Manitoba Hansard — 13 November 1990 (Sitting 23B, 35th Legislature, 1st Session)

35-1-23b

Manitoba — Debates (Hansard)

MG-8048 First Session - Thirty-Fifth Legislature of the Legislative Assembly of Manitoba DEBATES and PROCEEDINGS (HANSARD) 39 Elizabeth 11 Published under the authority of The Honourable Denls C. Rocan Speaker VOL. XXXIX No. 238 • 8 p.m., TUESDAY, NOVEMBER 13, 1990 Printed by the Office of the Quee ns Printer, Provlnctl of Msnltoba ISSN 0542-5492

MANITOBA LEGISLATIVE ASSEMBLY Thirty-Fifth Legislature Members, Constituencies and Political Affiliation NAME ALCOCK, Reg ASHTON, Steve BARRETT, Becky CARR, James CARST AIR S, Sharon CERIL U, Marianne CHEEMA, Gulzar CHOMIAK, Dave CONNERY, Edward, Hon. CUMMINGS, Glen, Hon. DACQUAY, Louise DERKACH, Leonard, Hon. DEWAR, Gregory DOER, Gary DOWNEY, James, Hon. DRI EDGER, Albert, Hon. DUCHARME, Gerry, Hon. EDWARDS, Paul ENNS, Harry, Hon. ERNST, Jim, Hon. EVANS, Clif EVANS, Leonard S. FILMON, Gary, Hon. FIN DLAY, Glen, Hon. FRIE SEN, Jean GAUDRY, Neil GIL LESHAM MER, Harold, Hon. HARPER, Elijah HELWER, Edward R.

HICKES, George LAMOUREUX, Kevin LATHLIN, Oscar LAURENDEAU, Marcel MALOWAY, Jim MANNESS, Clayton, Hon. MARTI NDALE, Doug McALPINE, Gerry McCRAE, James, Hon. MciNTOS H, Linda MITCHELSON , Bonnie, Hon. NEUFELD, Harold, Hon. ORCHARD, Donald, Hon. PENNER, Jack, Hon. PLOHMAN, John PRAZNIK, Darren, Hoh. REID, Daryl REIMER, Jack RENDER, Shirley ROCAN , Denis, Hon. ROSE, Bob SANTOS, Conrad STEFANSON , Eric STORIE, Jerry SVEINSON, Ben VODREY, Rosemary WASYL YCIA -LEIS, Judy WOWCHUK, Rosann CONSTITU ENCY Os borne Thompson Wellington Crescentwood River Heights Radisson The Maples Kildonan Portage la Prairie Ste.

Rose Seine River Roblin-Ru ssell Selkirk Concordia Arthur-Virden Steinbach Riel St. James Lake side Charleswood lnterlake Brandon East Tuxedo Springfield Wolseley St. Boniface Minnedosa Rupertsland Gimli Point Douglas lnkster The Pas St. Norbert Elm wood Morris Burrows Sturgeon Creek Brandon West Assiniboia River East Rossmere Pembina Emerson Dauphin Lac du Bonnet Transcona Niakwa St. Vital Gladstone Turtle Mountain Broadway Kirkfield Park Flin Flon La Verendrye Fort Garry St. Johns Swan River PARTY.

Liberal NDP NDP Liberal Liberal NDP Liberal NDP PC PC PC PC NDP NDP PC PC PC Liberal PC PC NDP NDP PC PC NDP Liberal PC NDP PC NDP Liberal NDP PC NDP PC NDP PC PC PC PC PC PC PC NDP PC NDP PC PC PC PC NDP PC NDP PC PC NDP NDP

LEGISLATIVE ASSEMBLY OF MANITOBA Tuesday, November 13, 1990 The House met at 8 p.m. House Business Hon. Clayton Man ness (Govern ment House Leader) : Mr. Speak er, I won der, with your indulgence and the indulgence of the House, if I could just read the item before me for 30 seconds? Would that be acceptable? Mr. Speaker, ! thank the House for its indulgence. There have been discussions amongst the House lea der s aime d at expediting Esti ma te consider at ion, and I would appreci ate your determining if there is unanimous consent of the House for the following: 1.

That both sections of the Committee of Supply sit tonight until twelve o'clock midnight. 2. That notwithstanding sub-r ule 65.(9)( c), the Estimates of a department may be introduced after ten o'clock tonight. 3. That where, after ten o'clock tonight, either

section of the Committee of Supply has completed de par tm en ta l Estim ates that we re under consideration at ten o'clock tonight, it may proceed immediately to consider the Estimates of another department. Mr . Speaker: Would the Honourable Government House lea der have unanimous consent to make those changes? That is agreed? Agreed. Mr . Manness: Mr. Speaker, before I move the motion, I should also indicate that I imagine there will be further discussions around many other det ails that will be introd uced in tom orrow's business. CONCURRENT COMMITTEES OF SUPPLY SUPPL V-FINANCE Mr.

Deputy �halrman (Marcel Laurendeau) : At this time, we will return to the consideration for the Department of Finance. When we last met, this portion of the Committee of Supply was considering No. 5.( a)(1 ) Salaries for Feder a l- Provincial Relations and Research Division, for $902,800.00. Shall the item pass? •

(2005) Mr. Leonard Evans (Brandon East): Mr. Deputy Chairman, I was asking the Minister the last time we met about the Government policy regarding acting as a collector for the federal Government for the GST. The Minister gave us a long explanation as to the ramifications of the GST on Manitoba, but one item, one area was the role of the collector. We pointed out that Manitoba sold fishing licences, hunting licences, trapping licences, we had land transactions at Land Titles Offices, motor vehicle licences and so on. Mr.

Deputy Chairman, my experience is that a Minister of the Crown could not be involved in debate in these committees unless he was the Minister involved in the particular department. At any rate, l gathered from the Minister's remarks that no decision has been made yet as to whether or not Manitoba is going to help the feder al Government implement the GST in Manitoba. I noted that the Government said they were opposed to it. I maintain that if they are really opposed to it, why would they want to facilitate the collection? At any rate, I just want to get a clarification.

The Minister did say, as I understand, that no decision had yet been made in collecting the GST for the federal Government for the various licences that we sell or services that we provide. Hon. Clayton Manness (Minister of Finance) : Mr. Deputy Chairman, before I respond to the question, let me thank all the Members and indeed the staff for their indulgence over the most part of the day and indeed late last week. These have been times when long discussions have been going back and forth and I feel sorry for not only Members of the committee, but indeed my staff. I publicly wanted to put that on the record.

I will endeavour not to bolt out of here at least before midnight, although some think I have a record of bolting out of committees. Mr. Deputy Chairman, the Member asks a question about collecting, on behalf of the federal Government, the goods and services tax. When we survey the scene, when we try and pull ourselves from the rhetoric that some use and indeed some of the genuine considerations that we ha ve as a

1078 LEG ISL ATIVE ASS EMBL Y OF MAN ITOBA November 13, 1990 Government and begin to say, well, what can happen if indeed we do not collect, if we choose not to collect, I can say in all honesty no decision has been made at this point to collect. Yet when we look at it from the other sense as to what would happen if we did not, to what ends would the federal Government go to penalize us if we chose not to collect the tax because we are providing a service, we are a seller of services, and if we chose not to collect, what would be the impact?

Would we lose somewhere else? lt is answering that question that we believe that we would lose somewhere else, that we have sensed that we had better at least prepare the system to collect in the event that we make the decision to collect. • (201 0) I just have to remind the Member that-this is a completely different question, and he would say, well, that is right, but when the Canada Health Act came down, provinces that were collecting certain fees in support of health, of course, lost dollar for dollar everything they collected, so the powers of the federal Gov ernment are very, very significant in ques tions like this.

One had better recognize that and just not boldly ride off to the sunset flaunting your disgust at the federal Government for imposing a tax and saying that we do not have to collect. I know in the case of Alberta where they probably for a number of reasons are more strongly opposed to this GST than any other jurisdiction, even there in that province they are collecting, but putting the funds into trust. Mr.

Deputy Chairma n , if that province is going to enter into a collection system, before they make their representations to court, before a judgment is rendered as to whether or not a province can be expected to collect on behalf of another senior Government, in this case the federal Government, they themselves are col lecting and are going to lodge those proceeds into trust . Mr. Leonard Evans: Well, Mr.

Deputy Chairman, I believe the Minister has simply confirmed what he said last week in that no decision has yet been made on whether or not to co-operate with the federal Government in this tax which the people in Manitoba are violently opposed to, there has been no decision made yet, and that you are bringing the information together, I think is what you said last week, and a decision will be made. I believe you made reference to M PlC-no decision yet has been made. I believe Mr. Bardua confirmed that also a couple of days ago, the president of MPIC.

Does that apply to all Crown companies and all departments, that no decision has been made on acting as a collector for the GST? Mr. Manness: There is no exact categorization of where all the Crowns fit. They are all treated differently.

First of all with respect to M PlC, because it has drawn the most attention over the last few days, the Government probably entered into--one of the very few times since we have been in Government that we used our vetoes in some respect and said for the well-being of the motorists that we would demand that MPIC approach the Public Utilities Board on the basis of a zero rate classification, we did that because if MPIC were to approach the Public Utilities Board on the basis of exem pt status, then the impact would have been much greater to the motorist. • (2015 ) We said in that case that the well-being of the Manitoba motorist takes complete precedence, and the only protector of their right in this whole situation is the Manitoba Government.

The Government stepped in, in essence directed MPIC against maybe even their better wishes and asked them to make their presentation accordingly. If one read the editorial today, time will tell whether we did the right thing or not, but we were given to believe early on in this exercise, our officials were led to believe, that MPIC could apply for zero rated status. We have had no official indication since, although we have had representation from the federal Government, their officials asking us-not asking us, but taking sort of a less than strong view.

So it is because of that concern that we asked M PlC to go forward on the basis they did. Now with respect to the other Crowns, Mr. Deputy Chairman, let me make it perfectly clear. There probably are a couple of examples where they are closer to Crown, due to Government entities, and as such are exempt, are zero rated, whatever they apply to. There are others such as hydro and telephone that are certainly at arm's length and are selling a service to individuals. They therefore will have to develop their own number and will have to collect the tax accordingly.

They cannot be in any way saved-and when I say they, I am talking about the rat epayer s who use their services- from the application of this tax. So the Crowns do not fall

November 13 , 19 90 LEG ISLATIVE ASSEM BLY OF MAN ITOBA 10 79 neatly into one class. They are sort of spread all over the place. Mr. Leonard Evans: Mr. Deputy Chairman, I think I sort of detect a Minister of Finance who is being too reasonable with the federal Government. I think on the one hand, he made a case that we would not !JSe the court route. Some provinces are engaged in court challenges. The Minister of Finance (Mr. Manness) and the Premier (Mr. Filmon) have indicated that this would not be a fruitful exercise to pursue. Now we are talking about collecting.

We seem to be on the verge of agreeing to collecting for the federal Government with regard to the various departments. Now he is telling us, those Crowns, such as hydro or telephones or whatever other Crown there is out there that is selling a service, that they, too, can just readily, easily co-ope rate with the federal Government and collect a tax. The point I am making and what people of Manitoba want to know is if you are really and truly opposed to this tax, surely we do not have to co-ope rate with the federal Government in collecting it. People are damn mad about the GST.

I know maybe with sitting in this building too long we forget that the people out there-you have to go to your constituency and talk to them, and you realize that this is still burning in the hearts of the average Manitoban. They are damned annoyed and damn mad at the GST. I think they would shout "bravo" if the Manitoba Government said, well, at least we are not going to co-ope rate with them. We are not going to court, but we are not going to collect this tax for the federal Government. That is the least you could do.

Some were disappointed that you are not using the legal route, but that is the least we could do is not collect the tax . *

(2020) Mr. Manness: Well, Mr. Deputy Chairman, this Member cannot have it both ways. He is fully well aware that when the federal Government first imposed an 11 percent telecommunications tax on our long distance charges-a nd I believe he sat around the Cabinet Table at the time. I do not remember the NDP Government of the Day taking that to court. As a matter of fact-I may have missed it-but I do not remember that. So you have a situation now where our users are paying 11 percent of long distance. Under the change they will be asked to pay 7 percent across the board on the total bill.

We sense there will be basically no difference. lt still takes out of Manitoba roughly several millions of dollars, so there will be no net change there. Now the Member talks about the other provinces going to court. Fair statement, and we have told the public, the Premier (Mr. Filmon) has told the public why Manitoba is not going alongside of Alberta, B.C. and Ontario, the three richest provinces in this country, and not joining them in the courts.

The Member does not point out that one of those provinces, in my view the one that is by far the most concerned and the most outspoken with respect to the GST, that is Alberta, is collec ting the GST -a gain, I reiterate, collecting it, taking the proceeds owed and putting them into trust. I do not know what the Member is trying to say. He is saying, do not collect it. Yet, in one breath he is saying, join the other provinces. In the other breath he is saying, but do not join them with respect to collection, because Alberta is collecting; we do not want you to collect.

Yet, when he was in Government, I do know exactly what happened. I know that the federal Government brought forward an 11 percent telec ommunications tax on long distance, and I do not believe the NDP Government did anything other than protest mildly. I just ask the Member to be consistent, because I th ink that is important in a discussion like this. Mr. Leonard Evans: Mr. Deputy Chairman, I think we are being consistent. The fact is, the Minister has various options open to him.

The point I was making a moment ago was that you are not going the court route, so you put that aside; you made the argument why you should not. Then I said, well, you have the oppor tunit y to show your opposition by not collecting. Now we are being given arguments why we should not collect, because one of the provinces going to court is going to collect anyway and put the monies in trust. I do not think I am being inconsistent at all. I am simply saying, if you are not using the court route, or the legal route , then why not show your displeasure by refusing to collect the GST.

The GST is qui te a bit different from the 11 percent telecommunications tax. That was a specific tax argued for a specific purpose. The GST is across the board and affecting everybody from cradle to grave.

10 80 LEGISL AT IVE ASSEMBL V OF MAN ITOBA November 13 , 19 90 The people of Mani toba have said categorically-! know in my own constituency I participated in a rally, it was about 30 below last winter when Brian Mulroney came to Brandon, we were outside for a long time because he was late in getting to the Victoria Inn. I can tell you the people of my riding were damn mad about the GST and they still are. I would say that they would be very delighted if this Government had some backbone and showed that it was not going to co-ope rate and meekly go along with the GST collection.

The Minister can do and the Government can do what they will, but what he has been telling me so far is that there has been no decision; you are collecting information and reviewing the position. Really I think what you are telling me, and I do not want to put words in your mouth, but I think what you are really telling me is that you are going to collect it. If you are going to collect it you might as well tell the committee now, that you are going to collect the GST on those various goods and services that the Manitoba Government sells. •

(2025) Mr. Menness : Mr. Deputy Chairman, the Member is putting words in my mouth. That is not my decision to make, whether we collect ultimately or not; that is a policy decision of Government. Those are made in Cabinet, and up to this point in time that decision has not been made. I can tell the Member though, again I will reiterate two things. First, departments are wanting to know, because they are being pressured one way or another to have a system in place if they are going to collect.

Second, I tell him that if we could just merrily ride off into the sunset not collecting this tax , we would prefer it, but ultimately if it is going to cost us more because the federal Government is unilaterally going to make some change in some cost-shared program or make a unilateral change in some other areas of funding to our province, we have done nothing to improve our lot. After all , we are governing in a way that is trying to maximize and optimize, to use terms that the Member understands, the lot of Manitobans with respect to its sharing in the national economic wealth.

I am well aware of the Member's constituents and their outcry on the GST. They are probably not an awful lot different from mine, but commonsense has to prevail at times when you are in Government. At times you have to make decisions that you would rather not make. We have not made any yet with respect to collection and, yet, we have to have all the options available to us so we can make the best decision. Mr. Leonerd Evens : When you say you have not made any decisions yet with regard to collection, does that include the Crowns, or did you say a moment ago that did not include the Crowns? Mr. Menne ss: Mr.

Deputy Chairman, we have absolutely no argument with respect to the Crowns. How do you say to, for instance, Manitoba Hydro, or what argument do you make in support of Manitoba Hydro when it is competing with Winnipeg Gas, which has to pay the tax ? What argument do you make to Manitoba Telephone System when there are other forms of communication systems that are paying the tax fully? I mean, how do you build the argument based on common sense and based on some common logic which you have to bring to these arguments; at least I do. Maybe the Member said, well, a Crown is something different totally.

As soon as we give it the title, Crown, then it is saved? Well, Mr. Deputy Chairman, if that was the way to work yourself out of anybody paying tax, then theoretically we should adopt the hoped for model of I believe the New Democratic Party. That is that Government owns every thi ng, and we put the Crown stamp on ever ything. We brand everything that moves, everything that earns and everything that has production, everything that creates wealth, with the Crown brand. •

(2030) Mr. Leonerd Evens: Well, of course, the Minister is not extremely serious when he made his last statement, that we believe that everything should be owned by the Government and operated by the Government. That is totally false. I do not know what that has to do with this argument. I am simply mak ing the case , Mr. Deputy Chairman-! do not want to ride this around really any longer, because we have discussed this last time as well-1 am simply making the case that this was an opportunity for the Manitoba Government to stand up to the federal Government.

I think the people of Manitoba would be cheering you on to do this. Maybe put the money in a trust, that is another opportunity I suppose; you could collect the money, put it in trust.

November 13 , 19 90 LEG ISL ATIVE ASSEMBL V OF MAN ITOBA 10 81 On the other hand, the Province of Alberta is in a different position, because it is fighting it. I presume it is putting it in trust pending the outcome of the court case, but I think there is a lot of symbolism in a lot of this. I think that the people of Manitoba would be very satisfied if the Government of Manitoba showed some backbone and opposed the GST in this way. In fact that is a fairly small way, because most people do not spend mu ch money in buying Government licences and fees and, you know, selling their homes.

We do not do that very often, so we are not involved that much in this process. So I am going to predict now that all Crowns would be collecting it and all Government departments and agencies will be collecting the GST for Mr. Mulroney and Mr. Wilson, and we will be going along very meekly and quietly in this respect. Mr. Manness : Mr.

Deputy Chairman, you know, that is an easy point for the Member to make, but let us be so honest and candid to watch the activity now in the new NDP Government in Ontario and see what their response will be when similar ques tions are posed. -(i nterjection)- The Member for Elmwood (Mr. Maloway) says , well, they are going to court. Well, yes, I guess they are going to court, Mr. Deputy Chairman.

I can tell you, no doubt this province will end up in court, but it will have to take all of its resources and direct it in an area of equalization, because when we prioritize these items, to me the greater threat still is in the area of equalization. The Member wants us running off into court on this issue, this issue and the next issue. I say to him, fine, but understand you can only do so much, and from my point of view, equaliz ation and the fight around that whole sharing concept in the Canadian context will take on the highest priority. Mr. Le onard Evans: Mr.

Deputy Chairman, could the Minister indicate whether he has any studies available or any research available from this division regarding the impact of the GST on the economy, not on the finances of the province, but on the economy? What information do you have on jobs, job losses, inflation or whatever? Mr. Manness : I can re member a year and a half ago, it seems to me that long already, that I gave a briefing to the Opposition Parties, and I believe Mr. Evans was there, at which time we answered the question of the impact on the economy. At that time the forecasted rate was 9 percent and we sensecJ.- Mr.

Leonard Evans: Nine percent of what? Mr. Manness: lt was the forecasted GST rate at that time. Mr. Deputy Chairman, the Member shows his keen awareness and historical understanding of this whole GST. At that time I th ink we said that it would be a negative-we sensed that in 19 91 it would be anywhere from slightly negative to slightly positive, and when I say slightly positive I am talking the highest forecast was the federal finance, which might be a little biased, at 0.2, and the most negative was the Conference Board at 0.6. I am talking about growth in the GDP, or provincial product in this case.

Then it changed to 7 percent, and since then we believed that the numbers would not change material ly. Indeed , seeing that there was less money being taken out, still the impact would be more or less flat. The Member says how can that be when you are services now? We have to take into account the inflow coming in through the sales tax credit. Mr. Leonard Evans: Mr. Deputy Chairman, just for cl arifica ti on, when the Minis ter uses these numbers- Yr. Deput y Chairm an: Order, plea se ; order, please. If the Honourable Members want to have a conversation, please take it out in the hall. Mr.

Leonard Evans: When the Minister uses these figures 0.2, 0.6, related to the 9 percent, is he talking about that amount that the real growth would be negatively affected by it? In other words, did he mean that the growth rate would be 0.2 less because of that, or would that be the growth rate? I am not clear from his statement. Mr. Manness: Mr. Deputy Chairman, I did not make myself clear. That would be the impact on the growth rate or whatever- Mr. Leonar d Evans: So it could turn in one day from one of those, whatever growth we had. Mr. Manness: That is right. Mr. Leonar d Evans: Okay. Mr.

Deputy Chairman, we spent a couple of hours last time on this, on the GST, so I do not think I will ask any further questions on that, but perhaps some other Members may have some questions on research. Mr. Jlm Maloway {Eimwood): I think the reason that we are suspicious about the Government's

10 82 LEG ISL ATIVE ASSEM BLY OF MAN ITOBA November 13 , 19 90 intentions goes back to the Minister's comments of a year ago when he suggested that he in fact supported consumption taxes. I mean, that is where the first indication comes that the Minister personally is in favo ur of consum ption-s tyle tax es, and although he pulled in his horns the next day and did not repeat that statement, we certainly feel that the Minister in fact in general supports this kind of a tax. More specifically, Mr.

Deputy Chairman, ! wanted to follow up with the Minister on a ques tion I asked him the other day regarding the investments policy of the Govern me nt. At the ti me, I ha d suggested-and he, of course, was not at this particular meeting-that if the Government was so concerned about this tax, they could perhaps retal iate against the federal Government and withdraw some of the monies that they have invested in federal Government securities and so on. I had some other ques tions that evolved out of that.

I would like to ask the Minister whether or not the Department of Finance has an investment policy, and if they do, what is it? Mr. Manness: Mr. Deputy Chairman, I ask for a repeat of the final-1 heard the whole commentary other than the last question. I am sorry. Mr. Maloway: I am simply asking the Minister whether he could tell me whether the Government has an investment policy with regard to- 1 am sorry. Could we get clarification on that? For clarification, the Minister is aware that the Crown Corporations invest considerable amounts of money in other provinces and so on.

I had suggested at the time that the Minister might want to look at a Government policy which dictated that perhaps the Government would not buy bonds from Ontario Hydro because Ontario Hydro was involved in nuclear, and they would not buy bonds from Quebec Hydro because they were disrupting Natives' lifestyle, and perhaps they would not buy bonds from the fede ral Government right now because the federal Government was bringing in the GST.

You have to consider that in view of the fact that a number of organizations in this country, financial organizations, do provide ethical financial services which can return as good a return as any other kind of investment. One does not have to invest in companies involved in tobacco or alcohol or armaments and so on to get a good return, and the Minister is no doubt aware of that. I am asking him whether or not the Government has a similar type of policy. *

(2040) Mr. Manness : Mr. Deputy Chairman, the Member is going to have to be more definitive, what he does not like about our investment strategy. I know we have roughly $500 million or $600 million invested short term that is in Government of Canada Treasury Bills. He then would say we should inv est th em, because the feder al Governmen t is bringing down the goods and services tax . I guess you want to look at MPIC. I have not looked at the whole portfolio of investments, but I know, for instance, MPIC does an awful lot of local purchasing of debentures, very supportive of the community as a whole.

An Honourable Member : Of course. Mr. Manness : The Member is saying that we should have guidelines that strictly prevent MPIC or the other Crowns from investing. I can also indicate, though, that when we float money from day to day-and I forget what the portfolio's short term is, not on the borrowing side, but indeed on the investing side-if we run away from Ontario Hydro, then they will run away from us, because they also have borrowed, taken some of our paper from time to time. What the Member is saying is, move away to what he considers ethical investments.

What happens if my ethical investments are different from his? I do not know how it is you preach ethical investing. We know, for instance, that thA Member says, tobacco. I do not think we have a dollar invested in shares in a tobacco company. I know we do not. We impose that restriction on ourselves without policy. lt is just common sense. ! know as a province we do not have a dollar invested in the pulp and paper industry. I do not know whether that is ethical investing or not or whether that is just aversion to risk. I guess I am at a loss as to what bent he is on.

You can be all over the place-and when the Member says about my view on consumption tax es, I would just ask that he listen carefully, if he can, to my view on consumption taxe s. The Member fails to realize that in Manitoba over $1 billion in this year's budget in the area of revenue

November 13 , 19 90 LEG ISL ATIVE ASS EM BLY OF MAN ITOBA 10 83 estimates is being brought in by way of consumption tax es, all of which the NDP Government increased more in one year than we did in our first three budgets. I would like to talk about the sales tax, $630 million brought in-a consumption tax ; liquor tax, $1 40 million brought i n-a consumption tax ; gas tax, $1 27 million brought i n-a consumption tax ; tobacco, $1 13 million brought in- a consumption tax. At leas t I am hones t enough to say tha t consumption taxes are something that in principle I can understand.

I cannot understand the Member for Elmwood (Mr. Ma loway) being part of a Government for so many years, which brought in virtually out of Manitoba source revenues of 1. 4 this year, $1 billion, all by way of consumption tax es, and then trying to wash his hands as if he is pure and wants a different system. These are consumption tax es. Mr. Maloway: I was simply checking your position. Mr. Manness: My position has not changed.

I said from Day One that consumption taxes are eminently fair, and I still believe that, because the more money you have, the more money you tend to spend. -( inter jec tion)- The Member says they are regressiv e . They are regressive if indeed the majority of your disposable income is going to be directed toward food and shelter and the basics of life; then it is regressive. They are not regressive if the vast ma jority of your income is going to be directed toward holidays outside of the country, toward fancy hairdos and after that, seeking investing advice, so you can make a million and pay nothing for it.

If somebody can tell me it is regressive with respect to some services, then I -(i nterjection)- I said, a consumption tax somehow is a fairer tax to me. I am sorry, I cannot withdraw from that. The GST has major problems, and I have said it. I am on the record over and over again. I have documented them on behalf of this Government several times to Blenkarn's committee, directly to the Minister of Finance federally-m assiv e, massive problems with the GST. That is why this Government opposes it. Mr. Maloway : Mr.

Deputy Chairperson, given that we have been on this particular line now for something like a week, or at least it seems like a week, perhaps we could pass S.(

a) and move on a bit. Mr. Deputy Chairman: We are dealing with item 5.(a)

(1) Salaries. Shall the item pass-pass. An Honourable Member: No. Mr. Deputy Chairman: Sorry about that. I did not see that. Mr. Kevln Lamoureux (lnkste r) : Mr. Deputy Chairperson, seeing as we are on the discussion of the goods and services tax, the Minister has stated that the Cabinet has not quite yet made a decision in terms of the collecting of the tax . I would ask the Mini ste r if he has been approached or his department has been approached, from federal officials tr ying to gain insights on what this Government is going to be doing regarding the goods and services in the collection area? Mr.

Mann ess : Mr. Depu ty Chairma n , no demands-we ll, let us just put it this way, full expectation bordering on demands, which is, I think, much stronger that a request for insight. Mr. Lamoureux: Mr. Deputy Chairperson, can the Minister then say, has he been in contact with the federal Minister of Finance? Has the federal Minister of Finance approached him on any personal note via letter correspondence directly to the Minister? I would be interested to know, if he has, what type of response has the Minister given? Mr. Manness: Mr.

Deputy Chairman, the Minister of Finance and myself correspond qu ite often about a whole host of issues. I do not know whether we formally corresponded on the GST, on the collection issue. I do not think we have ever form ally corresponded on collection at all. lt has sort of come down from officials. I can tell you the last-this may sur prise the Member, but because the earlier requests and points of criticism that I was making by way of letter were taking so long to receive a response, I sort of just got on the phone and made my representation directly, but I have a letter here dated April 9.

That is one of the last areas where I laid out all of the consideration or the main problems with respect to the goods and services. This is April 9, 19 90. At that time, and I will read the line: With regard to the goods and services tax, I would like to make a few points regarding two issues discussed during the recent meeting, and here again, mainly around Lotteries and treatment of municipalities, university, schools and hospitals. I implored upon the Minister that they refrain from applying the goods and

10 84 LEG ISL ATIVE ASSEMB LY OF MAN ITOBA November 13 , 19 90 services tax to provincial revenues generated by Lotteries. *

(2050) Mr. Deputy Chairman, I am on the record several times, and I know this is just a part of the correspondence between myself and the federal Minister with respect to the GST and the specific items, but to the best of my recall, I do not ever rememb er comm unicating on paper or indeed verbally, certainly verbally, with the federal Minister with respect to collection. Mr. Lamoureux: Mr. Deputy Chairp erson, the Minister of Finance (Mr. Manness) has made, on several occasions, statements that Alberta is going to be collecting the tax even though they are taking the federal Government to court.

Are there any other provinces he is aware of that have taken on the responsibilities of collecting the tax? Mr. Manness: Mr. Deputy Chairman, certainly Quebec is taking it on. They have entered into an agreemen t. Let me answer the qu estion in a negative sense. We are not aware of one province that is not collecting the tax on behalf of the federal Government, and we dialogue, certainly on a weekly basis, with our counterparts in other provinces. Mr.

Lamoureux: I would like to go back to the province, I guess, and the direction that they are going to be taking us in terms of collecting the tax , and go back to the Cabinet meetings where I suppose we will find out if we are going to be, in fact, collecting the tax. Does the Minister have any idea in terms of when he feels it is necessary that decision be made-like the next month, within a month? When can we antici pate some type of response from the Government as to whether or not they will be collecting the tax ? Mr. Manness : Mr. Deputy Chairman, it has to be made sooner than later.

I do not know whether it will be made in the month of November, but certainly it will have to be made, I would think, before-we ll, it has to be made before Christmas. Mr. Lamoureux: One final thing regarding the GST point, and that is the number of jobs. The federal Government is going to need a large number of people in order to implement the tax . Has there been any discussions regarding those jobs? In particular, what will happen here in the Province of Manitoba? Mr.

Manness : If the Member is saying with respect from an economic development point of view, whereby the federal Government is going to be lodging certain numbers of tax collectors under this GST, representing our area and other points east and west, no. Certainly no commitment has been made by the federal Government. You would be hard pressed to ask them to settle people here, from a provincial standpoint, when indeed you have been against the tax .

I would hope our federal Members though, who obviously are strongly supportive of the tax-and I say our s ; I am ta lking politically from the Cons ervat ive Party- would be ma king the ir representations at caucus and/or Cabinet. lt is kind of difficult for a provincial Government that is opposed to this tax to go and lobby the federal Government to bring all the tax collectors here. That is kind of foolhardy. Let me say though, that of greater concern to us was whether or not there would be a raiding of our own tax officials.

We sense that the federal Government, in their desperation, might try to lever away a lot of our people. That is happening to a very large degree, I understand, in British Columbia because I know their Minister is very concerned. They have lost a lot. I guess our rates of pay in Manitoba are more or less at the same level as the bureaucracy in Ottawa, and we have not experienced a major raiding to this point in time. Mr. Gulzar Cheema (The Maples): Mr. Deputy Chairperson, can the Minister of Finance (Mr. Manness) tell me-1 am so used to the Minister of Health (Mr. Orchard). He just keeps on coming.

His picture is right over there. All the volunteer organizations raising funds for various things, for example, the medical equipment for hospitals, and anybody who raises more than $30,000, I am told, they have to pay the tax, GST. Why, if so, because people are putting their hours in, it is a very difficult job and that means that the volunteer people are being taxed for their labour? Can the Minister of Finance tell us what action he has taken since he has been made aware of this issue? Mr. Manness : Mr.

Deputy Chairman, there is no doubt, after our Government has pursued the criticism in the area of municipalities, universities,

November 13 , 19 90 LEG ISL AT IVE ASSEM BLY OF MAN ITOBA 10 85 schools and hospitals, that after that the next item was the impact on the non-profit groups. We made the strongest representation to the fede ral Governm ent because , first of al l, we consider it an unwarranted attack on these groups. Also, it is myriad of rules around them , because they �re not all treated the same.

I understand the rationale from the--a gain it is the federal rationale; it is not ours-is that these groups, in spite of their hard working efforts to raise funds, when they went out and bought goods before, of course, the manufacturing sales tax was buried in the price of all these goods. So what the federal Government is saying is that they will provide a 50 percent rebate, knocking the effective rate then down to 3.5 percent if indeed they are non-p rofit groups.

From the federal Government analysis-and we have no way of proving or disproving this- these agencies then will in essence be paying the same tax to the coffers in Ottawa that they would have been before under the old system. Mr. Cheema : Mr. Deputy Chairperson, 1 have a question on a different issue, in terms of the equalization payments. I understand there was a document inside the House by the Memb er for St. Johns (Ms.

Wasylycia-L eis) that clearly indicated how the transfer payments are going to be affected. lt was as given that last year's budget-and the Minister of Finance made those comments a number of times, how it was difficult for this Government to have all the health programs, just even to continue with the rate of inflation. How are they going to continue to maintain all the health care services for the next maybe three or four years with the possible decrease in the transfer payments? Have they any communication from the federal Minister of Finance?

Are those funds going to be cut in terms of the programs, real programs, or ongoing funding of the new programs, because these two are very important in terms of the-if you are going to cut the real programs, the hospital funding, it will have a really bad impact, because if you cut even $20 million in the real program , you might as well shut down one of the hospitals. lt is going to have a major impact. Can the Minister of Finance tell us what avenues they are going to look at and how they are going to continue to provide the health care system? Mr. Manness: Mr.

Deputy Chairman, I wish I had the answer to that question. If I did -(i nterjection) One Member says change the Government in Ottawa. Well, I th ink all polls will indicate that is going to happen. Were it that simple, I suppose we would all be calling for the election, but I am not one who ever naively beli eved that chang ing a Government automa tically would provide any guarantee of a change.

The Member's question is very serious and it is one I guess that-it is one of the reasons why Ministers of Finance will probably be asse mbling sometime in the next little while to see how it is that the systems that we have in place, in support of our healt h and our education particularly, can be maintained given the incredible debt that we have as a nation. * (21 00) There is no question that the very systems that we have in place are under a tremendous threat and only a fool would stand up and say, they are not.

That is why it is important, from my point of view, that people who really care about these systems set aside some of their political biases, set aside their political stripes, and come together and try and find a solution to this. That is what I am hoping to see done over the next few weeks, with respect to Ministers of Finance, because somebody has to take a lead. Nobody was more upset than me when Ministers of Finance and Health were asked to come together by Premier s in Moncton in 19 89-or maybe, yes-early '89, and asked to see whether or not we could find a way.

Firstly, it took the first five hours of that coming together to try and get some people to realize that we were not there just to bash the feds and ask for more money .I mean, that is easy. That is great. That is pretty easy to go to a conference and have a good dinner and see a new town and come away from it knowing that you have bashed the fed eral Government all around the block. I must say, I was very disturbed then with-there were some positive recommendations that came out. We forwarded them to the federal Government and they chose to do nothing. They did not take them seriously.

I am very critical also of the federal Government because if there was ever a time that you needed leadership to bring together the provinces and all

10 86 LEG ISL ATIVE ASS EMBL Y OF MAN ITOBA November 13 , 19 90 those, particularly in the health care system, who are concerned about debt as to how we are going to continue to support the health care system, given the incredible debt we have, if there ever was leadership needed from the federal Government that was the time. I do not sense it is coming. As a matter of fact, some provinces will claim that they have no licence whatsoever right now. They have no freedom whatsoever now, flexibility, to deal with a lot. They have the mandate of the Canada Health Act and within it they have no flexibility whatsoever.

As far as the commitment by-not the commitment. By the conclusion of some, in another 1 0 years, in some cases a shorter period of time, the total cash coming by way of transfer in support of health will be reaching a number closer to, or at, zero. Those are logical extensions of pure basic arithmetic and you cannot argue with it. I am saying to Members opposite, in this case we need help as a Government to find solutions. We have promised that health will be the last area under attack, but nevertheless you cannot continue to support everything you have with borrowed money.

I cannot believe, in the context of Canada where we have so much wealth, that we cannot find the solution to this, if we are prepared to share a little bit, maybe hurt a little bit, but certainly there is enough wealth and money being generated to resolve this if we wish. Mr. Cheema : Mr. Deputy Chairman, I think the Minister of Finance (Mr. Manness) has made it very clear we got an immediate threat as far as you know.

To the best of my knowledge, in the next three to four years it is going to be the only health care, not the provi ncial Govern ment, it is going to be ultimately the federal Government because if you cut the real programs, you are going to be in big trouble. As I repeated earlier, just cutting, let us say, $20 million, shutting two Winnipeg hospitals, would have a major, major impact. Also, the Canada Health Act, even if you are Government, at any given time try to have an extra fee charged to the patient, that will have a negative impact on the transfer payments.

So it is really a punishment in both ways, first to the public , and second to the pr ovi ncial Governments. I th ink the basic changes ultimately have to be made in terms of the Canada Health Act, also to make sure that any Government who tried to reform some of the health system are not punished. Right now, it is not clear at all . I ju st wanted the Minister of Finance (Mr.

Manness) to be aware of some of the facts, because as he has said, it is very easy to criticize, but there is $1 .7 billion and with the 5 percent next year, I do not know where the Government is going to bring the funds to fund all these new programs. lt is going to be extremely difficult. My next ques tion is in terms of the ACCESS Program. Part of that was supposed to come from the federal Government, and there is one program by the University of Manitoba which is for the northern and Native medical students. That program was started in 19 79, and the program is not going to proceed without any funds.

I think the federal Government has said that the Minister of Health was in the House of Commons two weeks ago. The question was asked by the Member for Winnipeg North, in terms of why you are not providing the funds. According to his answer, he said that is the responsibility of the provincial Government. Here the provincial Government is saying we are not going to fund that program, because we are not getting funding from the federal Government.

So can the Minister of Rnance tell us how you are going to attract some of the Natives and some of the northern people to go into some of the underserved areas if you are not going to help them?

I think it is a serious matter and has to be considered, because once you do not provide incentives, it is going to be difficult. lt took all the eight or nin e year s that ther e was only-1 understand, about five or six graduates were able to go and practise medicine, and also some of the other areas like nurses, physiotherapists, or even somebody going for a graduation class for social work. lt is going to be very difficult. I think it is the responsibility of the provincial Government to make sure that at least the facts are clear either to the Minister of Health who-1 understand, he is not new now.

He is in his office for the last nine months, so whether he was not aware that they have cut down the funding- Can the Minister of Finance (Mr. Manness) at least communicate with them and make sure that at least partial funding is provided for some of the programs?

November 13 , 19 90 LEG ISL ATIVE ASSEM BLY OF MAN ITOBA 10 87 Mr. Manness: Mr. Deputy Chairman, in all of my involvement in cost-shared programs, outside of the major transfer areas, none has been mo re perplexi ng to me, and indeed the Minister of Northern Affairs (Mr. Downey), than the Northern Development Agreement, its ultimate breakdown, and the impact it had on some of the northern training programs. We believe that the federal Government has moved too quickly and, certainly in a unilateral fashion, away from their responsibilities. I guess we have learned now that you should never be the service provider.

If you enter into an agreement, make sure some other Government is the service provider. You just put up your share of funding. What has happened here is a classic textbook case of what can happen when people at other levels of Government unilaterally decide that they are no longer interested in a program that they have made a commitment to which does good work. Nobody can argue that. Here is a case- when we inherited Government, the contribution, I believe, was around $8 million in support of the Northern Development Training Allowance.

In over two budgets now, we are well over $1 2 million and heading for $1 4 million. We also, though, have always indicated that we will maintain our level of support, but the Members are asking us to pick up the federal share, and all you are doing is putting pressure again on other areas of health . You are putting the pressure certainly on education and some of the other priority areas as the dollar can only be spent once. We are mindful of it, and believe me, in this area we have fought hard. As a matter offact, the Minister of Northern Affairs (Mr. Downey) and the Minister of Education (Mr.

Derkach) made a special trip to Ottawa to see all the major players to deal with this one issue. Although we have a slight reprieve for a short period of time, nothing that will guarantee the longe vity of some of these ve ry worthwh ile programs. Mr. Deputy Chair man: Item 5.(a)( 1) Salaries $902 ,800 -pass ;

(2) Oth er Expen ditures $280,800-pass ; (

b) Manitoba Tax Assistance Office: (1 ) Salaries $332,800 .00. Mr. Leonard Evans : Just one qu estion, Mr. Deputy Chairman. Can the Minister advise if there has been any change in the operation of the office or anything different this year than last year and the year before? Mr. Manness: Not materially, Mr. Deputy Chairman.

Of note to Members of the Committee might be an interview I did with somebody representing the CBC program called Venture, which, in doing a major expose I suppose of the goods and services tax, was very intrigued on the syste m in place in Manitoba with respect to the Tax Assistance Office, particularly now that the federal Government was adopting a sales tax credit system as a major part of the new tax form in support of the GST, wanting to know what assistance might be in place for those to make a proper claim.

Somebody had told him about the system that is in place in Manitoba in support of some of our cost of living tax credits, I guess we call it, property tax credits, and some of the other credits we have. Somebody was holding it up as a model anyway. I know they called me and probably-did they call somebody in the department too? So you may hear more about Manitoba's Tax Ass istance Office, maybe some time in December, Sun day night on CBC. Mr. Leonard Evans: That is fine. I agree with the Minister.

I think it is a very unique service and one that helps particular groups of people, some that are having difficulty in filling out their forms and so on. The Minister has answered the question. There has been no change, and I just hope that the office will be able to continue in the years ahead. • (21 10 ) Mr. Manne ss : Mr. Depu ty Chair man, if the Members opposite did not request of us to continue to spend more and more money in every other area, it certainly would help to guarantee the longevity of this program.

The Members have a lot of the control within their own hands in day-to-day Question Period when they are across the House asking questions. Mr. Leonard Evans: I would have to remind him that it is his Members and some of his colleagues in Cabinet who keep on getting up bragging about all the money they are spending and how they are doing much more than the NDP Government had done. They are spending more money here, there and everywhere so it works both ways, Mr. Deputy Chairman.

10 88 LEG ISL AT IVE ASS EMBL Y OF MAN ITO BA November 13 , 19 90 Mr. Deputy Chairman: Item 5.(

b) Manitoba Tax Assistance Office

(1) Salaries $332 ,800-pass;

(2) Other Expenditures $59,400-p ass. Resolution 57: RESOLV ED that there be granted to Her Majesty a sum not exceeding $1 ,575,800 for Fi nance , Federal-Pr ovincial Rela tions and Research Division for the financial year ending the 31 st day of March, 19 91- pass. We are now dealing with No. 6, Insurance and Risk Ma nage ment $1 ,091 ,700 ; (

a) Salaries $1 64,400.00. Mr. Leonar d Evans: Yes, a similar question, Mr. Deputy Chairman. Can the Minister advise whether there is any change in this office's operations in the past year or is it simply a continuation of what we have experienced for a number of years now in terms of Risk Management and Insurance, various kinds of insurance? Mr. Manness : Mr. Deputy Chairman, not in its mandate.

What has changed is that the Government has entered into an agreement with a consortium of private insurers who are helping us place some of our coverage at a value which we believe represents a saving to the province, when one takes into account premiums plus levels of coverage. Mr. Leonard Evans: Mr. Deputy Chairman, maybe the Minister can provide me with some information. I presume up till now at least M PlC played some role in the insurance, or was all the insurance given with the private companies?

The other point, as the Minister might point out, the Government can insure Itself-why in such a big operation that it can provide for its own, in effect provide for its own future contingencies. Mr. Manness: We did use to lodge the property and liabilit y and of course the Au topac, the car insurance, with MPIC. An Honourable Member: Is that still the case? Mr. Manness: That will still be the case, but as far as property and liability we now are using other insurers. Mr. Leonar d Evans: If other than that there has been no substantial change, I would just pass the item, unless the Liberals have some- Mr.

Deputy Chair man : Any qu estions? 6. (

a) Salaries $1 64,400-pass; 6.(

b) Other Expenditures $1 2 ,3 00- pass ; 6. (

c) In sur ance Premiu ms $1 ,867 ,500-pass; 6.(

d) Less: Recoverable from Other Appropriations $952,500-pa ss. Resolution 58: RESOLVED that there be granted to Her Majesty a sum not exceeding $1 ,091 ,700 for Finance, Insurance and Risk Management for the year ending the 31 st day of March, 19 91-p ass. 7. Treasury Board Secretariat $2,651 ,400; (

a) Salaries- Mr. Leonar d Evans: Mr. Deputy Chairman, can the Minister tell us what level of expenditures has to come before the Treasury Board now? Has there been any change in that? Can he elaborate on level of controls exercised by the Treasury Board, as its level in expenditure control? Mr . Mann es s: $20 .00. Th is is a ha nds-on Government, Mr. Deputy Chairman. (Mr. Eric Stefanson, Acting Chairman, in the Chair) Mr. Acti ng Chairman, in its tende red arrangements over $25,000, that level has to come before Treasury Board. Mr.

Leonar d Evans : I would gather then that is a figure or level that has not changed for the last few years. Mr. Manne ss: That is correct. Mr. Leonard Evans: I gather the Minister answered that question. I could not hear him for the statements being made by the Minister of Northern Affairs (Mr. Downey) there, his yeses and noes and passes. You said there were no changes. You agreed or you confirm that there has been no change in the level. What about your annual fiscal plan and strategy? This is one of the activities of the department, I presume th at-c ould I ask the Minister this question?

Is the Government now in the process of developing the fiscal plan for 19 91 -92 7 Mr. Manness: Mr. Acting Chairman, much of that plan or much of the presentation of that was delivered in the budget. Certainly the most key numbers were, where we for once sort of told Manitobans where it was going. We did not say what our bottom line number would be exactly, because of course over the next three months we hope to do a lot of planning to effect that.

The assumptions are that if growth of revenues continue or increase at the rate of 3 percent and if expenditure grows at the rate this year at 5.8, the deficit next year, '91 -92 , will approach $450 million. That is the fiscal plan. That is where we begin the whole Estimates process. That detail around that has been presented to Ministers and hopefully will

November 13 , 19 90 LEG ISLA TIVE ASS EMBL Y OF MAN ITOBA 10 89 be presented to managers and deputies in short order and may ultimately-at caucus tonight we were trying to decide whether or not that information maybe should even be shared with Members of the Opposition. We have not made that decision yet. We sensed that everybody should know the state of affairs in this province, so if the Opposition really twisted my arm and I sensed that there was a genuine, sincere desire to see a presentation made in this area, I might be inclined to listen to that. A (21 20) Mr. Leonard Evans: The Minister's offer is noted.

I guess I could say tha t virtually Gov ernm ent departments, maybe not Ministers, but departments or people, some people in departments, are busy with Estimates preparation forever. I guess this is where it is focused in the Treasury Board. One other area we briefly touched on was ISSB. I would gather it is in the secretariat now that the ISSB key people are situated, people like Mr.

De Luca, who we heard the other night at the Public Utilities Com mittee, and therefore one of the ongoing functions of the secretariat then, through the ISSB group, is this ongoing problem in ensuring that there is not duplication in the approaches and utilization of compu ter equipment and other electronic equipment. Mr. Manness: Well, Mr.

Acting Chairman, the short answer to the question is yes, the group in Treasury Board will be taking much more of a control function to ensure that the advent of new technology or of new hardware into the Government is done in an efficient manner and that there is not redundancy and waste. Mr. Leonard Evans: What about the potential of redundancy and therefore waste, duplication not only bet ween depar tmen ts , but bet ween departments or among departments and Crown corporations? I am thi nking particularly of the Manitoba Telephone System.

Does this secretariat, through the ISSB group, have the authority to go into MTS operations and make judgments? Mr. Manness: Mr. Acting Chairman, one ofthe great revelations in coming into Government was that we sensed that there really was virtually no control of the Crowns, even though ISSB was in its place. We have undertaken to rectify that. We have included in the Crown Corporations Council as one of its mandates to liaise between the Crowns and Mr. De Luca's shop.

Further to that point, I can indicate as recently as two or three months ago the Liquor Control Commission, which I am sure at one time would have been free to pretty well move in any type of systems change that it so desired, found that their latest request was stopped by Treasury Board through this transition when the Crown corporation was coming. Indeed, I guess the short answer to the question is, the Government is very much more involved through either Treasury Board and/or the Crown Corporations Council in what the Crowns are doing with respect to bringing forward new systems. Mr.

Leonard Evans: Yes, it seems to me, Mr. Acting Chairman, that one of the functions that MDS had when it was a Crown corporation, or it seemed to play that role, was to try to ensure that there was not this duplication. I think in order to achieve this, it seems to me that some members, senior people from the Crowns, were on the board of MDS in order to ensure that there was you know adequa te discu ssion , liaison , co-operation rat her than competition for acquiring more and more and better equipment.

So can I ask this specifically then: If MTS wishes to acquire some new computer equipment, does it have to get the permission of the Treasury Board, or can it do it on its own? Mr. Manness: Mr. Acting Chairman, let me te ll you when I first saw the first systems plans that were brought forward to Treasury Board-is it called the syst ems plan?-of all the Government and its entities, I was horrified to see that roughly, as I recall, it was a $1 00 million-plus bill. The Government and all of its departments were spending roughly, as I can recall, $40-4 5 million and the rest of it was the Crowns.

More significant than that, over the last it seems to me it is either six or eight years, wher ea s the depar tmen ts of Government, through more difficult times, through the time of the former Government and ourselves,

whereas systems growth on a dollar basis was occurring at the rate of 4 or 5 percent a year. Crown corporation growth-g iven the fact that they had represe ntat ion, the Manitoba Data Services; given that they were all sort of acting as their own checks and balances; given that IS SB was in place, I was horrified to see that the annual growth over that period of time in the dollar value of systems with respect to the revenue stream coming to Manitoba Data Services, it was increasing at the

10 90 LEG ISL AT IVE ASSEM BLY OF MAN ITOBA November 13 , 19 90 rate of it seems to me it was 15 percent or 20 percent a year, high double digit. So nobody can tell me that there were any effective brakes put into place on the Crowns by the existing board of Manitoba Data Services and/or ISSB. I do not believe it was there,

whereas in Government, through the Member's term when he was in Government and even when we were there, through the Tre asury Board sys tem you had effective controls through the departm ents. There was control in place, but that did not exist with respect to the Crown. Mr. Leonar d Evans: Just to clarify, is the Minister saying as of now or whenever, that no longer can MTS, just to use them as an exam ple, acquire any type of computer equipment or related equipment without permission of the Treasury Board? Mr.

Man ness : Without the permission of the Government formally, and I guess we could say Treasury Board, certainly we will expect Mr. De Luca to pass judgment. His judgment is given considerable weight by the Government. Mr.

Leonard Evans: So there is a formal process whereby MTS has to formally go, say, perhaps to the Minister of Finance or whoever, to the Treasury Board, where the ISSB group is located, and that there is a formal procedure put in place so that permission-and again I do not want to pick on MTS, but it is a good examp le-m ust get a written memo or whatever saying that permission is hereby granted or "we agreed that you should acquire X millions of dollars of Y new equipment." Mr. Manness: We are still at a point of transition. We have not reached it, and the formal part has not been totally developed yet.

What we are working towards is this: Right now, we insist that the capital plans of the Crowns come either before the Treasur y Board and/or the Crown Corporations Coun cil. As the Crown Corp orati ons Council reaches its full pace or its full gait, certainly at that time they will become the first screening place, because the Crowns are going to have to lodge their capital expenditure forecast, indeed their plans, with the Crown Corporations Council. No doubt they will be in contact with Mr. De Luca of the Treasury Board, so there will be that type of system in place.

I can assur e the Member, thoug h, that the Government will know before any Crown adopts a major new application of a system. Mr . Leonar d Evans: I can easily agree with the Minister's objectives. I shared the concerns that he is expressing now about duplication, waste and so on, and I would just urge him to get this nailed down formally.

Whether it is done initially through the Cr own Corpor at ions Council or without them-maybe it is almost immaterial, but I guess since you established the Council, it is reasonable to include them-you have to make sure that the matter does not fall between the boards, so to speak, in the crack s . You must have a firm procedure put in place, so that nothing happens by way of expenditure and new equipment without a formal approval in whatever way, whether it be a memorandum from the Council or whether it be a directive issued by the Minister of Finance on behalf of the Treasury Board or whatever.

With that, I would pass the item. (Mr. Deputy Chairman in the Chair) Mr Depu ty Chairman : Item 7 .(

a) Salaries $2,335,800.-pass. Item (

b) Other Expenditures $31 5,600.00. Mr . Leonard Eva ns: On that agai n, ju st to reconfirm, it is Mr. De Luca's-1 should not single him out personally-! mean the ISSB group that is going to be responsible for ensuring that the terms of the contract that the Government has, or the agreement with STM Systems is carried out to the letter, at least with respect to rate charges and related matters. * (21 30) Mr. Manness: lt was one of the first items of business once we knew we were seriously entering into very serious negotiations with STM.

We knew we had to have somewhere in Government that expertise to be able to monitor the covenants under the agreement to make sure they were delivered. Tha t is certa inly also one of Mr. De Luca's responsibilities. He has three main responsibilities, that is certainly one of the three. Mr. Deputy Chairman: (

b) Other Expenditures, $31 5,600-pass. Resolution 59: RESOLV ED that there be granted to Her Majesty a sum not exceeding $2,651 ,400 for Finance, Tre asury Board Secr etariat, for the financial year ending 31 st day of Mar ch, 19 91 -pass. Mr. Manness : Mr. Deputy Chairman, I would be remiss in not introducing Mr. Don Potter and Debra

November 13 , 19 90 LEG ISL ATIVE ASS EM BLY OF MAN ITOBA 10 91 Woodgate who have provided just incredible service to this Government, and I know Governments before us, with respect to trying to keep the numbers in a presentable form and to protect the Ministry of Finance and I want them to be recognized and to thank them for their efforts. ,..r. Deputy Chairman: And we thank you for your pat ience. 8. Tax Credit Paymen ts , $251 ,000,000.00. Mr. Leonar d Evans: We are talking strictly about an expenditure, we are not talking about staffing or whatever.

I was wondering if there are no items shown for Salaries and Other Expenditures, who is responsible for issuing the tax credit payments? You know, doing the calculations, overseeing it and so on. I should know but I have forgotten. Mr. Manness: Mr. Deputy Chairman, this is one of the areas I would rather have the $2 million or $3 million staff cost and keep the money, but we have a situation here where other people provide the service , not the lea st of which is the federal Government in the Income Tax Branch; secondly, munic ipal offices with res pect to the resident homeowner tax property credit.

So, municipalities and the federal Government do a lot of the service with respect to administering this grant; we just write out the cheques. Mr. Deputy Chairman: 8. Tax Credit Payments, shall the item pass? Mr. Leonard Evans: Mr. Deputy Chairman, that is very interesting, the fact is we virtually spend no staff money, money on staff salaries, for the expenditure of all these monies, that is we strictly rely on, as the Minister said, the federal Government income tax ad min is trati on and, to some degr ee, the municipalities, and no money is spent ... I guess that has not changed from the past.

Just one last qu estion on this then. Is there anything that the Minister can report by way of any significant changes currently? I think the answer is no, but I am going to ask it anyway in this item. Mr. Manness: I see $3 mil lion mo re being committed to the program this year over last. Mr. Leona rd Evans : Mr. Deputy Chairman, I imagine part of it is inflat ion, but has he any information to share with us as to why it is almost $3 million more, or $2.2 million. Mr. Manness: Mr. Deputy Chairman, the Member claims that housing starts are dropping way off.

This disproves his argument, because there are new homes, and obviously a significant number of new homes in the province, and that is why we are providing more property tax credit relief. We shoot down another one of his arguments, but I do not expect him to get up in the House and acknowledge that tomorrow. Mr. Leonard Evans: Mr. Deputy Chairman, I remind the Honourable Minister there is a difference between housing starts, new construction and existing housing stock.

As long as you have even a minor amount of new housing starts, you add to your stock, so we are talking about the housing stock, not the level of housing starts. Having made that statement of clarification for the Minister, pass the item. Mr. Deputy Chairman: Shall the item pass-pass. Resolution 60: RESOLV ED that there be granted to Her Majesty a sum not exceeding $251 ,000,000 for Finance, Tax Credit Payments for the financial year ending the 31 st day of March, 19 91 --pass. We are now going to No. 9, Public Debt (Statutory), $475,600,000 -(i nterjection)- An Honourable Member: I will let Len explain this one.

Mr. Deputy Chairman: Item (a) $1 , 1 12,600,000.00. Shall the item pass? Mr. Leonard Evans: Mr. Deputy Chairman, if you are not careful, we will discuss this for hours on end instead of a few minutes. I just remind Honourable Mem bers and the Minister that for liabilities there are also assets, and we have a great number of additional assets in the province. They are there by way of hospitals and schools and highways and libraries, and you name it, in the public sector, and they are contributing to the quality of life in this province. Let us not lose sight of that.

On this item, I guess the major variable in a way, short of additional borrowing, which I do not expect the Minister-we ll, the Minister is going to be engaging in additional borrowing, but short of additional unusual borrowing or borrowing that is not planned, I would imagine that the variable here would be the rate of interest. To that extent, does this branch or this group concern itself with monitoring future rates of interest,

10 92 LEG ISL ATIVE ASSEM BLY OF MAN ITOBA November 13 , 19 90 or is that strictly done in the research division? lt seems to me that the rate of interest is coming down, so is this the reason why the Minister can show a lower level of public debt interest payments? Pardon me, I guess the interest payments are up. At any rate, can the Minister explain why the figures have changed from 487 to 475 approximately? Mr. Manness: Mr. Deputy Chairman, first of all, we are in an area that has no vote.

As I pointed out in the House the other day, you are looking at a tremendous slug of money without the benefit of receiving any vote, because of course it is a law, and the law says, of all our bills, this bill is paid first. With respect to the qu estion, we are sort of caught with some good news and some bad news. The good news is that the Canadian dollar, in the context of this item, is so strong that the evaluations and the set aside in support of potential losses is very small as compared to the past; the bad news is that the interes t rate is high.

As we are renewing and refinancing, certainly we are doing so at a higher rate. We have a little bit larger short-term money; that is at the rate of 12 .5 percent, 12. 25 percent. We have more short-term money than we otherwise might have, because we are always told that if we wait a few more months the interest rate will be down and we will be able to lock ourselves into some tenure money much below the present 11 percent, 11 .25 perce nt, and one knows the difference between tied into tenure money at 9 percent versus 11 percent is millions and millions of dollars.

So it is a combination of our little bit larger short-term borrowings, a combination of the very high interest rates counterbalanced with the fact that the Canadian dollar is strong, is the reason why the level shows virtually no increase from last year, and a slight decrease. * (21 40) Mr. Leonard Evans: Mr. Deputy Chairman, as the Minister pointed out, there is no resolution number for it but regardless it is here to be discussed, and I do not intend to belabour this. I would only reiterate a point I made a week or so ago, and that is, we all want to have as low as possible a debt. Why not?

Who wants to have debt if you do not have to have it because it is a drain. But having said that, I cannot help but observe again that the burden of the debt as expressed as interest payments per capita in Manitoba is not out of line with the other provinces. We are somewhere in the middle. There are four or five provinces that have a higher interest per capita than Manitoba has and while it would be desirable to have it lower, like many other things, Manitoba is in the middle in terms of the debt burden on this province.

So we are not as though we are the worst of all the 1 0 provinces; that Is not the case or at least it was not the case according to the figures we had in the '88 Kostyra Budget. Mr. Mann ess : Mr. Depu ty Chair man, let me respond to that by saying I think it is a combination of what we have done with some of the surplus revenue that did come in over the first two years of our mandate. We held back on major spending incr eas es, where a Jot of oth er pro vincial Governments did not. That is reflected in a very much reduced deficit in the '89 and in the '90 years.

Beyond that though, the Member should realize our capacity to tax is very limited. We are at amongst the highest rates. Other provinces if they so wished have room to increase taxes to our levels. Secondly, we have a wage rate in the public sector that is almost the hig hest in the country when one does certain analyses. So we have some structural concerns of our own which in some respects mask maybe this issue in itself. I am talking about interest as a percent of revenue or a percent of expenditure. Our real challenges are lying before us.

We are locked into right now, because of the legacy of the former Government's borrowings, a $400 million, $500 million deficit situation and there is no guarantee that it will stop there, if we do not practise the greatest diligence with respect to our spending. We sense that increasing taxes is a non-option. There just is not the wealth in Manitoba to attack. We are talking about a gross provincial product of $22 billion, $23 billion and $5 billion flowing into the Government by way of revenues. So we do not have an awful lot more to go after.

The Members may say, well, make the rich, or there is certain wealth out there that is escaping the tax and we should go after it. Mr. Deputy Chairman, ali i know is the last taxation measure brought in by the former Government was the 2 percent t�x on that income. That hit not only the very wealthy; it also hit the individual at Safeway who packed grocery bags and was earning $1 1 ,000 and $1 4,000.00. lt hit that person hard, too.

November 13 , 19 90 LEG ISL AT IVE ASSEMBL Y OF MAN ITOBA 10 93 So we are trying to hold this interest cost. We are not going to be able to bring it down significantly in the next two years unless the Canadian dollar appreciates beyond 90 cents, which again would be a tremendous blow to our manufacturing industry, and/or debt or interest rates over the next three, four, five years start to hover at some value 5 percent lower than at present and I do not see that happening at all, Mr. Deputy Chairman. Mr.

Leonard Evans: I appreciate the fact that it is hard to get additional revenue, but I note that we are not the only province that has a flat income tax . I see both Alberta and Saskatchewan also have such taxes. In fact, the last year Saskatchewan has increased theirs from 1. 5 percent to 2 percent, bringing them up to the Manitoba level.

I would also comment that if the Minister was really interested in getting down the interest on the debt as much as possible, he could have refrained from put ti ng the $200 mi llion in the Fiscal Stabilization Fund and he could simply use it to pay off the debt, but he chose not to. He chose to take it out of revenue, in effect, and put it into another fund. So, to that extent, that is inconsistent with his often- stated objective of reducing the debt and the interest on the debt. Mr. Manness: Mr.

Deputy Chairman, I think I have explained that several times that we actually had a small interest saving in doing what we did. But, beyond that, had we shown a surplus like we could have in the first year, 19 88-89 , we probably could have shown a surplus, not of $50 million, but I think we made a change, too, with respect to Manitoba Hydro, some of their long-te rm borr owing, we probably could have shown a surplus of $1 00 million.

Another reason that we chose not to was that it would have given credence to the belief that a change of Government could have solved the problem just overnight. lt would have said that all the population has to do to correct some of these problems is change the Gover nment and the solution will be right there. The fact then that you would bring down a deficit the year after that that would move back into $300 million or $400 million, then it would say, well, the Government had lost, even though it was practicing the very same type of management, its ability to manage. Mr.

Deputy Chairman, as I have said several times, we received an additional $200 million, $1 30 million of it in one lump, purely because the federal Government decided, in my view, that they wanted to prepay some of its past expenses so that it could set a base of expenditure in the past year that was higher than it otherwise should have been so that they could make the present year look better. So they were prepaying a lo t of equaliz ation reconciliations. We then, with our strict accounting, have that problem presented to us.

This was never done in the past; this was never done when the strict accounting of the province was developed. I mean, it was not in place; it was unheard of. The federal Government would almost give you two years--not two years, I exaggerate-but a year plus a significant portion, surplus in one year as a major catch-up, and not try to spread it or blend it. So, Mr. Deputy Chairman, I think in fairness to the process, that one should not be allowed to believe that any Government can turn things around in the course of one budget when it has taken the best part of a decade or more to come into being.

I still think it was the right thing to do. I am talking now specifically about setting up the Fiscal Stabilization Fund and trying to even out the flows. I th ink we did it the right way in taking it to the Legis latur e and seek ing supp ort, legisla tive support. Secondly, I think we have been true to our word in saying that we would go into it only during the budgetary process and that we would access it only once a year. Mr.

Leonard Evans: Well, I would remind the Ministe r, and perhaps he does not need any reminding, that the other reason why he was able to have monies for fiscal stabilization was the fact that the rates of taxation were increased in the previous couple of years to provide that additional flow. We pay the political price for it, I might add, as the Minister knows, but you benefitted from it. At any rate, what I want to ask the Minister is whether he sees the Fiscal Stabil ization Fund cont inuing on indefinit ely.

Because of his statements of having to draw out, he suggests in his budget speech that even if he utilized pretty well all the money in the fiscal stabilization fund, there would still be large deficits, et cetera, does he envisage, in the near future, the Fiscal Stabilization Fund becoming nil? Mr. Manness: Mr. Deputy Chairman, I envisage where it is going to be drawn down, not to nil. I

10 94 LEG ISL AT IVE ASS EM BLY OF MAN ITOBA November 13 , 19 90 believe it has a very, very important role to play in the context of the Manitoba budget, indeed, in the presentation of our fiscal position. I say that because of the strict accounting system that we have in place, because deficits are so important to me and their minimization are important to me, that I think a proper reflection over a year or two is more important than this wild gyration as a result of transfers or activities outside of your jurisdiction.

So the answer is I certainly see that the Fiscal Stabilization Fund will be with us in concept. lt will have significant monies in it. I think it is the proper place to lodge the disposition of any hard asset. I just see it as a good piece of legislation and a good tool to have in place. Mr. Deputy Chairman, what Saskatchewan did the same year that we received that windfall , in the minds of some, to use the word advisedly from Ottawa, Saskatchewan also as a new recipient province, had significant additional revenues come in unexpectedly.

What Saskatchewan did was that they ordered their Liquor Control Commission to hold the dividends for a whole year, to not pay those dividends to the Government because again they too were caught with this problem. They wanted to even out the flows. * (21 50) Mr. De puty Chairm an, our accounting -t he strictest anywhere in Canada and rightfully so-did not ever foresee when you might have these revenue problems. I say that advisedly because it was a nice problem to have.

So in my mind I see the wisdom of having this tool and this vehicle. lt will not be drawn down. lt has the shares of Repap which have real value to them, not cash value today, but have real value. Consequently, it is the best pla ce to lodge those shares. Otherwise, when they do take on value in let us say six or seven years who should be the beneficiary. Under the present accounting system, they would pretty well have to go into the income, extraordinary income of that year. That is not fair.

That is not fair to those Manitobans, indeed the Government of the Day that was involved in the disposition or the sale of Manfor to Repap. To me, it is a perfect place to lodge the value of those shares. ! expect it will be in place-m eaning the fund will be in place-for several years. Mr . Leonard Evans: Can the Minister te ll us whether a Fiscal Stabil ization Fund or some counterp art the reof is being util ized by other provincial Governments in this country? · Mr.

Manness : Well, I think we all know the Heritage Fund in Alberta exists, and of course in B.C. they have a fund somewhat similar, although it seems to me it does not have the constraints of entry that our fund does. Mr. Leonard Evans: Okay, pass. Mr. Deputy Chairman: We will move on to item 10 . There is no vote on item 9. Item 10 is Expenditures Related To Capital, $1 ,300,000 on (a)- Mr. Leonar d Evans: Mr. Deputy Chairman, can the Minister explain what is involved here, what kind of physical assets we are tal king about? Mr. Manness : Mr.

Deputy Chairman, as I indicated the other day, the lion's share of this is with respect to the Wang agreement where Manitoba Data Ser vices funded the acqui sition of the Wang hardware. There is a repayment

schedule in place. This is the area in Government where that is displayed. The payment

schedule for Manitoba Data Services to Wang calls for 45 percent when installed and running, 45 percent user acceptance, 1 0 percent final acceptance. We are paying our portion over five years in support of that $4.1 million purchase. Mr. Leonard Evans: Pass. Mr. Reg Alcock (Osborne): I just have a procedural question. If we pass the expenditures related to capital, then do we move on to the Minister's salary? Mr. Deputy Chai rman: That is correct. Mr. Alcock: Okay. I would just ask the Minister then if he recalls our discussion at the beginning of the Estimates that we would move back into some items on that.

Okay, pass. Mr. Deputy Chairman: Ite m 10 , Expenditur es Related To Capital $1 ,300,000-pass. Resolution 61 : RESOLV ED that there be granted to Her Majesty a sum not exceeding $1 ,300,000 for Finance, Expenditures Related to Capital for the financial year ending the 31 st day of March, 19 91 -pass . The last item to be considered for the Estimates of the Department of Finance is item No. 1. (

a) Minister's Sal ary $20,600.00. At this point we request that the Minister's staff leave the table for the consideration of this item. Shall the item pass?

November 13 , 19 90 LEG ISL ATIVE ASS EM BLY OF MAN ITOBA 10 95 Mr. Alcock: I would like to start back, if I can a little bit, on the Fiscal Stabilization Fund. I would just like to get some factual information from the Minister first, if I can. I listened to the discussion that took place with the Member for Brandon East (Mr. Leonard Evans), but pan we just walk through some of the numbers that are involved? When the fund was originally set up, it was set up with $200 million. Then there was an interest allocation of some $25 million, as I recall. Mr. Manness: Mr.

Deputy Chairman, that amounted over -(i nterjection)- that is right, for after the period of the time the fund was set up until the beginning of the next fiscal year. Was it $22 million? I have numbers coming to me. Mr. Deputy Chairman , as pointed out in the budget, page 12 , $200 million in '89-90 , April 1, interest earnings of $25 million, then of course the Repap shares were transferred in-$303 million. I guess that answers the qu estion. Mr. Alcock: That interest payment of $25 million, over what period of time was that accrued? Mr. Manness: Mr.

Deputy Chairman, it is the interest for the full '89-90 fiscal year. Mr. Alcock: At what rate? Mr. Manne ss: Mr. Deputy Chairman, 12 .5 percent. Mr. Alcock: From what source? Mr. Man ness : From shor t-te rm investme nts , mostly -Mr. Depu ty Chairm an, it is invested through trust in our temporary investment. I think some of it is in guaranteed investment certificates, and a goodly portion of it would be in Treasury Bills. Mr. Alcock: So at the end of the year we have $303 million in the fund.

I would presume that the Repap shares got transferred in that at the end of the fiscal year, so there was no accrual of interest on-of course, there would be no interest because there is no cash attached to those shares. Mr. Manness: Mr. Deputy Chairman, because there is no cash, there was no interest earning on it. I must say this is a present value of what we deem the value of those shares to be. Consequently, that takes into account their interest -earning ability during the period that the time is moving on to their ultimate redemption and therefore their ultimate cash value. Mr.

Alcock: Did the Minister indicate then that he believes those shares are increasing in value at the present time? Mr. Manness: Mr. Deputy Chairman, $78 million is the present value of the redemption. These are dividend bearing, and the dividends would be in addition to the $78 million once they start to flow. Mr. Alcock: When will they start to flow? *

(2200) Mr. Manness: Mr. Deputy Chairman, from memory, and probably Mr. Bessey should be with me, but from memory, 19 95-96, in that time frame. Again though it is dependent on when the interest clock begins to run and that is dependent on when we receive the final environmental licences, in this case , from the federal and the provi ncial Governments with respect to phase two. Mr. Alcock : Then the $78 million that is shown as the value of the Repap shares in that fund is not at the current time accruing either interest or paying any dividends. Mr. Manness: lt certainly is not paying dividends.

I was a little in error here; I sort of thought it was the present value taking into account the dividends which may ult imately begin to flow, but Mr. Rosenhek, the comptroller, tells me that is not the case. Mr. Alcock : The $32 million in interest earnings that are coming in 19 90-9 1 is com ing from the investment of $1 7 4 million in cash? Mr. Manness: Mr.

Deputy Chairman, it is on the full cash, because these earnings-the transfer of $1 00 million out will not occur until the end of the fiscal year, and also the $1 7 million, MDS cash proceeds have been in since summer, since August. 1t is the interest accrued on all the cash items. Mr. Alcock: Then is that $274 million? Mr. Mannes�: lt is the $303 million less $78 milliom plus the $1 7 million. Mr. Alcock: Plus $1 7 million, which totals? Mr. Deputy Chairman: We do not have a calculator here. Mr. Alcock: Theoretically we have a person who has all those tables sitting in front of him. Mr.

Deputy Chairman: He does not have that. Mr. Alcock : Well, then get it. Mr. Manness: It is the interest run on the $242 million. Mr. Alcock: At what rate?

10 96 LEG ISL ATIVE ASSEMBL Y OF MAN ITO BA November 13 , 19 90 Mr. Manness: I do not have that number with me, but it seems to me that the value was certainly at the same level. As a matter of fact some of it may have been taken out for a little bit longer term at a higher rate. lt seems to me that the bulk of the money is around 13 -cert ainly at 13 percent or beyond. Mr. Alcock: lt would have to be to meet that level. The Minister indicated that there had been some net earnings in I believe interest payments from moving to the front as opposed to simply paying off debt with the funds that were available.

How much, and can he walk me through how that occurred? Mr. Manness: At the time we did not have significant short-term borrowings. We were very fortunate in that respect and so if we wanted to retire at $200 million worth of debt we would have had to prepay some of our long-term debt. When I say long-te rm, we would have had to have prepaid some of our 1 0-year issues. I do not think we had any five or six year calls coming in on 1 0-year issues, so because we did not have any debt coming due, it was pretty hard to pay when that money did come in, to pay down debt.

Had we decided to pay down debt that came due, Mr. Deputy Chairman, that was debt that was probably in the area of 7 percent or 8 percent. We refinanced it. We were able to get long- term money at that point in time in U.S. terms at around 8.75 percent, 9 percent. So the decision we had to make was whether or not to not enter into the market and borrow at the 9 percent when we indeed could take these earnings and earn 13 .

What we did ultimately decide to do is we did borrow at those rates at the full value of borrowings that we needed, full refinancings, and ultimately took these proceeds and invested them at a higher level. Mr. Deputy Chairman: Order, please. Honourable Members, I am having a little trouble hearing here. Mr. Alcock : So when you moved from a net positive of whatever it was, $48 million or $52 million-let us assume it was that for the sake of the discussion--to a deficit in the $1 50 million range, how did you finance that deficit? Mr. Manness : Mr. Deputy Chairman, that was very subjective.

I am trying to recall if there was anything more behind it. We just sensed that we had $200 million because of a number of sources, more than we were planning on. At that time we also entered into a $50 million deal with Manitoba Hydro whereby we removed them from their liability in some of the currencies that they were in. That left us with $50 million surplus. At that time we decided to make the straight $200 million transfer as a combination of unexpected revenues from two sources, mining and reconciliation of past estimates of equaliz ation payments. Mr. Alcock: lt is interesting.

I had not heard the Minister explain that further rationale for building the fund, sending a message to the public. ! thought that was an interesting argument. In creating this fund, you created on paper, In any event, a deficit in the order of $1 50 million. How was that deficit financed? Mr. Manness: Mr. Deputy Chairman, that deficit was financed through borrowing 1 0-year money at 9 percent. Mr. Alcock: So that cost us-? Mr. Manness: Well, Mr. Deputy Chairman, the Member can do his own figuring. Mr. Alcock: lt must be getting late. -(i nterjection) Thank you. I appreciate that from the Member for Pembina (Mr.

Orchard) . Let me just move on to the next one then, HydroBonds. Can we talk about HydroBonds for a minute? There have been two- Mr. Deputy Chairman: If the Honourable Member does not mind, I think we will just come over and get Mr. Evans. He had just a couple of points, and we will come back to you. Is that all right? Give you a breather? Mr. Alcock: What do you want to do? lt does not make any difference to me. Mr. Deputy Chairman: Go ahead. Mr. Alcock : Okay, if we can come on to the HydroBonds for a minute, you had two offerings of HydroBonds. The first one raised three hundred and-? Mr.

Manness: Net $308 million or $309 million. * (221 0) Mr. Alcock: When you say "net, • explain that to me. Mr. Manness: lt means that $31 2 million were provided in purchases by Manitobans and once the expenses around commissions were deducted, I ended up with roughly $309 million. Mr. Alcock: Which paid 11 .25? Mr. Manness That is correct; 11. 25 percent.

Nove mber 13 , 19 90 LEG ISLA TIVE ASSEMBL Y OF MAN ITO BA 10 97 Mr. Alcock: Can you break out those expenses for me, please? Mr. Manness: Well, Mr. De puty Chairman, this is the wrong committee, because it was Hydro's count, but it seems to me that the commissions were in the area of 0.9 percent all in, so then obviously there is roughly $3 million of that issue that went into the investment community in the form of commissions. Mr. Alcock: Would that $3 million in expenses include brokerage fees and the amount paid to Pemberton for coming forward with the idea in estab lishing the program and the advertising?

Would it cover all of those? Mr. Manness: Mr. Deputy Chairman, it would have been paid to Pemberton. I am a little vague now as to the process, but certainly for them to of course direct to the 25 groups of bankers, credit unions, trus t companies and eve rybody else in the inv estm ent business who is selling these HydroBonds. So if they, for instance, if the Royal Bank sold $25 million worth, they achieved a fee of I percent, a quarter of a million dollars, and so included in that was the adverti sing and everything else, yes. Mr. Alcock: Pemberton paid for the advertising? Mr .

Manness : To the best of my recall, they did. I know the value of the advertising was significant and I am pretty sure we paid it to Pemberton because they were the managing agent and it was up to them to secure the advertising. That was their role. If I am wrong, I certainly will attempt to correct the record tomorrow. Mr. Alcock: Is the Minister suggesting that the hydro committee on Thursday morning would be a more appropriate place to raise this? Mr. Manness: I consider this appropriate, too. Certainly though they might be prepared.

If my Treasury people were here, if a representative of the Treasury branch was here, I could tell the Member all of those ques tions, I could provide him all those qu estions. Mr. Alcock: Well, would the Minister undertake then to provide me with a detailed break-out of the expenses for the two years? Mr. Manness : Mr. De puty Chairman, I would be more than delighted to do so. Mr. Alcock: Does the Minister know, from memory or from staff here, what the effective rate of interest was on that first offering, the cost to the province th en, taking in that additi onal $3 milli on in expenditure? Mr.

Manness: The effective rate was still very close to 11 .25. lt had not changed very much, because only2o r, well, 3 percent-no, 1 percent, pardonme. Not 3 percent-$3 million-1 percent. Roughly that all in costs it was a little over 1 percent. Mr. Alcock: So would I be correct in saying that 1 percent on top of 11 .25? Mr. Manne ss: No, you would be completely wrong. One one-hundr edth on top of 1 1. 25. Mr. Alcock : Right. Okay. On revenue, we talked about revenue-well, let me finish off with the HydroBonds, although this may be better for Thursday.

H you are borrowing in the U.S. at 8.75 or 9 percent, why are they offering for 11 .25 here ? Mr. Manness: Mr. Deputy Chairman, for two or three reasons. Firstly, no foreign exchange risk; secondly, because we sensed it was important that Manitobans realized that it was important to invest in their province; thirdly, they could not invest in their province unless there was a vehicle to do. so, and up to this point provincial savings certificates were going nowhere fast. They just brought in virtually no revenue. Fourthly, other provinces had done these types of issues with incredible success.

All in all, I think we were more than justified in providing an opportunity for Manitobans to invest within their own province. Mr. Alcock: At a cost of about 3 percent, 2.5 percent? Mr. Manness: Probably at a cost of 2.25 percent more than it would have cost us to do a risky borrowing in U.S. dollars. Mr. Alcock: A risk y borrowing that you are continuing to do? Mr. Man ness : Mr. Deputy Chairman, that is because we cannot secure all the money we want in Canada. I have made this comment over and over again. lt would be wonderful if we could, but we cannot. Mr.

Alcock: Another issue that arose when the Minister was in Opposition, and certainly arose in the one meeting of Public Accounts that we had in the previous Session, was the question of unfunded pension liabilities. Does the Minister want to tell us what is happening with that right now? Mr. Manness : I did not realize that the Member was so inclined to want to read comments that I put on

10 98 LEGISLA TIVE ASSEMBL Y OF MAN ITOBA November 13 , 19 90 the record when I was sitting in his chair. If I had thought of that I may have tried to find the time to have reread what I had stated in the past. Let me say, with respect to the unfunded pension liability, it continues to be a thorn in the side of Governments everywhere. Let me indicate that I brought the subject up now on one occasion and again it is on a list of items to be discussed with the Ministers of Finance.

I am not really getting too far with being able to convince other jurisdictions. lt should be recognized and, ther efore , rec orded as such so we are sti ll dialoguing amongst other jurisdictions. Mr. Alcock : When this was discussed at Public Accounts before-oh, by the way, if the Minister would like a copy of his remarks, I could give him an annotated copy of everything he has said since he came into the House, but failing that- when the Minister discussed this before, he said one of the concerns he had was for Manitoba to go it alone, and I wonder if he could tell us what the nature of that concern is? Mr.

Manness : Well, if we recorded our unfunded liabilities, it seems to me that is now moving into the $1 .1 billion range, if not $1 .2 billion. If you put an interest rate, if that money all had to be borrowed, because as soon as you record it you have to begin to reflect on the bottom line, our, of course, bottom line number would change by $1 00 million to $1 20 million, and quickly. Now that would be fine if everybody moved in concert, all the provinces legitimately moved in concer t, an d dealt with it such that one province-the accounting systems were the same.

Right now in Canada we have the strictest accounting system going. There is none stricter. We reflect capital. We amortize probably less capital than any other jur isdiction. We reflect Crown corporation losses right to the-if they do not have the ability, through rates, to increase their rates to offset a loss, we reflect that on our books. I do not think that happens elsewhere. I am sure it does not. So we are consolidated. We are moving qu ickly along on consolidating.

I defy any person to tell me where the accounting is as strict as it is in this province, and I am proud of that. l thinkall legislators, regardless of what political stripe they have, are proud of that. To impose upon that to being the first ones out to reflect our unfunded pension liabilities, to me, is too unfair, because then we will be weighed in the context of other provinces by the rating agencies who will say, well, why can you not do this; why can you not do that, as compared to others, and I think we will pay a price for that. So I would like to see us move in concert. Mr.

Alcock: The Minister and his staff know more about this than I, but when I examined this issue earlier, when you go to the markets to borrow and the Auditor prepares a statement to accompany those borrowings, this liability is mentioned in that statement, so it is not as though the market is not aware of this fact. I am not certain as to how that then alters their rating of us, being fully aware of that information at the current time. •

(2220) Mr. Manness: Mr. Deputy Chairman, the Member is right. That information is fully displayed, recorded and it is duly noted, but whenever I engage myself in conversation with representatives from rating agencies, they always focus too on the bottom line, the recorded budgetary deficit, and when they talk in terms of comparisons, that is what is always focused on. I do not knowwhy it is, but it is. Sure, they are aware . The information is presented to them. If they do any digging at all, and I know they do, they are well aware of the unfunded liability. Mr.

Alcock : Yes, in the statements I read, it is stated rather clearly that ex ists. Are ther e ongoing discussions with the provinces about making that change? Mr. Manness : Not to the same extent that I would like. When I have brought it up in private and in formal discussion, it receives pretty short attention. Mr. Alcock: The genesis of the discussion came from a recommendation from the Association of Public- Mr. Manne ss : Public Sector Accoun ting and Auditing Committee, PSAC for short. Yes, certainly my deputy was a former chairman of that group. Mr.

Alc ock: Did they not also make recommendations or begin work on the ques tion of the amortization of capital? Mr. Manness: They have released nothing. They are still studying.

November 13 , 19 90 LEG ISL AT IVE ASSEMBL Y OF MAN ITOBA 10 99 Mr. Alcock: Is it likely that we will move where they have in some jurisdictions to a point where we will begin to amortize capital? Mr. Man ness: As the Member knows, the Provincial Auditor has pushed for this for some period of time. lt probably comes as no reve lati on to this committee, I for one am not supportive of that, and I have no difficulty saying so. Unless somebody can convince the Government that a different approach should be taken, I for one will not push for it.

As a matter of fact I am prepared to continue to say publicly why it is I disagree with the Provincial Auditor. I can see it as a short-term benefit. To me it might as well be a light year away from the reality of a corporation which has a legiti mate use of an amor tization on capital depreciation, a

schedule form. We in a public policy sense will be very tempted to amortize a lot of things. I understand for instance, if you read the record I was horrified to find that the State of New York one time was contemplating the use of amortizing the cost of education because they said it was a tremendous investment in the future. Well, of course it is an investment in the future. Who could possibly argue with that?

How would you dare amortize the cost associating with this year's Education Bill?-and that is the pressure that comes to bear when you are preparing budgets. lt is the worst form of manipulation and I say that ultimately that is where it leads if you are not prepared to deal with this capital and this amortization issue with great care. Mr. AI cock: Surely there is some distance between amortizing the cost of an illusionary good in a sense, a non-durable good like education versus hard items, hard capital .

I believe, if I recall the discussions that took place with the Auditor that was what their recommendations were directed at. Mr. Manness : Mr.

Deputy Chairman, certainly we can understand the tangible difference, but I would argue, for instance during times of Government's having to react and having to deal with discretionary spending because the revenues do not come in, unless Auditors and indeed those proponents of that system can guarantee a revenue stream that will be there year after year, then what we are saying to the Government of the Day-and to use an exam ple, the Department of Health, their capital budget last year $250 million roughly.

If we had not spent a dollar in that department, there still would have been a capital line expenditure of $25 million, or I forget what the number is. Maybe it is much higher than that. In the area of education, I think we built schools and had a capital program last year of around $25-30 million. If we decide this year that we cannot afford to build any new schools it will not help the budget at all because there will be a requirement there because of the amortization system of $25 million. Because Governments in the past have decided to build then and pay later. I submit, Mr.

Deputy Chairman, that you will need new schools and you will need new health facilities every year. You will never get away from them. So why would you not expense them? Pay for them the year they are built because you know for sure the next year you are going to have to build some again. Then the year comes along when the revenue is not there , and if you cannot sustain the building because the revenue is not in place, then cut back on the expenditure and at least you will leave your deficit somewhere close to balance.

The way we do it now, revenues drop, if you decide not to continue your capital building you have no saving on the bottom line, absolutely none. So to me it is completely different from a business that builds that factory once in 20 years and makes it last or a homeowner that builds his home or buys a home once in a lifetime. Two different issues, because Government as long as we are here-we meaning all of us- will always need more money for our health facilities, more money for education facilities, more money for highways-highwa ys though we do expense. Mr.

Alcock : Why then does the-and maybe this is too speculative. I am interested in the issue. Why are the auditors moving in this direction then? Mr. Manness: Well, Mr. Deputy Chairman, the reason I think that Provincial Auditors are pushing for this is because they like to see it as an offset against the liabilities, particularly in the pension area.

So what auditors seem to be saying is, okay, we know you have an unrecorded pension liability, that once you record you have to begin to find the funds and support a funding, and as an offset against that maybe you should recognize there are a bunch of ass ets out there that you are not reflecting, and if you did reflect the cost of building and amortizing that over a period of time maybe that now would represent a drop in the deficit that was

11 00 LEGISL ATIVE ASSEM BLY OF MAN ITOBA November 13 , 19 90 going to increase as a result of reflecting the liabilities of the unfunded pension liabilities. I say I do not know-what assets are we missing? Well right now we are missing highways. We are not am ortizing highways , we are not amor tizing Government buildings, we are not amortizing parks, some minor sewer and water infrastructure, we are not amortizing that. Mr. Alcock: Perhaps I misunderstood that. We are amortizing some schools and hospitals then. ..

(2230) Mr . Man ness: Mr. Deputy Chairman, we are amortizing schools and hospitals. Mr. Alcock: Another area of questioning that I was interested in-the Minister's remarks just about the size of the debt and the amount of borrowing that needs to be done and the concern he expressed rather eloquently both in the budget speech and then again here about the number of provinces that are going to be going to the financial markets for-I think he gave a figure of some $1 0 billion-in the next year, just from the- Mr. Manness : Five months. Mr. Alcock: -next five months, just on the part of pr ovinces.

Then presumably the fed eral Gov ernm ent will be going back for another $30-some billion. That is a fair assessment of that. He expressed concern about how long this could go on, what sort of problem that was going to create in the financial markets along with interest rates and all those kinds of things. This Government was elected in part to control expenditures and to reduce the level of debt and public expense. You have taken a fairly cautious, fairly careful approach to it. I am just curious about it.

Why are you spending anything on capital at a time when you are running a deficit if your goal is to reduce the amount of borrowing you have to do, oth er than to the essential re pair s and replacements? Mr. Manness: Mr. Deputy Chairman, we continue to build health and education facilities, firstly, because we need them desperately. Secondly, there is still an economic benefit to the construction industry and therefore the economy as a whole if you continue to build. Thirdly, if you stop building, when time s change you may not have the infrastructure there to build and to give you competitive bids.

Fourthly, if you do not build for two or three years you have such a backlog then you never do catch up. You continue to find capital dollars to build-and I am talking now about health care and education facilities. When you are tal king about highways you have an added incentive to continue to build because there is just no greater response in an employment sense. I mean, you just see it anywhere you build a road. lt is short-term work for a lot. lt is hard work. lt is not great hourly per pay work but it is work. lt is cash . Nobody can argue the benefits of road construction.

So that is why we continue to build. Mr. Alcock: When we discus sed this in the past-and I recall a discussion actually during the election on one of the radio programs that we seem to meet on. When we talked about the long-term meeting of revenue and expenditure, the Minister spoke about annual gains in revenue that had just come about because of growth in population, a sort of inflationary growth in revenue, and that if there was an ability to keep expenditures down below a certain level, at some point the two would balance.

Can the Minister tell us when he anticipates that happening, or how he anticipates that coming about? Mr. Manness: Mr. Deputy Chairman, as I have said in the budget, I expect the next two years to be very difficult. I see where there will be possibly an increase in the deficit if we are not diligent in our planning over the next three months. Beyond that, I still believe that the plan that we have embarked upon-a nd believe me it is a plan. Some Members like to make fun and say that we have no great plan in effect. I mean, part of the plan was we saw what we are into now.

We saw it coming two years ago and it was one of the reasons we set up the Fiscal Stabilization Fund. lt was one of the reasons why we did not balance the budget like we could have in our very first budget because we knew what was coming. We just did not, at any time, want to lead Manitobans on to believe that because they had elected a Conservative Government that good times were here because that was not the truth.

I think we have been very diligent through our planning over the two or three years not to raise expectations unnecessarily, to work towards trying to moderate the growth and expenditures and most importantly, withholding tax increases.

November 13 , 19 90 LEG ISL ATIV E ASS EMBL Y OF MAN ITOBA 11 01 In my view, that is starting to pay dividends. I am not going to boast loudly that we have the lowest rate of unemployment in the nation but we do. lt is still too high. The number that came out a few days ago is probably unrealistic but still the trend is the right way. That says a lot about this province. lt says a lot about our business people, but it also says something about this Government over the last two and a half years. lt says that in the minds of most they have the ability to take us through these difficult times. To that end, Mr.

Deputy Chairman, I want to indicate that people outside of our province are taking note of the stewardship of this province. There are jobs that are coming here very silently. I could tell you who they are, but I will not, because they are silently coming here from other provinces. Once other provinces realize they are losing it to Manitoba, there will be outcry there. Part of the reason why the statistics are staying favourable is that this silent movement of jobs to this province is continuing, not in thunderous herds; I do not say that people are coming here in legions, because they are not.

Nevertheless, people are coming to this province and taking note. With the changes that we are making in telecommunications policy, with respect to our MDS divestiture, I believe that two years of sound decision-making will put this province in a good growth position starting in late 19 92, and the revenues emanating from that will be reflected in significant fashion as early as '93-94. Mr. Alcock: Actually the Minister reminds me of something that I meant to mention earlier, and it is true, we have the lowest rate of unemployment in the country.

I think that to the extent to which the Government is responsible for that, the Government is to be congratulated on that. I mean I am quick to point out when it is the other way. I was pleased for the province to see that it in fact was much more positive than it has been. The Minister talked about two movements when we debated this before. One was the holding of expenditures to some point below the rate of growth of revenue so that at some point down the road we would see the budget come into balance. The Minister has indicated that he has a plan. When are we likely to see that balance occur? Mr.

Manness: I cannot give an answer to that qu estion, because the decision-making that we bring to bear over the next two years will ultimately be critical. If we do not arrest this divergence as between expenditure and revenues in the context of the next two budgets, I am of the view that this province will be structurally tied to a deficit that will continue to grow at a very significant rate. "

(2240) I say to him that he can help us if he wishes by asking his colleagues to be very careful of the demands they put on the Government to spend more, because of course this is key to everything, and help us deal with the problems associated with the public sector wage package, and help us deal with the problems of trying to hold the line on taxation. I mean there is no magic formula at work here. There is no magician that can pull a rabbit out of a hat. We are not going to benefit because of $35 or $40 a barrel of oil. We are not going to benefit with pulp going up to $600, or $700, or $800 a ton immediately.

We are not going to profit, certainly, with $3, $4 wheat. So, Mr. Deputy Chairman, we do not have any upward surprises in a wealth-gene rating sector that is going to provide incredible revenues. Certainly, the mining industry is one exception. Of course, faith springs eternal with respect to what the mining industry could do in this province in years to come. To that end, Government is going to be challenged to find ways and means of providing greater incentives to continue to explore that great shield that is in place, to see come forth the mineral wealth and seeing it explored. Mr.

Alcock: I felt for a moment there the Minister was beginning to launch into song about this great shield. What is the Minister's projection for annual rate of increase of revenue for the next couple of years? Mr. Manness: Well, Mr. Deputy Chairman, in the budget I think we said 3 percent in '91 . I think we took an optimistic 5 percent growth in '92-93 . Mr. Alcock: What rate of growth has to occur in expenditures in order to be on the Minister's plan? Mr. Manness: Well, Mr. Deputy Chairman, the Member is now beginning to ask me to share some of the budgetary information with respec t to 19 91 -9 2.

I know he would not want to see me impeached and see me having to resign because I provided too much information at this point in time. Mr. Alcock: No, I certainly would regret seeing that occur. At the same time though the Minister has

11 02 LEG ISL ATIVE ASS EMBL Y OF MAN ITO BA November 13 , 19 90 spoken about having a plan. Without divulging secrets, can he give us some sense of comfort as to when we are going to see some movement that will begin to bring expending? The average rate in growth of expenditure right now is? Mr. Manness: 5.8 percent. Mr. Alcock: When will we see that 5.8 percent and that 3 percent come a little closer together? Mr. Manness: Well, Mr.

Deputy Chairman, the very essence of the budget document was to say that unless they came together soon like, we are talking about '91 -92 , we were not going to be, as a Government, pr oviding a great solution to that pro blem. That becom es a challe nge of this Government to the very heavy planning that will begin immedia tely upon this Session being completed. Mr. Alcock : Well, we talk about revenue for a moment. There has been discussion off and on in the House about a minimum corporate tax. Has the Minister examined this? Mr. Manness : Mr. Deputy Chairman, the minimum corporate tax, in all honesty, no.

I know enough about the arrangement that we have with the federal Government that they would have to take the lead on it or otherwise I would have to somehow append it to already an unwieldy tax form in the form of yet another schedule. I do not know whether I have the flexibility. I know I have to ask Ottawa with respect to any changes. Secondly, I do not know how it is that if we apply the minimum corpo rate tax selectively in a Manitoba context, how that would help the economic development plan if we were out of step with other provinces. Mr.

Alcock: Yet there was some discussion of this during the election and in the House the other day, that I understood the Minister to concur with the value in moving in that direction, or perhaps it was the Premier. Mr. Man ness: Mr. Deputy Chairman, we have no problem with that, but the lead for that has to come from Ottawa, by all means, for strong supporters of that system, although I am led to believe that there is basically a minimum in place now, or at least coming into place in Canada. Is that right? I am looking at Ewald for some sound advice. Mr. Deputy Chairman, ! stand to be corrected.

On the federal side there is yet no minimum on the corporations although many of the exem ptions that used to be in place have been removed. Provincially, the Member asked the question with respect to a provincial minimum corporation tax . We have almost something similar in place. We have the corporation capital tax which is a tax without reference to net income. Of course that is strongly resisted and resented by many of our corporate citizens. Mr. Alcock: There is discussion and the NDP will from time to time raise it at various sessions we have been at.

In fact it came up several times during the debates we had during the election, the existence of exem ptions and such that mean that large corporations do not pay a tax, where they talk about an unpaid tax bill

Document details

Collection	Manitoba — Debates (Hansard)
Citation	35-1-23b
Type	hansard
Volume / chapter	35th 1st hansardpdf 23b.pdf
Language	en
Format	pdf
Source	PROVINCIAL
Identifier	edabff7aaeff7dcb64a6d48dcd767c1d59723bb2

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