Manitoba Hansard — 15 May 1979 (Sitting 61B, 31st Legislature, 3rd Session)

31-3-61b

Manitoba — Debates (Hansard)

.. ... .. • .. .. .. ISSN 054?-549 2 Third Session - Thirty-First Legislature of the Legislative Assembly of Manitoba DEBATES and PROCEEDINGS 28 Elizabeth II Published under the authority of The Honourable Harry E. Graham Speaker VOL. XXVII No. 618 8:00 P.M. Tuesday, May 15, 1979 Office of the Queen 's P rinter for the Province of Mamtooa

.. • ... • • .. LEGISLATIVE ASSEMBL V OF MANITOBA Tuesday, May 15, 1979 Time: 8:00 p.m. BUDGET ADDRESS MR. SPEAKER: The Honourable Minister of Finance . MR. CRAIK: Mr. Speaker , I move , seconded by the Minister of Health and Community Services , that this House approved in general the bud get policy of the government. MOTION presented . MR. SPEAKER: The Honourable Minister of Finance. MR. CRAIK: Mr. Speaker, I know that the quest ion could be put immediately and would have no difficulty , and it would get the unanimous support of all sides of the House . And , Mr.

Speaker , I note that, for the first time in recent history that there are really only two sides of the House now and that we don 't have the three or fou r-cornered Chamber that has existed, Mr. Speake r, since you and I have been members of this House and perhaps for the last 20 years or so, or perhaps more. We are now facing the first case where we have only two sides to the debate , although I would hasten to add that there are often more than one side that appears from the members opposite, even though they are of one party . Mr.

Speaker , I want to indicate to you, first of all, that I am going to ask for your indulgence to live with me tonight as I go through what I think probably is a fair ly long presentation of speaking notes , as I address the Budget items before the House tonight, and I suppose in a way I am forewarning you that it may be a fairly long presentation . But, Mr. Speaker , I would hasten to add that I also think it's a fairly important presentation as this government now introduces its second Budget to this Legislative Assemb ly. Mr.

Speaker, before I go on, may I first of all very heartfeltly extend the thanks and congratulations to the staff people who have worked with me in the presentation of the items that I want to discuss with you ton ight and I think if I could name one person I would perhaps be appropriate in doing so. I would like to thank, in particular, my Deputy Minister, Charlie Curtis, who has been the chief marshal of the many things that have to come together for a Budget presentation .

And I know that there are many members on this side of the House who have had to live with Charlie Curtis and many members opposite who know who Charlie Curtis is, who would also agree with me. May I also extend, in addition to that, the thanks to the staff who have backed him up in the work that has gone into this presentation . Mr. Speaker, traditionally, the end of one decade and the beginning of another is a time for reappraisal, for reassessment, reassessment of directions, reassessment of goals and reassessment of accomplishments . In Canada, such a reappraisal is overdue .

During the 1970's the accomplishments have been less than we could have expected , and too often were somewhat transitory or illusory, while the problems , both economic and social have intensified and fueled a lack of confidence in our people , who by every yardstick known, should be not only confident but demonstrably leading the way in economic and social achievement .

For 10 years and longer senior governments , both federal and provincial have been mortgaging the future of this country without due regard for the validity and integrity of the present economic base, and the heritage of our children , that they have a right to expect.

A sluggish economy, inflation and unemployment, more often than not , aided and abetted by government policy , and larger and larger deficits , are only some of the problems which we must tackle successfully if we are to make the '80s a " Decade of Development." The next 10 years will bring this count ry face to face with among the most important economic and political challenges since Confederation. For Manitoba, the challenges will , in many ways, be a representative microcosm of those facing the Nation . Mr. Speaker, that's been true since 1867, since 1870. The decisions we take now, and 4293

Tuesday, May 15, 1979 in the next few years, will be critical in determining whether the 1980s and indeed the remaining 20 years of this century, will see the realization of our province's full potential. Based on the problems of the past several years, some forecasters have been less than optimistic in their predictions for the near future in Manitoba, and assertions have been made by some Socialists and other naysayers, that the private sector of our economy is unable or unwilling, to provide the sufficient stimulus and impetus, for sustained growth .

And that the state must move in with massive expenditures of taxpayers' dollars on projects of doubtful viability, regardless of the obvious implications of deficits and over-expenditures . Those kinds of predictions, Mr. Speaker, and that kind of attitude are indicative of precisely the type of negativism we have to overcome in Manitoba , and overcome quickly . While in some cases it may be well-intentioned, too many times it's self-serving , designed to support a misguided ideology that an ever-growing public sector , more and more government intervention, takeovers and control, are essential and inevitable .

It's also destructive, because it causes uncertainty and undermines the confidence that is so vital to assuring the productive investment, and the permanent job creation, which only the private sector can in the long term provice . Mr. Speaker, confidence is fragile , and once eroded , it' s difficult to restore . Our government is not underestimating the rebuilding tasks ahead . On the other hand, we know we have a strong support from the vast majority of Manitobans for the goals and policies we have established thus far .

The citizens of this province are well awar e of the alternative - the wasteful, doctrinaire approach which led directly to the stagnation of the 70s, the late 70s , from which we are only now beginning to emerge . In an attempt to support some of their claims about current econo mic issues , our friends opposite sometimes like to quote selected statistics from sources of various origins, but I would like to suggest that one of them , coming from the Conference Board, isn't particular ly significant .

Unfortunately, in quoting the likes of the Conference Board they seem to have forgotten what the Conference Board said in January of this year, in January of 1979, and I quote , and it says: " For Manitoba , 1978 and 1979 can be characterized as years of moderate recovery , in the non-agricultural sector at ·least, 1'rom the sluggish economic conditions prevalent since 1975. " I'm talking abou t Manitoba , Mr. Speaker, not about Canada . "The period between 1975 and 1977 was one of general recession in the province . . . " It wasn't , Mr. Speaker , to that extent , in Canada .

" ... since constant dollar non-farm production (which captures business cycle swings in production more closely than does total provincial output)" , in that period , "did not register any growth at all." Mr. Speaker , while we don 't always agree with the Conference Board 's forecasts , we have few problems with their after-the-fact analysis. Mr. Speaker , the after -the-fact analysis of most is usually more accurate than the forecasts .

It confirms what the members opposite wouldn't admit, but what the peop le of this province could sense: Their policies were ineffective and inappropriate and a direct cause of stagnation in our economy. New directions were essential and the citizens of Manitoba recognized that clearly when they went to the polls in October of 1977. Mr. Speaker , our government's primary objectives for the 1980s can be stated quite simply: To ensum that it is a decade of responsibility and accountability in government and a decade of recovery and stability for the Manitoba economy and for all of our people .

These basic goals are closely related . A sound , responsible budgetary policy is an essential prerequis ite for sustained economic development.

Our specific economic objectives are clear and straightforward as well: Strong, steady growth in employment and income centred in the productive private sector ; A con tinued fight against inf lation , insofar as it is within our power to do so; Greater stability and fairer returns in agriculture - still the backbone of our economy; Renewed development of our natural resources for the benefit of northern Manitoba and the entire province; Expansion and diversification of our industrial structure , particularly in manufacturing, where the greatest potential exists for permanent job creation; Increased competition and reduced government intervention in the day-to-day decision-making that is so essential to making our market economy work effectively; and A cost of government, Mr.

Speaker , that is within the means of our taxpayers . Mr. Speaker , those are the details of the goals of this government for the 1980s. We want to ensure that the increased opportunities for economic expansion in Manitoba will benefit all of our citizens . Let me make it clear that the key work word is " opportunities" . We believe in individual initiative and in providing incentives for hard work , risks and special skills. That is the essence of our market system and the key to realizing - - our potential.

We gener ally . reject rigid controls, except in extreme situations , and we categorically reject state-imposed distribution schemes that would presume to tell the people of this province what they can or cannot earn to support their families or to provide for their retirement years. The infamous "two and a 4294

• • .. .. • Tuesday, May 15, 1979 half to one" income levelling formula propounded by the Opposition , and their dogged adherence to the proposition of taxing estates in a punitive way are blessedly , things of the past . For pensioners, and others who need assistance, income support programs must be sufficient to ensure dignity and well-being, but for people who are able to work , permanent, productive employment is the answer, not "make-wo rk " projects , or welfare-type payments which discourage initiative and foster a debil itati ng dependence.

As I indicated earlier, these economic goals are directly related to the key fiscal policy objectives set out in our first Budget last year , which were: First - Continuing moderation in the rate of government spending, to reduce the public sector's share of gross provincial product over time, and lessen its demands , in relative terms at least ; Second - greater efficiency in government programming, to ensure that improved and expanded services can be provided for those who require them; Third - rationalization of taxation measures, to simplify our tax structure and make it more competitive; and Fourth - improved financial reporting , to ensure that the citizens of Manitoba have up-to-date, factual and understandable information about their government's budgetary position and performance.

In the 1978 Budget, I made it clear that our challenge is not to restrict essential services for the people of Manitoba, rather it is to help build and maintain the economic base which will make these services possible . Mr. Speaker, that is the overall goal. Nine months later , in the 1979 State of the Union Message, President Carter said much the same thing in outlining his objective of a new foundation for the American economy. I think some of his words bear repeating here, and I quote: "In our government it is myth that we must choose between compassion and competence.

Together, we must build the foundation for a government that works and that works for people. To be successful, we must change our attitudes as well as our policies . We cannot afford to live beyond our means, to create programs we can neither manage nor finance, or to waste our national resources. It is not enough to have created a lot of government programs. Now we must make the good programs more effective, and improve or weed out those which are wasteful or unnecessary ." Mr. Speaker, I hear the Leader of the Opposition saying that Jimmy Carter is a second Herbert Hoover. Mr.

Speaker, I would remind the Leader of the Opposition that Jimmy Carter was possibly elected by a number of .the same people who he may have supported in that country in their particular election, given that alternative. The fact that consolidation and rationalization are recognized to be necessary in the United States where the scale of government activity, in relative terms, is substantially smaller than in Canada, underscores the urgency of similar action in this country.

Greater program effectiveness has been a top priority of our administration since we took office and as I said earlier, it was one of the major objectives outlined in our first Budget last year. I described our government's 1978 Budget as a transitional budget, the first step in re-establishing a sound financial and economic base for recovery in our province. That Budget served its purpose and it served it well. Almost every sector of the economy experienced an improvement in 1978.

In some cases the improvement was modest and less than we would have liked to see, but in others it was substantial and encouraging to our government and to Manitobans. After barely 18 months in office, we can point with a sense of accomplishment to growing evidence that a turnaround is taking place and that the people of Manitoba can now look ahead to the 1980's with genuine and justifiable confidence . In only a year and a half , measurable progress has been made toward every one of our economic and financial objectives and later I'll give some further details, Mr. Speaker .

Possibly the best evidence , however, can be found in the "bottom line." The heavy and restrictive deficit burden which we inherited from our predecessors has been reduced in a major way in the past year by even more than we had anticipated in our 1978 Budget, despite the fact that our government introduced a number of significant tax reductions in line with our commitments to the people of Manitoba, Mr. Speaker. . Many sceptics suggested that it couldn't be done, that the deficit could not be reduced and, Mr.

Speaker, the sceptics were fairly well represented by the members across the way, and that taxes could .not be cut without serious disruptions and deterioration in essential services. In fact, Mr. Speaker, I believe that we have proved that it can be done. Those who argue differently have failed to prove their case. They have only succeeded in demonstrating their totally irresponsible disregard for the hard-earned tax dollars that must support government programs in this province. In many ways, our record stands as a model for other jurisdictions which are now following a 4295

Tuesday, May 15, 1979 similar course and the First Minister of our province deserves much of the credit for influencing the other First Ministers in early 1978 to take their positive joint positions of goal settinq in relation to private and public sector responsibilities in fighting inflation and strengthening our combined economies . This kind of courageous, common-sense leadership will continue to be badly needed at all levels of government for the 1980's and beyond and , Mr. Speaker , I'm guaranteed it will be available. Mr.

Speaker, our administration will continue to aim for a balanced Budget, not necessarily on a rigid " every-year" basis , but certainly over a medium term period when economic conditions further improve. We believe a permanent Budget deficit would mean permanent disparities and permanent erosion o1' our economic strength and our ability to maintain services .

Perhaps the greatest challenge for our Administration and others in the 1980s will be to hold to this course of fiscal responsibility , and not be drawn towards the shoals of superficially-attractive, but costly short-term "Band-Aid " solutions, whose immediate impact may appear to be positive, but whost3 long term effect cou ld well be to undermine our recovery . Mr. Speaker, tonight 's Budget is an important part of our response to that challenge . Mr. Speaker , I want to look at 1978. Earlier I pointed out that almost every sector of the Manitoba economy experienced an upturn in 1978.

Most of the facts are already well known , and members will find an economic review with the full details included with the text of this Address when it's tabled at the end of it. For all Manitobans the 1978 highlights are as follows : A gross output of over $9.5 billion - an increase of about 10 percent over 1977; Real wowth of close to 3 percent, compared to almost no. growth at all the previous year ; Privat -e sector capital investment up 22 percent - three times the increase the year before , and the fastest growth of any province in Canada , Mr.

Speaker ; A 21 percent increase in the value of agricultural production - almost double the growth of the year before ; A 26 percent increase in Farm Cash Receipts , compared to no growth in 1977; Nearly a 17 percent increase in manufacturing shipments - four times the percentage in the last year our friends opposite were in government . Mr. Speaker, I think that's an important one ; the previous two have more to do with circumstances that are closer to the natural elements, the manufacturing

part is one that is very critical and very important to this Manitoba and has been throughout its history . A 29 percent increase in Housing starts , compared to under 1 percent in 1977, Mr. Speaker. Mr. Speaker, that's probably one that's almost worth repeating , although I readily admit that the now absent Member for Fort Rouge would probably be the only one over there that would be · responsive to something like that because he was consc ious of housing . A 9 . ~1 percent increase in retail trade , double the increase in the previous year .

And perhaps most encouraging of all was the strong rate of employment creation in the province . On average , there were 11,000 more jobs in 1978 than there were a year earl ier. The rate of increase was nearly four times that of 1977, and the private sector account ed for the entire increase, Mr. Speaker. Manufacturing employment alone increased by 5,000 and is approaching former levels followin!~ a serious drop-off , and statistics today , Mr. Speaker , will more than verify that because there has been another further increase .

While the average unemployment rate for the year was higher than in 1977, it remained well below the national average, and over the last several months , including April , for which figures were released today, the rate has been below 1977 levels on a seasonally-adjusted basis . The strong increase in employment last year was reflected in improved incomes .

Both total personal income and personal disposable income increased more quickly last year than in 1977, in each case by over 10 percen t according to our preliminary estimates and by more , according · to the latest estimates released by the Conference Board in canada . Of course , it 's important to emphasize that in the national context some of these year-over-year increases appear relatively modest when compared to those in some other provinces , and in certain sectors the growth rate was lower than a year earlier .

Tourism experienced its second slack year , and in mining the value of pro duction decreased from 1977 levels although revenues to the province recovered somewhat late in the last part of the fiscal year. The difficulties facing the world-wide mining industry were, of course , foreseen and well known, but that was no consolation in view of the importance of this key industry to our total economy . Fortunately , there are signs of an upswing in mining , and there have been a number of predictions that 1979 will be a year of renewed strength .

Later in my comments I will outline specific proposals designed to ensure that the tax laws of this province won 't undercut this projected impro vement. Mr. Speaker , before I deal more generally with prospects for the balance of the current year , 4296 • ,.

.,. .... Tuesday , May 15, 1979 I want to tou ch briefly on a matter that was raised earlier in this Session, the questio 1, of migr ation patte rns, both to and from our province . As has been stated a number of tim es, the net migrati on figures for 1978 were . larger than in the previous years, but not because of the greater than average outflow of Manit ob ans. The figures reflected reduced in-migration and the same phen omena occur red in the majority of other pro vinces , as well. While recent quart erly popu latio n esti mates from Stats.

Canada have indic ated a slight downturn , the same pattern has not been reflect ed in the populati on tota ls generate d from the reco rds of the Manito ba Healt h Services Commission, Mr. Spea ker, which we tend to take more seriously tha n Stat s. Canada . -(Inte rjecti ons)- MR. SPEAKER: I sugges t to all honoura ble members that we allow the Minister of Finance to carry on with his statement . MR. CRAIK: Thank you , Mr. Spea ker. Obviously , the general question of out-m igration is a concern for any government .

Manitoba is continu ing to lose too many of our well-trained young people , although possibly now more to the "hot" economies of our western prov incial neighbours th an to Ontario . But while the destinations may be changing, the general trend has been a fact of life in th is pro vince for far too long and , althoug h we believe our policies should reverse the trend gradually , we aren 't likely to see a dramatic change in the near futu re a nd are not predicting one.

I would remind the members opposi te that they had a n opportunity to help alte r th is longsta nding pattern but instead they imposed the most punitive , incentive-destroying tax system in this count ry and coled that wit h musings about "two and a half to one" , the "Big Brother " formula, Mr. Speaker. For the rema inder of 1979, the outlook f or the Man itoba economy and for the nat ional economy , as well , is somewhat mixed , and the curren t flood situat ion adds some uncertainty .

Even befo re the late spring the agricultural sector, by most of the prognosticato rs, h ad been expected to show less strength this year tha n it did last and now forecasts may have to be reviewed again. We also remain very concerned about the impact of national policies on our province. Mr. Speaker, I don 't blame the membe rs oppos ite as my colleague , the Minister of Highways, says, for not understanding the agricultural pictu re. But it is, after all, a fact of life when a large chunk of our productive land is still under water. They don 't realize that you 're farming for grain and not fishing for fish .

Unfortunately , relatively little federal-provincial economic and fiscal policy consultation has taken place in recent months because of the political situation nationally. Following what was widely recogn ized as an inadequate federal Budget last November and a relat ively unproductive National Conference on the Economy later the same month , another Budget was expected this spring, but it did not materialize and now there probab ly can 't be a new Budget until late summer or early fall. Obviously , this hiatus has played a large

part in the uncertainty now being expressed by most forecasters in Canada but that period should soon end , with the federal election. Despite clear commitments and a great deal of rhetoric, the federal government has failed to take effective steps to bring its spending under control and to reduce its def icit. There is little doubt that a significant portion of the inflationary pressures which are continuing in this country are attributable directly to its inability or unw illingness to implement effective financial management. The Report of the Royal Commission on Financial Manageme nt a nd Accountability, Mr.

Speaker, which has been surprisingly somewhat downplayed during th is period of the election when it could have been a matter of some relativity to the electors of this country , and the Lambert Comm ission Report made that very clear when it was released in March . For th ose in the House who may have read it, or may not have read it , I recommend it highly . Its concl usions and its proposals have relevance not only for the federal government but also the entire public sector . There are a great many passages , and I want to quote one, in particular , to you .

And I quote, and it says: " When we reject unemployment , as we all do, then we must ask ourselves unflinchingly , what is the cause of high unemployment? Quite simply and unequ ivocally it is caused by paying ourselves more than the value of what we produce . It is an absolute fact of life which no government, be it left or right , can alter. We used to think that you could just spend your way out of a recession and increase employment by cutting taxes and boost ing government spending. I tell you in all candour that that option no longer exists ... " -(Inter jection)- It no longer exists, Mr. Speaker .

" ... and that insofar as it ever did exist , it worked by injecting inflat ion into the economy . And each time that happened the average level of unemp loyment has risen, and each time we did this the twin evils of unemployment and infl ation have hit hardest those least able to stand them - our own people, the poor , the old and the sick." Mr. Speaker , that wasn't said by Mr. Lambert and it wasn 't said by Herbert Hoover or Jimmy Carter ; Mr. Speaker , that was said by the Prime Minister of Great Britain , James Callaghan , in 1976. -(Interjections)- Mr. Speeker, James Callaghan sensed ... Mr.

Speaker, despite the comments 4297

Tuesday, May 15, 1979 of the Minister of Health, James Callaghan wasn't recognized as an arch Conservative; James Callaghan, unfortunately , knew what was taking place , knew the lesson from experience, but, unfortunately, too late in his political life, and our friends opposite, it's also too late but it's never too late to learn, although it may be for members opposite like the Member for Brandon East, who have been insulated from practical economics for many years. Mr.

Sp,eaker, the decline in the Canadian dollar and the concurrent rise in interest rates over the past year reflected many of the fundamental problems outlined in the Lambert Report. While the dollar has moved upward somewhat in recent weeks , and while there has been speculation that the Bank of Canada may reduce its lending rate from its present record level, there is little doubt that both will have played an important

part in influencing the final statistics for 1979. The fall-off in the value of our dollar has provided one virtue out of the bad management of our economy over the past many years in Ottawa , and that is by helping our competitive position . On the other hand, the increase in cost of interest has acted to reduce or defer potential invest ment , particular ly, we believe , in provinces such as ours where small businesses predominate. And, of course, interest rates and the dollar have continued to fuel inflation and added cost pressures which could undermine the competitive gain to the last year or so.

We believe that the Federal Government has paid far too little attention , in both its fiscal and monetary policy decisions, to the differing regional and provincial effects such decisions can have. These concerns have been an important topic at the last two First Ministers ' Conferences on the economy and at the most recent Western Premiers ' Conference, Mr. Speaker, where it was agreed that steps should be taken to ensure regular provincial input to monetary policy formulation .

Meetings with the Governor of the Bank of Canada will be held in the near future to consider various options for improved consultation. The western provinces have also agreed to work more closely together in preparing overall development strategy proposals for consideration by the next Federal Government. Despite our concerns for the negative effects national policies can have on our economy , we acknowl43dge the willingness of the Government of Canada to provide financial assistance, on a cost-sharing basis, for some of our provincial initiatives here.

While our government has expressed the view that more flexible arrangements would be preferable in the DREE Agreements, we have entered into important new agreements with the Federal Government , in the fields of industrial development , agriculture and tourism . These agreements , coupled with the existing Northlands Agreement and related rural infrastructure programming , constitute a comprehensive set of initiatives designed to stimulate several of the most important sectors of our economy.

These programs are being administered through the reorganized and streamlined governmental structure , including the new Department of Economic Development , and through the Department of Finance , the Cabinet Committee on Federal-Provincial Financial Arrangements , and, ultimately, the new Economic Development Committee , Chaired by the First Minister. We also expect tangible economic gains from our current efforts to reduce regulatory burdens on the private sector .

This activity is still in its initial stages , and is being carried on in co-operation with the Federal Government and the other provinces , in conjunction with the special Economic Counci l review proposed, Mr. Speaker , by our own Premier at the First Ministers' Conference in February , 1978. While the process of reducing regulat ions , and even controlling their spread , is a difficult one , the potential benefits to the economy are immense, and this initiative is one to which we intend to devote increasing time and staff resources in the coming months . Mr.

Speaker , I would point out here that one province, within this time-frame since this was a major topic of discussion , has established a Department of De-Regulation , having recognized the important impact it has on citizens and on the economic structure of our country. Our overall outlook for the Manitoba economy for the balance of this year is for continuing moderate growth . Improvement should be reflected in several key sectors , including manufacturing . Mr. Speaker , that was reflected today in the employment statistics that were tabled .

And we are encouraged by forecasts which indicate that a reasonably strong rate of employment growth is likely to be sustained for the year as a whole . We recognize and have acknowledged that the substantially -reduced scale of capital expenditures for Hydro has had, and is having , some temporary dampening effect on the economy . But , with current overcapacity , the maintenance of earlier levels of activity simply could not be justified on any grounds, and as is well known , the previous government had made no effort to plan for an orderly phase-down of construction.

As a result , the increasing evidence of recovery in the private sector is extremely important. In these circumstances , we are firmly convinced that it 's appropriate , and, in fact, essential that our £JOvernment maintains the basic fiscal stance that we adopted last year. Now, Mr. Speaker, the year-end position - 1978/79 . Our last financial report for the 1978/79 fiscal year, the third quarter statement covering the period to the end of December, 1978, indicated 4298 .. . ....

.. : • .. • • .. Tuesday, May 15, 1979 a slight impro vement in the p rojected year- end positio n relative to earlier foreca sts. 1 am pleased to report tonight that the improvem ent has been signific antly great er than was anti cipated with three months to go before the end of the year.

Acc ordi ng to preliminary, unaudited figures from my department, figures which are not com pletely firm in some cases, but 1 know that will be basically on-t arget when the final facts come in, it appears that the deficit in the year just past, including expendit ures based on capital authority carrie d forward from prev ious y ear s, all inclu sive, Mr. Speaker, was approximately $83 million. This total is some $47 million lower than the $129 .8 million proje cted in the third quar ter financial statement. Even more significant , Mr.

Spea ker , it is $108 million less than the $191 million year-end deficit recorded in the 1977/78 fiscal year, even then brought unde r control by this government and budgeted by those fellows oppos ite. Mr. Spea ker, I shou ld correc t t hat , it wasn't budgeted , but it was, Mr. Spea ker, where they were headed . A reduction , Mr. Speaker , over that , over the $191 million by about 57 perce nt or more than half in a period of 12 mont hs. Mr.

Speaker , abo ut one-third of the improvement in the deficit in the last th ree months of the fiscal year, was attributable to reduced expendi ture growth , and abou t two-thi rds to improved revenues . Tota l expenditures for the year were some $17 million lowe r than projected at the end of the third quarter, while revenues increased by approximately $30 million, about $10 million of this imp rovement resulted from mining revenues received late in the year . Earlier estimates made it clear that Manitoba 's rate of spending growth in 1978/79 , would be the lowest of any senior government in Canada .

The year-end figures provide confirmation, Mr. Speaker . Mr. Speaker, I ver y clearly recall the statements from the members opposite , that it was in fact impossible , it wasn 't true , it was an understatement of expenditure growth last year. I want to say that with these year-end results , these prel iminar y year-end results, that with those results in place, 1978/79 as compared to 1978 showed zero growth , i n terms of expenditures by this governmen t. Mr. Speaker, . zero-government expenditure growth , Mr.

Speaker , and that included the fact of very substantial reduct ions in taxes to the people of Manitoba . Very substantial reductions in taxes , Mr. Speaker, in that same year , to the people of Manitoba . Mr. Speaker , the preliminary unaudited statement, the quarterly statement that I referred to, should probably be available in about a month's time or so, and that , I'm sure will verify the figures I have given you here tonight. I can advise members that the 1978 -79 figures include approximately $19 million in expenditures based on capital authority carried forward from previous fiscal years .

Last year at this time it was suggested , not only suggested but debated at great length and with great fury, that these expenditures would increase the def icit estimated in the Budget, Mr. Speaker. I don't think anybody can forget those debates, Mr. Speaker , there were suggestions that they didn't think it was quite honest. Mr. Speaker, there was another suggest ion that went further and he said, he's a liar. There was another suggestion that he's a bald-faced liar. I don 't know the difference between a liar and a bald- faced liar , Mr.

Speaker , but that was the statemen ts by the members oppos ite with regard to the prjected figures from last year . Mr. Speaker , I should point out too , that none of those were ever retracted, and I don 't think they ever will be, Mr. Speaker, because that 's the breed of cat we're dealing with now in this Legislature . As I indicated some weeks ago, when tabling the Main Estimates, Mr. Speaker, the 1979-80 figures represent in effect, a zero-base approach insofar as capital authority is concerned.

Authority needed this year has to be voted ·this year , another innovat ion designed to enhance accountability , Mr. Speaker, and we will get it down to the point where we know exactly what is being voted every year and we'll know exactly what is being spent ever year, and that will be a new change for this prov ince, Mr. Speaker. I can recall , Mr. Speaker , six, seven years ago , sitting on that side of the House and in pressing the Min ister of Finance at that time and asking what was in

Schedule 8 Capital, I found out there were gestetners in it. Mr. Speaker, gestetner mach ines are not capital in my book, they 're not capital in anybody's book that has an ounce of responsibility in accountability . Mr. Speaker, that day is over . Gestetner machines will not now be in capital , gravel piles will not now be in capital, they will all be in expenditures that the people of Manitoba will know they 're expending for current purposes, even though they 're in that grey zone, or maybe in that grey zone between current and capita L Those days are over. MR. LYON: No more slippery bookkeeping . MR.

CRAIK: Mr. Speaker, the Main Expenditure Estimates for this year which were tabled earlier in this Session , showed an increase of 5.56 percent over the Estimates of 1978-79 . Mr. Speaker, 4299

Tuesday, May 15, 1979 dependin!~ on the flood costs and other factors - and I point out here that the flood costs for this year are gross figures , they will show as an expenditure although there will be a significant recovery from the federal government for those expenditures , will show as an expenditure and therefore will be a factor in showing what the percen tage increase is this year over last year . The increase in actual spending between the two years could be somewhat higher than this percentage , and mainly for that reason .

The 1979-80 Main Estimates did not, of course , include provision for supplementary Estimates and special warrants or for lapsing . I note that the federal government , in its Estimates , provides some allowance for both factors in establishing its annual targets . While we're not in a habit of looking to them for account ing or financial management advice, it may well be a practice which warrants consideration for adoption in Manitoba at some time in the future. Mr.

Speaker, I say that because we're now on the basis of combined accounts and we have no more of this nonsense of the capital carry forward that we had in prev ious years . So Mr. Speaker, although I said last year that the lapsing would very likely offset the capital carry forward , which it more than did, Mr. Speaker - we don 't have capital carry forward now, I expect that the lapsing factor , which the federa l people have now integrated into their budgets, ought to be something that ought to be shown in the budgets in general from now on .

However , it's only a matter of presentation , in the fina l wash it all comes out at the end of the year . Generally, I think it 's fair to say that the federal government could learn a great deal from looking at the systems that we've adopted.

First of all, and I point to the operation of our treasury board system , which is now fully operational, that has now set aside the former operations of the former governme nt in that there are dozens of people that sat on their management committee and there are dozens more that sat on their planning and priorities committee that were somewhat integrated, that we have the treasury board system fully oper ational.

It is small in number, the responsibility has essentially, in the management and planning area, been vested in the departments , it is working exceedingly well , the Ministers have assumed their responsibilities in this regard, and the accountability emanates through the departments , primarily for the planning and primarily for the management , and Mr. Speaker , I can suggest to you that that is a very major change in the operation of this government compared to the last governmen t.

Important new accounting and other financial management procedures are being introduced in amendments to The Financial Administration Act now before the House , many of which are in line with the Lambert Royal Commission Report. Our stepped -up financial reporting system is working well and providing the people of Manitoba with far more complete and timely information on our budgetary positio n than has ever been available before in this province . Mr. Speaker , we feel that these measures are essential steps toward our basic objective of greate r responsibility and accountability .

Their effectiveness is already evident in the Estimates which are now before the House , and in the year-end figures for 1978-79 which I outlined earlier . In an Appendix to this Address , members will find some interest ing tab les showing the trend in government expenditures in this province in recent years . I think that they will show what can be achieved , Mr. Speaker , by a responsible government , and in a short period of only 18 months.

Last year, all eleven senior governments in Canada made a formal commitment to hold expenditure growth rates at levels lower than the rate of growth of the GNP, or the GPP, the Gross Provincial Product , to reduce the public sector 's demands on the economy and to leave more room for expansion of the productive sector, private sector . And in Man itoba , it's clear that this commitme nt is being met. In fact , and I think that this is probably one of the most important indicators that statistics will give you, because they 're after the fact statistics and not the ones that mislead some members of this House .

In fact , we've been able to reduce the provincial government's share of the total output of our economy by a full 1.7 percentage points , from a record high of 18.9 percent of the GPP in 1977, to 17.2 in 1978 . Mr. Speaker , the mem bers opposite would not apprec iate that , although I know that Mr. Calahan , having been through the mill, would . Having said this , I want to re-emphasize that the ultimate purpose in holding down this overall expenditure growth, is not to restrict essential services , it 's to help build and maintain the economic base , which on a lasting basis , will make the services possible .

The fact is that priority programs in the key fields of health , education and economic development are all being provided with increasing tax support , in many cases at a rate faster than the average growth rat1~ of total provincial expenditures . For example, despite all the loose talk about cutbacks in health spending , there has, in fact , been an increase of $47.3 million in the Estimates of the Department of Health and Community Services this year . Mr. Speaker, one side comment.

I noted a premeditated , paid political announcement on the radio as 1 came to work this morning , by the current federal government , the Liberal Party , which 4300 ... ...

.. .. • ,. .. ' Tuesday, May 15, 1979 said that problems at the University of Manitoba are caused by the fact that the Governm ent of Manitoba are not passing on the fund s, Mr. Speaker, not passing on the funds being con trib uted by the federal gove rnm ent. I th ink this is one of the most blatan t misstatements of fact , the most shameful misstatement of fact that any political part y has ever attempted to create . Mr. Speaker, it is such nonsense it is hardly worth commenti ng on but it's a fact of life. It is stated as a premed itated , paid politi cal annou ncement . It shows you the desperate state , .Mr.

Speake r, that the current government in Ottawa is in when, in spit e of the fact that they are the incumbent government, they have to resort to that kind of nonsense . It's a blatant misstatement of fact by what has generally been considered a responsible government, otherwise they wouldn 't be government. But if that's the depths of their irresponsibility, they are a short-lived government. Mr.

Speaker , at the time of course that I referred to, it is necessary to remember that the Main Estimates also provided for an increase of approximately $20 million in public debt charges for 1979-80, an increase which resulted in part from foreign currency exchange rate fluctuat ions and in part from the deficits of previous years . Inevitably an increase of this magnitude and prospects of further increases in the future must limit flexibility and necessitates the most rigorous possible evaluation of priorities and program options. Mr.

Speaker , I don't have to remind the members of the House that those obligations , the $20 million obligations, are statutory and are not at the discretion of this House in terms of a vote . Mr. Spekaer, I now want to deal with the Supplementary Estimates for 1979-80. Later this year, our government will be presenting a White Paper containing proposals for improving and rationalizing tax relief programs and in a broader way, other income support programs which are either in effect or under consideration .

Our object ive in presenting this White Paper is to permit the proposals to be exposed to wide-ranging review and evaluation and to ensure that comments and suggestions can be received from specific groups, as well as from the general public. The government is considering the poss ibility of convening a special session of the Legislature this fall to enable members to discuss and debate the White Paper proposals and to consider follow-up legislation, where appropr iate, along with Supplementary Supply if required. Mr.

Speaker, for this reason we are advising local governments that there will be no change in property tax assistance measures this summer. Homeowners will continue to be eligible for up to $225 in rebates on their property tax bills for 1979 and those homeowners who are pensioners will be entitled to claim up to an extra $100 to offset school taxes in excess of $375 for the year.

At the conclusion o.f my address tonight, I will be tabling Supplementary Estimates providing for an amount of $1,650,000 to cover the cost of maintaining the Manitoba Supplement for the Elderly on its current basis for the balance of the year, if need be. Mr. Speaker, last week the House approved separate Supplementary Estimates to provide for an additiona l $5 million for expenditures related to the current flood emergency, bringing to $5.3 million the authority available to cover flood-related costs.

A partially-offsetting revenue addition of approximately $2.5 million from the federal government is also being assumed and this will be shown in the Revenue Estimates. The $5.3 million total is, of course, provisional at best. It is intended to cover immediate costs; we recognize fully that it will almost certainly have to be augmented later.

With respect to the flood emergency itself, I want to state that our government has been pleased with the assistance we have received from the federal authorities, the cooperation of the municipal governments has also been excellent , and the attitude and support of all Members of this Legislature has been commendable .

Tribute should also be paid in a formal way to the former Premier of our province, the Honourable Duff Roblin, for his foresight and determination in proceeding with the Winnipeg Floodway, the Portage Diversion, the Shellmouth Dam, and the dyking systems protecting communities in the Red River Valley. The correctness, Mr. Speaker, of those decisions is now accepted and indeed acclaimed universally, as it should be. MR. LYON: Not universally. MR. CRAIK: Well, a little bit' across the way.

Over the years they have prevented hundreds of millions of dollars in damages and the net benefit' the impact o.n the provincial economy , would be difficult, if not impossible, to calculate. Most important of all, the citizens of our province, individuals and families, old and young, have demonstrated to themselves and to other Canadians that the traditional values of self-reliance, cooperation, community spirit and hard work together to preserve and protect homes, farms and businesses, are still alive and well in our province. Mr.

Speaker , we have one problem, if I recall the Fifties and it has been pointed out to me by some of the people who were here in the 1950's 4301

Tuesday, May 15, 1979 and after, including myself, that it did take us about two years to overcome the image of being still under water. Mr. Speaker , that is a pretty significant and important factor that is hard to put a measure on in terms of our abili ty to maintain our important position in Manitoba in terms of attracting the type and the extent of industrial development tllat we want in this province. Mr.

SpHaker, I am certain that I speak for every member in this House in saying that in total tonight, in terms of the total flood effort, we all feel somewhat privileged to be able to represent those people who have pitched in on their own and done so much in this effort. Mr. Speaker , I will be tabling Revenue Estimates for this year , 1979-80, totalling $1,689,600,700.00 . I am pleased to announce that these Estimates include no provision for any increase in provincial taxes this year. Mr .

Speaker , they allow for some selective direct reductions and for a major indirect reduction as well as for an extension of the permanent tax cuts announced when we took office and in our first Budget. Last year we estimated that the net saving from these tax reductions , including the temporary retail sales tax cuts , which was financed partly by the federal government, was approximately $83 million or about $83.00 for every Manitoban .

In 1979/80, these changes, including: The 2 point reduction in the Personal Income Tax Rate; The expiry of the Personal Surtax at the end of 1978; The reduction of the Corpora tion Income Tax Rate and the increased Corporate Capital Tax Exemption for small businesses; The elimination of Succession Duties and Gift Taxes , and Other changes , including elimination of "N uisance " Taxes; will save Manitobans $31 million on a net basis this year. For 1979/80 , we propose to supplement these reductions with additional relief measures . First of all, Mr.

Speaker , I am pleased to announce a number of selective Sales Tax reductions , effective at midnight tonight. First - The exemption level for restaurant meals will be raised from $2.99 to $4.00; Second - for farmers , tax will no longer be applicable to purchases of tractor-mounted snowblowers for farm use, or to granaries, other than for multipurpose buildings ; Mr. Spe1aker, I would recall , Mr. Speaker, that the granaries exemption applied to 1969 and was reimposed by the former government who felt they had to get at this major form of revenue for the province of Manitoba .

Third -- the exemption for used clothing and used furniture will be raised from $25 to $100, and for used footwear from $5 to $20; Fourth ·- a full exemption will be provided for purchases of sandbags for flood control purposes which I'll note later ; Fifth purchases of firefighting equipment by municipalities and Indian Bands will be exempt; Sixth the exemption for safety equipment will be extended to purchases by employers as well as employees ; and Finally -- Mr.

Speaker , after eight long years, after having introduced a Resolution into this House and having it accepted unanimous ly in this House , but when I was on the opposite side of the House and accepted by a government that didn't have the intestinal fortitude to bring it in, or never could answer why they didn 't, the exemption for children's clothing will be extended to cover all clothing and footwear purchased for children up to and including age 14.

The present general size exemption will contin ue unchanged, while purchasers of larger-sized clothing and footwear will be able to take advantage of the extended exemption by completing a simple age declaration . Mr. Speaker, what the people who have families , and there are a lot of people who have families oddly enough in this province , have wanted since hhis was brought in. Mr. Speaker , the estimated revenue loss from the ex-terrt·ion of the children's clothing exemption is around $1 million this year , while the restaurant meal exemption increase is expected to reduce revenues by $800,000 annually .

The rem aining Sales Tax changes are expected to cost about $250,000 a year . In addition , we propose to refund , by Order-in -Council , any Sales Tax which may already have been paid on the sandbags for flood-fighting purposes this Spring - an anomaly, Mr. Speaker, which we only became aware of and, Mr. Speaker, which more importantly never should have existed. With regards , Mr. Speaker , -(lnterjections)- MR. SPEAI<ER: Order please , order please . I realize that many members want to take

part in the debate but could we have one speaker at a time please? The Honourable Minister of Finance. MR. CRAll<:: Mr. Speake r, members opposite had 8 years to make these changes and didn 't make 4302 ...

.. • Tuesday, May 15, 1979 one. They i ncre ased them r ather than lessened them. Mr. Spea ker, the Motive Fuel Taxation, to lessen paperwork and red-tape, we also p ropose to permit road builders and othe r users of motive fuel for off-hi ghway equipment to p urchase coloured fuel for t hose p urposes at the reduced tax rat e of 2.2 c ents per litr e. This measure will elimina te the p resent pract ice of having those persons originally pay the full rate of t ax, and t hen apply for partial refunds. That change, Mr.

Speaker , will take effect July 1 thi s year , and should be of partic ular assistance in the construc tion indust ry. We also announce , Mr. Speaker, by separate way of Order- inCouncil , apar t from the Budget address, that wooden concrete forms in the construction indus try were also being exempted from the tax but is similar in nature to th is type of change . We don 't expect revenues to be affected by that particu lar dereg ulation measure . Mr. Speaker , i n the field of Resource Taxati on, I think that th is is one of the more critical and important measures that I want to discuss with you .

During the last election campaign , our Party made a commitment to respond to concerns expreseed by northern residents and by the mining industry about the detrimental impac t of mining exploration and developmen t in Manitoba , and of the incremental roya lty rates implemented by the prev ious administrat ion in 1975 - and to concerns about the subsequent diminut ion in the con tribut ion whic h the mining industry is capable of making to employment opportun ities and incomes in this Prov ince. Since tak ing off ice, our government has carried out a complete review of the metallic minerals royalty legislation .

We have also participated in a joint federal-provi ncial study of the entire structure of resource taxes and royalties in Canada . Both our internal review and the Federal-provinc ial study confirmed that the general tax and royalty levels facing the mining industry more than doubled between 1971 and 1975 - and , that The Manitoba -(Interject ion)- Mr.

Speaker, I have to remind the agreeable people across the way that it's roya lty levels not revenues - and that The Manitoba Meta llic Royalty Regime, in combination with national Income Tax changes sinc e 1971, resulted in the industry in this province facing potential total taxatio n and royalty burdens which are higher than anywhere else in Canada.

Our concern was aggravated furthe r by the fact that these increases in taxation were accompanied by: First of all - an increase in the proportion of mineral investments by Canadian-based firms in mineral exporting countries with which Canada competes; Second ly - declines in Canadian exploration ' research and development expenditures in the mining industry, and ; An average decline in employment in min ing, smelting , and refining of 0.6 percent over the 1971-1977 period, compared with the average annual growth rate of 1.6 percent over the preceding decade. Mr.

Speake r, while taxation was not the only factor accounting for these declines, it was, in our view, a major contributor. Mr.

Speaker , along with the Minister of Mines and Natural Resources I had an opportunity and he had an opportunity to attend the conference that dealt with this at some extent in Ottawa in December of 1978, and one of the major factors that came home to register at that conference was that the Canadian industry where it once held a world-wide reputation of being a leader in hard-rock mining , had very rapidly , not only was it loosing but had lost the lead , and in the view of those assembled, it was primarily due to the attitudes of the government and the intransigence of the var ious governments to make any moves to relieve the industry from what was amount ing to a tax on success of about 75 cents of each add itional dollar earned by the industry , which would accrue to the pub lic sector, Mr.

Speaker , whic h i s fine except that it was killing the industry and the research capacity and the technology capacity which it possessed over the lifetime of that industry , which was born and raised in Canada , was lost. In light of all these factors and in order to restore the Manitoba system to a competitive posit ion in Canada , my colleague , the Min ister of Mines, Resources and the Environment will shortly be introduc ing legislation to reform the meta llic minerals royalty legislation .

In addition to propos ing a series of housekeeping and non-royalty measures , the bill will provide for major reforms in the incremental royalty system , reforms geared towards assuring a realistic royalty system, fair to the industry and .people of our province , a system which encourages development in Manitoba instead of inhibiting it. One of the most impor tant changes to be proposed is the replacement of the present incremental royalty rates of 15 percent and 35 percent with a single rate of 18 percent.

This change will reduce the max imum potential income taxation and resource charges facing the industry from about 73 percen t under the p resent system to around 56 percent , Mr. Speaker , still a fairly high tax rate 4303

Tuesday, May 15, 1979 in comparison to the tax rate paid by normal industries.

There are several reasons for implementing a single rate system: One was the high marginal tax rates such as occurred under the incremental rates system, identified as a very serious impediment to new mining development; Dual rate systems discriminate against companies with fluctuating incomes; High marginal tax rates have led to the perception of Canada as a high-tax country and, as noted earliElr, have resulted in reduced investment from abroad as well as from domestic sources; and Quite simply, dual rate systems of the type in effect in this province are overly and unnecessarily bureaucratic. Mr.

Speaker, the reform legislation will also include a major incentive for investment in new facilities, or expansion and improvement of existing facilities. Specifically, it is proposed that companies be eligible for an investment credit equal to 5 percent of such new investments, provided that the credit does not reduce royalties otherwise payable by more than one-half . In our view , this type of incentive affords maximum protection for provincial royalty revenues, while at the same time providing the industry with significant encouragement to undertake new activity in Manitoba.

Improvements will be proposed as well for the existing exploration deduction and the processing allowance. This latter change will provide a better environment for attracting secondary processing activity in our province, Mr. Speaker, and I would say that this has been the objective of any government over the years, to attract further processing in the mining industry . In addition, to assist small quarry operators and to eliminate overlaping and duplicative administration, and in cases, double taxation, we also propose to terminate the taxation of of industrial minerals under The Mining Royalty and Tax Act.

As well, in line with the changes to Crown oil royalties implemented on January 1 of this year, changes in The Mineral Taxation Act will be proposed to equate returns from production on freehold land with the returns from Crown lands and provide similar incentives for increased exploration efforts. Members will be interested to note that our Revenue Estimates contain an estimate of $15 million for the metallic minerals tax in 1979-80 , and this is an increase of $12 million over the $3 million originally estimated for last year. Mr.

Speaker, as I noted earlier, this substantial and important increase reflects the improving health of the mining sector . We are confident that, provided with a public policy environment which recognizes the huge risks involved in resource investment, the mining industry will once again expand in the better competitive atmosphere in our province and increase its contribution to overall development.

Our government has also reviewed the tax situation facing individual freehold owners of oil rights in Manitoba and has concluded that the federal government's income tax resource allowance of 25 percent provides insufficient recognition of the actual provincial oil charges paid by these individual Manitobans. As a result , these people find themselves paying income tax on money they did not receive. To alleviate this double taxation, which would otherwise persist, our government intends to rebate to these individuals any net increase in Manitoba persona l income taxes - personal income taxes, Mr.

Speaker - payable after both non-deductibility and the resource allowance are taken into account. This measure, which is expected to cost under $50,000 annually, will be effective for 1979 and subsequent taxation years. I might add that this measure parallels a rebate plan which was in effect for the 1975 tax year ' Mr. Speaker , but was then , for some strange reason, removed . Now, in

summary of the tax reductions , the tax cuts our government has implemented within the last 18 months, coupled with those announced tonight , represent the first full step towards . restitution of a competitive tax system in this province. We have now introduced important reductions in personal taxes , both income and sales, in business taxes, in resource taxes , and in nuisance taxes and others which were impeding initiative , investment , and growth in Manitoba , or that are extremely important , Mr. Speaker , to the ordinary taxpayers of Manitoba.

But a great deal more remains to be done before we can point to a tax system which provides both equity within Manitoba and equity between taxpayers in this province and those elsewhere in Manitoba. While we would have liked to provide further reductions this year , we were constrained by a number of factors, including of course our objective of gradually reducing the deficit and reductions in certain federal transfers. We have also made an important commitment in another field, which I will discuss shortly, affecting all taxpayers in Manitoba.

We calculate that the changes in federal transfers announced by the Government of Manitoba 4304 ·- ·~

Tuesday, May 15, 1979 last fall as part of its so-called restraint exercise, reduced our potential revenue in 1979-80 by about $31 million . The overall growth in federal transfers in 1979-80 is now estimated to be about the same as the overall rate of increase in our revenues. 1 want to emphasize this fact to those who have argued that because one com ponent of these transfers, the cash porti on of the established programs financing arrangements, EPF, has grown quite quickly, the government should blindly try to match that rate of growth in

part icular program areas with additional tax dollars without regard for the rate of growth of other feaeral payments and without regard for our overall budget and the bottom line. To have followed that kind of misguided advice, advice apparently based on a complete misreading of the financing arrangements involved, would almost certainly have had adverse consequences for our deficit, for our ability to hold down taxes, and for other, Mr. Speaker, and I point out, other essential government programs . In

summary, the Supplementary Estimatessfor floodrelated costs and extension of the Supplement for the Elderly will raise estimated expenditures tabled now by $6.7 million to a total of $1,780,863,100, with total revenues estimated at $1,689,600,700.00. The resulting budgetary deficit on this basis would mmount to $91.3 million. Further on in my Address I will be announcing another major initiative which will increase this amount significantly.

Although the $91.3 million estimate is higher than the preliminary year-end figure of $83 million for 1978-79, it is some $59.2 million, or 39 percent lower than the combined $120.1 million deficit Estimate for last year, plus the $30.4 million capital carryforward. 1 might add as well that on the old current account basis, Mr. Speaker, the Budget is now balanced. 1 make that point emphatically only for the members opposite who adhere very adroitly to that antiquated idea that you can fool the people all the time. As a matter of fact, Mr.

Speaker, on the old basis of accounting we would have generated a very small surplus in 1978-79. However, as we have said many times, in our view and also, Mr. Speaker, I might add the view of the Provincial Auditor - in our view and in the view of the Provincial Auditor - that the distinctions which used to be made between current and budgetary capital were artificial, meaningless, and I commented on those earlier. They created a false impression and obscured the substantial real deficit being incurred for "dead-weight" capital expenditures. Our government's objective , Mr.

Speaker, as I said earlier, is to work towards eradication of the combined current and capital deficit as and when the economic conditions permit. A balanced budget on a combined basis, and even a modest surplus, to provide flexibility for special initiatives and to reduce our det?t load is not an unrealistic possibility and it remains as our objective and that of all reasonable governments. Although strict balance may well be inappropriate on a continuing, year-after-year basis, it's essential over the medium term to ensure confidence, to protect our economic base, Mr.

Speaker, and to maintain the programs and services which we are responsible for providing to the people of this province, and Mr. Speaker, also and more inportantly, to not underrate the capability of the people of Manitoba. Regards capital financing, in recent weeks a number of questions have been raised with respect to the policy of the Provincial Government relative to offshore borrowing. While our policy is straightforward, a great deal of misinformation has arisen to obscure it, so I'd now like to outline the basic guidelines for the record.

When interest rates are favourable, our first preference is to borrow on the Canadian market. Our second preference is the United States, and we will borrow outside of North America only when Canadian and U.S. rates are prohibitive , and when we borrow offshore, Mr. Speaker, it will be on an estimated effective rate . During consideration of Finance Estimates in Committee of Supply, I indicated that changes in exchange rates had meant a dramatic increase in the potential costs of repayment of our fore ign debt obligations .

While the figures have improved slightly in recent weeks, they still represent an enormous additional burden for Manitoba residents on top of one of the highest per capita debt totals in the country. In keeping with our commitment to financial accountability, new accounting procedures will ensure that the people of this province will have accurate and up-to-date information on the extent of this added liability.

I might add, at this point, that the budgetary capital totals included in the Estimates do not reflect the full capital spending programs for both Health and Public School facilities, since the Boards involved borrow on a long-term basis and are reimbursed by the province for annual financing costs through the Manitoba Health Services Commission and the Public Schools Finance Board. Mr. Speaker, I will basically say that for comparison purposes the

Schedule A borrowing procedure is still identical to the pattern it has always been. The Health Capital Program provides for about $26 million to be spent this year for such projects as additional personal care home beds and completion expenditures for the Seven Oaks Hospital, as well as the new Cadham Provincial 4305

Tuesday, May 15, 1979 and the Cancer Treatment and Research Foundation. For public schools, planned capital expenditur ·es will amount to around $24.7 million. Mr. Speaker, 1 can't resist the opportunity to say here that while we're being accused by an irresponsible Federal Government in a predetermined paid political announcement of saying we're not passing on the money to the university, but keeping 1t, m1ght I ask, Mr. Spea ker, has anybody asked them, what are they spending in capital in this province this year? What has been built in this province since the Mint was built?

What happened to the Computer Centre? What happened to all of the great announcements? What happened to the Air Canada Centre, besides an empty building at the Airport? Let me really ask you, Mr. Speaker, if capital ~~xpenditures are a concern at this point , has anybody thought to ask the Federal Government , midstream of an election campaign, what they're doing? Mr. Speaker, the answer would be embarrassing, but it's a very appropriate question because let's now turn and ask about the facts of lift~.

Somehow we seem to have gotten this question around as to what the Provincial Government is spendin~l . and the Provinc ial Government, Mr. Speaker , I can tell you, is doing its

part in spades with regard to capital investment in this province . Mr. Speaker , at the conclusion I'll table

Schedule A capital authority requir ements for the Crown Agencies and this will total $205 million . This total represents a decrease of $87.4 million, or 30 percent from the author ity requested last year. As usual, the largest requirement is for Manitoba Hydro. It is some $118.7 million, compared to $205 .6 million for 1978-79. The request of Manitoba Telephone System is $35.3 million, down $11.7 million from the amount authorized for last year. In total , we estimate our combined budgetary and non-budgetary borrowing requirements at approximately $350 million.

Off-market sources such as the Canada Pension Plan will provide about $100 million of this amount , and the remainder, about $250 million, will be obtained from public market sources . Mr. Spe·aker, I now want to deal with what I think is the most important initiative of this Budget , and that is the matter of energy cost in Manitoba and, more specifically , with the stabilization of electrical energy rates. Hydro Electric Power in Manitoba is one of this province's greatest heritages.

Unlike the exhaust ible· fossil fuels , which are now producing great wealth in our two neighboring western provinces , llhe Prairie Provinces , our Hydro Resource is renewabl e, and even though we can't expect that resource to provide revenue on a scale comparable to those of oil and gas in other provinces, we should, with good management , be able to expect substantial benefits from that resource, and that should include, first of all, the provision of below-average electrical costs for Manitobans, and secondly, the potential benefits of revenue earnings from exports , which can accrue to our population and, of course, from the industrial development that comes from use in Manitoba .

Since the day this government came to office some eighteen months ago, we have pursued an aggressive role directed to building a more secure and more rational position for development of our Hydro resource . We hav~~ . first of all, initiated a study of a Western Power Grid, a potential hook-up in Western Canada which , if proven feasible, as we believe it can be, would allow the logical interconnection of electric utilities to integrate at least partially, and to optimize the consumptio n of renewable and non-renewable resources for the economic benefit of all provinces and regions involved. Mr.

Speaker, -(Interjection)- let the record show that from his seat the Member for Brandon East says, "Pie in the Sky." Mr. Speaker, that's a test of the visionary capabilities of that proclaimed economic prognosticator that habits these hallways. Mr. Speaker, apart from that -(Interjection)- MR. SPEA~CER: Order please. Once again, may I remind all members they will have an opportunity to take pal't in debate at a later date. The Honourable Minister of Finance . MR. CRAll<:: Mr.

Speaker, I really like the interjections from the members opposite, particularly because it demonstrates the lack of any planning or foresight that they really have. I couldn't think ~ why they would react negatively to such a proposition, Mr. Speaker , because it's not only in the best interests of this country, it's not only in the best interests of Manitoba, it also serves the conservation ethic , Mr. Speaker, which is at the root of everything we do if we look far enough down the pipe , but economists, Mr. Speaker, sometimes don't see very far. Secondly, Mr.

Speaker , we've pushed ahead to examine more fully and completely the various options for interconnections with our southern neighbors in the United States, with the objective of achievin!~ the diversity of North-South exchanges , and also the possibility of firm power export contracts for a limited period of time until we're likely to require the power for our own purposes in Manitoba and Canada . This would enable us to emba rk, on a sound footing , to harness more of our renewable water resources and advance the construction of the Hydro plants . 4306 ...

... .. Tuesday, May 15, 1979 Mr.

Speaker, 1 have to tell you at this point I can't help but recall a Public Utilities Committ ee meeting in 1970, when the Member for Lakeside and I sat in oppos ition and posed a question to the then Chairman of the Manitoba Hydro and said, why aren 't you pushing for intercon nections to the United States, and he says, "Because the power isn't worth more than half a mill per kilowatt hour and it's not worthwhile." Without passing further comment on thi s, but saying that this is the kind of planning and strategy that dominated the people opposite, I want to tell . you that we have undertaken a very active program on the Western Power Grid and in the North-South ties, and we think that this dual approach pursuit is a pretty basic strategy, and we're convinced that the prospects for success are good, but the examination and negotiations are, by their basic nature, both complex and time consuming.

We've established a negotiating committee, comprised of Manitoba Hydro, Provincial Government , and external professional people headed by legal counsel, to carry out the U.S. portion of the negotiations . This committee , formally referred to as the Extra-Provincial Negotiating Committee, provides the Utility with external backup in negotiations, advises government through the Minister of Finance, and coordinates the preparation of Letters of Intent and agreements that the government may wish to consider with utilities and other agencies in the United States, because basically, Mr.

Speaker, that part remains a government responsibility. The ultimate objective is, of course, to secure, Mr. Speaker, within the framework of a rational Canadian energy policy , the protection of the Canadian public interest and the maximum financial benefits to the citizens of Manitoba . With this background, I'd like to now outline important positive steps that we intend to take to provide benefits directly to the ratepayers and to enhance the base for further economic expansion in our province. Manitoba Hydro has requested and received a number of rate increases over the past few years.

The first general rate increase in the history of Hydro was put into effect in July, 1968. Since that time the following general rate increases have taken place - Mr. that was when the 10 percent disSpeaker, I think count for prompt payment was deleted.

Since that time the following general rate increases have taken place: Effective April 1, 1974, rates increased by an average of 20.6 percent; April 15, 1975, rates increased by an average of 19.2 percent; April 1, 1976, rates increased by an average of 19.8 percent; March 17, 1977, rates increased by an average of 15.0 percent; February 1, 1978, rates increased by an average of 14.9 percent; and February 1, 1979, r~tes increased by an average of 14.5 percent . On a compound basis , these increases total in excess of a staggering 150 percent in a five-year period, Mr.

Speaker - a rate which applied to a basic and essential utility, and impacting on just about every individual and household in the province, is clearly unacceptable. The i'ncreases were brought about primarily by development strategies initiated by the previous administration, resulting in a magnitude of capital investment that has now, as predicted, established a debt burden which exceeds the traditional rate base's ability to service . Nearly one-half of the rate-payer's Hydro bill now goes toward paying the interest on the debt of that Capital investment.

The size of the debt, and the manner in which is it was increased on component projects, has been one of the principal subjects of the Commission of Enquiry on Hydro. To add insult to injury, the ratepayer has had to bear the brunt of the debt service costs having to be paid mostly in foreign currencies. This has caused a further burden recently because of the weakness of the Canadian dollar in relation to the U.S. dollar, the Swiss franc, the Japanese yen and the German mark, currencies in which the bulk of Hydro's debt must be repaid.

When these foreign debts were taken on by Manitoba Hydro or, more accurately, Mr. Speaker, were given to Hydro by the Manitoba government, since the province in all cases negotiated the loans, the interest rates looked attractive but now there will be a very substantial negative impact when the debt becomes due, if the relative strengths of the currencies do not improve drastically in our favour . And although the total debt repayment is spread over a period of years, the first of the loans must be faced within months.

To illustrate this point more clearly, if the present value of the Canadian dollar were not to change in relation to other currencies from now until the end of all loan repayments, the Utility would have to pay back, on the capital portion alone, about $350 million dollars more than it had borrowed, to say nothing of the increased cost of interest, Mr. Speaker, because that goes on. The first of these repayments could occur in June of 1979 in respect of 100 million Swiss 1975, it converted to franc loan.

When the loan was made in $40.8 million Canadian , but now the repayment of the loan will require $68.4 million Canadian. Mr. Speaker, I have heard the Member for St. Johns call this laughable. I have never known a loan . .. When I had to pay off my second mortgage, Mr. Speaker, on my house, I didn't laugh at all; I just paid it. 4307

Tuesday, May 15, 1979 The $27.6 million loss must normally be assumed as an expense by the Utility and could have a further direct impact on Hydro rates . And although the currencies may shift back in the future in our favour, they may just as easily go the other direction, depending on changes that take place in world economies, so that foreign debt will likely continue to have a significant effect on the Utility , and that offect should be recognized and dealt with. Mr. Sp1~aker , we seem to be developing the air across the way here , that it's all off in the future.

I remind you that the first one could be in June of this year. The Task Force on Government Organization and Economy recommended that the Provincial Treasury lemd to its utilities in Canad ian dollars at prevailing Canadian rates and that the government, not the utilities , take all risks in foreign borrowings . We agree with that recommendation and it's our intention to take tha t action in the case of Manitoba Hydro, which has the greatest exposure to currency shifts . This action will no doubt be costly to the Teasury in the short-run. The long-term impact will depend on future currency fluctuations.

Taking into account all these considerations, which are The encouraging progress of extra-provincial negotations and export sales; The need to stabilize costs of financial planning in the electric utility ; The rescheduling and trimming down of Capital costs of Hydro development ; The recommendations of the Task Force; and , most importantly, The urgency of protec ting the ratepayers and of building a solid base for growth and opportunity in Man itoba , We have arrived at what I think is one of the government's most significant undertakings and redirections in relation to its largest public utility. a five-yea r fixed Mr.

Sp1~aker , it's our intention to guarantee power rate for all Manitoba consumers, other than bulk purc hasers and those on other separate contracts . The rates, Mr. Speak er, therefore will stay as they are in 1979 for five fiscal years, including this one. The government will lift all foreign debt from Hydro retroactive to Apr il 1, 1979 , and recalculate it on the basis of Canadian debt at various interest rates corresponding to the rates in effect on the dates on which the foreign issues were taken out . I will be introducing necessary legislation for this purpose .

These moves alone will , we believe -(Interjections) - MR. SPEAKER: Order please, order please . Order please , order please . Every member of the Chamber will have the opportunity to enter debate if they so choose. The Honourable Minister of Finance . MR. CRAIK: Mr. Speaker , I repeat , the rates' therefore , will stay as they are in 1979 for five fiscal years, including this one. Mr. Speaker , I have heard the first utterance across the way that would favour the taxpayer in this province coming from those people opposite . Mr. Speaker , I would remind the Member for ! ! · St.

Johns that the taxpayers are also mostly Hydro ratepayers. Mr. Speaker , the government will lift all foreign debt from Hydro retroactive to April 1, 1979, and recalculate it on the basis of Canadian debt at various interest rates corresponding to the rates in effect on the dates on which the foreign issues were taken out. These moves alone will , we believe , provide tho Utility with sufficient elbow room not only to hold its rates fixed for this period, but also to rebuild its reserves to a more appropriate level. But, Mr.

Speaker, come what may, the government will guarantee the Utility in this undertakin!l The Supplementary Estimates will contain prov ision of $31.3 million to finance this important initiative . This will bring the - estima ted excess of expend itures over revenues for the 197980 fiscal year to $122 .6 million. It should be noted , Mr. Speaker , that Winnipeg Hydro customers will also benefit directly from this action . Mr. Speaker, I want to remind you that that $31 .3 million is all for the purposes of the servicing of the foreign debts . By guaranteeing that there will be no . . .

This is not a subsidization of Hydro, Mr. Speaker, per se; it's the removal, Mr. • U Speaker , of an arbitrary decision by the former government to place on the shoulders of the Utility a debt which the Utility had no choice in. By guaranteeing that there will be no rate increases for a five-year period and by lifting the burden of foreign exchange fluctuation from Hydro , the government is radically altering the traditional relationship between Hydro and the province. This relationship must be reviewed in light of changing times and changing markets , as well as the changing energy picture .

The Commission of Enquiry is in the final stages of its review of the present and future 4308 ..

Tuesday, May 15, 1979 of Manitoba Hydro, and the report, which is expected later in this year, may well be instructive for further future policy determ inat ions affecting the relationship between Hydro and the government. At the present time, the net debt of the Utility is about $2.3 billion and represents nearly 60 percent of the total outstanding direct and guaranteed debt of the and its agencies. The sheer size of the debt alone dictates province the government's presence in mon itor ing the debt management.

The fixing of domestic Hydro rates for a five-year period will most surely return Manitoba to having about the lowest electric power rates in North America, a position we once enjoyed but lost over the last few years. Mr. Speaker, it's an undertaking that runs contrary to what is happening to the prices of other energy forms, such as oil and natural gas, and if current rates of inflation ' continue, one could expect electr ical energy to become remarkably economic in comparison to those energy sources.

The undertaking which I have outlined will provide immediate benefits to every Manitoban in .the form of an assured low-cost electrical energy supply, the basic objective in setting up a provincial Hydro utility in the first place, Mr. Speaker, but lost sight of for eight years. Mr. Speaker, for indiv idual Hydro customers, homeowner and renter alike, and particularly those with moderate and fixed incomes such as pensioners, the impact of these changes will be extremely beneficial.

There is no doubt that the measure is progressive in its impact and will represent a positive factor in reducing inflationary pressures. In fact, Mr. Speaker, it will be an inflation fighter of the first order . This measure will also provide a further major incentive to economic development. It will enhance our competitiveness and provide ! significant additional stimulation for the creation of more job opportunities in Manitoba. Mr. Speaker, our Hydro resources represent one of the most important economic advantages that our province enjoys.

To ensure that advantage is realized, our government, unlike the previous administration, intends to put the ratepayer and the taxpayer first and to support the utility in meeting its objectives of service to the customer. With the actions I have announced tonight the citizens of Manitoba can once again be assured that the availability of abundant, renewable Hydro power at reasonable and predictable cost will be a key factor in the expansion of this province throughout the new decade, Mr. Speaker, and into the new century. Mr. Speaker, I want to say, in conclusion, that ... Mr.

Speaker, and I forewarned you that it would be a long and I think in the final analysis important. Mr. Speaker, tonight's Budget will continue the rebuilding process which is now under way in Manitoba. First of all, it confirms a reduction in the deficit burden inherited from our predecessors and reaffirms our goal of a balanced Budget. Mr. Speaker, it continues the process of tax reduction and realignment started last year - a process which will mean $116 million in total tax relief for the citizens of this province by the end of our second year in office. It might be higher, Mr.

Speaker, if you include the Hydro initiative in that. Mr. Speaker, it guarantees for our vitally important mining tax structure that it will be competitive once again, without eroding revenues. Mr. Speaker, it freezes Hydro rates at 1979 levels for five years, a measure which, along with the others announced tonight , will benefit every Manitoban . And finally, Mr. Speaker, the signs of renewed strength in our economic base are already evident and we still face difficult challenges in the next few years and through the 1980s, but we've got a strong base to build from.

This Budget represents an important step in meeting those challenges. The objectives it sets out are realistic, Mr. Speaker, and they are attainable and reflect the aspirations, Mr. Speaker, to repeat, of the vast majority of Manitobans. We continue to believe that responsible financial management in the public sector throughout Canada is the key to sustaining economic development, to reduced inflationary pressures, and to continuing improvement in job creation, Mr. Speaker. Our government has proved its commitment to this principle and we believe others should follow that lead, Mr. Speaker.

Based on the accomplishments that I have outlined, we believe that the people of Manitoba can look forw.ard to a decade of recovery and stability, a decade of opportunity, Mr. Speaker, and a decade of promise. And with this Budget we have completed, and I repeat, the first transitional stage . The rebuilding job is working, Mr. Speaker, and, most important of all, confidence in our future is returning to Manitoba. Mr. Speaker, thank you . 4309

Tuesday, May 15, 1979 MR. SPE,IKER: Are you ready for the question? The Honourable Leader of the Opposition . ~ MR. PAWLEY: Mr. Speaker, I beg to move, seconded by the Honourable Member for St. Johns , that deba te be adjourned. MOTION ,,resented and carried. MR. SPEAKER: The Honourable Government House Leader . MR. JORC~ENSON: I move , seconded by the Minister of Highways, that the House do now adjourn . MOTION presented and carried and the House adjourned and stands adjourned until 2:30 p.m. tomorrow afternoon (Wednesday). 4310 ..

Tuesday, May 15, 1979 APPENDIX A , FINANCIAL STATISTICS • 4311

Tuesday, May 15, 1979 Government of Manitoba Total Expenditures as a Share of Gro ss Provin cia l Product Per ce nt 1968/69 to 1978/79 20·-r--------------------------------------------------------. 15 10 5 ' 0 1969 197:2 197.'\ 1976 1977 1978 1979 Fisca l Year Ending March 31 Fisca l Year '7c Share 1968-69 12 .1 1969-70 13 9 1970-7 1 15.6 1971-72 16 . ~ 1972-73 lid 1973-74 16 . ~ 1974-75 16.9 1975-76 18 ~ 1976-77 18.4 1977-78 18.9 1978-79 17 ~ 4312

~ ~ w .... w ., t .,. " ' '· ' Growth in Provincial Expenditures: 1968/69 - 1978/79 P.:rO.:l'O\ ~< ~0--1 ..........., Government of Manitoba Total Expenditures Percentage Growth- 1968/69- 1978/79 1>:0»."«-"!0~ t.0!~'"\11 -1-BB li1111~.- r1 15 ~ '"··~·. ~. ~m;~~: ~~'1 w . .

«~ .... · C:.:.:-:&.:!3 =t'§:-d .. :.;.: .... -:. ~-~8y.._ $~~- • .,,-__,-.-,.,.~ .._......,.,........._., r.-..~-.-., ... -.-..-.-.-.-.-.. ~.._ .. ,._.._~,-,.. .,._._.._._ .. .._...,._~ .._._._.._._._._._,. ,,_,_,_.._,_,_._.._. .......................... ~~~ '" IYf,(,l 1970 lo.J ~ I II.J 7~ 1'17_\ IY7~ lo.J7'i IIJ7f'! 1977 l'.f?X Fi,..:a l Y~·otr Ending M<~r~·h .11 Government of Manilnha Total Expenditures 190X-69 Ill 197H-79 5 Hilli1\0" . u- I 1.0- / . - .ll- l'lfl':l 1'171 IIJ1.l 14 7_~ 1':.1:''1 preliminary ' - . -1 c CD (II a. Ill I li .... 9' .... CD ..... CD . 1.., .... l'l7'1 rn.:limin&\

1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 Preliminary Tuesday, May 15, 1979 GOVERN~ffiNT OF ~~ITOBA TOTAL EXPEND ITURES FISCAL YEARS ENDING HARCH 3l Expenditures(!) ($ OOO's) $ 349,006 400,824 486 ,1 94 574 , 538 657,311 728 ,59 9 870 , 704 1,064,142 1, 299,712 1,4 72,082 1,635,586 l,l'i32,nnn % Change From Previous Year 14.8 21.3 18.2 14.4 10.8 19.5 22. 1 22.1 13 .3 11.1 en 0 2)

(1) The expenditure s shown include the gross expenditures relate d to the cos1: of living and property tax credit programs and the t-lani toba Health Services Commission. They have also been adjusted to reflect the changes in the accounting syst em as reflected in t he 1978 /79 and 1979/80 estimates. The most significant of these changes is the combinin g of all direct Govern ment expenditur es formerl y referred to as curr ent and Sche dule B capital. SOURCE: Province of Manitoba Public Accounts adjusted as stated in the note. 4314 -

, • Tuesday, May 15, 1979 Estimated Expenditures and Revenues 1979/80 1979-80 Estimated Expenditures (in millions of dollars) Health and Community Services Education Highways and Local Government Assistance Economic and Resource Development Other Services Public Debt Total Expenditures 703.7 369.0 188.6 333.2 149.7 68.0 1.812.2 38.8% 20.4% 10.4% 18.4% 8.2% 3.8% 4315 27.9'7c 22.5'11: 5.9% 4.3% 39.4'/i 1979-80 Estimated Revenues (in millions of dollars) 122.6 471.8 380.2 99.7 72.0 513. 1 152.8 1.689.6 Excess of Expenditure Over Revenue Income Taxes Manitoba Levies and Collections Other Revenues Liquor Control Commission F ede rat Transfers: Unconditional Shared Cost Programs Total Revenues

Tuesday, May 15, 1979 1979-80 EXPENDITURE ESTIMATES MAIN AND SUPPLEMENTARY Health & Community Services ..................................... . Education ......... . . . .... ............ ........ ...... .. .. ......... . Highways~ Loca l Government Assistance ......................... . .

Economic & Resource Development Agriculture Co-operative Development Economic Development Development Agencies Finance (excluding Public Debt) Labour & Manpower Mine's, Natural Resources & Environment Northern Affairs Tourism & Cultural Affairs Canada-Manitoba Enabling Vote $ 28,842,000 706,400 31 ,84 2,9 00 824,200 148,780,000 18,622,900 56,715,100 25,765,000 11,400,5 00 9,732,900 Other Services .................................................. .

Legislation Executive Council Attorney-General Civil Service Consumer & Corporate Affairs Fitness, Recreation & Sport Government Services Flood Control & Emergency Expenditures General Salary Increase Hydro Rates Stablization $ 3,749,900 871,900 35,123,1'>00 14,563,300 3,919,000 1' 811,600 45,518,200 5,309,000 7,500,000 31,300,000 Public Debt ... ..... . .... .. ...... . .............. .. ......... . ...... . 4316 I. 1979-80 % of Estimate Total $ 703,650,400 38.8 ... 368,996,000 20.4 , 188,637,300 10.4 333,23l,!:l00 18. i- 149,666,500 8.2 67,981,000 3.8 $1,812,163,100 100.0 4

Tuesday, May 15, 1979 1979-80 REVENUE ESTIMATES 1979- 80 Estimate % of Total Income Taxes . .. . . . . . . . . . . . . . . . .. .. . . .. . . . . . .. . . . . . . . . . . . . . . . . . . .. $ 471,800,000 27.9 Individual Income Tax Corporation Income Tax ~ Manitoba Levies & Collections Gasoline Tax Mineral Tax (Incremental) Hetallic Minerals Tax Motive Fuel Tax Corporation Capital Tax Revenue Act, 1964,

Part I Tobacco Tax Retail Sales Tax Others Other Revenues " ..

Fines & Costs Land Titles Fees Insurance Corporations Tax Motor Carrier Licences & Fees Automobile & Drivers' Licenses Mines & Minerals Water Power Rentals Parks Others $356,200,000 115 '600' 000 $ 58,500,000 8,000,000 15,000,000 17,000,000 13,500,000 17,000,000 26,300,000 217,700,000 7,205,000 $ 5,726,500 6,250,000 8,300,000 7,130,000 21,250,000 3,714,100 3,801,500 4,795,700 38,760,100 T.iquor Control Commission ....................................... . -federal Transfers Unconditional: National Equalization Established Programs Cash Transfer Government of Canada Subsidy Total Unconditional Transfers Conditional - Government of Canada - Shared-Cost Receipts: Education Health & Community Services Northern Affairs Highways & Transportation Other Total Conditional Transfers 4317 $241,750,000 269,200,000 2,173,000 $513,123,000 $ 42,430,700 69,357,000 18,061,400 8,858,700 14,037,000 $152,744,800 380,205,000 22.5 99,727,900 5.9 72,000,000 4.3 665,867,800 39.4 $1,689,600,700 100.0 -

Tuesday, May 15, 1979 1979/80 CAPITAL AUfRORITY REQUIRr:l1ENTS FOR SELF-SUSTAINING PROGRAMS "Schedule A Capital" Manitoba Hydro Manitoba Telephone System Manitoba Water Services Board Manitoba School Capital Financing Authority Manit oba Agricultural Credit Corp. Insulation Loan Program University of Manitoba - Tache Hall Manitoba Data Services 4318 $118,655,0 00 35,256,00 0 2,318,000 11,000, 000 25,000,000 3,000,000 5,240,000 5,000,000 $205,469,000 ..

.. Total Debt Per Capita (Dollars) 3,500 3,000 2,500 2,000 1,500 1,000 500 Ntld. Tuesday, May 15, 1979 Provincial Per Capita Debt Comparison - 1977* P.E .I. N .S. Province Newfoundland Prince Edward Island Nova Scotia New Brunswick Quebec Ontario Manitoba Saskatchewan Alberta British Columbia N.B . *Fiscal Year Ending March 31. 1977 P.Q. Ont. Man. Sask. Total Debt Per Capita - 1977* (Dollars) 3,538 1,050 2,020 2,450 2,205 2,295 3,130 1.469 1,918 2,204 ~ Source: Bank of Montreal- Provincial Summaries. July, 1978 The following notation appeared with the information shown in the above table: Alta. B.C .

"For the fifth consec utive year Newfoundland and Manitoba have led the other province s in total debt per capita . Quebec has increased its debt per capita by 96% in the 1973-77 period, seco nd only to Manitoba at 101% ." 4319

Millions of D ollars 4,500 4,000 3,500 3,000 2,500 2,000 1.500 1,000 500 1964 Tuesday, May 15, 1979 Province of Manitoba Direct and Guaranteed Debt : By Purpose Total Direct and Guaranteed Debt Outstand ing (Net of Sink ing Funds) Debt of Manitob a Hydro Other Self- Sustaining Debt General Purpose Debt $3,213 $2.639 1969 1974 1975 1976 1977 March 31st 4320 $3 ,949 ~ ~ $3.583 0 ,.., ,.., ,.., <--i 00 ..., 1978

• Tuesday, May 15, 1979 PROVINCE OF MANITOBA STATEMENT OF VALUATION AND PURPOSE OF BONDS, DEBENTURES AND OTHER SECURITIES OUTSTANDING AS AT MARCH 31, 19 79 Valuation of Debt Direct: Payable in: Canadian Dollars U.S . Dollars Swiss Francs European Units of Account Japanese Yen Deutsche Marks Hong Kong Dollars Total Direct Guaranteed: Payable in: Canadian Dollars U.S.

Dollars Swiss Francs Deutsche Marks Pounds Sterling Total Guaranteed Total Direct & Guaranteed Debt Less: Sinking Funds Net Direct & Guaranteed Debt Purpose of Debt General Purpose Debt Self-Sustaining Debt: Par Value 1,181,440 373,000 905,000 45,700 27,000,000 150,000 150,000 1,034,128 926,000 160,000 90,000 4,978 }knitoba Hydro-Electric Board Manitoba Telephone System Manitoba School Capital Financing Authority Manitoba Agricultural Credit Corporation Manitoba Development Corporation Manitoba Housing & Renewal Corporation Manitoba Water Services Board Federal-Provincial Loan Agreements Universities Municipal, Hospital & Other Indebtedness Total Direct and Guaranteed Debt Less: Sinking Funds Net Direct & Guaranteed Debt

(1) Payable in various currencies (in thousands) Canadian Dollar Equivalent at Date of Issue $1,181 , 440 396,675 426,094 54,738 ll3,177 67,578 33,518 $2,273,220 $1,034,128 930,904 56,ll4 27,558 10,495 $2,059,199 $4,332,419 382.793 $3,949,626 $1,040,119 $2,489,366 469,367 191,000 65,879 8,108 8,ll8 12,014 16,617 26,0ll 5,820 $3,292,300 $4,332,419 382,793 $3,949,626 4321 Exchange Rate as at March 30/79 $ 1.00 1. 1594 0.6847 (1) 0.005534 0.6213 0.2345 $ 1.00 1.1594 0.6847 0.6213 2.3994 Canadian Dollar Valuation $1,181,440 432,456 619,653 103,013 149,418 93,195 35,175 $2,614,350 $1,034,128 1,073,604 109,552 55,917 11,944 $2,285,145 $4,899,495 $1,143,270 $2,861,482 561,176 191,000 65,879 8,108 8,ll8 12,014 16,617 26,011 5,820 $3,756,225 $4,899,495 Foreign Exchange Fluctuation $ 35,781 193,559 48,275 36,241 25,617 1,657 $ 341,130 $ 142,700 53,438 28,359 1,449 $ 225,946 $ 567,076 $ 103,151 $ 372,ll6 91,809 $ 463,925 $ 567,076

Tuesday, May 15, 1979 APPENDIX B ECONOMIC REVIEW AND STATISTICS 4322

\ • ;. • .. ... Tuesday, May 15, 1979 MANITOBA ECONOMIC REVIEW THE CANADIAN SETTING Real Gross National Product in Canada increased 3.4% in 1978 according to initial year-end estimates by Statistics Canada. Although this was an improvement from 1977's growth of 2.7%, it was below the federal government's predictions for the year. The federal Finance Minister held out the prospect of 5% real growth until well into the third quarter of 1978, when estimates of economic performance to date in the year had almost certainly placed 5% growth beyond the potential for a late resurgence in the economy.

The November 16, 1978 federal Budget still maintained that "the growth in output should be close to 4%." Unemployment continued to be a problem across the country in 1978. The national unemployment rate rose to 8.4% from 8.1% in 1977 as labour force expansion again exceeded employment growth. Inflation also worsened during the year. The Consumer Price Index increased 9.0% following a rise of 8.0% in 1977. Food prices led the increase as United States growers and the declining value of the dollar drove up prices of imported food products.

Domestic supply shortages, particularly in beef production, added to the increases. A revision in the C.P.I. weightings late in the year reduced the relative importance of food purchases within the index, in line with changing consumer purchasing patterns, but on the basis of a comparison with a partial version of the old index which is made available by Statistics Canada, the new weights do not appear to have had a significant effect on the overall index. Overall, food prices were up 15.5% in 1978 while prices of other items continued to ·rise at about 6.5%.

Stronger net export performance was the main source of Canadian growth in 1978. While real final domestic demand grew only 2.1%, real exports increased 8.5%. However, part of the contri bution to growth of the export sector was offset by a 4.1% rise in the volume of imports. The decline in the external value of the Canadian dollar was partly responsible for a 12.7% increase in import prices during 1978, and a substantial rise in Canadian dollar prices of exports which are priced in world markets.

Increased profitability in export markets helped push corporate profits before taxes to a 16.7% annual increase in 1978. Real personal consumption expenditures fell far short of the federal economic performance targets in 1978. Federal projections in early 1978 suggested that 5.4% growth in volume of consumption expenditures was required over the medium term to meet federal growth targets. In the November Budget, the federal Finance Minister spoke of a 3~ to 4% rise in consumer spending. However, national accounts estimates show that consumer expenditures were up 3.1% for the year.

The stimulus provided by federally-initiated •.. 2 4323

Tuesday, May 15, 1979 - 2 - personal income tax cuts early in the year and indirect tax cuts later on was in part offset by price and interest rate increases . The volume of investment spending in Canada as a whole in 1978 was virtually unchanged from 1977. Unlike the situation in Manitoba, residential construction was the major source of wea kness with a decline in real expenditures of 4.8%. Non residential construction activity was also weak, advancing by a mod,est 2.4% in 1978. Business investment in machinery and equipment was about constant in volume in 1978 compared with 1977.

Expenditures by all levels of government increased by 11.6 % in current dollars or about 1.5% in real terms. Government revenues, however, rose only 8.7% in 1978 with the result that the net deficit of the total government sector rose from $5.4 billion in 1977 to $8.2 billion in 1978 on a nationa l accounts basis, even including Alberta's substantial surplus. For 1979, most economic observers see little change in the overall growth prospects for the Canadian economy, although a shift in the sources of growth from the foreign sector to stronger domestic demand is widel y anticipated.

With recent rises in the value of the Canadian dollar , a nd with growth in several of Canada's trading partners, espec i ally the United States, expected to weaken, there does not appear to be much scope for a repetitio n of the large export gains recorded i n 1978 .

Nonethele ss, the improvement in Canada's competitive pos i tion brought about by the lower value of the dollar and by the deceleration in wage gains since 1976 means that export opportunities for Canadian firms, particularly in the manufacturing sector, still exist, and their successful exploitation will be an important potential bas is for strength in the economy over the medium term. The latest round of the General Agreement on Trade and Tariffs, which was initialled in Geneva last month, represents a further step in this direction.

One of the chief concerns regarding the Canadian outlo ok for 1979 is the high level of interest rates. The Bank of Canada raised its prime lending rate seven times between January 1978 and January 1979, bringing the rate from 7.5% to an unprecedented 11.25%. This record high interest rate has already been costly in terms of employment and output growth, and has also had an adverse effect on inflation, at least in the short run.

Although the targeted growth rate of the narrowly defined money supply - M1, currency and demand deposits - fell from 12% in 1977 to about 7% in 1978, the growth of other monetary aggregates - including savings, personal term deposits, and foreign currency deposits- accelerated during the year. . .. 3 4324 ..

.. Tuesday, May 15, 1979 - 3 - In addition to high rates of interest, further increases in food prices and the recent sharp rise in the price of imported oil are dampening prospects for much improvement in inflation in Canada this year although the recent upturn in the Canadian dollar can be expected to stabilize imported food prices somewhat, at least temporarily. There is widespread concern that pressure for increased wage settlements induced by ongoing inflationary pressures could become a majo~ negative factor affecting Canada's competitive position into the 1980's. DEVELOPMENTS IN MANITOBA

Summary In Manitoba, 1978 was a year of moderate economic recovery, following three years of virtually no growth in production outside the agricultural sector. The gross value of production, the Gross Provincial Product, topped $9.5 billion for the year, an increase of almost 10% over the 1977 level. The improvement in economic conditions and prospects for continued growth were particularly evident in the resurgence in private sector investment spending which occurred in 1978.

Although the initial outlook for the year suggested only moderate increases in investment spending, there was a steady upward trend in private investment intentions statistics over the course of the year. "Preliminary actual" estimates of total private new capital expendi tures reached $1.4 billion, an increase of 22% over 1977's level of $1.1 billion. This was the greatest percentage increase in private investment of any province in Canada. Economic growth in 1978 was based in the goods producing industries, especially housing, manufacturing and agriculture.

The momentum gained in 1978 is carrying over into the economy in 1979. Further growth has occurred in the first quarter in manufacturing employment, and incomes generated in the agricultural sector are having a positive effect on a number of industries in the supply and service sectors of the province. Activity in some areas, notably housing, and to a lesser extent agriculture, is not likely to duplicate the strong performance recorded last year.

However, renewed strength in mining production, continued growth in manufacturing and utilities output, and expansion of the service sector are expected for the current year. The outlook for Manitoba is somewhat tempered by current high interest rates in Canada and by the influence of other national and international developments. Although there is evidence that not all the recent increases in inflation in Canada have been transmitted .•• 4 4325

Tuesday, May 15, 1979 - 4 - to the provincial economy, and the province's reco rd of job creation has stood up ver y well in re cent months, the economy is by no means immune to nati onal economic events , and ha s suffered losses as a result of such fa c tors as tie-ups in the grain transportation system and the high cost of both consumer and producer borrowing. Employment and Incomes Overall employment in Manitoba inc reased by 11,000 to average 440,000 in 1978.

Private sector employment acc ounted for the entire increase, and growth in manufacturing employment accounted f or nearly half, or 5,000 of the new jobs. In the private sector, total employment was up 14,000, to an average of 340,000 in 1978, an increase of 4.3 %, after no growth whatsoever from 1975-1977. The re-emerging strength of the private sect or in the economy is shown by the growth in the private share of total employment in the past eighteen months. Fr om Oct ober, 1977 t o Marc h , 1979, private sector employment increased from 75% to 78% of t otal employment.

Table 1 ---- PRIVATE AND PUBLIC EMPLOYMENT (thousands) Annual Averag_es First guarter 1977 1978 1978 1979 Private Paid Workers 271 279 263 284 Employers, Own Account and Family Harkers 55 61 56 59 Private Sector Employment 326 340 319 343 Public Sector Employment (all levels of government) 104 100 101 97 TOTAL EMPLOYMENT 429 440 420 439 Totals may not add due to rounding. SOURCE: Statistics Canada, and Manitoba Department of Finance . . . . 5 4326 .. .. .

' .. t Tuesday, May 15, 1979 - 5 - A decline in the number of in-migrants to Manitoba from other provinces and abroad has meant that most of the new jobs have been filled by Manitoba residents. The total labour force in Manitoba increased to 471,000 in 1978. This average level was 15,000, or 3.3% above the 1977 average. Labour force growth in 1978 was mainly the result of more women joining the labour force and a large number of young people coming on the job market for the first time.

The influx of women and young workers reflected the improvement in employment opportunities in the province, as well as the contemporary trend among women to seek employment outside the home . The result was an increase in the total labour force participation rate, that is, the percentage of persons 15 years of age and over who are working or looking for work, of 1.4 percentage points to 63.1%. The increase was rather large for one year and greater than the advance in the national rate, which increased 1.1 percentage points to 62.6% .

The rise in the labour force participation rate continued in the first quarter of 1979, but the year as a whole may well post smaller gains than in 1978. The unemployment rate in Manitoba in 1978 averaged 6.5%, compared with 5.9% in 1977, and 8.4% nationally. The seasonally adjusted unemployment rate averaged 5.4% in the first quarter of 1979· Youth unemployment has been a cause for concern both nationally and provincially in recent years. Unemployment rates among persons under the age of 25 have been substantially above average.

However, the share of all persons aged 15 to 24 who held jobs in Manitoba increased during 1978 and averaged 60.1% for the year compared with 59.5% in 1977. Nationally the share of 15 to 24 year olds who held jobs averaged 55.0% in 1978. The provincial government's summer youth employment programs, and mainly the Private Sector Youth Employment Program, helped create or finance more than 7,000 jobs for young people during the summer months of 1978.

There are indications from Canada Manpower that the student employment picture, at least for university graduates, has improved this year and the Government has announced plans to reinstitute the Private Sector Youth Employment Program with funding of $3 million . 6 4327

Tuesday, May 15, 1979 - 6 - Average weekly earnings increased by 6.0% in 1978, a continuation of the decelerating trend of 1977. This factor, along with the dollar devaluation has contributed to an improvement in the competitive position of Manitoba industries, and helped stimulate employment expansion in the province. Preliminary estimates based on Statistics Canada data indicate that total personal income and personal disposable income increased by at least 10% and 10.5% respectively in 1978.

Some estimates, such as those contained in the latest Provincial Forecast of the Conference Board in Canada, place the increases even higher. The Conference Board projects that personal income and personal disposable income increased by 11.8% and 13.0 %, respe c t i.vel y , in Manitoba last year. In 1977, personal inc ome increased 8.7 % and personal disposable income was up 9.3 %. Farm incomes, which performed exceedingly well last year, sho"1ed the greatest percentage increase, as noted in the

section on Agriculture, which follows. However, growth in non-farm business income, interest and dividend payments, and in weekly earnings and employment also contributed to the rise. The intr oduction of a number of tax reduction measures during the year increased the disposable income available to Manitobans. Prices The Winnipeg C.P.r. increased 8.5 % in 1978, an increase of one-half a percentage po int over the 1977 growth rate. However, the full extent of the national advance in consumer prices last year was not transmitted to the provincial economy, as shown by the acceleration in the Canadian C.P.

I. of a full percentage point in 197B, to 9.0 %. In March, 1979 the Winnipeg C.P.I. st ood a t 8. 1% above the March, 1978 level, \~th the food component of the index being 14 . '3% higher than the previous March. At the same time the Canadian C.P.r. was up 9.3% and Canadian food prices were 17.4 % higher than in March, 1978. Investment Private sector investment plans increased steadily throughout 1978, according to surveys conducted by Statistics Canada.

Pre l iminary actual expenditure estimates show that private sector new capital formation grew by 21.9% in 1978, faster than in any other province, and more than quadruple the 1977 rate of increase in Hani.toba. . . . 7 4328 ~ ! ),. ~ .. .( "!. ,.. ..

-,. ... • ') Tuesday, May 15, 1979 - 7 - Total new capital spending (the sum of private and public expenditures) increased by 8.5% compared with 7.8% nationally. Most of the increased expenditure was in the housing and primary and construction sectors. However, investment in the manufacturing and trade, finance and commercial sectors also grew faster than the national average. The outlook for 1979 is for substantial increases in manufacturing investment (expected to rise 17.4%) and trade, finance and commercial investment (up 35.3%). The expected growth rates in these sectors are each double the national rates.

Housing invest ment is expected to decline somewhat in 1979, following the boom conditions in residential construction last year. The preliminary outlook for all private sector new capital spending is for a 3.9% increase. However, based on last year's experience, the percentage change could be revised upward in coming months. For 1978, private sector investment intentions reported in M~rch last year stood at 6.5%; subsequently this percentage was raised to 10.2% in late summer and to 21.9% in March, 1979.

Primary Industries The value of output in Manitoba's primary sector advanced by more than 10% to reach a total of $2.3 billion in 1978. A downturn in mineral resource output was offset by strong gains in the value of agricultural and forestry production, and growth in the fishing industry. Agriculture The value of agricultural production advanced strongly in 1978, as a result of more crop specialization and higher prices for Prairie grains, as well as stronger livestock prices.

Preliminary estimates by the provincial Department of Agriculture indicate that the total value of agricultural production reached $1.5 billion in 1978, an increase of more than 20% from 1977. According to Statistics Canada, preliminary estimates of farm cash receipts were up nearly 26% in 1978, to total $1.1 billion. This was the first signi- ficant improvement since 1975; farm cash receipts declined in 1976 and were up less than 1% in 1977.

Projections by the Canadian Agricultural Outlook Conference show that, after allowing for increases in farm input costs, total net farm incomes advanced by 27% last year, from $348 million in 1977 to about $442 million in 1978. . .. 8 4329

Tuesday, May 15, 1979 - 8 - Table 2 --- FARM CASH RECEIPTS AND NET FARM INCOME Percentage Change 1976 1977r 1978p ($ millions) Crop Sales 498.3 486.4 Livestock Sales 362.6 390.6 Other Sources 30.0 22.0 TOTAL FARM CASH RECEIPTS 890.9 898.9 TOTAL NET FARM INCOME 345.0 348.0 r - revised; p - preliminary.

Totals may not add due to rounding. 600.5 515.1 14.1 1,129. 6 442.0 1976/ 1975 -1 2.5 s.s 35.1 - 4.7 -17.5 SOURCE: Statistics Canada and the Manitoba Department of Agriculture. 1977 I 1978/ 1976 1977 - 2.4 23.5 7.7 31.9 -26.7 -35.9 0.9 25.7 0.9 27.0 While much of the improvement in the agricultural picture can be attributed to rising prices brought about, at least in part, by the decline in the value of the Canadian dollar, agricultural receipts were als o bolstered by the cyclical upswing in livestock prices, and the continuing diversification of agricultural production.

The value of production of specialty and other crops (including rye, mixed grains, gra in and silage corn, field peas, buckwheat, mustard seed, sunflowers, rapeseed, tame hay, sugar beets, potatoes, vege tables, fruits and ornamentals and forage seeds) exceeded the value of wheat production in the province for the first time in 1978, according to preliminary estimates by the Department of Agriculture. Oats and barley ar e the other major crops produced in the province.

Despite a decline in the volume of beef production, that l s, total marketings plus changes in inventory of animals on farms peoduction of tame hay increased markedly in 1978, due to higher yiel ds per acre. Production of oilseeds, potatoes and sugar beets also showed strong growth. Oi lseed production, to supply the oilseed crushtng plant at Altona , expanded by about SO% last year. Out put in 1979 and into the early 1980's is expected to continue to •.. 9 4330 .. .. ..

) Tuesday, May 15, 1979 - 9 - grow as domestic supplies ·are substituted fc'r seeds cu1rentlv being imported for processing. The opening of a large p<'tato processing plant at Portage la Prairie, in Januarv, 1979, stimulated potato production in the 1978 crop year. ,;r,'wing c<'ntr<~ c ts for the company involved could increAse Manitoba's P•' t A to AcreAge from the current level of 37,000 acres to 40,000 acres hv lQRO, and up to 45,000 acres within five years . AnticipAted growth of demAnd hy other major contracting c ompanies c ould expand production Fven further.

In order to take greater advantage n f the potential for increasing value added in spe c iality crops aml 1 ivesto c k production in the province, the Governments of Manitoba "'nd Cilnadil entered into a five-year, $18.5 million agricultural shared- c ost agreement last December. Programs under that agreement are intended to improve productivity, increase the adopti o n of new technologies, and assist in the expansion of production of speci"'l c rops. The Agreement also provides for a program intended to enhAn c e the qua 1 i t y n f land and water resources.

Although agriculture was clearly one o f the hright spots in the provincial economy in 1978, the sector remains dependent on international price developments and domestir marketing and transportation policies.

After raising serious c on c erns about current grain handling problems at a Federal-Prrov in c. iill First Ministers' Conference on the Economy in November, 197R, "'nd s•Ig gest ing a spe r ial follow-up conference on the matter, Premier Lyon c onvened il meeting of Western Premiers, federal Cabinet Ministers, heacls r,f grain 'lnd railway companies, and o thers con c erned with Pr'lirie grain transporta tion in Januar y of this year in Winnipeg . nne ,,f the delegates, the Chairman of the Pri n ce Rupert Grain CoQ rdin'lti r, n CoTIUllittee, summed up the results of the conferen c e i n wel cr$ing t h e Wes t er n Premiers to his city in late ~arch by stating: "Th e J a nuary, lr1 79 '..Jinn ipeg c onfere -:-t<:" on grain handling and ::ransportat ion, 1-, osterl "Y ' 'l e Government of ~ani t o\a, and : o- c'l aired ..,y Premie r Ly on, f-,as 'Jeer, 'N'idely a c 1<-nowl <ed~~;e-1 an ou tstanding suc c ess.

This upbeat and optimis:ic : onfo ~ "' ~ ce was sin~~;ular in :~e vir~ u a l · ;na n i~i:y

Document details

Collection	Manitoba — Debates (Hansard)
Citation	31-3-61b
Type	hansard
Volume / chapter	31st 3rd hansardpdf 61b.pdf
Language	en
Format	pdf
Source	PROVINCIAL
Identifier	fcd4a30cdd1974a7dabbdf04d2826996452b74e8

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