1994 Legislative Session: 3rd Session, 35th 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)

TUESDAY, MAY 3, 1994

Afternoon Sitting

Volume 14, Number 23

[ Page 10481 ]

The House met at 2:05 p.m.

A. Warnke: Visiting with us today is a group of students from the adult literacy centre in Richmond, specifically the riding of Richmond East. On behalf of myself and my colleagues for Richmond East and Richmond Centre, I would like to take this opportunity to welcome them to Victoria as they tour this precinct and our lovely city. May the House make them welcome.

It is my pleasure to introduce Keith Parker, a grade 3 student at St. Michaels University Junior School. He lives in James Bay and has often wondered what goes on under the big dome. I've asked myself that question as well. Today he's here to find out, and hopefully take an excellent report back to the school director, Mrs. Gaye Stone, who kindly excused him from classes this afternoon. Whether we're launching a new career or not remains to be seen, but let's try and educate Master Keith, even if we can't inspire him. Would the House please make him welcome.

Hon. M. Sihota: Witnessing the proceedings today in the House are a number of people who have just recently moved from Ottawa to Victoria -- a wonderful move and something that more and more people are doing. Nothing to do with my last....

Interjections.

Hon. M. Sihota: I'm amazed what a reaction I get from the opposition just when I give introductions.

In any event, Jordan Campbell and Mike McWilliams are the newest residents in the riding of Victoria-Beacon Hill. On behalf of their MLA, I'd like to welcome them, first of all, to Victoria and, secondly, to witness these proceedings today.

The Speaker: Hon. members, before proceeding with the order of business, I would like to respond to the hon. member for Powell River-Sunshine Coast.

On Monday last, the hon. member for Powell River-Sunshine Coast sought to move an adjournment of the House pursuant to standing order 35 to discuss a definite matter of urgent public importance -- namely, comments attributed to the Leader of the Official Opposition in Ottawa with reference to the separation of Quebec from Canada. Notice was received in the Speaker's office, for which I thank the hon. member.

Standing order 35(1) provides for adjournment of the House for the purpose of discussing a definite matter of urgent public importance. The proposed matter for discussion, however, must relate to a genuine and immediate emergency, such that the ordinary daily business of the House would be set aside. The words "urgent public importance" in the standing order suggest a sudden or unexpected occurrence; hence the essential element of suddenness must be present.

I think all hon. members would agree that while the matter he raises is definitely of public importance for the province of British Columbia -- and, indeed, for Canada -- nonetheless it has been a continuing and longstanding situation of concern, which, in my opinion, cannot be brought forward under standing order 35. The matter of the separation of Quebec from Canada is long standing and not a sudden occurrence. Moreover, I remind the hon. member that during the recent throne speech debate, there was ample opportunity to debate the matter. This issue was as current then as it is now.

For the above reasons, I find that the matter raised does not meet the requirements of standing order 35, and I must rule accordingly.

Oral Questions

CHIEF EXECUTIVE OFFICER OF B.C. HYDRO

G. Campbell: The official opposition has learned, as have many employees of B.C. Hydro, that the government has finally taken action and agreed to remove Mr. Eliesen from his post at B.C. Hydro. My question is to the Deputy Premier: can she confirm that Mr. Eliesen is on his way out of B.C. Hydro?

Hon. E. Cull: I'd be glad to take the question on notice for the minister responsible for B.C. Hydro.

The Speaker: The matter is taken on notice, hon. member.

A further question?

G. Campbell: A new question, hon. Speaker. The opposition has also learned that there was a major report of over 100 pages done at Hydro outlining how Mr. Eliesen could be dismissed with cause. Could the Deputy Premier let the House know whether or not they will be pursuing the recommendations of that report, which would require Mr. Eliesen to be dismissed with cause, or will they be using the taxpayers' dollars once again to pay off the government's mistakes?

Hon. E. Cull: I'm sure the opposition would like to ask many questions with respect to B.C. Hydro, and I'd be glad to take these questions on notice for the minister so that he may answer them in full when he's in the House.

The Speaker: Final question, hon. member.

G. Campbell: I think we all recognize that there are times when we make mistakes and we have to learn from them. I would like to ask the Deputy Premier: is the government willing to learn from the mistake with regard to B.C. Hydro? Mr. Eliesen's replacement should be carried out through an open, public process. I would like to know whether the government will be pursuing an open, public recruitment process to replace Mr. Eliesen so that for once we get what's best for B.C., not what's best for the NDP.

Hon. G. Clark: I am, of course, delighted to take that question on notice.

Interjections.

The Speaker: Order, please.

G. Farrell-Collins: And the public wonders why B.C. Hydro, among other Crown corporations, is in such a mess. That's exactly the reason.

The official opposition has also learned that Mr. Eliesen is not only on his way out, but the government has found a cushy position for him in a joint venture with some investors in China. Can the minister confirm that Mr. Eliesen is not only on his way out of British Columbia, but on his way out of the country to be working in China on behalf of the joint venture?

[ Page 10482 ]

Hon. G. Clark: No, hon. Speaker.

The Speaker: Supplementary, hon. member.

G. Farrell-Collins: Seeing that he's leaving B.C. Hydro, perhaps the minister can confirm what pension and severance arrangements have been made for Mr. Eliesen. Are the B.C. taxpayers, once again, going to be carrying the bill?

Hon. G. Clark: I believe I've taken that question on notice.

The Speaker: The question has been taken on notice.

Additional question, hon. member?

G. Farrell-Collins: I've got that one on notice, hon. Speaker, but I'll give him another one; maybe he can take that one on notice too. Can the minister explain why the government finds Mr. Eliesen a cushy position in the private sector when he gets fired, but when Mr. Dixon gets fired he's out on his own? Can the minister tell us why there's a double standard, one for friends of the government and one for enemies of the government?

RESIDENTIAL WELL WATER TAX PROPOSAL

J. Weisgerber: My question is to the Minister of Environment. The Premier promised that there would be no new taxes, but we've now learned that the government has plans in place to impose a tax on water drawn from residential water wells -- if you can believe it, Mr. Speaker. This fact has been confirmed by the water management branch. Can the minister tell us what in the world caused him to implement this lamebrained tax and why it wasn't in the budget?

[2:15]

Hon. M. Sihota: I know that members of the Reform Party were out and about asking all sorts of questions of staff the other day with regard to the water situation in the province and initiatives that the government is proposing under its water stewardship initiatives. As part of our practice of open government, there has been a whole series of discussions around the province with regard to water stewardship, which has been known to the public for quite some time. I know that members of his party were asking about this issue this morning, and I didn't have the opportunity to meet with them and correct their misinformation. I will do that in due course.

The Speaker: The hon. member's supplementary.

J. Weisgerber: In the Prince George Citizen, one Colin McKean, a program analyst with your ministry, says: "We're saying water is a resource, not a commodity." He says that those who argue they have paid drilling costs must remember they haven't paid for the water. No other government in Canada taxes residents for the use of residential water. Will the minister deny that the government plans to tax residential water in British Columbia?

Hon. M. Sihota: The hon. member knows full well that those are statements made by an official and are not government policy.

The Speaker: Final supplementary, hon. member.

J. Weisgerber: The government obviously has a death wish in rural British Columbia if it intends to bring in a tax on water in residential wells. Will the minister have the courage to stand up and either confirm or deny the statement made by his ministry staff, reported in Prince George yesterday? Are you or are you not bringing in a tax on residential water wells?

Hon. M. Sihota: I want to assure the hon. member that this government has no death wish at all. In fact, residents of rural British Columbia voted in overwhelming numbers for members of the New Democratic Party in the last election. This government has been recognized for the initiatives that it has taken on behalf of rural British Columbians -- initiatives like the forest renewal plan, which I notice the Liberal opposition has voted against, and initiatives in terms of job creation...

Interjection.

The Speaker: Order, hon. member.

Hon. M. Sihota: ...throughout the province...

The Speaker: Thank you, hon. minister.

Hon. M. Sihota: ...and we would not take steps that would unnecessarily hinder the government's standing in rural British Columbia.

LETTER FROM AGRICULTURE MINISTER REGARDING LAND PURCHASE

M. de Jong: Over the last few days we have heard a great deal about a letter that may or may not have been written by the Minister of Agriculture -- and off-road development -- to the Ministry of Transportation and Highways concerning a road at Opheim Lake. Here's a simple question for the Minister of Agriculture. Will he confirm whether or not he has written a letter to the Ministry of Transportation and Highways concerning the road at Opheim Lake?

Hon. D. Zirnhelt: As I said yesterday, I do not want to interfere with investigations that Mr. Hughes is undertaking. The Liberal Party is making allegations and he will have to consider all sides of the matter. I have determined that no such letter exists.

The Speaker: Supplemental, hon. member.

M. de Jong: The land baron from the Cariboo was a lot less reticent about discussing the matter with the Williams Lake Tribune. That's fine.

Let's go to the Minister of Transportation and Highways. Could the minister...

Interjections.

The Speaker: Order!

M. de Jong: ...tell the House what efforts her office and the district office in Williams Lake have made to ascertain whether or not the letter in question still exists?

Hon. J. Pement: I'd like to say that my ministry and the office in Williams Lake are working closely with the

[ Page 10483 ]

conflict-of-interest commissioner to ensure that the investigation is complete.

The Speaker: Final supplemental, hon. member.

M. de Jong: Today's edition of the Williams Lake Tribune sets out in stark detail the contrast that exists between what the Bradys are saying and what this minister's officials are saying. People in Williams Lake are beginning to allege a

cover-up within the ministry. What action has the Minister of Transportation and Highways taken that will serve to assure British Columbians that in fact no cover-up is taking place within her ministry?

Hon. J. Pement: I just told the member that we are working in concert with the commissioner to ensure that the investigation is complete.

COLUMBIA POWER CORPORATION

G. Wilson: My question is to the Minister of Employment and Investment. The members of the Alliance noticed that we have a new Crown corporation in British Columbia, the Columbia Power Corporation, which this government has pumped $51.8 million into. Can the minister tell us why the development of the two dams involved was not provided for or developed by West Kootenay Power or B.C. Hydro?

Hon. G. Clark: I'm delighted to clear up some confusion that exists in the minds of at least some reporters on this question. The Columbia Power Corporation is essentially a shell company, which was created to hold the assets of future power generation that we need from the Brilliant dam as part of the Cominco transaction. It was part of the announcement on March 4. There's no secrecy; it's just suddenly come to some people's attention.

The purpose of the corporation -- to hold the assets rather than, say, B.C. Hydro -- is because.... Now that we have other options to sell the assets to other investors -- joint ventures, West Kootenay Power or B.C. Hydro may wish to buy those assets -- the government has purchased those assets and they can be sold to the highest bidder. Secondly, the transaction is transparent and businesslike, which insulates us from any possible concern about countervail. If we had asked B.C. Hydro to buy it, there may have been some suspicion that they weren't paying market value for it.

Dominion Securities has done an analysis to show that it is a market transaction. Essentially, those are the two reasons. The corporation has no employees and no function other than to hold those assets and, through Powerex, to purchase power on the way through from Cominco to the United States.

G. Wilson: A supplementary question. The completion of new generating opportunities at those two facilities is going to cost roughly $500 million. Can the minister tell us what obligation, if any, the province has with respect to that production? If not, at what point will the minister confirm that the assets that have been purchased will be put up for sale?

Hon. G. Clark: These are good questions. Both the Waneta and Brilliant dams will require something in the magnitude of half a billion dollars to be invested, to take advantage of these rights which now are held by Columbia Power Corporation or the government. We have not decided yet how to dispose of those. We understand that West Kootenay Power is very interested in purchasing those rights and then making the subsequent investment. B.C. Hydro is interested in purchasing those rights and making the subsequent investment.

Over the course of the next few months, we will be analyzing what would be the best approach to take. One approach may well be simply to put them up for auction and let anybody buy them. That only gives them the right to invest the $500 million or so that is required to take advantage of the rights to surplus power generation in those dams.

The Speaker: A final supplemental, hon. member.

G. Wilson: Will the minister provide a guarantee to this House and the people of British Columbia that this transaction, given that West Kootenay Power or B.C. Hydro buy into it, will not remove the obligation of those two power utilities to have a full hearing through the Utilities Commission and simply provide additional power into Powerex for the export potential of the province of B.C.?

Hon. G. Clark: I'm not sure about the latter point, but you're absolutely correct that.... Columbia Power Corporation is not a regulated utility, because it's not a generator of electricity. As soon as the right to create energy, or the surplus power asset held by Columbia Power is sold -- whether to West Kootenay Power, B.C. Hydro or some other agency -- then it becomes part of a regulated utility, and all the rules apply. All of the environmental concerns -- and there are some with respect to sturgeon -- will have to be fully canvassed before the Utilities Commission before the actual construction can take place.

TRIPP AUDIT OF FOREST PRACTICES

W. Hurd: My question is to the Minister of Forests. Can the minister explain why he neglected to advise the public that his own ministry, the Ministry of Forests, through the small business enterprise program, was one of the worst offenders in the Tripp audit of fish and wildlife and stream management on Vancouver Island?

Hon. A. Petter: The Tripp audit, which was initiated by this government as part of our toughening up of the enforcement of forest practices, certainly disclosed that there is much room for improvement. But the comprehensive report that was released by myself on Tripp indicated that the small business program ranked very near the top of the list in terms of its performance, according to the Tripp audit.

The Speaker: A supplemental, hon. member.

W. Hurd: I think the minister needs to read the Tripp audit, because it points out that his ministry ranked near the bottom when it came to site preparation and site access. In fact, the reports on file were significantly at variance with what they found in the field. Can the minister explain why he neglected to even mention in his press release that his own ministry had flunked a number of important tests in this audit?

Hon. A. Petter: I'm glad that the critic for the official opposition, having perused the documents for about three months, is finally getting into some of the detailed substance.

The full report was released at the time of the news conference. With respect to site preparation, it's true that the small business program needs to improve, and will improve,

[ Page 10484 ]

but it's also true that its overall performance ranked very near the top of the list. But no one, certainly not I, would deny that there is much room for improvement. That's why we have that audit process, and that's why we're proceeding with the Forest Practices Code. I look forward to the member's support when we come forward with that initiative in the very near future.

The Speaker: The bell signals the end of question period.

Ministerial Statement

CANATEX 2

Hon. C. Gabelmann: At 8 o'clock this morning, B.C. joined the federal, Alberta and municipal governments in the lower mainland in the active phase of the Canatex 2 exercise. Canatex 2 will test the planned provincial and national response to a catastrophic earthquake in British Columbia. In the exercise scenario, an earthquake measuring 8.5 on the Richter scale occurred off the west coast yesterday afternoon. The earthquake had a devastating impact on the lower mainland, requiring full mobilization of provincial resources and the channelling of federal resources through Alberta.

The province's role in the exercise is defined in the B.C. earthquake response plan. Under that plan, as minister responsible for the provincial emergency program, I would be briefed as soon as possible on casualties and damage and response efforts. Given the imminent threat to lives, the province would likely declare a state of emergency. Over the course of response and recovery, cabinet would continue to be briefed. Major policy and expenditure decisions could be made by ministries with response functions under the response plan.

Canatex 2 will help the province determine how well the B.C. response plan works with the national earthquake response plan and the Alberta support plan. It's an important step in ensuring we can respond to a catastrophic emergency. It's possible that as a result both of Canatex 2 and of Emergency Preparedness Week, which began Sunday, members may get inquiries from their constituents. I therefore had a backgrounder on the exercise and copies of an emergency preparedness brochure, prepared by my ministry, sent to all MLA offices.

J. Dalton: Again I thank the Attorney General for giving us a copy in advance of his statement. As it happens, the member for Surrey-Cloverdale and I had occasion this morning to go up to the emergency program headquarters just off Douglas Street. We did have a firsthand opportunity to sit down with some of the officials who are coordinating this very important exercise.

There are probably many things of importance that we could cover with regard to this. No doubt we'll have that opportunity in the estimates, when and if they return. But there was one very telling question that I want to share with all members. It was asked this morning by a ministerial official -- from Health, I think; I'm not quite sure which one. That person asked the coordinator what planning is being done, particularly in the lower mainland, with regard to intermunicipal cooperation. I think that is probably the key to an exercise like this.

It is great, of course, that Victoria is leading the way in doing things like this and providing the opportunity so that we can all be thinking of them. But I would suggest -- and the latter part of the Attorney General's statement emphasizes this -- that when we in the lower mainland, who may be directly affected by this, get back to our constituencies and our municipalities, we should be sitting down with local officials to determine their game plan and see how they're coordinating that with the people next door to them or perhaps across an inlet or something of that nature.

In fact, I will be doing that very thing myself on the weekend. Happily for me, I guess, one of my neighbours is Ross Peterson, the coordinator for the North Shore emergency program. I know Mr. Peterson very well, and I know the hard work that he and his volunteer staff -- plus the municipal officials, of course -- put into this.

[2:30]

I thank the Attorney General for his efforts and the efforts of this government. I do remind members that this is something we must take beyond Victoria; it is far more important than that.

Orders of the Day

Hon. G. Clark: I call Committee of Supply in

Section A, Ministry of Aboriginal Affairs estimates. In the House, I call committee stage of Bill 19, Taxation Statutes Amendment Act, 1994.

TAXATION STATUTES AMENDMENT ACT, 1994

(continued)

The House in committee on Bill 19; D. Lovick in the chair.

section 8 (continued).

L. Fox: Just prior to the lunch break we were talking on

section 8 and the impact of removal of a tax that was placed on jet fuel by this government two years ago. One of the concerns that I had at the time this tax was introduced was the additional costs it would create for the ambulance service of government air services in British Columbia. That service is particularly highly valued by rural British Columbians. Can the minister tell me what the impact of this tax, which she is now removing, has been over the course of the last two years on the air ambulance, and whether or not that contributed to the review of the air ambulance service and the subsequent move to privatization?

Hon. E. Cull: I wouldn't have that information; I wouldn't have the tax impact on any particular user of the jet fuel. That question would be better put to the Minister of Government Services during his estimates around government air services.

L. Fox: I understand that it would be specific to that particular minister, but given that this is an initiative of this minister to remove a tax that is currently in place, I'm surprised that she, the Finance minister, would not know its effect on the varying parts and industries that it was applied to. I would have assumed that during the course of discussion on the removal of the tax, impacts such as this would have been discussed.

Sections 8 to 14 inclusive approved.

section 15.

F. Gingell: Actually, in no way would I vote against this section, but I wonder whether the minister might accept a friendly amendment by repealing this whole

section altogether.

[ Page 10485 ]

Hon. E. Cull: I don't think that would fall under the category of friendly amendments. No, I'm not interested in repealing the

section entirely.

F. Gingell: A great deal has been said in this House since 1993, when these provisions were brought in. I think it became fairly clear during the debate that in many parts of the province, the type of vehicle that is appropriate for people's safety -- vehicles that have winches, that are four-wheel drives, that are built for difficult terrain or that contain the right equipment in case they are ever in distress -- clearly cost these amounts of money.

I can appreciate that you may wish to put on an additional tax; I don't think you're doing the right thing, but I can accept that you might want to put additional taxes on drivers of Rolls Royces or other luxury cars. But it seems to me that this is really far too tight, and it would really be wise if there were provisions that recognize that people who live in the more remote parts of the province do live by a different set of standards than the rest of us.

Hon. E. Cull: Before answering the specifics of this, with respect to this

section and the next I want to say that the former Minister of Finance struck a task force with the industry last year. Prior to the budget this year, we spent considerable time working with the industry to confirm what was happening, because there was a lot of dispute about what was really going on in the industry. As we go through the sections, I will provide the members with some of this information.

With respect to luxury vehicle sales, which is the part of the act we are on, the sales continued to increase after the budget was brought in. In fact, they grew by 6 percent, which is more than for new vehicle sales for the year overall. While no one wanted to pay the tax, it was not a disincentive to those people who wanted expensive vehicles. We wanted to review it to make sure that we were not capturing the working vehicles that people in rural and northern areas often require in order to get around. I know that full well.

I lived down a gravel road outside Prince George, and in the winter I required a fairly hefty truck to get in and out of that rural property. If you look at most of those vehicles and add on all of the options you would care to, you would find that they come in under the $32,000 that has been listed here. The ones that exceed that are ones that are going for fairly exceptional things that are added on -- complete stereo systems and the like -- or that fall beyond the categories that are captured here under the legislation.

For vehicles that fall into that category, we think that those individuals can afford to pay a larger social service tax to help contribute to the services that are required throughout the province.

L. Fox: I think we might be talking on

section 16 rather than

section 15, but they do kind of flow together.

With respect to the statement the minister just made, I don't know when the last time was that the minister went out to buy a three-quarter-ton 4-by-4 diesel, added some minor accessories to it and found it to come under $32,000. I submit to her that it is virtually impossible to do. The three-quarter-ton 4-by-4 diesel is a piece of equipment used consistently in northern and rural British Columbia in the woods industry, mining exploration and so on, for a couple of different reasons. Their equipment runs on diesel in the bush, and having a diesel pickup eliminates the need for two types of fuels.

Also, there are economies and efficiencies over the term of the use of that vehicle. So I'm not sure that the minister has done all the homework she needs to do with respect to the industrial uses of vehicles in northern British Columbia. Unless she were a fleet customer, she would find that she wouldn't be able to come under the price of $32,000.

She should well know this luxury tax affects vehicles that are three-quarter-ton or less, but if they decide to acquire a one-ton vehicle rather than a three-quarter-ton vehicle, even though the vehicle is not that significantly different, this luxury tax does not apply. So it does affect the average worker in northern B.C. who travels up to 150 kilometres a day to get to and from work. The vehicle is a necessity, not a luxury, as this tax seems to indicate. In terms of 16, I'll leave my comment until we get to that section.

Hon. E. Cull: This tax is designed to capture passenger vehicles and to provide exemptions to people who have passenger vehicles -- not industrial or commercial vehicles. So the kind of vehicles that you're talking about -- in fact, I think you used the words "industrial use" -- are not the ones. We're talking about the cars that individuals need for personal travel, not for business travel.

L. Fox: Perhaps, then, there's a need for clarification. The minister is telling me that this does not apply to F150 or

half-ton or three-quarter-ton pickups that are used every day by individuals going to and from work. A three-quarter-ton pickup that is powered by a diesel engine and retails for $33,000 and more, without any accessories on it.... I'm under the impression that everything under a one-ton vehicle falls under this tax classification. If I am wrong there, the whole industry has been misinformed over the last year.

Hon. E. Cull: Let me just read this. It says that a passenger vehicle is a truck that is or is smaller than a

three-quarter-ton truck, but does not include a truck that is larger than a three-quarter-ton truck.

[2:45]

L. Fox: Now that the minister has it straight in her mind that not just luxury vehicles but indeed pickup vehicles are being taxed, perhaps she should once again look at the impact of this taxation on the average working rural British Columbian, who is being taxed -- based on even the new

schedule contained within this bill -- as though it were a luxury vehicle. That's the fault of this legislation. If we were talking about Cadillacs, Lincolns or Mercedes-Benzes -- the kinds of vehicles that indeed are luxuries -- I wouldn't have near the problem with this legislation as I do under its current guidelines, which include three-quarter-ton trucks or less. That is the type of vehicle that is used by every northern and rural British Columbian to get to and from their industrial jobs, where they have to pack their fuel with them because they travel up to 100 to 150 kilometres a day. It's those average working individuals that are being affected negatively by this legislation.

Section 15 approved.

section 16.

F. Gingell: It's a little difficult to follow all of this, because the current statutes of British Columbia that are in the House do not contain the amendments that were made last session. It seems to me that there were some changes made to this

section last year, because I can remember some concerns about them. So I have come to the assumption that this is correcting or clarifying the amendments that were made last year. Could the minister, first of all, confirm that?

[ Page 10486 ]

Hon. E. Cull: Not the amendments made last year. I'll just tell you what this

section does do. It clarifies the definition of purchase price, and it clarifies it for purchases in the province. Charges for transportation, interest, finance, service, customs and excise only form part of the taxable purchase price if such charges are incurred before title to the tangible personal property passes to the purchaser. There's no substantive change to the definition, just a clarification. The amendment was made at the request of tax practitioners to remove the uncertainty that sellers face when they're required to charge and collect the tax.

The existing definition is simply not clear, particularly when it comes to financing, service and delivery charges. This is on the recommendation of people who have to interpret the legislation and provide for legal collection.

F. Gingell: I appreciate that response. This does clarify an issue that was on my mind when the amendments were being made. It sets it up much more clearly.

From what has happened here, I take it that there is no intention to change anything to do with the issue of something that is sold installed, versus sold not installed and a separate contractor is hired to make the installation.

Hon. E. Cull: Maybe I could attempt to answer this by giving an example. An example might be the purchase of a stove that would be installed in a house. The purchase of the stove in this case would be taxable, but the installation into real property would not be taxable. This is a way of clarifying those kinds of distinctions, when people don't know what is part of the overall purchase price and therefore what is subject to the tax.

F. Gingell: That's a good example of one type of transaction. My understanding of the act is that if the Hudson's Bay Co., or whoever you were buying it from, sold it to you on an installed price, and an electrician came and actually hooked up the stove and pushed it back into position, if the purchase price of the stove included that service, then that would be subject to tax. But if you were to buy the stove separate from that service and hire your own electrician, you'd be buying something that is freestanding.

I'm sure that by reading her mail the minister appreciates that this question of the installed price and the non-installed price is a problem for taxpayers. It's not a problem for your revenue officials, who have a very firm and concrete attitude about these issues.

Over the two and a half years or so that I've been an MLA, I have had three or four cases where, particularly in the agriculture industry -- which creates some other uncertainties because of the exemptions of farmers from the social services tax -- small contractors tend to build.... One of the examples was pouring a concrete trough in which greenhouse plants would be grown. Because the trough was installed by one contractor, I believe the tax was applicable. Had they bought the trough from one supply company.... Even if that supply company had set up its own sister company for the purpose of installation, the transaction would have been tax-exempt.

We clearly cannot have one set of rules for one person and a different set of rules for somebody else. But it does seem to me that a lot of these problems could be dealt with if the department of social services tax administration had a better communications role, which would be by searching your proved registered vendors, by seeing those to which some of these situations could apply and by ensuring that they are aware of the rules.

The conclusion I came to was that the sophisticated business person was able to do things in the right fashion, and the very small business person who can't afford to hire lawyers and accountants but gets by in a very small, businesslike way is put at a disadvantage.

I'm sure the department must have established a series of precedents that will clearly apply to many other businesses. All you need is a little one-page communication that goes into their monthly sales tax once every two or three years or whenever some new issue comes up. Small businesses really do feel hurt when they've been doing something in a particular manner, and your assessors go back, sometimes for five or six years, and assess these matters with interest and penalties. I was wondering if you could respond to that.

Hon. E. Cull: I think the member will be pleased to hear that procedures are currently in place which do much of what he has just requested. Also be aware that one of the things we looked at in this budget cycle was addressing many of the small administrative problems that small businesses face. A lot of the changes that we've made with respect to remittance, appeal periods, commissions and that type of thing have been done to try to help small businesses and to respond to the concerns they raised with me.

We have over 100 bulletins dealing with the application of taxes, which do get complicated, particularly when you get into exemptions. We send out an index annually, which goes to over 90,000 registered vendors. So they are aware of the information they can obtain. We have 15 offices throughout B.C.

On a personal note, I had a constituent call me as an MLA with respect to a tax problem. I put her in touch with somebody in the branch, and it was resolved within the week -- with good suggestions from my staff about how she could handle her tax remittance in an easier way. This is the type of thing that my staff, throughout these offices and throughout the province, do on a regular basis: try to assist the tax collectors to find solutions that are still within the law but flexible, allowing them to do a better job. That doesn't mean that there aren't many more things that we can do, and I'm committed to continuing to do that.

One of the things that the Minister of Small Business is conducting right now, through his discussion paper on small business, is a look at the impact of tax regulation on small businesses. As we come to the conclusion of that review, we will be making other changes that are possible -- immediately, the ones that we can do through practice or regulation. If necessary, we will be preparing further legislative amendments. The idea is to simplify the tax collection process as much as possible. On the other hand, that has to be balanced with the incredible demand for all kinds of complexities into the system as people want exemptions for specific situations.

The case of the concrete troughs is exactly one of those problems. An exemption is provided to farmers that is not provided to other individuals, and sometimes the tax ends up being paid. Under the act, the contractor is deemed the consumer of the service, not the farmer, because of the way this particular business transaction takes place. I don't know if that can be dealt with by further review of the complexities of the legislation. If it can, it's something I am committed to doing.

F. Gingell: I have some files which I should maybe send over to your staff, because I have had a terrible lack of success. In fact, I have a property transfer tax issue up at 70 Mile House that we have discussed. Perhaps I could hand

[ Page 10487 ]

that to your staff, and we'll see if the gentleman on your left can do a better job.

Interjection.

F. Gingell: No, that was Alan.

In dealing with

section 16(b), the words "at a retail sale" have been taken out of the definition of "use." When I read the act and see what that does, I'm not exactly sure of the consequences and whether one is defining differences among retail, wholesale and dealer sales, or something like that. I wonder if the minister could explain this issue for me.

Hon. E. Cull: I'd be happy to. This change in definition changes the definition of the word "use" to clarify that the purchase of goods for resale by both retailers and wholesalers is exempt from social services tax, according to that section. The existing provision explicitly excludes purchases of goods for retail sales from the definition of "use," but it's silent with respect to wholesale sales. The amendment simply removes the uncertainty of the application of the tax to goods that are purchased for wholesale sales. So it's a technicality, a confusing issue in the current legislation that is being corrected.

[3:00]

L. Fox: I just want to clarify

section 16(

a) where the definition of "purchase price" is being repealed by paragraph (a)(i). Does this have any relationship to

section 15 to help clarify when the options added to a vehicle become part of the taxable sale of the vehicle?

Hon. E. Cull: Yes, there is a relationship here. If an option on an automobile is installed prior to the purchase or purchased at the same time as the automobile, then it becomes part of the entire purchase price and is taxable at the amount that would apply to the automobile as a whole. If, however, a stereo system is installed two days later, then it is not subject to that tax, and it would be subject to the regular social services sales tax.

L. Fox: Thank you. I appreciate that clarification. It was my understanding during the debate when this tax was put in place a year ago that in the original legislation, any additional option, up to 30 days after the sale, was considered to be part of the sale if it was sold by the same seller. If it was sold by a second seller, that wasn't the case. However, I am pleased to note the clarification.

This leads me to one other question. Given that we are now in a transition and there could be a considerable amount spent on labour.... The new social services tax on labour is 7 percent. You could spend up to ten hours changing equipment from one vehicle to another under the transaction of that sale. Previously that was allowed to be billed separately or included as part of the agreement. Now it would be subject to the 7 percent. As I understand this, if the collective amount brings it up to $34,000, then it could be subject to the 10 percent because it was part of that transaction. Would the minister like to clarify that for me?

Hon. E. Cull: We're getting into a very technical aspect here for me. If we're going to get much deeper into this, I might suggest that we do it through a technical briefing. Let me attempt to try to clarify it for the member. If the services he's talking about form part of the purchase price before the property changes title and moves to the new owner, then that would be considered part of the purchase price and subject to the appropriate tax. If that is not the situation, then it wouldn't be subject to the tax; it would only be subject to whatever labour taxes might apply on that sale.

You would really have to start breaking these all down to determine exactly what would apply. That's why I say that it's starting to get rather complex and technical.

L. Fox: I'm not trying to be difficult or complex. I want to know if it is the minister's intention that the additional cost for labour -- or service only -- is part of the acquisition cost.

Hon. E. Cull: If something is installed on a vehicle prior to the sale of the vehicle and there's a labour element that has a tax component to it, then that becomes part of the purchase price.

L. Fox: Just one final follow-up on that. Perhaps it will be easiest if I lay out a scenario. If I own a vehicle that has radio equipment in it that I have already paid for, and during the sale I make an arrangement with the dealership to take the equipment out of my old vehicle and install it in my new one, there's a labour charge for that. Is that considered part of the sale?

Hon. E. Cull: No. I'm sorry, I guess I was only thinking of things being installed in the vehicle, as opposed to the example you have just given where something is actually removed. In that case it would not be part of the purchase price. I should also clarify here that this part of the act is confirming existing practice. There is no change to the way the act will actually be imposed. It confirms existing administrative practice and provides some clarity and certainty to that.

Section 16 approved.

section 17.

F. Gingell: We have now come to the

section that repeals the cancellation of the trade-in allowance for automobiles. I'm glad about one thing: the amendments to the act that got rid of the trade-in allowance credit for sales tax purposes never got into these sets of statues that are in the House here. So please don't go and print up last year's changes, because this year you will be taking them out again. I just want to save you some....

Interjection.

F. Gingell: You'll have to do it whatever happens.

Let the record show that the previous Minister of Finance did one of the stupidest things possible, and one year later this Minister of Finance is given the job of going around and cleaning up the mess that was left behind. If only this government would take a proper look and do a thoughtful evaluation of all changes to tax legislation before they make them, instead of putting them in one week and taking them out the next, as they did in the property super-tax issue, or putting them in one year and taking them out the following year, as they have had to do with this.

I really just wanted to use this opportunity to speak to this issue. I will give my wholehearted support and the support of all members of the official opposition to the passage of

section 17.

Hon. E. Cull: I just might take the opportunity to put some figures on the record from the joint industry-government task force. Prior to the budget, the vehicle trade-ins to dealers were down by 0.7 percent; over

[ Page 10488 ]

the 1993-94 year, they were down 0.3 percent in British Columbia. That compared to an increase in Canada of 1.6 percent, which should make the member say "Aha," except that when you look at the figures for all the provinces, they're all over the map. Try as we liked.... We looked at a whole pile of things to figure out the predictor of Manitoba dropping even more than British Columbia, or Quebec dropping even more again. Manitoba was down 1.9 percent and Quebec was down 2.4 percent. It was very difficult to find anything that was actually a predictor in that case.

The thing that was compelling in terms of the task force, though, was the impact on used vehicle sales by dealers versus private sales. We were able to establish that yes, there was a transfer of sales from dealers to private sales. Depending on your point of view, you could see that as a positive or a negative thing, but private sales clearly went up after the budget.

There wasn't any revenue impact. The suggestion some made -- that there was a loss of legitimate sales tax as a result of moving from the dealer sales to private sales -- simply wasn't borne out, either in the tax revenue figures we have for the year or in a spot study we did. We actually went back through private sales, went back to the seller, confirmed the price and looked at the sales tax paid. It shows, and I was pleased to see, that British Columbians are a remarkably honest group when it comes to purchasing automobiles and paying their fair share of the tax. All of that was useful information gleaned as a result of the joint industry-government task force.

I think perhaps the most useful thing about this, and why it makes a useful model for future work, is that both parties came to the task force with information that wasn't entirely correct. At the end of the day, while I can't say that we agreed 100 percent on all the facts we use to make decisions, we certainly were a lot closer. Both sides learned a lot by sharing the information.

L. Fox: I'm pleased to see that this

section of the act has been brought forward and that the minister has been prepared to make the necessary changes. She has recognized that in used vehicle sales there was a transfer from the car lots to private sales. I think one thing we should recognize is that that not only affects the provincial government, but individuals selling their private vehicles do not have to pay GST, so it also has to have significant federal tax implications.

But there's another issue here that the minister may or may not be aware of. When there was a shortage of trade-ins, by and large it drove up the used vehicle prices at the licensed dealers. So the consumer ended up being hurt two ways: (1) by losing the tax credit, and (2) by having to pay more for that used vehicle through a licensed dealer. That's purely based on supply and demand, because there was not a good supply of used vehicles, and when that happens the demand is increased.

Whether we like to recognize it or not, for many reasons a lot of people want to buy a vehicle from a licensed dealer versus through a private sale -- because they're not sure about whether there are any liens on the vehicle or about the safety features and all those other issues.

I'm pleased to see this come forward. I feel somewhat sorry, though, for those individuals who did trade their vehicles over the course of the last year and in that process had 7 percent of the value taken away by the legislation created by this government a year ago. Many individuals had to trade their vehicles in because they needed the equity to finance their new vehicles, and in that process this government took 7 percent of the price of their used vehicles out of their pockets.

It's very unfortunate that the Minister of Finance of the day wouldn't hear the concern that was out there among the auto dealers and consumers around the province and being generated in this Legislature, and have a second look at that before implementing it and costing those who had to exchange their vehicles last year an additional 7 percent in the process.

Sections 17 and 18 approved.

section 19.

F. Gingell: I'm interested in why the minister sees a need for this new section. It makes common sense, but I wonder if there has been a problem. I also wonder -- perhaps the minister could answer at the same time -- if there is any arrangement between those municipalities that would give licences and permits for people to do things giving rise to a taxable sale, to make sure that they don't permit or license someone who is not a registered vendor.

[3:15]

Hon. E. Cull: Yes, this

section provides some consumer protection. Most of us, I assume, have had or may have the experience of selling our own car at some point. But there are individuals who make a business of acquiring and selling cars, not through a licensed retailer. What we want to do is ensure that those individuals who want to register under the Social Service Tax Act are also registered under the Motor Dealer Act, to provide protection to consumers who may be buying from the curbers, as they're known.

F. Gingell: I'm glad you described it, because I didn't realize that. What this specifically does, then, is look after circumstances where title moves from the original owner to a private car sales curber and then to a second owner. If title moves immediately from the vendor to the buyer, with the middleman being paid a commission rather than a markup, the sales tax is paid at the time you go to register the automobile, isn't it? Wouldn't that normally be the best way of handling it, or did you have a problem that the curbers had to pay tax when they acquired the vehicle from the vendor?

Hon. E. Cull: These individuals who want to sell cars in this fashion want to be registered under the Social Services Tax Act so that they can buy cars from auction tax-exempt. What we want to do is to also make sure, if they're taking that advantage of coming under the Social Service Tax Act, that they are registered under the Motor Dealer Act. Again, this was part of the results that came out of the government-industry task force.

Section 19 approved.

section 20.

F. Gingell:

Section 20 opens up

section 4 in the act, a subject of great interest to all of us. I was wondering about two issues, which would be amendments to

section 4(1).

First, I was wondering if the minister has considered making any changes under the exemption in

section 4(1)(p), the one that deals with used clothing and footwear. You are aware, I'm sure, that there have been some problems in the Fraser Valley to do with charitable organizations that are running thrift stores. The majority of those goods, in the normal course of events, would qualify for exemption under 4(1)(p). As life goes on, the price of clothing goes up. Perhaps

[ Page 10489 ]

it is time that the minister considered an amendment to 4(1)(p).

The second

section that comes to mind is 4(1)(z.9), which is the one that allows the Lieutenant-Governor-in-Council to exempt anything that they so wish: "...tangible personal property that the Lieutenant Governor in Council may prescribe as exempted from taxation imposed by

section 2, 2.1 or 2.2." I was wondering if the minister would agree to send me a list of any and all tangible personal property that has been exempted under (z.9), because it obviously didn't come under something else.

Hon. E. Cull: With respect to the second part of the question, the Social Service Tax Act and regulations, which we have consolidated, are up to date. That would contain the full list and regulations that you are requesting of things that have been exempted under (z.9).

The other question was about used clothing. We have reviewed that and decided not to make any changes this year.

F. Gingell: The minister said they have reviewed

section 4(1)(

p) and decided not to make any changes -- so that's not to the dollar limits. I'm sure the minister appreciates that certain correspondence has gone by over the years, long before this government came into administration, that indicated it was the policy of the government not to require charitable thrift stores -- the majority of which are either the Salvation Army, Catholic organizations or, as in my community, hospital auxiliaries -- to collect tax. I'd just like confirmation, if I can get it, minister, that there is no change in that policy, either.

Hon. E. Cull: With respect to the charities, we have to sort out exactly what's going on there. They are not required to pay tax, but they are required to collect tax on taxable sales. In this particular item we're talking about, the regulations of 4(1)(p), these are items that are exempt from tax. However, often charitable organizations are selling items that are taxable. It would be very difficult to distinguish between the Salvation Army store downtown selling used furniture and the store up the street that is not part of a charitable organization that is selling entirely the same merchandise.

That issue has come up in the past and has been dealt with by the former government on a number of occasions.

I have asked my staff to have another look at charities as a result of this issue. One of the things we also have to be cognizant of is that some of these organizations, which are raising money for very good purposes, are also businesses in direct competition with other legitimate businesses selling used merchandise. You don't want to correct one seeming inequity and thereby create another one which might be just as bad in the other direction. We're taking a close look at it.

Sections 20 to 33 inclusive approved.

Title approved.

Hon. E. Cull: I move that the committee rise and report the bill complete without amendment.

Motion approved.

The House resumed; D. Lovick in the chair.

Bill 19, Taxation Statutes Amendment Act, 1994, reported completed without amendment, read a third time and passed.

Hon. E. Cull: I call committee stage on Bill 17.

PROPERTY TRANSFER TAX AMENDMENT ACT, 1994

The House in committee on Bill 17; W. Hartley in the chair.

section 1.

F. Gingell:

Section 1 deals with the issue of leases and the adding together, I believe, of a series of lease agreements that are then considered to be a purchase of property for the purposes of this act. Perhaps the minister would be good enough to give us a little background on the need for these sections.

[3:30]

Hon. E. Cull: This is designed to close a loophole that some companies were using to avoid paying the tax. They would register consecutive alternating leases to the same property at the same time. For example, Company A would register a lease for 20 years, then Company B would register a lease for another 20 years, then back to Company A for 20 years and so on, to try to avoid the whole question of what is a lease and what is a transfer of the property. Because each of the leases were for less than 30 years, they were exempt.

We used 30 years as the cutoff point to distinguish between a shorter-term lease and a longer-term lease. This amendment will close that loophole by making leases that are registered against the same land within a six-month period taxable if the sum of the leases exceeds 30 years.

Sections 1 and 2 approved.

section 3.

F. Gingell: This is the

section that gives us the cutoff date for all the people who previously had the advantage of a tax rebate or reduction if they qualified -- because they were not going to expensive homes, they didn't have a lot of money and they were subject to high-ratio financing. But the minister, in her wisdom, has now decided to drag them into the tax net. I would say that it is a new tax. It's certainly an additional tax, because it's taxing a group of people who were previously not subject to the tax. That is the sole reason that we opposed this bill in second reading.

There are certain changes to the limits that apply to first-time buyers. They have been pulled up from $150,000 to $200,000 and $200,000 to $250,000. I would presume that the way this has been done, by the amendments to the definition of qualifying value, doesn't in any way allow transactions between March 22, the date of your budget, and July 1, the final cutoff date, to be subject to the high-ratio credit rebate under the higher limits. Or have the limits been held down to the original amounts?

Hon. E. Cull: That's correct. The intent of this section, which eliminates the high-ratio-financing tax relief program, is to ensure that individuals who had been in the process of buying a house, assuming they would get relief under that program, have until the end of June to wind up their purchase. But it doesn't provide them with the enhanced benefit of the new increase, the same as it wouldn't drop the

[ Page 10490 ]

high-ratio financing from 75 percent to 70 percent, which is also an added improvement to the new program. It's simply intended to wind up this program and redistribute the benefits that were there. The existing

high-ratio tax relief program costs the province about $15 million. We estimate that the new first-time homebuyer program will cost us $35 million. The applications that we have to date under this program indicate that it looks like we're on target.

I see the member shaking his head, so maybe I'll give this information now rather than waiting. I'm sure this question will come up. In March 1993, the total number of beneficiaries under the old program was 541. In the first week of the new program -- so that was the last week in March, after the budget came in -- 494 people had applied. It was almost the same number of people in one-quarter of the time. If you look at total beneficiaries in April '93 under the old program, it was 443. The number of

first-time buyer exemptions in the first two weeks of April was 475. We've had more exemptions in two weeks than we had in the whole month of April '93. It is clearly benefiting more individuals, because two improvements have been made to the program: to increase the value of the home that can be purchased under the program; and to reduce the financing requirement from 75 percent, the point at which the relief cut out, to 70 percent. It has now been dropped another 5 percent to 70 percent. So there is additional room there for people to benefit.

The other reason that the cost is greater -- besides the larger number of people who will benefit from the program -- is that the tax relief is total. You get 100 percent tax relief if you qualify for the program,

whereas the other program had a sliding scale. Clearly this does benefit different people than the old program, although there will be a considerable amount of overlap, because most first-time buyers are involved in buying modest homes, usually with considerable high-ratio financing. But this will redistribute the benefits that are available to the group that the government believes is in greatest need of assistance in getting into housing: the first-time family.

F. Gingell: Is it possible to make a fair comparison? A fair comparison requires you to use only the old qualifying values of $150,000 and $200,000 for both periods or the new qualifying values of $200,000 and $250,000 -- which would be more difficult -- to compare what has actually happened in this early period in 1994 against what would have happened if those values and the financing had been the same.

We all have problems. I know that the gentleman on your left, who is a chartered accountant, will strongly and truly believe in the concept that we must be consistent. We must be consistent to be fair. It is absolutely unfair, I believe, for us to make comparisons where the rules have changed. So to make a comparison, we bring last year's qualifying values and financing amount to this year's applications and do a quick check to see what the results would have been, because we must only make comparisons on a comparable basis.

Hon. E. Cull: When we have had a bit more time to gather statistics on this, we will be able to make a comparison of the two programs, and I'll make that available to the member. But there's more at work here than simply comparing one program to another. There is a desire on the part of the government to provide tax relief to first-time homebuyers, young families who are struggling to get into their first home and get their foot in the market. Doing that without making any other changes to the existing arrangements would cost $35 million.

So if you just set the high-ratio program aside and ask what it would cost us to implement the new program, it's going to cost us more money than we're spending right now. The judgment that had to be made on the part of the government, on the part of the Minister of Finance, was whether that money could be better spent and better targeted at those first-time buyers.

If we were not dealing with any other financial constraints in this province, then perhaps we could eliminate the tax; perhaps we could add on program after program to benefit people who are worthy of receiving benefit. But that's not the circumstance we're in now. The hon. member's party is constantly calling for cuts to spending, cuts to the deficit and cuts to our debt. That can't be accomplished at the same time that we are adding on programs that will cost the government more money.

Government is all a question of priorities, and in reviewing this particular situation and the needs of young families trying to get into their homes, we believe that this money is better spent and better targeted at those young families. That is a matter of political priority and political judgment, and it's obviously an issue that distinguishes this government from the opposition, which would not necessarily make those priority decisions.

F. Gingell: I would just like to say one last thing on that issue. We do support the elimination of the tax for the

first-time homebuyer; we always have. We have called for it. We were disappointed that you decided to finance it through taxing these others.

[3:45]

One last question from me. You've mentioned the sum of $35 million. Last year the program cost you a fraction under $13 million. Do you anticipate that the total cost will be $35 million more -- i.e., $48 million -- or that it will be a total of $35 million -- i.e., $22 million more?

Hon. E. Cull: The cost of the new program is $35 million; the old program was about $15 million; so the net cost of the new program is $20 million. The number has to be subtracted from the new program.

M. de Jong: I will echo what my colleague said earlier insofar as we would be supporting this bill wholeheartedly except for the inclusion of

section 3, which deals with the elimination of the high-ratio tax relief program.

As I look at the minister's figures, this is one of the difficulties I have. It seems to me that the figures are being presented in a way that suggests the following: a first-time homebuyer purchasing a home for $150,000 would ostensibly be required to pay $1,500; this program is therefore saving that person $1,500, and the savings are being calculated on that basis. The minister will know that there's a bit of a fallacy there.

The vast majority of first-time homebuyers qualified under the old system anyway, and they weren't paying $1,500 in property purchase tax; they were probably only paying in the neighbourhood of $250 on that $150,000 home purchase. So to suggest that the new exemption is going to result in that case in savings of $1,500 just isn't the case. There were savings available to those people in any event.

The minister is correct insofar as she states that governing is a matter of setting priorities. The question I have for her is: does she recognize and is she prepared to accept that as a result of the changes this legislation will enact, from the time that a couple buys their first house or townhouse -- they get into the housing market, and I recognize that the government has established that as a priority -- and moves

[ Page 10491 ]

through the ordinary cycle of home-ownership till they require a home that can accommodate several children, for example, they will pay vastly more property purchase tax as a result of this amendment than they would under the old framework?

Hon. E. Cull: Theoretically that is true if, in the case of moving through several houses, a family must resort to high-ratio financing each time. More commonly, though, once individuals have purchased a house, they develop some equity in the house, not only through making their mortgage payments but usually through the increase in the value of the property. That allows them, if they're upgrading to a larger house, to take out a smaller mortgage than they would have the first time. That generally happens over a the lifetime of a family moving through housing. If the member is asking if I acknowledge that there may be circumstances where that is not the case, yes, that's true.

One has to ask, though, whether in the case of limited resources -- and that's what we're facing here in this province.... There are competing demands, and not only on the tax expenditures that we've made, because this $20 million net is an expenditure that has to be put beside all of the other expenditures of government and evaluated. But in making decisions about that $20 million tax expenditure, are we better to target that money to those people who have not yet even been able to get into the housing market, as opposed to helping people move their way up the ladder through the housing market?

I'm not denying that that family looking for the extra bedroom or for a little more elbow room doesn't have a housing need that may require support. But since we can't provide support to all families who have a call on the public's finances, we have to look at the money that we can afford to spend and target it more directly to those families who are in the greatest need.

That is also the case with respect to your earlier comments about how many of the people who will qualify under the

first-time buyers program would have also qualified under the high-ratio program. Obviously, if you were a first-time buyer and high-ratio, you would have qualified under the old program. But the facts to date -- and the statistics don't have a long life, because the program has only been in effect since March 23 -- show that the average benefit is $1,490 right now under the new program versus $790 under the old program. So there certainly are more people who are receiving a larger benefit, not only because of the increase in the house purchase price and the reduction in the financing but also because of the fact that the program is a complete exemption of the tax.

F. Gingell: The minister has a soft voice. Did you say the average benefit under the old program was $790 or $1,790?

Hon. E. Cull: The old program was $790; the new one is $1,490. I may be a dollar or two off there, as I'm recalling this from memory, but I think it's somewhere in that vicinity.

F. Gingell: There's just one final comment that I'd like to make. As one looks at all of the issues to do with housing markets around the world, although the west coast of Canada has enjoyed some excellent times, and house values have taken little blips, I remember well the early 1980s, when mortgage rates got up so high. People whom I knew -- particularly the CEO of our community college, whom we'd brought out from Toronto when I was chairman of the college board -- got themselves in a disaster because of the inability to sell their homes in Toronto. I recognize that housing markets do go up and do come down. It always happens; there isn't any secret rule.

The point that I wanted to mention is that particularly in Europe in the early 1990s, there were a tremendous number of houses that were repossessed by mortgage companies -- in Britain they're normally called building societies. What happened there was that real estate values dropped, and mortgage interest rates went up. There they don't have any long-term rates, and people were all of a sudden in a position where they could not only not afford their monthly payment but they didn't have any equity left in their house. Under your previous program with the

high-ratio-financing rebate, if we had that set of circumstances happen here, these people would have been eligible to get back into the market later on,

whereas now -- the way Bill 17 will amend the property transfer tax -- that won't be available to them. That's just a point I'd like to make. Markets don't always stay up; they fluctuate. And people here, just as they were in Europe, could be wiped out quite easily and not have assistance from this act to get back in.

M. de Jong: I have one further comment as well. I just want to point out to the minister, and this is based as much on personal experience as on anything else.... In my office, where I do conveyancing work, I have not had occasion to have prospective homebuyers tell me -- where they are obliged to pay $250 or $300 as first-time homebuyers under the existing framework, relying upon high-ratio financing and the tax relief exemption that existed -- that that represents an impediment to their completing the deal.

On the other hand, I have certainly been faced with situations where purchasers faced with a $2000 or $2500 property purchase tax bill -- young families where relief isn't available -- have said that it is prohibitive, and the deal will not complete on that basis. They are precluded from moving up, in many cases, to satisfy the legitimate needs of their family.

The minister has fairly pointed out that she is attempting to establish priorities. But if she is saying that she is prepared to run that risk or assume that risk on behalf of the many families in the province for whom the elimination of the high-ratio exemption program will have an impact, then so be it. Obviously we have taken some pains to point out to her our concern that that will have a very negative impact on those struggling families.

Hon. E. Cull: As I reflect back on the three homes I've owned, I would have qualified for high-ratio-financing tax relief for all of the purchases had the tax been in place. I don't think that would be the best use of public funds given the income of my family. Except perhaps with the first house that was purchased, I don't think that families in the circumstances of my own personal situation are the priority for public dollars for tax relief to encourage people to get into housing.

[4:00]

So I think -- as long as we want to go through personal examples, and you want to go through the cases that come through your office -- we will always find individuals who will not qualify for one reason or another and who would be benefited by the other program. But it goes both ways. I think that, at the end of the day, by providing tax cuts this year -- $112 million of tax cuts overall -- the government is trying to target those tax expenditures as strategically as possible to provide the greatest benefit to those in the greatest need. With all due respect, I think a number of families and individuals have benefited under the existing

[ Page 10492 ]

program who would not be seen as at the highest need in the overall scheme of things.

Section 3 approved.

section 4.

Hon. E. Cull: I move the amendment standing under my name on the order paper.

[Section 4, in the proposed

section 3.24(2)(

a) by deleting "45 days" and substituting "92 days."]

The opposition critic is scrambling to understand exactly what it is. This is the issue: the requirement about how long you have before you actually move into the new home to qualify. We are extending it from 45 to 92 days. I believe the old program -- and I'm sure my staff person here will correct me if I'm wrong -- was 45 days, and this was simply carried forward in the draft of the legislation. It was picked up afterwards as too tight a period of time, particularly with respect to the Residential Tenancy Act. We believe that 92 days covers almost all circumstances.

Amendment approved.

section 4 as amended.

F. Gingell: So we're now dealing with

section 4 as amended?

The Chair: Yes, member.

F. Gingell: What we need is one of those butcher shop things where it says we're now serving customer number such and such.

In the course of considering the various amendments being made at this time, I wonder whether the minister considered the issue of a notch provision for the maximum number; i.e., if the house cost $251,000, the tax will be so and so, and it would gradually phase out. At the moment, if the house is $250,000, you get a tax relief of $3,000, and if it's $250,050, you don't get anything. In many acts, such as the corporate capital tax act that we'll be dealing with later on, there are these notch provisions that carry us up.

[D. Lovick in the chair.]

Hon. E. Cull: We did look at that possibility. In fact, there are a variety of ways that you might want to provide some kind of a sliding scale or, as you called it, a notch provision such as the price of the house, the degree of financing and the size of the property, because if a property is over half a hectare, different rules apply to it. We looked at all of those, and on the one hand, we tried to balance off the fact that sooner or later you have to draw a line. When you draw that line, there will always be someone on the other side who will be disappointed that they didn't qualify for want of a few percentage points, a few dollars or a few acres.

The other very real consideration, which we discussed in our last bill, is the need to provide some simplicity in a fairly complex system. At the end of it all, we decided that since we had to draw a line somewhere, it would be administratively easier to do and therefore clearer to the person who is purchasing the house -- as well as to those who have to collect the tax -- to do it in the way that we have. But we did give it some very serious thought before rejecting it.

The Chair: I understand that the member for Cariboo North rises to make an introduction. Shall leave be granted?

Leave granted.

F. Garden: We're privileged this afternoon to have approximately 20 members of McLeese Lake Elementary school from Cariboo North visiting us today. McLeese Lake happens to be one of the most beautiful spots in the Cariboo, and I urge you all to visit there some time and see why these people wouldn't want to leave. Accompanying the kids -- whom I just took on a tour and who were exceptionally well behaved -- are Mr. Wayne Rodier, their teacher, Mr. Tom Walker, Jeana Graham, Sherri Ekshaw, Marie Paxton, Tracy Paxton, and last but by no means least, the bus driver, Emile "Poncho" Forseille. Will you please join me in making them welcome in the House today.

F. Gingell: I was wondering if the minister would be good enough at this point, because this is the area where it comes into play, to just set out for the committee the circumstances that deal with joint tenancy or tenants in common: whether tenants in common or joint tenants are treated differently, and in the case of joint tenancy, if one purchaser qualifies and the other purchaser doesn't, exactly how all of those matters are handled.

Hon. E. Cull: I'm just getting a little briefing on exactly how this

section works. In the case of tenants in common, the purchasers could decide how much of the interest they're purchasing. Each purchaser would be qualified for the program individually and therefore get the tax break they were eligible for based on their interest and qualifications.

In the case of joint tenancy, where it's considered to be fifty-fifty, the rules would apply. Of course, there's less flexibility there to apportion the tax, so each would qualify individually, but it would be based on their 50 percent interest in the property.

F. Gingell: In recognizing that tenants in common are a different species from joint tenants in that they each own a specific and separate but inseparable part, are there any provisions in here that deal with the issue? Maybe, as an example, there is a home worth $400,000 that they're going to buy. The tenants in common arrangement is that party A, who qualifies as a first-time buyer, owns 60 percent of the residence, and the non-qualifier owns 40 percent. Would the exemption then be available to the qualified buyer, or would the fact that the total building costs $400,000 bar it?

If they were joint tenants, I could see that, you know. But I wonder whether the circumstance is a little different for tenants in common.

Hon. E. Cull: The member has just struck on something that causes me to sign dozens of letters every week on tax appeals or questions around this issue. The value of the property is the value of the property, not the value that you purchase. So if two individuals are purchasing this $400,000 home, and they try to split it into two to say that they're only buying a $200,000 property because that's the way they've registered the interest and title, it doesn't change the property value for the calculation of the tax regardless of this program, and it also doesn't change the application of this particular program.

You can't rearrange ownership to improve your ability to qualify under the guidelines in the program or to restructure your tax to avoid paying the higher percentage of tax after it goes over $200,000.

[ Page 10493 ]

F. Gingell: Would they be able to do that if they were to strata-title the building by dividing the single title into two separate stratas?

Interjection.

Hon. E. Cull: I think the member just answered his own question. I heard him say across the floor that it would cost them more for the strata title than they would save in terms of the tax. That's probably very true. If a property can be legally divided into two parcels, the strata titles act would, of course, apply, and then two people could buy their portion of it. It would be very difficult to legally divide a single-family home into two parcels.

Section 4 as amended approved.

Sections 5 and 6 approved.

Interjection.

The Chair: I'm sorry, we're apparently proceeding too precipitately.

M. de Jong: I think I've missed the boat. I did have a question about the lien provisions, and it appears that that is included in

section 4.

The Chair: I think, with the minister's indulgence, we'll pick that up.

M. de Jong: If I understand it correctly, the amendments to the act that this legislation embodies contemplate the possibility of a lien being registered against the property as a security instrument for the benefits of the tax exemption. I have a couple of questions for the minister. I don't believe that the existing legislation contemplates the provision for a lien. Secondly, this act suggests that a lien may be registered. Is it the minister's understanding that once the property purchase tax return has been filed with the first-time homebuyer's exemption claimed, a lien would automatically follow?

Or is that a discretionary call? If so, what factors would be taken into account before the lien was registered?

Hon. E. Cull: We will be registering a lien -- it's automatic. In signing the return for the tax relief, one of the things the purchaser does is give permission for the lien to be registered.

M. de Jong: I think the minister answered this at the very beginning of her response. A lien would, therefore, automatically follow.

section 7.

F. Gingell: I wonder if the minister could advise the committee if, to her knowledge, there's any

section in any other act that is similar to this. It's a rather unusual matter. I can appreciate that the people who are responsible for the administration of the act would like it to be there, and it would help them. I wonder whether this is unique.

Hon. E. Cull: As a result of the passage of the Freedom of Information and Protection of Privacy Act, we in this House are going to start seeing more explicit provisions in legislation to deal with matters that have not had to be explicitly handled in legislation in the past. I can't answer whether there are any other acts with this provision in them or whether there are other acts that have always assumed the ability to do this. But we have checked this with the commissioner for freedom of information and privacy to make sure that we're following the proper procedure to access this information.

[F. Garden in the chair.]

Sections 7 to 9 inclusive approved.

Title approved.

[4:15]

Hon. E. Cull: I move the committee rise and report the bill complete with amendment.

Motion approved.

The House resumed; D. Lovick in the chair.

Bill 17, Property Transfer Tax Amendment Act, 1994, reported complete with amendment to be considered at the next sitting of the House after today.

Hon. E. Cull: I call committee stage on Bill 3.

MANUFACTURED HOME AMENDMENT ACT, 1994

The House in committee on Bill 3; D. Lovick in the chair.

Sections 1 to 9 inclusive approved.

section 10.

F. Gingell: I was wondering if the minister would just give us a little background on the new

section 37.1, concerning whether or not this is designed to protect buyers and sellers of manufactured homes.

Hon. E. Cull: No, it's not a matter of trying to protect buyers; it's just a question of when a manufactured home is moved from one location to another without going through the registry and the registry becomes aware of that.

Section 37.1 provides a procedure for the registrar to follow after being advised by the B.C. Assessment Authority that a manufactured home is not at the location shown on the register, or that a change has been made to the registered location of a manufactured home on the register. It allows for the registrar to take action as a result of being advised through, I guess, the non-normal procedure.

Sections 10 to 16 inclusive approved.

section 17.

F. Gingell: I wonder if the minister could advise us if there are any thoughts in the minister's office as to other uses for such an electronic or computerized registry.

Hon. E. Cull: Sorry, I'm not clear whether the member is asking if there are other uses for this particular registry or whether he is asking if an electronic registry could be used in other situations.

F. Gingell: I am asking if any consideration is being given to other uses for this registry of manufactured homes. I must

[ Page 10494 ]

admit that I'm a bit lost. I'm asking questions on behalf of another member of caucus who is, unfortunately, committed to.... The question revolved around real estate office listings of manufactured homes for sale. That, to me, didn't seem what you had in mind, but I thought I should see if you do have any other thoughts in mind for the registry.

[F. Garden in the chair.]

Hon. E. Cull: You can only search this registry using the name of the owner or the location. Obviously, since we're trying to deal with the concerns of a member who isn't here, it's hard to be absolutely precise as to what his or her concerns might be. There would be protection around freedom of information and privacy in terms of access. Access is only by searching, using the two means I have mentioned. So the ability to provide access to a listing agent, or the ability of a real estate agent to suddenly find out information through a general search, would not be permissible.

F. Gingell: This is, in my memory, really the first revision of a registry operation since the Freedom of Information and Protection of Privacy Act was passed. Could the minister give the committee some idea of how that complicated, affected or influenced the way you had to structure all these changes as you pulled this registry into the latter half of the twentieth century?

Hon. E. Cull: I'm afraid I can't do that, because I wasn't involved in the detailed discussion with the commissioner's office on this matter. However, if the member would like to explore this further and have a look at what considerations were put before us, particularly in light of the fact that there may be future changes to move into a more high-tech world, I'd be happy to arrange for that.

Sections 17 to 20 inclusive approved.

Title approved.

Hon. E. Cull: I'm just going to clarify one point here that my staff advised me was incorrect in my answer. The search cannot be made by location; it's only name, serial number and the number of the manufactured home. So just for the record, I want to make sure that....

F. Gingell: The name, serial number and....

Hon. E. Cull: And the manufactured home registration number. So it's even more limited than I had led you to believe.

The Chair:

Section 21 is before you. I neglected to mention

section

Section 21 approved.

F. Gingell: On a point of order, is 21 a separate section, or is that just a subsection to

section 20? It's been put in different print and indented.

Hon. E. Cull: No, it's not a separate section.

The Chair: I've already passed that. Thank you for your question, hon. member.

Hon. E. Cull: If the member takes a look back through the bill, he'll see that the indent occurs any place that there is a title. That's what's misleading him there in thinking that it's a subsection.

In any event, I move the committee rise and report the bill complete without amendment.

Motion approved.

The House resumed; D. Lovick in the chair.

Bill 3, Manufactured Home Amendment Act, 1994, reported complete without amendment, read a third time and passed.

Hon. E. Cull: We're making remarkable progress here. I would now like to call committee stage of Bill 16.

MINERAL TAX AMENDMENT ACT, 1994

The House in committee on Bill 16; D. Lovick in the chair.

section 1.

F. Gingell: As I understand it,

section 1 brings in a new concept: fiscal year of the operator. Many mining operations are partnership arrangements -- partnerships between various mining corporations -- or are in the hands of a single operator. They keep a separate set of accounts for that mine, and then each party picks up its own share of the results of that. Does this amendment contemplate a mine that is being operated and owned 100 percent by a single corporation being able to have a financial year that is different from the fiscal year of that one corporation?

Hon. E. Cull: In the absence of my staff, who I believe are on their way to the chamber right now, I will attempt to answer this. The current Mineral Tax Act defines the term fiscal year to mean the fiscal year of the mine. But with the addition of

section 10.1 to the act to allow exploration costs to be carried by an operator of a mine without being allocated to any particular mine, it now becomes necessary to define fiscal years for operators as well as for mines. In

section 1, (

a) and (

b) replace the term "fiscal year" with the terms "fiscal year of the mine" and "fiscal year of the operator," and (

c) amends the definition of "investment allowance rate" to allow for two types of fiscal years. This provides greater flexibility for the mine operators to apportion their exploration costs according to their mining activity.

[4:30]

Sections 1 through 3 inclusive approved.

section 4.

F. Gingell: I'd just like the minister's assurance that what is happening here is purely a set of regulations -- a formula, in effect -- to leave the mineral tax payable by a coalmine at the coalmine rate until March 22, 1994, and to move it to a base metal mine rate subsequent to March 22, 1994. We deal with these 13 percent rates, 17.5 percent rates, 2 percent rates and 7.5 percent rates. I'm making the assumption that the coalmine has a 17.5 percent rate, compared to a 13 percent rate, for the purposes of the calculation made under (a); and for the purposes under (b), it presently has a 7.5 percent rate for coalmines, which after March 22, 1994, will go down to a

[ Page 10495 ]

2 percent rate, which is the present rate for a base metal mine.

Hon. E. Cull: What

section 4 does is create a straddle provision for the legislation. Because regardless of the effective date of the change in tax rates, there are going to be fiscal years of mines that are not in sync with that. They begin before or end after -- or, in other words, straddle -- the date. Since it would be impractical for us to determine revenues and costs before and after the date, it's necessary to specify what rate of tax will apply to such years.

Section 4 sets out how the rate of tax will be determined for the straddle years. The new

section 3.1 provides tax rates for the straddle years that will be the average of the new and old rates, weighted according to the proportions of the years before and after the effective date -- and the effective date is March 23, 1994.

F. Gingell: So the answer is yes.

Hon. E. Cull: Yes.

Sections 4 through 8 inclusive approved.

section 9.

F. Gingell: Maybe the minister could refer back to the briefing notes. All

section 9 does now is give coalmines a similar set of circumstances that existed for base metal mines. Or is this an entirely new allowance?

Hon. E. Cull: Could you ask that again, please?

F. Gingell: Perhaps the minister could explain to the committee what the consequences are of the amendments made under

section 9.

Hon. E. Cull: In the way that you rephrased the question, you made it a longer answer. Let me give you a brief explanation of

section 9.

The provisions of the current act require that exploration expenditures be added to the cumulative expenditure account of a mine in the year the expenditures are incurred. An intention of the amendments is to allow exploration costs to be added to this cumulative expenditure account whenever the operator of the mine chooses. A secondary intention is that the operator will still receive an allowance for a return on an investment in exploration. This requires a means by which the operator can accumulate and report exploration expenditures as they are incurred and before they are allocated to a mine.

F. Gingell: I'm sorry that I'm not better briefed on the questions. Does this mean that in future an exploration account will be kept by a corporation for each different mine that they have? Or will they keep one account and then allocate sums of money from that account against the income earned from different mines?

Hon. E. Cull: No, hon. Chair. This makes it easier for companies to deduct their exploration costs. They can essentially collect up their exploration costs and then apply them as the occasion arises and as they wish, to get the maximum benefit.

Sections 9 to 19 inclusive approved.

Title approved.

Hon. E. Cull: We are making remarkable progress this afternoon.

I move the committee rise and report the bill complete without amendment.

Motion approved.

The House resumed; D. Lovick in the chair.

Bill 16, Mineral Tax Amendment Act, 1994, reported complete without amendment, read a third time and passed.

Hon. E. Cull: Committee on Bill 18.

MEDICAL AND HEALTH CARE SERVICES SPECIAL ACCOUNT ACT

The House in committee on Bill 18; D. Lovick in the chair.

section 1.

L. Reid: Hon. Chair, is

section 1 on definition?

The Chair: That's correct.

L. Reid: I would just ask a question in terms of "prescribed group." I understand that looks at practitioners in the field. Is it the intention to extend that group beyond medical practitioners? Are we looking at the creation of a category for supplementary service providers?

Hon. E. Cull: At the current time, as the member knows, this special account is being established to deal only with medical practitioners, but the "prescribed group" definition clearly allows that other professionals could be established under this act via order-in-council.

L. Reid: Again on the prescribed group, I understand the minister's comment in terms of medical practitioners in the field. When I look to the subaccount, it seems to me that there is the possibility for other groups to be created. Are we speaking of a group such as podiatrists under this section?

Hon. E. Cull: I'm just checking with some Ministry of Health staff who have joined me for this bill. Yes, that is contemplated, although it's permissive. It's something that the ministry would have to move towards. At the present time, and I know that the Health critic knows this very well, the agreement with the B.C. Medical Association actually contemplates and requires the establishment of a special account to allow for carryover from year to year. There isn't any other provision yet with other practitioners, but this would allow for it in the future if it was deemed to be a desirable and workable provision for other practitioners.

L. Reid: I certainly understand the minister's comments about how at some future point it may indeed be desirable, and I understand her point in terms of this being an accounting mechanism to allow carryover from year to year. My understanding is that under the B.C. Medical Association agreement, that carryover allows for five years. Has there been any discussion in terms of a similar time line on contract language regarding other care providers? Are we all looking at the possibility of

five-year plans?

[ Page 10496 ]

Hon. E. Cull: A minute ago, the member mentioned podiatrists as an example of a group that might be covered under this. I am aware that podiatrists are having discussions with the Ministry of Health about a similar provision. There may be other supplementary practitioners who are also discussing this with the ministry. The carryover provision, though, would be a matter of negotiation, and it might be different for different groups. On the other hand, as a result of negotiations, it might be the same.

Section 1 approved.

section 2.

L. Reid: When we talk about the medical and health care services special account being established, my understanding is that the maximum on that amount, the ceiling that can be carried forward, will be $40 million. If there is a surplus at some point, where will those surplus dollars end up?

Hon. E. Cull: The $40 million limit that the member mentions is with regard to the BCMA. Casting back to the discussion we just had, there might be other amounts for other groups. But if that amount is exceeded, the money returns to consolidated revenue.

Section 2 approved.

section 3.

L. Reid: I would ask for a very brief explanation in terms of moneys recovered from audit and put into the special account through an order-in-council. If the minister can just take a moment to explain how that process works, that would assist the discussion.

Hon. E. Cull: Where the ministry undertakes an audit of the activities of a practitioner from a previous year, and it is determined that the practitioner received payments that she or he was not entitled to receive, the repayment to the government of those payments would go into this account.

Sections 3 to 5 inclusive approved.

section 6.

L. Reid: I would just draw the minister's attention to the last section, 6(3): "...however described, are deemed to be references to the commission." For the record, are we referring to the Medical Services Commission?

Hon. E. Cull: That's correct.

F. Gingell: I was wondering if the minister would allow me to ask a question that deals with the bill in its general form. We seem to go through little cycles, where we create special accounts and we get rid of them. They don't accomplish what they're intended to do, on occasion. I have a most embarrassing situation every so often: I have to phone the comptroller general's office to talk to someone who can go through the exercises and remind me again exactly how they work. With my 40 years as a chartered accountant, I can understand the problems of other people in trying to understand these things.

[4:45]

Are we going to end up with a set of circumstances where funds truly are available to be moved from year to year, or are they still going to have to go through the normal exercise of their being voted in appropriations?

Hon. E. Cull: A special account allows for a statutory expenditure, so it doesn't have to be voted in from year to year, and that's the whole purpose of this. I don't necessarily disagree with what the member was suggesting around special accounts. I generally don't like them; we're better off with fewer of them than with more of them.

In this case, if we recall recent history, a lot of work was done with the B.C. Medical Association to deal with the question of health services utilization, particularly the use of medical services.

The doctors said: "If we are to cooperate and join with you in an effort to reduce the utilization of our services, we think there should be some benefit to the physicians of the province for doing that." One of the ways we can achieve that benefit is to create the ability to save the money in years when utilization goes down, then be able to spend it in years when utilization might increase and be able to provide benefits to practitioners for good behaviour. It's really an incentive system to encourage the behaviour that I think we all agree is desirable in terms of managing the health care system.

It gives us the flexibility that just doesn't exist now. We saw that quite well in past years. The Medical Services Plan was overspent every year, and there had to be a special warrant to top it up. We also saw the unusual circumstance in 1992 when it was actually underspent, and that created its own problems for the next budget year.

F. Gingell: Members of cabinet, or the Lieutenant-Governor-in-Council, continually say that the special account is meaningless because there isn't any money in it. Is this special account going to be unique in that manner? Will there actually be a savings account at our local friendly credit union, marked "special account for the Medical and Health Care Services Act"?

Hon. E. Cull: I agree that it is somewhat confusing when you start dealing with special accounts. There won't actually be a bank account entitled the medical and health care services special account that will have money deposited in it to be drawn upon in subsequent years. It is simply a notional account in consolidated revenue. This allows access to the funds in the notional account by a statutory appropriation, as opposed to a voted appropriation. Therefore, it gives greater certainty to those who might draw on it that those funds can be drawn upon without having to go through the process of deciding expenditures.

F. Gingell: The decision to make those expenditures will be made by the Lieutenant-Governor-in-Council. Although the expenditure is statutory, rather than voted -- i.e., it is being voted now forever -- it still has to be included in the budget for the year. The Minister of Finance will forever be juggling with the problems she was speaking of earlier: competing demands and how you pay for them. Is there really any guarantee here that is different from the commitment of a minister to have continual funding for programs?

Hon. E. Cull: Yes, it is different, because this legislation arises as a result of the agreement struck between the government and the B.C. Medical Association, and that gives life to the act and also gives the requirements for the expenditures. Right now, because we're only dealing with medical practitioners, payments can only be made out of the account in accordance with the agreement. The minister

[ Page 10497 ]

must authorize them, but they must be in accordance with the agreement or with the provisions of the regulations.

This gives the minister and the Medical Association the ability to say that we will allow savings to be moved from year to year up to a maximum of $40 million a year. That money would also be used to pay for overexpenditures. It is not really transferring money from one account to the next, so it is notional rather than real in the sense that dollars move backwards and forwards between different accounts. But what it does do is allow the agreement that was struck to be implemented. Without this, we wouldn't be able to provide that more money be available that would be entirely related to an underexpenditure.

Section 6 approved.

Title approved.

Hon. E. Cull: I move the committee rise and report the bill complete without amendment.

Motion approved.

The House resumed; D. Lovick in the chair.

Bill 18, Medical and Health Care Services Special Account Act, reported complete without amendment, read a third time and passed.

Hon. E. Cull: I call committee stage on Bill 14.

BUDGET MEASURES IMPLEMENTATION ACT, 1994

The House in committee on Bill 14; D. Lovick in the chair.

section 1.

F. Gingell: I'm sure that no one really expected

section 1 to pass without a little lecture from me on this matter. We will support this

section wholeheartedly. We're really pleased that the government has taken our advice. We wish that you would take our advice more often, but we congratulate you on your wisdom and foresight in taking it on this occasion. We don't think it's the job of government to speculate with taxpayers' money, to tax us all for the purposes of speculating in the stock market, however capably and however well those functions may be carried on by the staff of the investment group in the Ministry of Finance. They are busy enough looking after the many billions of dollars in trust funds.

I think this is an opportunity to say a few more words about that. I appreciate that government expects members of the opposition to yell "conflict" on every possible occasion, and we certainly do. I guess it is a disease, the bugs of which linger on within these hallowed walls, because it used to be shouted out with glee by members of the government when they were in opposition. In fact, we are keeping count and are presently only calling out "conflict" at about 37 percent of the rate of the previous opposition.

But on a more serious note, when we were given the investment portfolio of the B.C. Endowment Fund recently and saw the very substantial investment that the Endowment Fund had in Westcoast Energy, and when one recognizes all of the arrangements, guarantees, contingent liabilities and commitments that were made with respect to Centra Gas and the Vancouver Island pipeline, one can see that it does become difficult. Conflicts are rife there. Government needs to deal with hands off on these issues.

You need to be able to do that which is right and fair for everybody, without considering any other issues or worrying about the price of a share in MacMillan Bloedel, Westcoast Energy or any other forest products company that has government-granted rights to harvest timber.

So I really am pleased. I hope they liquidate the assets of the B.C. Endowment Fund as quickly as they reasonably and properly can. I think they will find their responsibilities in government much easier to respond to and administer in the future.

Hon. E. Cull: I thought I should rise -- although that was a statement, not a question -- just with respect to the

arm's-length relationship of the Endowment Fund and government decision-making. That too has concerned me, as Minister of Finance, and our government with respect to the conflict issues.

Justice Peter Seaton, as I think all members know, did a review of whether the government could be in conflict in such cases and concluded that there was no conflict, real or apparent. But he then went on to make a number of suggestions that could reinforce the separation between the government in its

decision-making role on all kinds of policy issues and in its investment role. We will continue, of course, to have an investment responsibility for government pension funds and the like, and that issue may still be there in some people's minds. We will be undertaking a number of measures during this legislative session to work to implement the recommendations of Justice Seaton.

In addition, the member now knows as much about the Endowment Fund as I do, in that it....

Interjection.

F. Gingell: I don't know the original cost of the original investment.

Hon. E. Cull: The member is saying he doesn't know the original cost of the investment, and neither do I, although obviously that information is available with my staff. The

day-to-day operations of the Endowment Fund are managed by our chief investment officer, Doug Pearce, who is with me here in the House. It's important that we all acknowledge that the decisions he and his staff must make are not discussed with me in my role as Finance minister. I'm absolutely rigorous on that requirement.

[5:00]

F. Gingell: There is just one last thing that I wish to state on the issue of conflicts. There was this very interesting 1993 publication by the government, which came up in question period yesterday, that deals with a whole series of issues for senior staff members of government. It deals with sexual harassment, racism and sexism and also the issue of conflict of interest. It recognizes that everybody, all civil servants and employees of the ministries, have private lives.

But the key interesting sentence in it was that if it is reasonable for someone to perceive that there is a conflict of interest, there is -- even though Mr. Justice Seaton, in looking at all those facts, recognized the clear division between the responsibilities of the investment group within your ministry and the various groups outside that advise them and on whose recommendations they are to act or not act. That's within your own government guidelines for employees. I'm just really pleased that you've moved in this

[ Page 10498 ]

direction, and that the British Columbia Endowment Fund will be wound up.

Sections 1 to 3 inclusive approved.

section 4.

F. Gingell: I was wondering if the minister could advise us about the ongoing costs that arise from winding up the Energy Council. I appreciate that costs for the year March 31, 1995, are included in the budget documents, and they're quite clear for us all to see. Could the minister please advise the committee if there are any costs that continue past March 31, 1995, that this government or the people of British Columbia will be responsible for with respect to matters and contracts entered into under the program entitled the Energy Council Act?

Hon. E. Cull: No. We're going to be able to contain all of the costs of the Energy Council within this year's budget. There is still some work to be done, which is why the Energy Council is not being wound up immediately. They do have to complete some work, but the budget allocation in the '94-95 budget is sufficient to address those costs.

F. Gingell: The kinds of costs that might be ongoing that one immediately thinks about in these circumstances are salaries and rental arrangements for premises. Not dealing with the issue of whether the property can be occupied by some other government ministry, which is a way around it, or by individuals assigned to new assignments, can the minister advise us if there are any costs that are not included in the 1994-95 budget that will be paid to individuals or corporations under contracts entered into by the B.C. Energy Council?

Hon. E. Cull: Again, I'm not aware of any costs that would extend beyond March 31, 1995. The budget has been designed in a way to be able to cover all foreseen costs. There is a rental agreement, which I believe will also be accommodated in this year's budget. The practice that we are pursuing with the various agencies being eliminated as a result of the budget decision is to use what is known as our managed-hiring process, which is a policy throughout the public service right now that requires

in-service hiring to occur before out-of-service hiring takes place. Through that process, we should be able to place a number of individuals in other vacancies in government who have skills that would be needed in any event, at no additional cost. If there are severance costs, they will also have to be accommodated under the budget.

F. Gingell: I take you to say that as far as rental properties are concerned, offices which I believe they had on West Hastings Street in Vancouver.... Perhaps the minister could confirm that. You don't know where?

Hon. E. Cull: I'm sorry; I don't know the location of the office space. The staff of the Ministry of Energy, Mines and Petroleum Resources that are here with me don't have the address, either. It is in Vancouver, but I don't know the address.

D. Jarvis: To answer your question, the office is on the fifth floor, I think, at the corner of Hornby and Davie Streets.

I am in full support of this repeal, of this aspect of the act, and I can't go away without saying a few things. What the Liberal Party asked at the time this Energy Council was first formed was: what could be done by this council that couldn't already be done through the Ministry of Energy, Mines and Petroleum Resources? The minister had a staff of approximately 400, plus or minus, and all this was going to do was increase a further bit of bureaucracy and cost the taxpayers millions of dollars to ostensibly supply a job for an ex-NDP candidate. We felt it was an excessive waste of the taxpayers' money.

If you read the mandate of the Energy and Mines portfolio and the mandate in the Energy Council Act, you will find that they are the same thing. So the minister did have plenty of staff to do it for her, and it was a completely unnecessary situation.

The other aspect we noted is that when the Energy Council was first brought up, it was in two-year increments. At that time we felt that the chairman could have had his contract for the two-year-increment period. Instead, they gave him a five-year contract. We've now gone through two years. The end of this year will be the third year. Because the Minister of Energy and Mines couldn't say if he was going to do any other work for the government, he'll be sitting at home for two years picking up $150,000 a year.

The Chair: Member, could I ask you to take your seat for just a moment. I want to remind you that we are now in committee stage, and we are dealing with a particular

section of the bill that, in this instance, has the effect of disbanding the particular item that you are choosing to talk about. I am having difficulty finding the relevancy of your remarks. We canvassed the principle of the bill in second reading, so I would ask that you please wind up your remarks rather quickly. I hope you have a question on this.

D. Jarvis: I was saying that I agree that this act should be repealed. I would ask the minister if she could possibly tell us how many dollars have ensued with this council up to this point, and how much more will be spent until the final day of '95 when it is disbanded.

Hon. E. Cull: The budget last year for the Energy Council was $1.5 million, and this year it is $950,000, so there is the cost of the Energy Council. Contrary to what the member has suggested, the council has done valuable work that the government did not believe could be handled by existing staff within the ministry. They did an excellent consultation process with respect to exports, and they're currently completing work on a provincial energy plan.

From time to time, governments of all sorts create bodies to do specific tasks. When they have finished their work, governments have the challenge of trying to wind up those bodies. When we formed government in 1991, we discovered there were all kinds of bodies and agencies that still existed on the books, some of which hadn't met for many years, some of which no longer had any useful purpose. We did begin to systematically wind up and eliminate those.

If the member is suggesting that having created something, one should never say that its useful purpose has come to an end and we're going to eliminate it, I can't agree with him. I'm pleased that he's supporting the bill, and I don't think there's any shame in acknowledging when you've created a body that did useful work and the work is finished. You thank them, and you move on through other processes.

F. Gingell: I would just want to say, seriously, that we would never wish to discourage the ministry from setting up task forces to do these things. But I think the position we take

[ Page 10499 ]

on these issues bears repeating. We don't have to set up a council to do the work of a task force. We can assign people out of....

The Chair: Member, I'm sorry, would you please take your seat. I have cautioned your colleague already. I have allowed both sides to state the position they are taking with regard to the late Energy Council. We are in committee stage now, and there is no useful purpose being served, in terms of a furtherance of this particular measure before us, in continuing that debate. I'm suggesting to both sides of the House that we have canvassed this matter. Unless the member has a question, I'm going to ask that this

section be passed.

F. Gingell: So that there is no misunderstanding with respect to the questions that I asked earlier, the intent of my question was to ensure that any costs that are related to ongoing contracts signed by the Energy Council are included in this year's estimates. At the moment, I understand that the minister has said yes. Therefore this year's estimates include all of the costs of Mr. Gathercole, who was hired, and there's not any additional amount to be paid to him under any other vote at any other time in the future after the year ended March 31, 1995. That is also true with respect to office space that has been rented or to any other employee who has been hired.

Yes, I appreciate, understand and thoroughly agree with your in-service program that would take employees not employed under contract but just in the normal course of events at the Energy Council and give them the ability to move on to others. Their separation pay, had they been separated, would have been included in the budget anyway.

Hon. E. Cull: Just to clarify that, I am not aware of any costs attributable to the Energy Council that will go beyond this budget year. But clearly, if there is a clerk 3 working for the Energy Council who is moved to the Ministry of Finance, there will be ongoing costs related to that individual because she will continue to be employed by the government.

Similarly -- and I don't know the makeup of the staff at the Energy Council, so I'm just using examples here -- if there were someone who right now was performing services for the Energy Council on a contract basis, and that person was subsequently hired again by the Ministry of Finance to perform contract services, moneys would still be paid there, but it would not be related to the Energy Council. There are a number of circumstances that would have to be looked at to trace every one of those through.

With respect to the intent of your question, which I understand to be whether the Energy Council's cost is going to pop up somewhere else in some other year in some other budget, to the best of my knowledge right now the answer is no.

[5:15]

D. Jarvis: I want to clarify that one point again. All the costs are going to be wound up inside this fiscal year of

1994-95, except for any outstanding contracts. Will Mr. Gathercole's contract, which runs to '97, be included in this year's budget, or will it run on until '97? Has it been paid up in full for the last two years?

Hon. E. Cull: With respect to Mr. Gathercole, negotiations are underway. If Mr. Gathercole is subsequently hired in another capacity, then there would be costs associated with that. But no decisions have been made with respect to Mr. Gathercole's continuing employment with the government. If he is wound up entirely and there are severance costs related to that, it will have to be borne out of the Energy Council budget.

F. Gingell: I don't think we want to spend any more time on this, but my understanding of what has been said is that every single cost that relates to every single contract that the Energy Council has entered into is included in this year's budget. Perhaps it's appropriate, because this council is outside the minister's responsibility, that the responses which have been given be reviewed and we be advised if that is not the case. I understood you to say that if there are severance costs in relation to Mr. Gathercole, they have been recognized now and are included in this year's budget.

Section 4 approved.

section 5.

F. Gingell:

Section 5 deals with investments that are perhaps not as readily marketable as one would expect in an investment fund. Could the minister advise us if there are any securities in the British Columbia Endowment Fund that fall into the category described under

section 5 (1.1), the amendment to

section 36 of the Financial Administration Act?

Hon. E. Cull: The member needs to be aware that this

section is simply a grandfathering -- grandparenting may be the more appropriate term -- which would allow us, as we eliminate the B.C. Endowment Fund, to transfer some assets of the fund into the general fund. Specifically, what's in mind here is B.C. Focus, which you may be aware of. I hope you're aware of it. B.C. Focus is the venture capital funds that were established last year, and we will want to continue that. The budget this year added another $10 million to that fund to allow us to continue investing in growing B.C. businesses that are in need of venture capital.

Sections 5 and 6 approved.

section 7.

F. Gingell: During second reading debate on this bill, we spoke about the effect of this change. What's happening is that a further 0.13 percent of teachers' salary costs are now going to be required to be paid out by all 75 school districts in the province. We all know that school boards struggle with budget issues.

Could the minister please advise us if this specific 0.13 percent has been included as a recognized additional cost to go with additional costs that come from the increases at Hydro, the Workers' Compensation Board and a whole bunch of other things that tend to be outside the control of school boards? Has this specific item been dealt with in the budgets of the school boards, or is it something that comes along to them later, as a surprise?

Hon. E. Cull: This amendment corrects an anomaly that exists only with respect to the education pension plan, the Pension (Teachers) Act. In other cases, such as in the Ministry of Health or where employees are covered under pension plans, this contribution has always been paid for by the employer. Historically, the Ministry of Education actually made these contributions. This amendment will now bring this pension plan into compliance with all of the other pension plans.

It's unusual for a provincial ministry to make a direct contribution of this nature into a pension plan. This is

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simply arising as a result of historical events, which are no longer current, in the way that the pension plan is managed.

F. Gingell: I almost feel like asking for a recess while I go back and think about that response. Am I hearing the minister say that steps are being taken to ensure that the teachers' pension fund, which is entirely separate and distinct -- in fact, there are even questions about whether the provincial government is liable for un