re- examination of the high proportion of our budget which goes towards salaries of public servants and others paid from government funds is necessary.

Table VIII gives a breakdown of the anticipated wage bill to be paid from puhlic funds in 1973-1974. Teachers, 6,450 employees. Approximate cost. $64.0 million. More thnn our entire. budget ju~t a few years ago. C:overnment Tlepnrtment!'I, f!,150 employees. Cost, $57,550,000.

March 30, 1q73 Tape 929 lB-3 Hospital Employees, 7,500. Cost, $48,100,000. Memorial University 1,650 employees. Cost, $17,500,000. Government Agencies, Boards, Commissions and Corporations, 2,000 people. Cost, $12,900,000. The total, 25,750 employees receiving from the Public Treasury, $200,050,000 in the year coming up. It is imperative, Mr. Speaker, that we control the spending of government departments and agencies and review our present wage requf .rements and productivity. Without increases in productivity there cannot be increases in Rervices or in salaries at the growth rate of the past.

I have not said that there r.annot be increases but they cannot be at the growth rate of the on~t. It is staggering to think that f.or every one per cent increase in public service salaries the cost to our Treasury is $2 million.

It has to be made clear to the public that if the demands for increased social services and if the demands for increased wages in the Public Service are in excess of those presently provided for in the 1973-1974 budget, it will be necessary for this Government to contemplate, before the end of the current fiscal year, an interim budget requiring tax increases or reductions in existing government programmes. This action would be taken because we must maintain a current account surplus to offset the current account deficit of last year and to manaie responsibly the finance .a of the Province of Newfoundland.

Revenues for 1973-1974. I should be noted that even if the Government were to introduce an interim budget and make significant tax increases, supposing we did that, the increase in annual revenues would only amount to a maximum of S12-SlS million dollars. In 1973-1974 our estimated revenues on current acounts are $361 million. Of that total, approximately $171.4 million will colll(' from tax equalization payments and other Federal Government sources • The revenue derived from Provincial sources will total $190:3 million. The major components of our 3 '} r.· 0 '' .)

March 30, 1973 Tape 929 IB-4 Provincial revenue are retail sales tax $61,600,000, personal income tax $39,127,000, gasoline tax $27,600,000, Newfoundland Liquor Corporation profits $21,800,000, and tobacco tax revenues $8,900,000. While the estimated revenues for next year represent a growth rate of 13.5 per cent over the year just ending, the fact remains that it is the expenditure aide of the Province's finances that must provide the scope for financial decision making. On capital account this year spending will amount to a total c,f $226,000,000 for an increase of $27,000,000 over the year just ending.

This total will be offset by related revenues so that our total requirements on capital account will he approximately $180.9 million after taking off Appropriations-in­ Aid. That compares, Mr. Speaker, to last year. The Net Capital Expenditures were $158 million.

The major programmes that make up this huge total are $37.5 million for the Linerboard Mill at Stephenville, ~25 million for the second 011 Refinery at Come By Chance, $26.4 million to continue the hospital conRtruction programme, $43.1 million on highway construction, $27.4 million on education facilities at the University and in the secondary and elementary system and $12.3 million on industrial and residential servicing. The net expenditure on capital account of $180 million is offset by the current account surplus of $6.7 million so that the budgetary requirement is $174.2 million.

In addition to thi.s we have to borrow $34.3 million to cover debt requirements and payments to sinking funds and $10 million for the Newfoundland Municipal Finance Corporation. Our total borrowing programme will therefore be $218.5 million to be obtained from the following sources: From the Capital Markets, $165 million. From Canada Pensions, $21 million. From OREE loans, $15.4 million. 3251

March 30, 1973 Tape _929 Fro other loans, $7.4 million. From Cuarantees, $10 million. IB-5 Unfortunately, Mr. Speaker, the requirements of two large industrial projects arid the on-going construction programmes, principally in health and education, have left the Government with little discretion in our attempt to reduce borrowing requirements. With one exceotion, no new major construction projects will be commenced by the Province this year. When I say major, I mean a project that might cost over « 111i1lion dollars.

It should also be noted that the total of $218,500,000 contemplated this year will not increase our total debt by an equivalent amount. Sinking fund purcha~es and debt retirement with respect to the Province and Labrador Linerhoard have to be subtracted from that figure and therefore our net debt will increase by approximately $161 million. Projected borrowings of $165 million in the capital markets for next year compares to $155,000,000 raised in 1972- 1973. Our bond~ and debentures received strong buying support last year and the outlook remains favourable for Provincial issues in 1973-1974.

We will not rajse all our re~uiremente, Mr. Speaker, in the long term sector of the canital markete. The C.Overnment has approved a money market borrowing programme in Canada and within the next several months the Province wil 1 begin a weekly treasury bill operation. Thie will decrease the long term borrowing requirement by $25-$40 million. The first phase of the Province' ·e lon~ range financial plan indi.cate!I an improvement j_n our major borrowinr, commitments. Over the next four years these c01T111itments will decrense from $130.2 mi 11 ton in 1973-1974 to $68t9 million in 1976-1977.

Table XI outlinea these requirements. The Second Oil Refinery, $25 million thia year, 1973-1974, 1974-1975, 1975-1976, Labrador 325~

March 30, 1973 Tap~ 930 IB-6 Linerboard $37.4 million the year coming up, then $19.7 million, $19.1 million, $19.3 million, Hospital Construction $26.4 million the year coming up, $30,1, 1974-1975; $10.9 million, 1975-1976, !ducationnl 1nt1tut1on~, $8 million each year, Debt Retirement, ranging from $21 to $32 million in each of those years and Sinking Funds from $12 to $14 million.

A realistic and proper level of borrowing can now be established for the Province over the next four or five year period which will allow us to carry out existing expenditure commitments and to introduce some additional project of high priority. If we look at the total expendi .ture by all Govemment departments in the year coming up at $674 million and compare it to last year of $599 million, the increase is 12.4 per cent. We have analysed this by Policy Group, Mr. Speaker, and table twelve shows the expenditure by Policy Group. Social Policy Group this year, $357 million. Resource Policy Group, $129 million.

The Services Policy Group, $107 million. Financial Services and Other, $79,622,000. For a total of $674 million. The largest portion of our expenditure relates to the Departments of Education, Health, Social Services, Rehabilitation and Recreation, Justice and ~anpower and Industrial Relations. These are the Social Policy Group. The following table shows expenditures, Table XIII, in those departments for last year and for the year coming up. There is an increase of $47.2 million. Education last year we spent $144 million, This year we will spend $164 mill{on. Health in the year just ending, $95 million.

In the year coming up, $116 million. Social Services, $46 million last year. $49 million in the year coming up. Rehabilitst{on nnd Recreation, $12 million last year. $13 million, seven hundred thousnnd in the year coming up.

March 30, 1973 'J'ap~ 930 IB-7 Ju1tice, $10,800,000 last year. $12,500,000 in the year coming up. Manpower and Industrial Relations, $1 million the year just ending. $1,278,000 in the year coming up. The Department of Education continues to be the largest spending department in Government. In the year coming up as I said, $164,136,200. The lar~est part of that budget is spent on Services to School Boards and that is a total of $102,577,000 in 1973-1974.

The majority of that figure is for the salaries of teachers and superintendents which I have said will cost this year $64 million as compared to the revised figure of $55,700,000 in the year ending tomorrow. The Government is aware, Mr. Speaker, of the need to examine carefully the regulations concerning the allocation of teacher salary units to school boards and the pupil-teacher ratio which presently exist. I am pleased to state that the Government is committed to changing the method of allocation and to reducing the pupil-teacher ratio in the 1974-1975 financial year.

The method of accomplishing these changes will be discussed with the teachers and the school boards during the coming year. The operational grants to School Boards are going to be $11.5 million with the cost of transportation of school children, $6.9 million. On capital account the amount of $19.1 million will be provided to school boards to ere.ct and equip schools during the year. Of that amount$11.l million is for expenditures on educational development in conjunction with the Department of Regional Economic Expansion. Mr.

Speaker, in connection with the capital costs of construction of elementary and secondary schools the Government is pledged to re~examine policy fn the field of the long term financing of school construction in this Province, We expect during the coming year 3" ,., 1 {, ~) .

M'&Tch 30, 1973 Tape 930 I to develop new proposals for the long-term financing of school construction which is where a great deal of the trouble lies. These proposals will be discussed with the Denominational Education Colll!littees. The object of these new proposals will be to permit longr,r-term financing of new school construction within the financial constraints faced not only by the Government but by the Church Authorities The second major component of the Educat:1.on budget is IB-8 for the operation of the College of Trades and Technology, College of Fisheries and the District Vocational Training Schools.

The grant-in-aid for the College of Trades and Technology is $3,200,000. It has been necessary for Government to defer any capital expenditures related to extending the existing College and the financing of a residence for the students. The grant-in-aid for the College of Fisheries is estimated at $2,625,000 and the operational costs of the eighteen Vocational Schools are $9,817,000. This figure includes provision to open new vocational schools at Happy Valley, St. Anthony and Baie Verte.

However, as is the case with respect to the College of Trades, the C.overnment has had to limit severly any capital expenditure relatinr. to the existing Vocational Schools. An amount of $200,000 has been provided for any emergency items that might arise. The third major component of the Education budget relates to Memorial University. In the past two or three years the University's enrolment has been increasing at the rate of 10 per cent a year and this combined with increasrd operating coRts has resulted in the current grant-in-aid ris1.ng from $16,227,000 in 1971-1972 to $21,250,000 in 1973-1974.

It is the p6licy of this Government that the growth in expenditures at the St. John's Campus of Memorial University must be limited if funds are to hP c.hnnnelled into other priority areas in the Department of Educ.atfon. It is therefore our intention within the next two months to approve an amount to operate the University for 3 nr• 5 (, .. )

March 30, 1973 Tape 930 IB-9 the next three years l)nd t .o request the University Ad111ini8tration to take whatever st•T'I ore necees11ry to adminiater the University effactively and etff.ciently within that approved amount, The eatimate  alao provide f.unda for the development of plan  for a new Regional College 32~6

March 30, 1973 Tape No. 931 NM - 1 to be e•tabli•hed in Corner Brook as such a college will reduce the preaaure for admi88ion to the St. John's Campus. The financial constraints imposed upon the Government and the seemingly insatiable needs of the education system generally have forced the Government to review the present Student Aid plan for students attending Memorial University. At present in this Province students who establish need must borrow up to $600 from the Canada Student Loan Plan before they receive a grant from the Government of Newfoundland towards their needs for tuition or assistance generally.

The Canada Student Loan Plan does provide for University students to borrow up to a limit of $1400 for a regular two semester year. Commencing with the next semester the Memorial tuition and allowances plan will be amended so that students attending Memorial University who establish need for tuition or assistance will be required to borrow up to a limit of $1400 from the Canada Student Loan Plan befo~e they became eligible to receive provincial asistance by way of grant.

The assistance plan for students at Memorial will then not be any less beneficial than t·hose in effect in Nova Scotia, New Bruns'lll'ick, Prince Edward Island or Alberta. This change will not prevent any qualified student who has financial need from attending Memorial since he will be able to borrow the necessary funds from the Canada Student Loan and receive a grant for any additional funds needed from the Government up to the existing average limits of $1800 per regular year for single students and $2650 per regular year for married students.

It will mean that there will be a requirement for a higher loan proportion rather than grant as was the case before this change. This revision will provide a savinr,s of approximately $1,600,000 to go towards our increased education expenditures. The Government, Mr. SpP.aker, continues ~o place a high priority on the provision of 1110dern and efficient health services throughout 3257

March 30, 1973 Tape No. 931 NM - 2 the Province. Our Estimates for the coming year reflect this. The major part of our capital account for 1973-74 is for the continuation and expansion of the Hospital Construction Programme. The completion of this programme will require the future spending in 1974-75 and 1975-76 as outlined in table XIV. The Health Sciences Project - total cost $45,3 million, prior to this year, that is the year coming up $8.6 million has been spent, in 1973-74 - $13 million, 1974-75 - $15 million and 1975-76 - $8.7 million.

The Carbonear Regional Hospital is estimated to cost $11.1 million, $1,1 million is being spent, next_year $5 million and in 1974-75 - $5 million. The Western Memorial Hospital, the total cost is $18 million, spent to date - $3 million, the year coming up $5.9 million, 1974-75 - $6.2 million, 1975-76 - $2.2 million. Tvillingate Hospital, total cost - $6,2 million, spent to date - $500,000, (that will be .explained when the Estimates are discussed) in the year coming up $2.5 million, in the year 1974-75 - $3.2 million.

Altogether $80.6 million for the total progr8111D\e, The Hospital Construction Programme for the Health Sciences Centre at Memorial is currently behind schedule, In the Btimates last year an amount of $14.5 million was included as the projected expenditure on the north campus facilites but the revised estimates show an expenditure of only $7.2 million. It was a wrong cash-flow forecast. It is encouraging to note that Government has received repeated assurances that there will be no overruns on the original estimate of $45.3 million and that the original completion

schedule remains a distinct possiblility. Mr. Speaker, I stated in the Budget Speech of last year that the extension to the Hospital for Mental and Nervous Diseases, which is now to be known as the Waterford Hospital, would occupy a 3258

March 30, 1973 Tap~ No. 931 NH - 3 very important priority in the expenditure programme of this administration. Because of the large capital expenditure programme to which we were coim;1itted last year we had to make a decision not to proceed last year. We have now made a decision that with this one exception of the Hospital for Mental and Nervous Diseases, there would be no major government construction programme instituted this year.

I am pleased to state that there is included in this year's capital budget an amount of $1,5 million to provide for the commencement of work on this essential and long overdue health facility. I might add that it is because of the tremendous campaign put up by the Minister of Health that this is done. We have all realized how badly it is needed and he has convinced us we cannot wait. The fin~l decision on the desi~n of the extended facilities for the Mental Hospital _are now being made. The final cost figures are currently being developed and these will be revealed once the project commences.

It is certain that this new extension will result in great strides being taken in the field of mental health in Newfoundland and will result in the replacement of facilities that should have vanished long ago. In addition to the capital account in the Department of Health, there is $84 million in current account programme to operate hospitals mainly, either government or by board. The total operating costs and expenditure on equipment and other services for hospitals will be $67 million in the year coming up.

Provision has been made in the Estimates to phase out the Sanatorium as a Hospital for Chest Diseases and to absorb that into the general hospital system of the Province particularly at St. Clare's Mercy Hospital in St. John's West. It is evident that in the examination of Health Expenditure priorities the proportion of the Budget spent on Tuberculosis Control may have to be decreased in light of the diminishing number of cases in recent years. I am 3 C') ., 9 (; J

March 30, 1973 ~ape Mo. 931 RM - 4 al80 glad to •ay, Mr. Speaker, that the etiaate  provide funds for plan  to be cOT11111enced for the Regional Hospital in the Clarenville Area, This hospital will be iatended to serve the people af the Bonavista Penin ula, the Burin Peninsula, and the Come· By Chance areas.

In the Department of Justice thi• year the. estimates will contain,tn addition to all our public safety services,costing $11.2 million, the setting up of a Newfoundland Guidance Authority, the administration of the Private Inve tisator  attd Security Guards Act, the drafting of a new Companie and Securities Act ad the printing of a new consolidated statutes, These expenditures total close to $300,000 and are the beginning of a long range plan to improve and reform the legal structure of this Province.

In addition $100,000 has been pTOvided for the provision of legal aid to those needing such assistance, includin~ certain members, Department of Social Services: The Covemment has been concerned over the fact that Social Aasistance policies tend to penalize a recipient of Social Aasistance if he goes to work. At present very little of a recipient's earnings are exempt from the assistance formula and therefore assistance payments aee cut back by a dollar for every dollar earned.

The Government is firmly committed to the principle that it should profit a man to work and that the social aasiatance recipient who is able to work should be given some incentive to do so. Some means has to, therefore, be found to ensure that a person on aocial assistance, able-bodied, is not discourap,ed from going · to work. With this objective in mind the Government has made provision for the introduction of an incentives programme which will encourage ocial assistance recipients to work as much as they can and become self-supporting wherever possible.

This programme will be a significant innovation in the social policies of this Province and should be a 3260

March 30, 1973 ,Tape No. 931 NM - 5 poaitive factor in motivating people who are currently receiving social •••i tance but who are phyically fit to work, to seek employment opportunities without the previout1 negative 1110netary implications. They will lose nothing.if they do so, or lose very little. This incentive provision will be introduced into the Social Assistance programme within the next two months. Now the House may ask - why two months? Well the reason, Mr.

Speaker, is that there is a major conference between the Government of Canada and the provinces and their social assistance ministers in April,in Ottawa. We have reason to believe that there is going to be changes made in that respect by the Government of Canada. But in any event, whether that happens or not, we will have our own incentivespro~ramme. We estimate the cost of the new scheme presently envisaged will be $2 million of which fifty per cent will be recoverable from the Govemment of Canada.

Department of Rehabilitation and Recreation A significant step in the restructuring of the Public Service was the creation of this Department. Their budget for the year coming up is $13,774,100. That amount provides, Mr. Speaker, for the homes for special care, the Hoyles Home, the Harbour Lodge for Senior Citizens, the Children's Home, the Boys' And Girls' Home and Training Schools.

In addition they provide recreation and sport services, We have included $230,000 for miscellaneous fitness and recreational projects, $75,000 for the Canada and Newfoundland Games, in which we are hoping our minister will participate. $925,000 for community sport facilities. I should point out, however, that the $925,000 capital expenditure for community sports facilities is almost totally committed to existing projects.Because of the situation on capital account in 1973-74 no new commitments with respect to community sports facilities can be entered into during the currrnt year, the year cominR up. 3 ~!61

March 30, 1973 Tape No. 932 NM - 6 The expenditures on the departments in the Resource Policy Group will total al1110t $129 million in 1973-74 •• compared to $118 million thi  year. The increase i  $11 million and this 1 consistent with our stated policy of placing priority where possible on resource development programme• and on programmes that will result in the development of productive facilities and revenue-producing activities within the Province.

Wherever possible, Mr, Speaker, the Government will divert financial resources to the resource development area in our effort to increase the productive base and revenue generating capacity of this Province. Table XV hows expenditures of resource policy group. Department of Forestry and Agriculture. Next year $16 million as compared to $11 million in the year juet ending. Fisheries, the year coming up - $10 million as compared to $6.8 million. Industrial Development - $69 million as compared to $73 million in the year just ending. Mines and Energy - $22 million as compared to $18 million, the year just ending.

Tourism - $7,032,000 as compared to $5,470 1 000. Rural Development - $4,255,000 as compared to $3,498,000 in the year just ending. In Forestry and Agriculture, the expenditure estimated is $16,251,000.

A major portion of this is applied to on-going forestry programmes, forest protection, forest management, forest access roads, forest inventory and forest consei-vation and development, Included in the estimates is a new agreement with the Department with DREE under the Agricultural Rural Development Act, This waa approved in March of 1973 and provides for expenditures during the current fiscal year of $4 million on such items as development of paatu~e land, capital assistance to farmers and land · consolidation. 3?.62

March 30, 1973 Tape"No. 932 NM - 7 It 1• auTpriain~ to note that of the expenditure of $16.2 million in Pore try and Agriculture, approximately $9.5 million 1• for Agricultural programme• A detailed analyais of the contribution to the Newfoundland economy of the agricultural community will be initiated in 1973-74 to determine whether or not a shift in government priorities in these two areas should be undertaken. It is hoped that in 1973-74 the reorganized Department of Fisheries will play an important role in the revitalization of the fisheries in Newfoundland.

We have provided over $10 million in the estimates including $4.5 million capital works, $500,000 in loans for the construction of multi-purpose boats, $1,500,000 \ for the Fisheries Loan Fund, $600,000 for the Fishing Gear Bounty Programme, $150,000 for the replacement of inshore gear and $690,000 for bounties on new construction. A significant step in the reorganizing of Government departments was the establishment of the new Department of Mines and Energy.

The prospects for a commercial find of oil and gas represents a great opportunity and challenge for Government to ensure that we have the technical expertise capable of analyzing the problems associated with major oil finds. In addition the opportunities for maximizing employment and business opportunities from this industry represent a great potential boom to the Province, The estimates of the Department have $1,250,000 for a mineral development programme undertaken in conjunction with the Government of Canada.

It is hoped that this progra1111De will encourage a mach higher degree of mineral exploration than in the past. In addition, a detailed study is now underway to identify the opportunities which exist for the further processing of mineral within the Province. The Newfoundland and Labrador Power Connnission, Mr. Speaker, this year requires $12,543,000. Of this amount $6,543,000 is 32G3

March 30, 1973 Tape No. 932 NM - 8 r•quir•d to •ervice existing agreeMnta of the Power Commission and represents the coat deficiency between the Power C011111iaaion and its customers as a result of fixed priced contracts which had no provision for escalating coats of generating nower. One of them of course is the ERCO contract. The balance of $6 million represents the cost of the surplus generating capacity of the Holyrood Thermal Plant. These payments will not significantly decrease until 1977-78 when certain of the existing contracts come up to be renegotiated.

Table XVI shows the anticipated cash flows for the next four years for the Power COffllllisaion for . I those purposes. $12,543,000 in 1973-74, then continuing to 1976-77. In Tourism, an important part of the resource development programme of course is expanding programmes in Tourism. The Department is going to spend in excess of $7 million in the year coming up. $880,000 for publicity and investigation, $1,711,000 for parks, $1,104,000 for wildlife resources and $490,000 to develop historic resources. An additional $2 million is being provided for cultural affairs, including library services.

A special provision of $100,000 has been included an the initial budget for the Silver Anniversary of Confederation which occurs in 1974. The next group is the Government Services Policy Group and in that area an expenditure of a total of $107 million. this year as compared to $104 million in the year just ending. That reflects our attempt to keep down expenditures on services and to put it in development. Table XVII outlines expenditures there. Municipal Affairs and Housing ~ill spend $31 ~illion as compared to $20 million in the year just ending.

Provincial Affairs and F.nvironmrnt - $2,300,000 as compared to $1.5 million. Transportatio~ and Connunications - $66 million as compared to $75 million in the year just endin~. 3264

March 30, 1973 Tape No. 932 NM - 9 Public Work -$8 million as compared to $7 million. In Municipal Affairs and Housing - an amount of almo•t $11 million will be pent in conjunction with DRF.E on industrial and residential ervicing. An estimated $13 million with be spent on local government affairs including $3,925,000 for grants to city and local councils, $3,400,00~ for payments for existing and proposed water and sewer systems, $4 million for special projects under the winter works programne.

The Housin~ Corporation will require $3,600,000r $2,800,000 of that is capital account for land assemblies, the New Town Housing, housing in support of industry/ and loans to municipalities for lot servicing. Provincial Affairs - The major component of this amount is for the management and control of our natural environment.

The Clean Air, Water and Soil Authority has now become the Environmental Management and Control Division of the new Department and will have a budget of $1,733,000 to conduct pollution control programmes, water quality surveys, pollution clean-up projects and to maintain and operate waste management sites and ADB water systems. The new Landlord and Tenant legislation will also result in an expanded programme and increased expenditure in that very important social area.

The large committed construction programme for Health and Education and for Industrial Development has limited expenditures in the Department of Transportation and Communication for 1973-74. Nevertheless, Mr. Speaker, the highway construction and maintenance programmes are a significant portion of this budget. It is estimated that approximately $19 million will be spent on the maintenance of highways, bridges and local roads. In addition an amount of $43 million has been budgeted for transportation deve~opment under the DREE programme, to improve and r~construct existing 3 n t' ~, (,,U~

Karch 30. 1973 Tape No. 932 NM - 10 road• and for nev conatruction and replacement of old bridgea. Th• total capital account budget for the Department i  $43.391.000 3266

March 30, 1973 Tape 933 PK - 1 Public Service Pensions. Mr. Speaker, are a matter that we have given much attention to. The problem that came to our attention •• soon as we aeaumed office was the problem of disparities in the pensions received by former employees of the Newfoundland Government, by teachers and by others who were on pensions for s0111e years. The pensions received by such former employees, particularly those who retired in the 1950's and 1960's, were in many cases unsatisfactory and socially inequitable.

Many of those pensions were very low and this situation has been further aggravated by the significant rise in the cost of living in the past year. We have received written and oral briefs on this from the Newfoundland Teachers Association, from the Constabulary, from the Newfoundland Association Of Public Employees and others, Table XVIII outlines the number of pensioners in receipt of pensions as a result of service with the Newfoundland Government, with the Newfoundland Railway before 1949, with the Constabulary and Fire Department and as teachers. It shows the total of 1137 pensioners.

Four hundred and ninety of those received less than $1600 a year, 83 receives $1600 to $2000 1 283 receives, $2001 to $3000, 137 receives $3000 to $4000, 61 receives $4000 to $5000, 38 receives $5000 to $6000, 9 receives $6000 to $7000, 15 receives $7000 to $8000, 10 receives $8000 to $9000 per year, 3 receives from $9000 to $10,000 and 8 receive $10,000 a year pension and over. I am very pleased to announce, Mr. Speaker, that the Government has decided as the first step in raising pensions to an acceptable level to spend an additional $350 1 000 in this coming financial year to improve existing pension payments.

It is quite obvious to us that the largest proportion of the increase should go to the pensioners who are receiving the smaller pensions. The increased annual pension payment will therefore vary from $360 per year for pensioners who receive $2000 per year or less, an increase of $30 a month each,to an amount of $1RO per year to those who receive an annual pension 32G7

March 30, 1973 Tape 933 PK - 2 , of $4001 and over. Thi• will mean an incruee in peneions fr0111 50 per cent to those receiving emaller penaione to approximately tvo per cent to tho•• receiving the higher peneion.

The peneion increase will be effective April 1,1973 and will mean that all pensioners from the Public Service, from the Newfoundland Railway pre-1949, from the Police and Fire Department .and from the teaching profession,receiving pensions leas than $2000 a year will have an increase of $30 per month; those receiving pensions between $2001 to $4000 per year will receive an increase $20 per month or $240 per year and those receiving pensions from $4001 per year and over will receive an increase of $15 per month or $180 per year.

This will mean that 573 pensioners will receive the increase of $360 per year; 420 pensioners will receive the increase of $240 per year; and 144 pensioners will receive the increase of $180 per year. The Government intends to continue examining the question of pension payments and to make adjustments in future years until all pensions are at a satisfactory level. In addition the Government intend to review the pensions of all employees who transferred to the Federal Government in 1949 to correct any inequities that may exist there with respect to the years of service they had with the Newfoundland Government.

Finally, Mr. Speaker, to conclude,this nud~et illustrates certain principles which the Progressive Conservative Government has decided upon in our development of the Province, These principles include:

(1) That we adopt an overall develo'PJl'ent plan as a reeult of the Planning Task Force studies;

(2) That at every opportunity and wherever there is flexibility in expenditure decision, Government should turn from the expansion of existing services to the encourar,ement of economic development, increasing productivity and wealth and creating employment. All of 32G8

March 30, 1973 Tape 933 PK - 3 these actions will create revenue, and in the long-run enable Government to expand and improve our social services;

(3) That social assistance programmes should incorporate built­ in incentives to encourage the physically fit to return to the work force;

(4) That assistance should be given to industry to establish in the Province if the industry itself results in net benefits to the Province and its people:

(5) That the Government and the oeoole of this Province must face the realities of our situation and understand the need for establishing realfstic financial priorities;

(6) That the Government must, wherever it can, assist those who cannot assist themselves. This Budget illustrates that wherever flexibility in expenditure programmes permitted, we have diverted funds to industrial and resource development. The Budget allocates substantial funds to the Development Corporation, for the Rural Development Authority, for the construction of the second Oil Refinery, for the completion and operation of the Labrador Linerboard complex and for the activities of the Resource Department.

The principle of facinr, realities has been illustrated by our recent decision to close the Newfoundland Steel Mill at Donovans as it had shown that it was not economically feasible to continue its operation. The decision of Government to cease granting sales tax and gasoline tax exemptions to industries establishing in this Province and to cease the ~rantinr. of powr.r subsidies to such industries further carries out our development principles. There is no point in the Province havinR industry eRtablish if as a result the Government loses large amounts of revenue.

The Government will,however, give specific, ascertainable grants if assistance is justified,as we did in the case of the sawmill of Newfoundland Forest Products at Hawke's Bay. 3269

March 30, 1973 Tape 933 PK - 4 The dec1a1on not to grant a ••lea tax emption to the second Oil Raflnery will mean receipt by th• Truaury of an eatimated amount ol ~12,6 million during con•truction, Our deci•ion that no aalea or gasoline tax exell!J)tion can be granted in connection with the development of the Gull Island site on the Lower Churchill means that if the project proceeds the Province will receive over the six year construction period some $32 million in revenue from those sources.

These two decisions illustrate our principle with respect to the establishment of industries on the basis of net benefit to this Province. The decision to increase substantially the amounts paid public service pensioners demonstrates our belief in assisting those who cannot assist themselves.

The Governlllent has had, reluctantly, to change the nature of the assistance programme for atudents attending Memorial to allow us to redirect f\fflds to other areas of education thereby establishing realistic financial priorities, This principle is further demonstrated by the decision to begin no new major construction ?rogramme with the exception of the Waterford Hospital extension.

As a result, we have had to defer certain construction expenditures and to limit ourselves to plans only with respect to the regional Jtmior College at Corner Brook, the residence at the College of Trades and Technology, the proposed new Government office building in St. John's and the regional hospital in the Clarenville area, designed to serve the Bonavista Peninsula, Burin Peninsula and Come-by-Chance areas. Very few tasks are as difficult, Mr. Speaker, as the re-direction of the efforts of Government. The structure of organizations and the patterns of behAviour once established tend to continue.

Expenditure programe8 once created tend to expand with relentle8s momentum. The Government ha8 taken positive action to restructure the adminiRtration of the Public Service but the most difficult challenge still lies ahead, the challenge of redirecting the expenditure efforts of Government 3270

March 30, 1973 Tape 933 PK - 5 so that more productive use can be made of our limited financial resources. Under the direction of the Planning and Priorities Coumittee Of Cabinet and Treasury Board,the Government will examine in detail, in the next few montbs,the efficiency and effectiveness of our existing expenditure prograrrrne. It will be exploring alternative methods of accomplishing the tasks fulfilled by present programmes in an effort to eliminate or reduce expenditure on low priority programmes.

The Budget and the Estimates now presented to this Honourable House of Assembly will be strictly adhered to during the coming year. The surplus and current account must be achieved and expanded if at all possible. Changes in existing programmes or the introduction of progranrnes can only be instituted within this guideline. This Budget, Mr.

Speaker, then marks ,in my view,the transitional point in the struggle to change the momentum of Government spending to accord with our priorities within our financial capability and to carry this Province forward to the achievement of the possibilities tht we feel and we know exist. I therefore move, Mr. Speaker, that you do now leave the Chair. MR, MARSFALL: Mr. Speaker, I move that this debate do now adjourn. MR. SPEAKER: Is it the pleasure of the House to adopt this motion. Those in favour "aye", those against "nay". Carried. MR, CROSBIF.: Mr. Speaker, I have a message from His Honour The Lieutenant Governor.

MR. SPEAKER: To the Honourable the Minister of Finance; "I the Lieutenant Governor of the Province of Newfoundland transmit estimates required for the public services of the Province for the year ending March 31, 1974, in the agy.rer,ate of $558,047,ZOO and in accordance with the provisions of the British North America Act 1867,aa amended,! recommend these estimates to the House of Assembly." . E.John A. Harnum Lieutenant Governor. 3271

March 30, 1973 'rape 913 ,PK - 6 MR. CROSRIF.· Mr, Speaker, I move that the me•••ge from Hie Honour th• Lieutenant Governor together with the ••tifflat•• be referred to the Committee of Supply and that the House now re•olve itself into Committee of Supply, MR. SPEAKER: It is moved and seconded that I do nov leave the Chair for the House to resolve itself into Committee of Supply. On motion that the House resolve itself into Co11111ittee of Supply, ~r. Speaker left the Chair. HR. CROSBIE: I move that the Committee rise and report progress and ask leave to sit again.

On motion that the Cormnittee rise and report progress and ask leave to sit again, Mr, Speaker returned to the Chair. On motion report received and adopted. On motion Committee ordered sit again on tomorrow. MR. CROSBIE· Mr. Speaker, just before moving the adjournment,! would like to remind honourable members and our guests that there will be a reception when we adjourn now at the College of Trades and Technology. I would be very pleased to see you all there and our guests. I therefore move, Mr. Speaker,that the House do adjourn until Monday, April 2, at 3:00 P,M. 1"1.

SPEAKER: It is moved and seconded that this House do now adjourn. MR.SPEAKER! On motion this House stands adjourned until Monday, April 2, at 3:00 P.H. 3272