Province
Législature
Session
Type de discours
Date du discours
Locuteur
Fonction du locuteur
Parti politique
Colombie-Britannique
31e
1e
Discours du budget
26 mars 1976
Evan Wolfe
Minister of Finance
British Columbia Social Credit Party

      Mr. Speaker, I consider it a distinct honour and a privilege today to present the first budget of this new Social Credit administration in British Columbia.

      British Columbia, for the last quarter-century, has been a province of enormous potential and growth. We were a leader in our country in terms of population and labour force increase, capital investment, and production. Together these provided the impetus for an expanding economy with high employment and almost unbounded optimism. At the same time, the government was provided with revenues to fund the necessary government social service programs.

      Unfortunately, in recent times, a combination of world-wide events - inflation, low world demand for our principal export products, and taxation policies of the previous government that frightened investment capital - sent the province into an economic decline to the point where the real increase in the gross provincial product last year was less than I per cent. The result has been lower government revenues to pay for the growing demands on government.

      Despite the declining revenues, government spending programs continued unchecked. In the last year or so an uneasy feeling grew within the people of this province, the feeling that their tax money was not being properly managed, and the result was that on December 11 last the people of the province issued a new mandate, a strong mandate, for the management of their affairs.

      Mr. Speaker, we accept this mandate gladly, convinced as we were that the people of this province can be better served, in all ways, in the long term with policies that encourage economic activity and good management that ensures the money received will be judiciously spent.

      Mr. Speaker, no one political movement can lay exclusive claim to serving the interests of all of the people. This government, even before approaching office, was concerned for the welfare of all groups in society, both the people who are able to contribute to our economic growth and those who through no fault of their own are unable to do so - the elderly, the sick, the underprivileged, the handicapped and the unemployable. This latter group, above all others, needs compassionate help from governments at all levels to provide them with hope and to free them from the indignities they may suffer.

      As government, we are pledged to maintain and improve the social programs which sustain these people. At the same time, we want to make it very clear we will not provide an atmosphere in our province which encourages the so-called "free rider" - those who are able but unwilling to play their part in building for the future economic security of all.

      Social programs can be imperiled if government fails in its function to plan programs carefully and to fund them properly. Government, as we have said many times, has no money of its own. The money which pays for our social programs comes from all parts of our society - companies, large and small, and individuals. Government must encourage industry and initiative among all sections of the economy to provide the revenues it needs. This cannot be done by taking away from one group to give it to another. Mr. Speaker, if we are to have a productive society, everyone must benefit.

      This government has as its central objective the development of a strong, free economy that can be translated into policies and programs to benefit everyone. This economy must be developed without polluting our environment or exploiting our people.

      Growth will occur on our terms without a continuing confrontation with the business community or other governments. We want to develop co-operation between business, labour and government to build a free, vigorous and productive society in which everyone is able to share the benefits.

      In addition to that, we will, to the best of our ability, provide the sound financial management this province needs. Government, like people, cannot go on spending more than it makes. What comes in must balance what goes out. If balance is not achieved then governments must borrow to pay the bills. But Bank of Canada Governor Gerald Boucy warned us only the other day that too much borrowing by governments will stifle growth of the economy. The competition by the public and private sectors for available funds will, in a period of monetary restraint, force interest rates to a higher level.

      As public borrowing increases then more and more of the funds received for government operation are wasted on debt payment. This then serves only to rob needed social programs and cripples planning for new and expanded programs.

      We have all seen recent tragic examples of this happening in other parts of the world. New York City is near bankruptcy because that city is saddled with major social programs beyond its capacity to fund. British leaders have conceded that their social welfare programs have been devastating to the economy and cutbacks amounting to $3.6 billion in one year are now planned in total public spending in that country. Britain discovered to its sorrow that unbridled spending in the public sector took away measurably from that country's total productive capacity. This has happened to some extent in our province but, fortunately, we have not reached that point where the system is out of control.

      In summary, we want to encourage initiative once again. We want to encourage capital investment that will provide jobs, payrolls and income for the provincial government to maintain and expand its social programs.

      We want to bring our financial books into balance so we can rebuild confidence in this province, a confidence that has been eroded, Mr. Speaker.

      This budget is a start on the road back, a recovery budget, moving us in a positive direction to restore confidence in British Columbia as a good place to invest, to Work and to live.

      The British Columbia economy suffered in 1975 from weakened demand in the export markets for many of the province's major products as well as protracted labour disputes in several industries. These problems were reflected by increased unemployment, continued high inflation and very little real growth. Gross provincial product, the most comprehensive indicator of economic activity, increased by approximately 10 per cent to an estimated $18.4 billion in 1975. Most of this increase, however, was attributable to a rate of inflation in excess of 9 per cent. Gross national product increased by only 0.2 per cent in real terms, its worst performance in 21 years.

      Personal income in British Columbia increased by 16 per cent in 1975 to an estimated $14.9 billion, which equals $6,074 per capita. The average weekly industrial wage is the highest in Canada, at least since 1939, reaching an estimated $231 in 1975 compared with $200.55 in 1974. However, British Columbia remains second in per capita personal income because of the lack of resident investment income.

      Unemployment in British Columbia reached its highest level in 15 years, increasing 29,000 people in 197 5 to 94,000, or from 6.2 per cent to 8.5 per cent of the labour force on the basis of the new Canadian Labour Force Survey. In this period the labour force grew by 5 1,000 people. All this occurred, Mr. Speaker, despite the former government's so-called job security budget.

      Inflation continued to erode the value of the Canadian dollar in 1975, although at a pace somewhat reduced from the peak level of 1974. The consumer price index for Canada increased by 9.5 per cent during 1975, compared with a 12.4 per cent increase in 1974. In comparison, the Vancouver index rose 8.7 per cent versus a 14 per cent rise in 1974.

      Price increases have been moderating in recent months, particularly at the wholesale level.

      Labour disputes caused substantial disruptions in British Columbia in 1975. Time loss due to strikes and lockouts was an estimated 1.8 million man-days, the second highest in the province's history, and almost 16 per cent more than in the previous year.

      Recessions experienced by British Columbia's major trading partners, the United States and Japan, resulted in reduced demand for some of our major products, particularly wood products, pulp and paper, copper and molybdenum. Some other products, notably coal and zinc, registered gains as market conditions strengthened.

      Other recently released data give a picture of the mixed performance of British Columbia's economy in 1975.

      The value of retail sales increased by 9 per cent to over $5.9 billion. The selling value of factory shipments increased by a marginal 0.4 per cent to an estimated $7.1 billion, while value added in manufacturing rose by 0.6 per cent to an estimated $3.289 billion. Employment in manufacturing fell by 8.8 per cent to 145,000 people.

      The total value of shipments in the forest products sector declined 10.6 per cent from the 1974 level to an estimated $2.9 billion. The wood products component experienced a 17 per cent decline to an estimated $1.5 billion, while the pulp and paper component suffered only a marginal decline to an estimated $1.4 billion. Prices for pulp and paper remained firm, but volume declined as a result of some shutdowns in the spring which were intended to reduce inventory and a 12 week strike in the summer and fall by the two pulp unions. Capital and repair spending in the forest sector in 1975 is estimated at $650 million, approximately the same as in 1974.

      The value of mining production increased by 2.2 per- cent to an estimated $1.22 billion in 1975. Coal became the major mineral product of British Columbia for the first time since 1903 as the value of production increased by 125 per cent to an estimated $348.5 million. This increase was largely the result of a substantial increase in the price received for coal. Copper lost its position as the major mineral product as a result of a 42 per cent decline in the value of production to an estimated $312, 1 million as price and volume both fell substantially. The performance of other mineral products was mixed in 1975.

      Farm cash receipts rose by 2 per cent to an estimated $373 million.

      The wholesale marketed value of fish and fish products declined by 34 per cent to an estimated $146 million as a result of a lengthy labour dispute and an off year for salmon runs,

      The growth of the travel industry moderated somewhat as travel receipts are estimated to have risen by only 10 per cent to $856 million, after much larger increases in previous years.

      Capital and repair investment in British Columbia increased by 8.9 per cent in 1975 to an estimated $5.7 billion. Construction spending increased by 9.6 per cent, while spending on machinery and equipment rose by 7.9 per cent. Housing was the weakest sector, showing a decline of 5 per cent, further reducing the supply of affordable housing.

      Now to the budgetary position for the current year 1975-76.

      Mr. Speaker, I would like to direct the attention of the House to the financial situation we found ourselves in as a new government on December 22.

      The budget presented in this Legislature one year ago forecast revenues of $3.223 billion and government expenditures only slightly less to provide for a small revenue surplus. When we took office, we needed an immediate assessment of the budget position to be able to develop a sound program of government spending for the next budget year.

      One of the first decisions was to establish an independent review of the province's financial affairs inherited from the previous government and projected through to the end of the current budget year. The national firm of Clarkson, Gordon and Co., chartered accountants, of Toronto, was appointed to review the financial statements and forecasts for the fiscal year of the government, its agencies and Crown corporations. Mr. Speaker, I would like to table that report in the House at this time with your permission. The report to the Minister of Finance from Clarkson, Gordon dated February, 1976.

      Mr. Speaker, last month the hon. Premier reported the financial results of that review to the people of this province. The picture presented of the province's finances was not a happy one.

      The review substantiated that revenue projections to the end of the current budget year, March 31, would more realistically approach $2.9 billion, a drop of $323 million from the original estimate. Expenditures were running about $218 million higher than the budgeted figure. The forecast for British Columbia at March 31,1976, is therefore $541 million.

      This is a staggering deficit from half a million dollars surplus forecast.

      It will wipe out the S 143 million provincial surplus account and it means the province for the first time in 24 years will have to borrow money to pay its bills.

      What became obvious in our Studies was that the government of the day was apparently quite aware that its 1975-76 budget was a speculative one. Revenues were indicated to be about $200 million less than required to meet the spending estimates. Even with this knowledge, the NDP government chose a questionable route.

      Their solution: inflate the revenue projections and gamble that the economy would recover.

      When it became obvious that revenues would fail to meet projections, reductions in public service employment and other expenditures were implemented. Despite this action, the fiscal year 1975-76 expenditures budget approved by the Legislature was reduced by only 1.6 per cent. Revenues, on the other hand, are expected to be 9.4 per cent lower than the original forecast.

      Dealing first with the revenue shortfall, Mr. Speaker, note should be taken of those revenues which fell short of original anticipations.

      The most noticeable drop in resource revenues relates to timber sales. The declining world market for lumber, coupled with slow domestic demand, has caused provincial timber sales revenues to fall from the originally estimated $135 million to just $35 million for the current fiscal year. This one item alone accounts for $ 100 million, or 3 1 per cent of the total $323 million revenue shortfall. This should not have come as any surprise last year. The present Premier said on March 3, 1975, in the budget debate, that the revenue estimates were subject to serious question in view of the pessimistic economic climate at that time.

      In the budget presented a year ago, it was noted that corporation income tax revenue had risen substantially as a result of strong profit gains for British Columbia businesses. Considering this trend, it was originally expected that the government would realize $260 million in corporation tax revenue. However, in view of the reported losses by major companies operating in this province, the current forecast of $200 million indicates revenue from this source will fall $60 million short. Again, the signs were there for the former government to read, but they just closed their eyes.

      A decrease of $83.1 million is now anticipated in collections from the federal government under joint service programs. Recoveries under the Hospital Insurance Act are forecast to decrease to $233 million from the originally estimated $285 million, while those under the Canada Assistance Plan will fall from $207 million to $180 million.

      Revenue derived from the social services tax will be $40 million less than expected. Instead of the planned $480 million, only $440 million revenue is expected to be realized.

      Revenue from motor fuel taxes will be 14.2 per cent less than originally estimated, contributing $28 million toward the current-year deficit.

      The Liquor Act revenues this year are now forecast at $136 million, 12.3 per cent below the $155 million estimated figure.

      Revenue collected under the Mineral Land Tax Act and mineral royalties legislation will be 21.7 per cent lower than originally estimated, due mainly to substantially lower levels of production.

      Compounding revenue shortfalls are the over expenditures encountered in administering current year programs. The previous government underestimated the cost of providing health services during the 1975-76 fiscal year by $27 million. At

      March 31, 1975, the British Columbia Medical Services Plan held $46 million in cash and investments to meet future claims. This cash reserve has now been used up and by March 31, 1976, there will be no money in the plan to cover claims costs.

      Premium collections were plainly inadequate. It is estimated that if the province continued to operate the Medicare plan on the same financial basis, the transfer of $5 1 million would be necessary to meet future claims.

      Mr. Speaker, the Clarkson, Gordon report showed that non-budgetary expenses will total about $260 million in the fiscal year 1975-76. These are expenditures for which the previous government made no provisions whatsoever.

      The total, I must point out, excludes the province's statutory obligation for payment of the natural gas producers' federal income tax on deemed income, commonly known as producers' gas tax. This liability is estimated to be as much as $52 million.

      Included in expenditures for which no money was budgeted are the estimated $175 million accumulated operating deficit to February 28, 1976, of the Insurance Corp. of British Columbia; the $32.6 million estimated operating deficit of British Columbia Hydro and Power Authority; the $26 million capital grant to the transit bureau; and the $20 million grant to the British Columbia Railway to meet part of the estimated $47 million operating loss.

      Now criticism has been leveled at the auditor's report for the inclusion of these items, particularly the large ICBC deficit. The members of the former government who were directors of ICBC, and the Minister of Finance (Mr. Stupich) who was chairman of the Treasury Board, having full knowledge of the financial loss being forecast for the insurance corporation, in my opinion, engaged in a massive cover up. Mr. Speaker, you could call it nothing less. These people concealed the problem from the public by failing to provide any amount in the provincial budget for this loss when they had ample evidence from senior management, as early as July, 1974, of the impending deficit.

      In spite of increased accident experience, rising claim costs and advice on how to overcome the deficit, these people chose to play with the rates. They should have been honest with the public and increased the rates a year ago to put ICBC on a sound financial footing. Instead, their fiscal irresponsibility and political cowardice created serious financial consequences for the corporation, and led directly to the premium increases of this year, which were necessary to rescue the corporation.

      Certainly, legislation was enacted allowing a transfer of a portion of existing provincial motor fuel taxes and motor vehicle license fees, but no action was taken by the previous government to transfer these taxes to ICBC. Mr., Speaker, you will find it impossible to believe the former administration was financially naive enough to believe any deficit in the insurance corporation would disappear as if by magic, or that there was a "Pot of gold" at the end of the Autoplan rainbow. That pot was empty by the time we lifted off the lid. One really wonders what the former government, were it still in power, would have done in 1976 to save ICBC from financial ruin.

      The government's decision to have the province pay the insurance corporation deficit to the end of the 1975 license year, and require the corporation to stand on its own feet from that point on, was an agonizing one. However, it is our firm belief that if government enters the marketplace in a field served by private endeavour, that operation should not be subsidized from the general public purse. While government does not usually enter into business to make excessive profits, the principle of non-subsidization motivates management to achieve an efficient and low-cost operation.

      Insuranced motorists play a vital role in any low-cost insurance operation;- 'lower Autoplan insurance rates are largely dependent upon a reduction in both the number and value of accident claims which can result from more cautious and defensive driving. Evidence is that the low premiums have encouraged careless driving with attendant higher social costs.

      There are other financial balances, both profit and loss, of other provincially owned operations not included in the report's provincial deficit. The British Columbia Railway, for example, was forecasting a loss in 1975 of $47 million.

      If this government had undertaken to pick up the entire net income or loss of all operations owned by the province, maintained the Medical Services Plan outstanding accounts reserve, and paid our liability in respect of the natural gas producers additional federal income tax, the total deficit would have been almost $700 million, Mr. Speaker.

      Whether we just look at the budgetary deficit of $281 million, the $541 million in the Clarkson, Gordon report, or the total aggregate of almost $700 million, the financial policies and investments of the former NDP government resulted in the largest deficit ever for the province and, for the first time in the last quarter-century, plunged this province heavily into debt.

      With $142.7 million in the bank our minimum cash shortage exceeds $400 million, and for the first time since the great Depression, the province must borrow to pay operating expenditures. There was, however, borrowing for government capital projects before 1952.

      This should be a clear indication to the citizens of British Columbia that this year's budget, ending this March 3 1, as planned by the former government, was excessive. However, everyone should realize that the inflation of the 1975-76 budget had its beginnings at an earlier date.

      In the three years between 1972, when the NDP was elected, and 1975-76, the provincial budget increased by 112 per cent - a compound annual rate of growth of over 30 per cent. Most of the increase was for operating expenses, not capital projects. The consequences for such budget acceleration are obvious: capital expenditures can be restrained without serious consequences, but operating expenditures are more difficult to contain and almost impossible, once established, to cut back.

      It would be a relief to us all if, by meeting and settling the deficit problem head-on, balance is restored to the province's finances. Unfortunately, this is not the case. The excesses which exist in the budget for the fiscal year just ending provide built-in momentum affecting next year's budget. For instance, the previous government left us a time bomb of retroactive pay going back to 1974 for all professionals -in government. Benefits programs negotiated for the total provincial public service will increase our employee costs by an estimated 281 per cent - and this after a 54.5 per cent increase in wage costs over the last three years.

      These legacies, Mr. Speaker, are of serious concern, for until the budget balance can be restored and real growth accelerated in the provincial economy, the government will be unable to fulfill its pledge to provide for the real needs of the people of British Columbia.

      The financial events detailed in the auditor's review demonstrate the need for more frequent government accountability with the citizen. Perhaps if such had been the case, the budget situation today might be somewhat different or, at the least, British Columbians would have had earlier indication of the problems. Just as a well-run business reports upon its finances to shareholders periodically through a financial year, so this administration believes the provincial government should report also. The comptroller-general prepares for submission to the Legislature a statement of revenues and expenditures for the nine months of the fiscal year, that is to December 31, pursuant to the Audit Act. However, this government is working towards publishing a quarterly financial review of the provincial accounts. This quarterly review should be a matter of interest to the financial community and to the general public. The review, along with our proposal to establish the office of audit or-general, reflects this administration's policy to improve the public disclosure of the province's business which, after all, is the people's business.

      As you know, Mr. Speaker, this new Social Credit government is committed to a financial policy of balanced budgets. British Columbia is rich in resources and the economy can support such a policy, but not at the present time with the level of expenditures in the 1975-76 budget, or the level of expenditures originally requested by the departments for the next fiscal year. The problem confronting this administration in establishing the provincial government's expenditure program for the fiscal year 1976-77 was how to balance the books, having in mind our social and economic goals and the ability of the individual and business taxpayer to pay the government spending. It has been extremely difficult for us to pick our options. The provincial budget, if allowed to grow at the excessive rates of the past three years, would seriously disrupt the federal and British Columbia government's program of combating inflation.

      Inflation is an insidious disease that feeds on itself and inflicts a heavier penalty upon the least protected members of the community. But it must be brought under control, and part of this solution, as this government sees it, is to restore balance and order to the provincial budget.

      Mr. Speaker, under this balanced budget, we are unable to have complete freedom in introducing new programs and are greatly restricted in augmenting existing ones. Even at that it will be necessary for the province to increase taxes. The taxpayers of British Columbia should need no further evidence of the stewardship of the previous administration when tax rates must be increased just to support the same level for many government programs.

      Now to the economic outlook for 1976, which provides cause for cautious optimism. Much depends on how well recovery proceeds in the economies of the United States and Japan, particularly the former. The pace of world recovery has been less rapid and not as broadly based as in past business cycles and there have been setbacks just when it appeared recovery was about to take hold.

      On balance, however, it appears the United States will be able to emerge from the latest recession slowly and avoid the inflationary boom that followed the previous one. In particular, it appears there will be some improvement in the American housing market, on which this province's lumber industry depends so heavily. From a peak of 2.4 million in 1972, the number of housing starts in the United States declined steadily to 1.2 million last year. It is expected this will rise to 1.5 million in 1976.

      Another influencing factor is the anti-inflation program in Canada. It was originally feared the export levy proposed by the federal government would remove the incentive for export industries to increase production in response to expected price increases. Mr. Speaker, I was the first provincial minister to raise objection to this levy at the meeting of federal and provincial Ministers of Finance in early February, and I was generously supported in my arguments by the other provincial ministers. The federal government subsequently withdrew this export levy, in great part, I think, because of this opposition. Mr., Speaker, if the remainder of the prices and incomes control program, with the help of federal fiscal and monetary restraint, is successful in holding down costs and prices, British Columbia's competitive position in world markets will improve, giving further impetus to recovery in our export industries.

      The province should experience an increase in the rate of real economic growth from the fractional rate achieved in 1975. The recovery momentum is expected to accelerate through the year. The real increase in gross provincial product in 1976 is expected to equal or slightly exceed the rate of 4.5 per cent forecast for Canada's gross national product.

      The year ahead is particularly important in our financial relations with the federal government. A number of important financial relationships, the post-secondary education financing arrangements, general income tax-sharing matters, and the National Equalization Program, for example, formally end in one year's time. The federal-provincial discussions on these issues, which are beginning now, will result in the replacement of the existing arrangements. In addition, the financing of many of the country's most important shared-cost programs involving health and welfare are also being discussed with federal authorities. All these programs taken together have an important effect on the financial position of the province, and on the manner in which the province is able to deliver the services the Constitution places within provincial jurisdiction. Our policy is to take an active and vigorous part in these discussions to ensure that the interests of our citizens are protected.

      Let me deal with just two of the areas which will be the subject of upcoming discussions with the federal government.

      For many years the federal government has contributed to the financing of the provinces' responsibilities in the field of post-secondary education. Prior to 1972 the federal government shared equally with the province on post-secondary education operating costs. Since that year, however, the federal contribution has been limited to an annual escalation of 15 per cent, which for the last two years has worked markedly to the disadvantage of British Columbia.

      Recently there has been a substantial growth in the cost of post-secondary education in British Columbia. Ibis, together with the limitations on the federal contributions, has meant an increasing share of the costs of our universities, colleges and other post-secondary institutions, has had to be born by the provincial treasury. We have, in effect, been penalized for the particular growth pattern that has characterized this part of the British Columbia public sector.

      The new arrangements which emerge in this area must correct the inequities that have affected British Columbia's ability to finance its colleges and universities.

      A second issue, Mr. Speaker, which will attract a good deal of our attention in discussions with the federal government relates to the question of the sharing of the personal and corporate income taxes between the two governments. It is now well established that the federal changes in these taxes, starting with the fundamental change in the income tax system in 1972, have had important effects on the province's own revenue position. The federal government sought to ensure that the adoption of the new income tax system in 1972 would not reduce provincial revenue from these sources from what they would have been in the absence of change. The provision entitled the "revenue guarantee" was adopted to give effect to this provincial undertaking.

      In every year since 1972 the province has received a revenue guarantee payment clearly indicating our provincial income tax revenue was decreased by the federal changes. This guarantee arrangement ends in one year. What is clearly required is a full discussion of the whole matter of revenue-sharing between the two governments.

      Such a discussion is particularly important given the substantial effect indexing of the personal income tax system, undertaken in. 1974, has had on provincial revenues. The federal government chose to exclude this revenue-reducing federal measure from the revenue guarantee provisions with the result that the loss of the province is not made up by the federal government.

      This has led to a serious and growing deterioration in the province's revenue position. If the federal government is to continue the collection of our income taxes by agreement, the province should have a guarantee that the provincial tax base will not be debased through federal action in respect of their own tax system.

      Mr. Speaker, on taking office this government moved quickly to work co-operatively with the federal government in the program to- combat inflation. We will introduce legislation this session which will protect the constitutional position of this province, and will serve to establish British Columbia-made regulations over both prices and wages in the public and private sectors of our economy.

      In the meantime, to protect the public interest, we will seek as part of our anti-inflation discussion with the federal government an agreement whereby the federal Anti-inflation Board will review pricing decisions for Crown agencies.

      To implement this, senior officials have been instructed to start formal discussions with the federal government towards an agreement whereby the Anti-Inflation Board will administer the national guidelines to our public sector. This is presently the case with public-sector employees under the agreement signed thus far by Alberta, Ontario, Prince Edward Island and Newfoundland,

      Any agreement which we will negotiate with the federal government will expire not later than April 1,1977, by which time the provincial changes will be in place so that we will have the machinery available to give proper leadership in public sector bargaining as well as to ensure a publicly accountable method of reviewing public sector pricing decisions.

      Mr. Speaker, given the financial realities confronting this new government, realities which would have confronted the previous government had it remained in power, and the performance of the provincial economy this past year, the determination of the 1976-77 budget has not come easily.

      It has already been indicated that the economics of our major trading partners, particularly the United States, are recovering from the recession that developed in late 1974. While it is unlikely we will experience the excessive demands of 1973 and the major part of 1974, there is a promising outlook for an increase in productive output which should generate increased employment in the province. The inflationary problem of the past three years was compounded by the excessive competition for limited resources between the public and the private sectors. It is not our wish to continue that competition. We prefer to give the private sector first access to available resources when the economic situation is positive for that sector. Production, employment and resource prices are showing signs of improving and the outlook is promising for their continued improvement throughout the next 12 months.

      In our view, the private sector is capable of reducing the slack in the provincial economy over the next year and it is appropriate, therefore, for the provincial government to introduce a balanced budget for the fiscal year 1976-77 in the restoration of the province's finances to a sound base.

      When speaking of a "recovery" budget, this does not imply maintaining the levels of government expenditure the same as in the fiscal year just closing. My job as Finance minister would be made easier under such circumstances. Wage and working benefit agreements were negotiated for public sector employees which, when applied to the greatly enlarged number of public servants, represent a large increase in non-discretionary expenditure,

      Mr. Speaker, the budget I am introducing today on behalf of the government calls for total expenditures of $3.6152 billion in the fiscal year 1976-77. This is only a 5.4 per cent increase over the current year's revised estimates.

      Now, Mr. Speaker, I would refer you to a table on the following pages, a table of expenditures of estimates by departments showing the previous budget estimate for the current year and the revised estimate by departments and the new budget for the coming year....

      In keeping with our desire to provide a full measure of services to people, we have substantially increased our spending for health care, education and income support. These have been increased by $339 million in total. By decreasing the cost of government in most other departments, the overall increase has been kept to only $185 million. We were required, of course, to trim substantially from the departments' original submissions in our review process. Some government programs have been hit harder than others.

      The tight fiscal position the province temporarily finds itself in, and the program constraints in the budget, present a challenge to the public service and those local governments and groups in receipt of operating funds from the provincial government to maximize program benefits from funds to be allocated next year.

      Speaking specifically now on elements of next year's budget, I would like to address my opening remarks t o the public servants who have responsibility for delivering many of the government services provided and who receive their compensation under the budget. In view of the essential financial constraints, the budget will not be as easy to administer as the "free-wheeling" spending budgets of the short-lived previous administration. The budget constraints are sudden but immediately required.

      If the previous government had responded in a responsible way to the excesses in their final budget - and the early evidence was before them - the severity of budget limits in this, our first budget, would have been lessened. But apparently they were not prepared, or perhaps able, to practice restraint even though the former Premier and Minister of Finance (Mr. Barrett) warned his own House members in his 1975 budget address by stating: "While we have the fiscal resources to meet these commitments, I must make clear to the hon. members that this volume of expenditure increases cannot be anticipated into the future." I might remind the members that this statement was in response to a budget 28.2 per cent higher than the previous year.

      And, despite this warning, that same Premier and Minister of Finance came back the following year with a dandy - with a budget of 48.3 per cent higher again.

      As a consequence, this government is challenged with making effective and efficient use of each budget dollar this next fiscal year.

      It is important also that we do not lose sight of the source of those budget dollars - the taxpayer - and see to it the taxpayers receive good value for their tax dollars.

      The salary and fringe benefits enacted under the previous administration for public servants were excessive in relation to increases obtained by most other labour groups in the productive sector. In addition to the significant increase in salary and fringe benefits bill over the past three years, the public service experienced a growth not seen since the immediate post-World War II expansion in the provincial service. Between the end of 1972 and 1975 the public service grew by 28 per cent, to almost 40,000.

      Mr. Speaker, I wish to draw to the attention of hon. members that in the Estimates of Revenue and Expenditure, which I will table in the House at the close of my speech, there is a deduction from the amount to be voted shown in each department Entitled "Staff reduction salary saving, " this results from government policy initiated in 1975 to effect an almost general 15 per cent reduction in the permanently established public service during this period of necessary restraint. This policy is modified in areas of essential government services such as staffing for the institutions. The hiring level of temporary staff is being constrained also. The total of this salary saving, to be accomplished by attrition, is $52 million.

      A pioneer program in Canada for reducing the burden of property taxes upon homeowners was the British Columbia Homeowner Grant. This program was initiated by the first British Columbia Social Credit administration in 1957. Introduced at $27, the grant has been increased in progressive stages until today it stands at a maximum of $200 for homeowners under 65 and $250 for those age 65 and over. A major step in this direction is planned this year through integration of the School Tax Removal Grant with the Homeowner Grant and a $50 increase in the additional Homeowner Grant to the 65's and over. This means an increase in the maximum property tax credit for this group from $330 to $380, effective the 1976 property tax year.

      The Homeowner Grant should be considered a basic exemption on property tax bills, just as the basic exemption exists for personal income tax Transfer of the School Tax Removal Grant to the Homeowner Grant increases the benefits to the advantage of the homeowner, particularly those of modest income. One further feature of the grant program which is to be altered - in response to a recommendation from the municipalities - is to increase the minimum tax payable by persons under age 65 from $1 to $50. The overall cost of this enlarged program is $6 million to the province.

      In this period of restraint, it is important that restraining measures be widely employed and accepted. As an example, in the public sector, the present salaries and allowances of all provincial ministers and members of the Legislative Assembly will be reduced by 10 per cent. In addition, similar cuts are being extended to some members of the Premier's office staff and some ministerial assistants.

      Total Legislation expenditure for 1976-77 will be held to $3.3 million, only slightly more than the revised 1975-76 expenditure figure.

      Expenditures under the executive council are estimated at $637,000 in the coming year, up from the revised estimate of $445,000 for the current year. This results from transfer of staff at the office of the Planning Adviser to Cabinet and Executive Council Administration to the Premier's Office and Intergovernmental Relations.

      The government recognizes the importance to British Columbia of a strong agriculture and food industry. In the next year's budget for the Department of Agriculture, increased emphasis will be placed on the marketing of agricultural products. Implementation of effective shared-cost merchandising practices will receive high priority so that the department will be in a position to offer its assistance in creating new markets for the British Columbia agricultural industry. Agricultural and Rural Development Act funds for projects have been increased to accommodate more activity in developing community pastures, irrigation and drainage projects and resource processing. The department will emphasize the development of Crown range resources under this federal-provincial program.

      To provide these services, $57.6 million is allocated to the Agriculture department.

      Now to the Attorney-General. Large yearly expenditure increases under the former administration have been experienced as well in the Department of the Attorney-General. In 1972-73, $42.4 million was expended by the department and in 1975-76 the comparable figure had risen to $107 million, an increase of 152 per cent. Estimated 1976-77 expenditures are $112 million, a 4.7 per cent increase over 1975-76 revised expenditures.

      Police costs are up $6 million next year to $27.3 million as a result of an increase in the cost of RCMP services rendered under contract with the federal government.

      The budget of the Department of Consumer Services for the coming year is $2.5 million, up from the revised comparative estimate of $1.7 million for 1975-76. In the government's overall fight against inflation, the department is monitoring consumer prices closely. It will also continue to promote fairness and responsibility in the marketplace.

      The government has provided the Department of Economic Development an increased budget to develop employment opportunities and to restore investor and customer confidence in British Columbia. The department's budget will go to $5.8 million from the revised estimate of $4 million in 1975-76, an increase of 44 per cent. While expenditures are to be increased, considerable economies will be effected in department overhead and administration. The major portion of the increase is for expanded technical assistance to encourage secondary industry in the province and for stepped up trade mission activities designed to create new jobs and income through expanding export sales.

      The department will also co-ordinate large-scale resource development to diversify economic activity on a regional basis. An example is the planning and co-ordination that will go into development of the province's northeast coal resources.

      The second largest single budgetary commitment for the coming year is for education.

      Expenditures for the Department of Education are estimated at $846.3 million, representing an increase of 10.9 per cent over the 1975-76 revised estimate.

      By far the largest expense will be incurred in the public school system. For the year 1975-76, $478.4 million was voted. This has been increased to $523.5 million for the coming year, representing a 9.4 per cent increase in basic education costs. It accounts mainly for the inflationary aspect in the provision of educational services as the school-age population has recently become stabilized.

      The newly created Department of Environment brings together the basic life-sustaining resources of land, air and water, and provides a central focus for environmental concerns. We are committed to a policy of economic growth with high environmental quality. Mr. Speaker, this is best achieved through co-ordination and co-operation between departments of government, Crown agencies and the private sector to ensure full consideration is given to environmental concerns in any major development within the province.

      Expenditures under the new department are estimated at $43.3 million in 1976-77 compared with $37.3 million spent in the current year by other departments that have now been consolidated into Environment. Of the expenditure increase, $ 1.5 million results from the provision in the department's budget for provincial major disaster expenditure previously provided through a special fund. An equivalent amount of the increase is devoted to the resource inventory program.

      Now to the Finance department. Total moneys to be voted under the Department of Finance for 1976-77 have risen to $164.8 million from a comparative $115 million this current fiscal year. Several reasons account for this large upward adjustment. An anticipated $40 million annual interest payment, representing 1.1 per cent of the total budget, must be provided on the borrowed money necessary to cover the deficit incurred in the 1975-76 budget year.

      A bill is being introduced to provide for this borrowing. In increase from $9.4 million to $55 million in the "grants, contributions and subsidies" vote flows from the inclusion in the budget for the first time of the provincial government's federal income tax liability on behalf of natural gas producers, and $1.5 million required for the underground utility service program previously provided from a special fund.

      Salary contingencies which were included within the amounts to be voted for individual departments in the current year have been consolidated into the Department of Finance. An amount of $53.3 million is necessary for pay increases already committed under existing contracts for all British Columbia public service employees.

      Previous provisions for forest protection and maintenance programs were made under the now phased-out Department of Lands, Forests and Water Resources. Departmental restructuring has resulted in the newly created Department of Forests.

      Forest-related expenditures for 1975-76 are estimated to be $79.1 million, while next year $98.6 million is required. Over $11 million of the increase results in a change from net to gross budgeting for both coastal scaling and the reservoir waterways improvement program. The revenue from these activities now will be taken into provincial revenue. The effective increase in the department, therefore, is only $8 million.

      It is not possible to reduce the reforestation program with its current level of nursery stock of 100 million trees, and planting stock of 75 million, without a net reduction in British Columbia's most important renewable resource.

      The program suffered this past year because the previous administration used $840,000 of its reforestation funds to provide decorative trees for Habitat, trees which Habitat did not require and which this government is forced to give away to B.C. municipalities.

      Fire-suppression estimates have been increased $4.2 million, or 84 per cent, to reflect a more realistic level of annual expenditures.

      The largest single expenditure is for health care. The province's comprehensive health-care program will require an estimated expenditure next year of $871.4 million. This is an increase of $148.1 million, or 20.5 per cent, over the revised current-year estimates. This budget amount represents almost one-quarter of the total budget for next year.

      Comparable expenditure figures for 1970 and 1965 were $198 million and $65 million, respectively, demonstrating that British Columbia health-care costs have risen tremendously during the past 10 years.

      The continued pressure of providing hospital facilities for a rapidly growing provincial population, combined with increased utilization, has caused a rapid upsurge in the cost of providing hospital care and the Medicare program. Total outlay for next year's hospital-care program is estimated at $553 million. This amount is over three times the $177 million paid to hospitals in 1970 and represents an expenditure of $225 on behalf of each British Columbia resident.

      Virtually all British Columbia residents are included under the Medical Services Plan. This plan, administered by the Medical Services Commission, is expected to require a contribution from the province of $192.5 million next fiscal year, representing a cost increase of 43 per cent.

      The revised cost estimate of operating the emergency health services program in the current fiscal year is $15.6 million, up from the $11 million originally budgeted. This program consists of province-wide ground ambulance service and is estimated to cost $17.8 million in 1976-77.

      Provision for the construction of special-care homes has been transferred from the Department of Housing.

      In periods of restraint, essential health-care services are an area where cost-cutting is of limited result, by the very nature of the service. However, due to current revenue constraint, it is hoped that not only the user but the also the provider of hospital and medical services employ a degree of financial awareness regarding the use of existing health-related facilities.

      The government has reviewed the historically low user charges for hospital and medical care and decided that under the current financial circumstances for the province it was appropriate to make some upward adjustments.

      An area of continuing concern is the hospital co-insurance charge of $ 1, particularly as it relates to senior citizens in receipt of provincial income assistance while under long-term care in extended-care hospitals. On the basis of the existing $1-a-day charge for care, an anomaly exists where such persons are accumulating estates for their heirs from public-income assistance payments. In view of these circumstances, Mr. Speaker, the government considers it appropriate to raise the $1-per-day co-insurance charge to $7-per-day to persons in extended-care facilities, effective June 1,1976. For patients in general- or acute-care hospitals, the co-insurance charge is to be increased from $1 to $4 per day, also effective from June 1,1976. The increased acute -care per them charge should not bear heavily upon the individual.

      The estimated $14 million in increased revenue in the fiscal year 1976-77 from this charge will remain with the hospitals and will have the effect of reducing the amount of each hospital budget to be covered by payments from the province.

      Another service which was turned from a profitable to a deficit operation during the short term of the New Democratic Party administration is the British Columbia Medical Plan. Established by the first Social Credit government in this province in 1965, the plan maintained a strong financial position while providing comprehensive medical coverage at low premium rates which are subsidized for low-income residents.

      At March 31,1973, six months after the former government assumed power, the medical plan had cash and investments of $64.9 million, which by March 31,1976, will have completely disappeared. With this cash all gone and costs up, the government has no option but to restore the medical plan to a sound financial footing.

      The premium rates, which have remained unchanged since introduction of the plan, will be increased, effective July 1,1976. The effect of the premium increases is as follows - and, Mr. Speaker, I show three categories here: the present category where there's no taxable income, the rate is increased for one person from 50 cents to 75 cents per month; for a family of two, from $1 to $1.50; for a family of three or more, from $1.25 to $1.87.

      In the middle category with taxable income of $1 to $1,000 in the previous year the premiums are increased from $2.50 to $3.75, from $5 to $7.50, from $6.25 to $9.37.

      In the largest category represented by taxable income above $1,000 in the previous year the rates are increased from $5 to $7.50 for one person; from $10 to $15 for a family of two; and from $12.50 to $18.75 for a family of three or more. This is a premium increase of 50 per cent.

      Estimated income for the plan from subscribers as a result of the premium rate changes is $40 million for the nine months of the fiscal year 1976-77. This still leaves an estimated operating deficit of $42.2 million to be financed from general provincial revenues after the payment of an additional $8 million for premium subsidies for low-income persons. If rates were not increased, the province would have to pay the medical plan $90.2 million in the next fiscal year.

      The Department of Highways and Public Works results from the recent amalgamation of the former Department of Highways and the Department of Public Works. This amalgamation has served to reduce the necessary expenditure in the minister's office by 28 per cent for 1976-77. Substantial cuts have been made in both highway and public works capital projects during this period of budget restraint. Accordingly, total expenditures of this department decline to $321 million next year from the revised level of $336 million in the year just ending.

      Compounding the call for restraint is the cost-inflation factor involved in capital projects. Cost increases within the framework of the budgeted figure serve to diminish the amount of work produced.

      In 1972-73, expenses under the rental vote in the Department of Public Works were estimated at $3 million. In the current fiscal year, the revised rental total is $15 million, a three-year increase of 400 per cent. Next year, projected rental will be $17.1 million, substantially curbing the growth rate in Public Works rentals.

      This government is locked into many long-term leases negotiated by the previous government on building space which wasn't needed, and, as a result, has remained empty and unused since the leases were signed. It is more than likely much of this space will continue to remain empty unless the government is able to negotiate out of some leases or rent the accommodation during the remainder of the lease period.

      In gross terms, expenditures by the Housing Department are budgeted to reach $113.4 million in the next budget year compared with the revised 1975-6 expenditures of $81.2 million. While expenditures for housing will be higher, offsetting federal payments and the provincial personal income tax rent credit program result in a reduction of $7.8 million in the estimates.

      The Elderly Citizens Renters Grant will now be provided through the provincial personal income tax in the form of a rent credit and the $3.5 million shown for the last year is no longer part of the department's estimates. Renters under age 65 also receive their rent credit through reduced income tax payments. The cost of the renters credit program is $15 million.

      A total of $16 million is earmarked in the next fiscal year to supplement the Home Acquisition Grant Fund.

      The federal Minister of Housing has recently announced new housing initiatives on behalf of the federal government and has invited the provinces to join with the federal government in these programs. We have decided to accept the invitation of the federal Minister of Housing to join with him through an integration of the programs of our respective governments.

      It is our intention to provide up to a maximum of $750 of additional assistance to purchasers of homes under the Assisted Home Ownership Program.

      We intend to integrate the provisions of the Home Acquisition Grants and second mortgages with this new program. In this way, we will avoid double benefits and ensure assistance is in relationship to need. Further, with respect to the purchases of used homes, it is our intention, while eliminating the $ 5 00 Homeowner Grant~, to increase the second mortgage available from a maximum of $2,500 to $5,000.

      The creation of an adequate supply of rental accommodation is a priority of this government.

      We are prepared to provide up to a maximum of $600 in the form of a conditional grant and a further $1,200 interest-free loan per unit to builders wishing to create rental accommodation under the assisted rental program. It is our view that with this inducement to the private sector, we will be able to create a healthy vacancy rate where it does not exist today.

      A number of communities, because of their location and supply of developed land, disproportionately shoulder the burden of growth. In order to assist these municipalities, we will make available an additional $500 grant per new unit, making a total available to municipalities of $1,500 per unit under the municipal incentive grant program.

      Expenditures under the Department of Human Resources will increase from the revised estimate of $481.9 million in the current Year to $589.6 million in 1976-77, an increase of 22.3 per cent. This increase reflects the government's commitment to the comprehensive social services programs provided to protect the basic human requirements of the citizens of this province.

      The Income Assistance Program, designed to provide for special needs - education upgrading, vocational training and work incentives - is allocated $218.8 million next year.

      Services for senior citizens and handicapped persons will cost $187.4 million, of which $128.7 million represents the British Columbia Guaranteed Available Income for Need Act (GAIN) . Mr. Speaker, this program is $23.8 million more than last year and extends benefits to qualifying persons in the 55-59 age group as well as to single-parent families. These extended benefits will provide $17 million more in payments, taken at very little extra cost to the province because the bulk of the funds will be provided through federal sharing The previous government, in our opinion, was remiss in not taking advantage of the federal money that was available in previous years to provide this increased benefit.

      The adult-care program accounts for another $48.4 million of the total. This program provides care in boarding houses and rest homes for the elderly. Rising numbers of patients and increasing per-patient costs account for the large expenditure increase.

      Family and Children's Service expenditures are estimated at $65.8 million in 1976-77.

      The Pharmacare program provides prescription drugs free of charge for those age 65 and over, and subsidized drug costs for those in need under the age of 65. This is estimated to cost $24.6 million. Special programs for the retarded will have an expenditure of $33.6 million in 1976-77.

      Expenditures under the Department of Human Resources in next year's budget are one of the three largest allocations in the budget.

      The budget for the Department of Labour totals $19 million, an increase of 34.8 per cent over the comparative revised estimate for the current year. This increase is attributable in part to the activities of the department respecting labour-management relations, and is intended to enhance the ability of the department to deliver the extensive services offered by the government to employers, employees and their accredited representatives in the orderly adjustment of their interrelated affairs.

      It should be noted that the Department of Labour has other significant areas of responsibility which, while they receive less prominence, are of no less importance to the province. Therefore the increase also reflects the intention of the government to strengthen services in the fields of apprenticeship, manpower training, occupational health, labour standards and human rights.

      Mr. Speaker, attention is also drawn to the inclusion in the department's budget of funds for the administration of those matters which directly affect the native Indian citizens of British Columbia, and which may fall outside of the responsibilities of the other departments of government.

      The Department of Mines and Petroleum Resources will receive $7.9 million, which is $2.1 million more above the revised 1975-76 estimates. The new energy resources evaluation program receives $5 00,000 for coal research and $ 100,000 for uranium.

      The Department of Municipal Affairs will spend an estimated $145.4 million next year, principally in the area of grants to municipalities and other local governments and for transit. The transit supply program escalates to $15.1 million next year from $106,000 this year, primarily to meet commitments the former administration made for new buses and construction of new terminals for the commuter ferries planned for Vancouver harbour.

      The reduction in the per capita grants under the Municipalities Aid Act results from the fact that 80 per cent of the population catch-up grants were paid in 1975 with only 20 per cent remaining payable in 1976-77. The provincial commitment under the Sewerage Facilities Assistance Act is increased $5 million in 1976-77 to a total of $11 million. A total of $30 million is provided for the province's revenue-sharing program with municipalities, $10 million more than provided under the Natural Gas Revenue Sharing Act in 1975-76.

      The provincial government realizes the increasing demand upon municipal and local governments for services coupled with the cost inflation element in providing these services. These are trying times for all levels of government, Mr. Speaker. The provincial government recognizes a responsibility to share partly in meeting these fiscal demands.

      The Department of the Provincial Secretary is estimated to spend $100.8 million in 1976-77, a one-year increase of $20.3 million or 25.3 per cent, principally in the form of increased public service benefits.

      Expenditures under the Public Inquiries Act are increased $1 million next year. While originally budgeted for $150,000, the current year outcome is expected to be $1.2 million due to inquiries initiated by the previous government. The bill for Unemployment Insurance Commission payments representing the employer's contribution coveting provincial public servants is increased from the revised estimate of $6.1 million in 1975-76 to $7.9 million.

      The appropriation for the development and operation of the museum for the next year is increased to $3.5 million.

      In 1976-77, expenditures under the Public Service Commission will rise to $27.4 million from the current year's level of $9.3 million - a tripling of costs in one year. Public service employee benefit costs are expected to escalate to more than $24 million next year from the $6.3 million revised estimate for the current year, an increase, Mr. Speaker, of 281 per cent. The recent rapid increase in employer-paid benefits to public servants, combined with high wage increases gained by public servants under the former government, account for this tremendous cost increase.

      The public service extended health care and dental plan, for example, will almost double this year's cost to $7.2 million next year. British Columbia public servants are not required to pay any premiums under this plan.

      The public service group insurance plan expenditures for 1976-77 will be $1.9 million compared with a revised cost of $732,000 for the current year, representing an increase of 160 per cent.

      The cost of the provincial contribution on behalf of public servants' Medicare premiums increases from $1.8 million to $2.2 million, and the optional selection of benefits plan, not in the current year's budget, will cost $8.4 million next year.

      The Superannuation Branch, administering numerous pension plans, is estimated to incur expenditures next year totaling $41.3 million, up from the revised estimate of $38.4 million this year.

      Mr. Speaker, these, coupled with the implementation of the 35-hour week and the new COLA clause, have a devastating effect upon the coming year's budget.

      The new Department of Recreation and Travel Industry receives an appropriation of $42.9 million. This department has been created by uniting elements of the Department of Recreation and Conservation and the Department of Travel Industry. Following a four-year program of parks development initiated by the former Social Credit governments through special funding of $25 million in 1971 and 1972, the budget for this activity has been reduced by $6.2 million and priority placed on maintaining existing facilities and services.

      The appropriation for the Department of Transport and Communications is reduced $6 million to $109.1 million, a decrease of 5.2 per cent.

      Expenditure for British Columbia Ferries is reduced $39 million to $59 million, of which $34 million will provide for the operating and capital expenditures until such time as the ferry system will become a Crown corporation. A total of $25 million is provided to cover the expected operating deficit of the new corporation for the remainder of the fiscal year.

      A new appropriation in the amount of $12 million is provided in the estimates for this department to cover the 25 per cent rebate on automobile insurance for under-age drivers with safe driving records in the 1976 insurance year. Under the safe-driver incentive plan, the government is concerned not only over the financial costs of accidents and injuries, but also the tremendous social costs involved.

      Now the financing of Crown corporations. The Minister of Finance is the fiscal agent for provincial Crown corporations and agencies, and as such is required to provide capital construction funds and working-capital advances. Capital construction funds are provided from provincial trust accounts, the Canada Pension Plan Fund, and market borrowings. Certain statutory loans and advances are provided from the provincial consolidated revenue fund.

      For the current fiscal year, the province has made available $881 million of investment funds to the Crown corporations for capital purposes. This amount was provided by provincial trust accounts ($367 million) , Canada Pension Fund ($214 million) , together with $300 million from market placements.

      The British Columbia Hydro and Power Authority will receive $541.5 million in capital funds during the current year, comprising $26.5 million in Canada Pension Fund proceeds, $215 million of provincial trust funds, and $300 million from market borrowings.

      On June 1,1975, a United States issue of $150 million 30-year sinking fund bonds, with a coupon of 9.625 per cent, was sold at $99.75 for an effective rate of 9.65 1 per cent. A $50 million 25-year issue was placed in the Canadian market on October 15,1975. These 10 per cent bonds were priced at $99.5 0 to yield 10.09 per cent. In addition, $ 100 million was raised on December 16, 1975, by an offshore issue in Canadian funds at 9.75 per cent, with an average term of five and a half years.

      The $29 million British Columbia Hydro Canadian issue, series T, maturing in 1995, but retractable to December 29,1975, was renewed for 20 years at a rate of 10.75 per cent. On September 1,1975, $25 million of 8.5 per cent parity development bonds were marketed to replace the $25 million of similar rate bonds which matured on that date.

      Legislation will be presented to the House in this session to increase the borrowing power of the Hydro Authority from $3 billion to $3.5 billion.

      The British Columbia Railway Company will have received $185.5 million in capital investment funds during the fiscal year 1975-76. This comprises $150 million from provincial trust funds and $35.5 million from the Canada Pension Fund. The railway currently holds $40 million of these funds in short-term investments against future commitments. Series R parity development bonds amounting to $16.5 million were retired in October, 1975, to reduce the amount of the issue in the hands of the public to $24 million. Series RR parity bonds outstanding total $1 million.

      During this fiscal year the railway also received a $20 million grant from the province. Mr. Speaker, I want to emphasize that this grant was approved by order-in-council in early 1975, and was specifically at that time defined as a grant, and not as an advance to be returned.

      Approval for an increase in the borrowing authority of the railway from $650 million to $900 million will be sought from the Legislature during this session.

      In the fiscal year 1975-76 the British Columbia School Districts Capital Financing Authority will have made available $103.1 million to school districts throughout the province for the construction of schools. Since 1963 an aggregate sum of $662 million has been provided to school districts by the authority.

      During the same period the British Columbia Regional Hospital Districts Financing Authority will have provided $50.7 million to regional hospital districts for hospital construction. A total of $199.6 million has been supplied to hospital districts by the Authority since 1967.

      Total capital requirement of the government Crown corporations for the fiscal year 1976-77 are estimated at $950 million. This comprises $530 million for Hydro; $152 million for the railway; $143 million for school construction; $85 million for the hospital districts; and miscellaneous other requirements of $45 million.

      With $40 million already provided the railway for next year's requirements, the net required is $875 million. Government-administered pension and sinking funds and the Canada Pension Fund could yield approximately $500 million next fiscal year toward these requirements.

      Legislation will be introduced at this session extending the provincial guarantee of principal and interest repayments to borrowings of the British Columbia Harbours Board.

      Just this month the province provided another $5 million to the British Columbia Development Corp. to provide loans to stimulate additional job creation. The entire issued stock of 250,000 shares of the corporation is held by the province for a total investment of $25 million.

      In July, 1975, the province loaned $1 million to the Pacific North Coast Native Co-operative to supplement earlier loans totaling $2 million to assist in the development of an integrated fish industry operation at Port Simpson. This is in addition to $6.3 million in grants and $860,000 in provincial guarantees given. The government has taken over direct management and supplied an additional $2.5 million to restructure the operation and place it on an efficient basis.

      Last December the previous government advanced $2.5 million to the British Columbia Central Credit Union to enable a loan to S.I.B. International Industries Ltd. of Sechelt. for the purchase and refit of the motor vessel "Arctic Harvester". The loan is repayable over a period of 10 years at 8 per cent.

      The Bums Lake Native Development Corporation is another native enterprise receiving financial assistance from the province. During the current fiscal year $70,000 has been advanced to this corporation, bringing total advances to $825,000. In addition, a bank loan of $690,000 has been guaranteed by the province to assist the corporation in the acquisition and operation of Babine Forest Products Ltd.

      Under the authority of the Farm Products Industry Improvement Act and through the fund established under the Act, the province invested $425,500 in the purchase of a 40 per cent equity interest in Swan Valley Foods Ltd. in this fiscal year. In addition, $2 million was loaned to this company in 1975-76 for a three-year term at 8.5 per cent interest. A further $2.5 million borrowed by this company from a financial institution was guaranteed by the province, increasing the total amount of the provincial guarantee to this firm to $7.5 million.

      Since 1952 the provincial government credit rating has been reserved exclusively for the benefit of provincial Crown corporations and important local projects such as schools and hospitals. The strength of this rating was developed through the sound provincial financial position established under the former Social Credit administration, established by adhering strictly to a pay-as-you-go policy for both operating and capital expenditures of government. Without this sound financial position the ability of the provincial guarantee to provide the lowest cost long-term financing for these essential public requirements is in jeopardy. This is one more cogent reason for bringing the 1976-77 budget into balance.

      Now, Mr. Speaker, to the revenue measures for the next fiscal year. The previous administration left the provincial financial cupboard bare. While extolling the principles of a balanced budget and no direct borrowing by government, that administration allowed public service employment to rise to excessive levels, introduced new programs and expanded existing programs beyond the ability of prevailing tax rates to finance.

      Mr. Speaker, that administration did the voters and citizens of British Columbia a disservice by espousing a principle but not supporting it in practice. (Mr. Speaker, someone's been adding grapefruit juice to my grapefruit juice.) Their legacy to this new administration is the job of restoring the credibility of the province's finances. In terms of the revenue shortfall in the current budget and the increased level of expenditure necessary in next year's budget, this challenge is no small under-taking.

      Even though measures have been taken to decrease government spending at all levels, the minimum increase required in next year's revenue to balance expenditures is $696 million or 23.9 per cent. This rate of revenue increase is equivalent to the increased yield in 1973 and 1974 when the provincial economy, strongly supported by international markets, was growing at an annual rate in excess of 18 per cent. In 1975, the gross provincial product only increased 10 per cent and provincial government revenues 11.2 per cent. Obviously, in the absence of an 18 per cent growth in the B.C. economy next year, revenue adjustments are necessary.

      Based on existing tax rates, license and fees and the expectation of a 14 per cent growth in the economy, provincial government revenues are forecast to be $3.319 billion in the next fiscal year, an increase of 13.7 per cent. However, this level of revenues falls short of balancing the budget by $295.5 million.

      Several alternatives to overcoming the budgetary deficit were available to the government, including further reduction in the level of government expenditures, debt financing of capital expenditures, direct provincial borrowing and increases in revenues.

      There has been some comment recently in the news media over the sustained policy of the Province of British Columbia in financing all operating and capital expenditure from income. The suggestion is made, Mr. Speaker, that this fiscal philosophy is outmoded because all other provincial governments in Canada and the Government of Canada all borrow for capital projects. The implied rationale here appears to be that whatever everyone else is doing must be right.

      Mr. Speaker, under a pay-as-you-go financial policy, the first Social Credit administration in British Columbia established the province on a sound financial footing that was the envy of many other jurisdictions. Tax rates were among the lowest in Canada and, along with that administration's economic development policies, the province experienced a rate of growth exceeding that of every other province.

      The cost of borrowing is generally well recognized. Most home owners know that a 20-year mortgage at 10 per cent interest costs over double the original amount, and on z 30-year mortgage the amount repaid is three times what is borrowed. These facts offer sound support to the financing of all expenditures from current income if the economy has matured to the degree to support such a policy.

      At issue here is the philosophy of deferring today's costs to a future date. Failure of the tax base to grow for the support of an increasing debt has a greater potential for endangering the provision of essential government services than a pay-as-you-go finance policy.

      It is far better that the money that has to service dead-weight debt go to provide extra services for people.

      A sound budget policy demands better planning, but it offers a greater guarantee of more efficient and effective use of the tax dollar. To borrow is the easy way out, but against that is the burden it creates for future generations. We will leave our children and their children a large enough legacy of problems, without this additional one of paying for government deficits when, with determination and minimum sacrifice, we can overcome our problem now.

      This government believes the economy is capable of supporting a pay-as-you-go policy for provincial government financing. Therefore it has rejected borrowing either for budgetary deficits or government capital expenditures, except for those capital projects I have already referred to as being removed from the province's budget.

      The government has decided to balance the next year's budget by taking two courses of action - one, increasing tax and other revenues and, two, recapturing certain of the special purpose funds.

      In the area of tax and other revenue adjustments the government proposes the following:
1) An increase of 2 percentage points in the corporation income tax rate to 15 per cent, except for small businesses where the rate becomes 12 per cent. These rates are effective from January 1,1976, and are estimated to yield an additional $31 million. For a business fully qualifying for the small business tax rate and with taxable profits of $100,000, the provincial corporation income tax payable will be increased from $10,000 to $12,000. For a large business with taxable profits of $1 million, for example, the provincial tax payment is increased to $150,000 from $130,000.

2) The personal income tax rate is to be increased 2 percentage points to 32.5 per cent, effective July 1,1976. The effect of this, Mr. Speaker, is to establish a rate of 31.5 per cent for the 1976 taxation year. This amounts to an additional 1 cent of provincial tax payable on every $1 of basic federal tax. Translating this rate increase to the amount of provincial tax payable, the increase for a single wage-earner with 1976 income of $10,000 is $1.23 per month for the year. For a married person earning $15,000 in 1976 and with two dependents under 16 years of age, the increase in tax is $1.92 per month. The yield in 1976 of this tax increase is estimated to be $23.5 million.

      Next, the cigarette and tobacco tax is to be increased, effective midnight tonight. The effect is to add 4 cents to the price of a package of 25 cigarettes and yield an estimated $ 10 million.
Next, a rather insignificant item: the social services tax, or sales tax, is to be increased 2 percentage points to 7 per cent.

      This rate is equal to.... Don't miss anything now, Mr. Member. This rate is equal to or lower than the rate in six other Canadian provinces. The estimated yield from this tax increase is $200 million, of which approximately $110 million will likely be paid by individual consumers and $90 million by the business sector. Generous exemptions will continue on most basic family consumables, for example, food, children's clothing and footwear, drugs, school supplies and reading materials, so, Mr. Speaker, the tax increase will not bear heavily on low and medium-income families.

      Lastly, liquor license fees are to be increased to yield $3 million more in this next fiscal year. The additional $267.5 million yield in the fiscal year from these increases provides total revenues of $3.587 billion, which is still $28 million short for a balanced budget.

      The government reviewed the special purpose funds which have been established from time to time since 1967 and now finds it appropriate to recapture certain of the funds for general government purposes.

      The Power and Telephone Line Beautification Fund was established at $10 million in 1972. Over the past four years only $2.2 million has been expended as the province's one-third share of the cost of placing utility lines underground. At this level of annual expenditure the government considers it more appropriate to include the expenditure as an item in the annual provincial budget.

      The Agricultural Aid to Developing Countries and World Disaster Areas Fund was provided $5 million in 1969, with the interest earnings dedicated to foreign aid. While the fund is being recaptured, an appropriation for $350,000, the annual interest earnings of the fund, is provided in the Department of Agriculture to carry on the province's commitment under this program.

      Since the Provincial Major Disaster Fund was established at $25 million in 1969, an annual average of $2.5 million has been paid from the fund. We have been fortunate - any disasters have been localized and relatively light in property loss. The government proposes to recapture the estimated $7.3 million fund balance at March 31,1976, and has provided a contingent amount in the estimates of the Department of the Environment for the coming fiscal year.

      The Green Belt Protection Fund was established in 1972 at $25 million. Over the past four years a total of about $22.2 million has been dedicated toward the preservation of green belt areas throughout the province in perpetuity. The province proposes to recapture the $2.8 million balance.

      The government intends to abolish the Economic Policy Analysis Institute Fund, which was initially established in 1973 at $5 million.

      The small unexpended balance of $94,792, remaining in the 1974 School Tax Removal and Resource Grant Fund will also be retained to general revenue.

      So, Mr. Speaker, the $28 million total of recaptured special purpose funds is as follows: Power and Telephone Line Beautification Fund - $7.8 million; Agricultural Aid to Developing Countries and World Disaster Areas Fund - $5 million; Provincial Major Disaster Fund - $7.3 million; Green Belt Protection Fund - $2.8 million; Economic Policy Analysis Institute Fund - $5 million; School Tax Removal and Resource Grant Fund - $94,792. A total of $27,994, 792

      This provides the necessary amount to balance our fiscal year 1976-77 budget.

      Mr. Speaker, in summary, the balancing of the province's 1976-77 budget is achieved as follows: net departmental expenditures after deduction of departmental staff reduction salary savings - $3.615 billion; estimated revenues at existing rates - $3.3 19 billion; leaving an estimated revenue shortfall of $295.494 million, which is then made up of estimated revenue from increased taxes and fees of $267.5 million, and recaptured special purpose funds of $27.994 million, arriving at a budget balance.

      Mr. Speaker, this government was elected to restore responsible, sensible administration to the province of British Columbia. Clearly the facts have revealed the shocking need for such action. To this our Social Credit government has responded positively in the short time available to us in preparing next year's budget. I have characterized the budget as a "recovery budget." But this budget isn't an end to our search to save money. All ministers are continuing their evaluation of programs to establish their effectiveness and worth.

      The former government, now in opposition, has left the citizens of British Columbia a bitter pill to swallow. The sharp reversal in the province's finances in a short period of three years is an indication of how fragile a province's finances are. Mr. Speaker, the very nature of our first budget is a measure of this government's commitment to a quick restoration of the province to a sound financial base.

      But along with restoring balance to the government accounts, we must offer incentive to the private sector in British Columbia which has been discouraged over the last three years by the policies of the previous government. We believe it is possible for government and business to work co-operatively to each other's mutual advantages and those of the individual citizen. During this session amendments will be introduced to existing legislation to restore confidence to the private sector.

      Certainly our two basic industries, forestry and mining, must be encouraged to provide the jobs we need for a more stable economy. Through proper development the economy will grow, incomes will be augmented and sufficient government revenues will be generated to ensure continued support of a high standard of government services.

      Mr. Speaker, as I stand here contemplating once again the sad and wretched state into which our province has fallen in three short years, I say, never again! Never again must the people's money be wasted so carelessly. Never again must political expediency replace sound management. Furthermore, never again must government be allowed to engage in such a disgraceful financial cover-up. Never again must a government be allowed to cripple our productive effort. Never again should the people of this province put their trust into the hands of people to whom money is "something other people earn by hard work" and spend so easily.

      Mr. Speaker, as I look at the last, sad remarks of the former government sitting across from me, I believe that when the people read this tragic story of how their money went down the drain, they will never again return that party to power.

      Mr. Speaker, the parties that expound this irresponsible use of public funds are on the skids everywhere in the world. The people have thrown the socialists out in Australian. They have been thrown out in New Zealand. They are hanging on the ropes in Britain, and their leader has quit. And they have been thrown out here. Now the chief architect of this financial disaster in British Columbia is trying to slide back in. How can the former Premier and Finance Minister (Mr. Barrett) of this province have the gall to ask people anywhere to vote for him after the way he has blown their money on one of the fanciest spending sprees this country has ever seen?

      Mr. Speaker, I would remind the House what that former Premier said a year ago when he presented what turned out to be a demolition budget. "We are not here to play games in the old style, " he said. "We're here to serve the people and we're doing it very well." Do the hon. members call what he did serving the people? He served them all right - a serving of bitter, bitter medicine that we're all choking on today.

      We have met our responsibilities in government. We have not shirked from our duty. We have met the needs of people by starting to rebuild their shattered economy. And I repeat, once that rebuilding is accomplished, never again must it be handed over to such a wrecking crew.

      Mr. Speaker, these times challenge the individual, the government and business. We can overcome our problems by dedication to the solutions and by fostering a spirit of co-operation among all. We can come through this experience in a much stronger position with a commitment from this government to achieve the goals for which it was elected.

      Mr. Speaker, I move that Mr. Speaker do now leave the chair for the House to go into Committee of Supply.