
ProvinceLégislatureSessionType de discoursDate du discoursLocuteurFonction du locuteurParti politiqueColombie-Britannique31e3eDiscours du budget10 avril 1978Evan WolfeMinister of FinanceBritish Columbia Social Credit Party
       It is my pleasure and privilege to present our government's third budget. This budget is one of the most important we have delivered to this House because it honours our commitment to lower the cost of government to the people. This budget proposes a dynamic program which holds benefits for everyone in the province: the individual citizen, the small businessman, the big businessman, labour, the farmer, whoever has a stake in the future of this land.

      This budget is possible because of this government's good management of public funds. This good management, Mr. Speaker, has promoted a sound provincial economy. This sound economy in turn has created and will create new and permanent jobs. This sound economy will increase the support for and quality of social services to people.

      In my previous two budgets I spoke of the need for restraint - restraint on the part of government in spending and restraint on the part of people in limiting their demands on the economy. We also pledged careful management of public funds to reduce demands on the private sector and so encourage it to develop and expand and provide new jobs and revenue for social services. The measures we introduced in those first two budgets were right for their time. During those two years we steadily built a sound foundation under our economy until we are now the bright spot in Canada, Mr. Speaker. So let us look at what we have done.

      In the midst of an extremely difficult national and international financial and business environment, the British Columbia economy continues to recover from the poor situation into which it lapsed in 1974 and 1975. In 1977 the provincial economy experienced a real growth of 4.3 per cent, much better than the national increase of 2.6 per cent. We expect a real growth of more than 5 per cent in 1978.

      The 1977 Vancouver consumer price index recorded the lowest rate of increase for any Canadian city: 7.2 per cent. This is encouraging to us in our battle against inflation.

      The British Columbia jobless rate has stabilized and shows improvement, while the national rate continues to deteriorate. Over the last year, British Columbia has been a leader in job creation and in business investment spending. As the Speech from the Throne reported, this province created 15 per cent of the new jobs found in Canada last year, although our province has only 11 per cent of the national work force.

      While I do not want to diminish the realities of the economic challenges that face British Columbians at this time, Mr. Speaker, I want to say that our previous budgets have prepared us for this moment. We are well armed to meet these economic challenges. Our two budgets have allowed us to regain control of a runaway growth in provincial government spending. We have practiced restraint in government spending, unlike other governments which have indulged in deficit financing, only to suffer the hangovers of inflation and economic immobility. As a result of our restraint, we now possess financial reserves that we can harness to create new jobs -permanent jobs - in essential areas of our provincial economy. Mr. Speaker, jobs not just for today, but for the long term.

      We have reduced provincial government expenditures as a proportion of the gross provincial product, thereby lessening our demands on the economy. We are not going on spending and spending. Now we are harvesting the results of our good management, to provide a secure future for our people.

      Mr. Speaker, now we are on the move. This budget builds on our accomplishments to stimulate further economic expansion in the private sector, which is the area from which government revenues come. We're doing all this without eroding our social programs; in fact, we're expanding these programs in all directions.

      Mr. Speaker, there are not many provinces in Canada that can boast of the combination of balanced budgets and social programs that British Columbia provides, along with encouragement to the private sector -particularly small business and individual entrepreneurs.

      Mr. Speaker, this budget will do all that. This budget will encourage growth in the private sector by providing additional incentives to small business. This budget mounts a direct attack on the province's unemployment problem by dedicating millions of dollars to a job-stimulation program that will establish permanent employment for thousands.

      This budget will continue with our broad range of social programs, and improve and extend many of them. This budget will return to all our people widespread benefits, which result from the careful management of the public's money and the building of a sound foundation under our provincial economy.

      I want to emphasize, Mr. Speaker, that in the development of jobs, in the encouragement given to small business, in the returns which the people will now reap, we will not lose sight of programs for people. So let me list some of our people programs.

      More than half the budget has been provided for two important ministries. For the f first time, Health and Education will spend more than $1 billion each. Community health services will be expanded significantly. Increased premium assistance will be given to low-income residents throughout the medical plan. The first grants will be paid this year to independent schools in British Columbia. The new SAFER program, providing assistance to elderly people who rent, is now in place to complement the elderly-homeowner grants.

      The homeowner grant, for the third consecutive year, will again be increased for our senior citizens who own their own homes.

      A long-term health care plan was initiated in January and is bringing significant health care benefits to British Columbia citizens.

      Increased financial assistance for young, first-time home buyers will be recommended to this House.

      Increased grants will be made to the support of community libraries.

      Revenue-sharing programs will supply municipalities with significantly increased funds to pay for local programs.

      For the first time, the provincial government Will pay grants to municipalities equivalent to full general municipal property taxes on government buildings.

      These last two measures should lead to mill rate decreases for homeowners and for businesses.

      As I said, Mr. Speaker, these and other new spending programs for our people are possible because of the government's continuing good management in the public sector.

      By ensuring the taxpayer receives the best value for his taxation dollar our government will demonstrate once again that society's demands for necessary and proper public services can be met without resorting to deficit spending, with its consequent heavy debt load.

      The 1978-79 budget for British Columbia, which I am presenting today, represents another step in the evolution of our government's long-term fiscal and economic strategy.

      That strategy is aimed at reducing government demands on the economy while encouraging the business community to develop and expand to provide permanent jobs and revenues to fund essential public services.

      Mr. Speaker, this budget develops a major thrust toward immediate action on our most pressing problem - unemployment.

      Over the last while, our country has encountered two frightening evils - inflation and unemployment. Since British Columbia's total economic performance is heavily dependent on successful competition in the international export markets, our government believed that inflation demanded treatment first. If inflation could not be brought under control, the basis for all economic gains would be eroded.

      While British Columbia has not won the war against inflation, the initiatives proposed in this budget will exert a downward pressure upon inflationary forces.

      One unknown factor is the anti-inflation program. While the Anti-inflation Board will be phased out commencing April 14, the Economic Council of Canada has agreed to monitor wage and price changes through the decontrol period.

      British Columbia will not establish any monitoring agency at this time, but our government will be watching trends very closely to decide whether there is any need to move in that area.

      The Council of Public Sector Employers has been established and should benefit negotiations in this sector.

      Our Premier has had several informal meetings with British Columbia labour and business leaders at which the need for strengthening our international competitive position was discussed.

      The end of the anti-inflation program will require responsible voluntary restraint in terms of wage and price demands. Recent export gains cannot be lost to windfall profits or excess wage settlements, but must be invested in new production and job opportunities.

      As I have emphasized, Mr. Speaker, this budget is directed principally at employment. While British Columbia has been creating jobs faster than any other province, this budget proposes to accelerate that process of job creation with special measures, which I will outline later.

      We are also going to give strong encouragement to small business. Small business is uncertain at the present time. It needs incentive to proceed with growth and development of new permanent jobs. We are going to provide that encouragement in our budget today, to build a good home for small business in this province. If nowhere else, British Columbia should be a haven for small business.

      Mr. Speaker, because we have brought government spending under control in this province, and restrained our spending, we have the flexibility now to move in these directions. We have extra funds that we can add to this current year's normal spending proposals to provide dynamic action in the fight against unemployment. This would never have been possible had we borrowed to pay our way out of the inherited difficulties of prior years. The funds that will create jobs today are funds that otherwise would have gone to service deadweight debt.

      Mr. Speaker, our accomplishments during our short time in office prove the wisdom of this government's policy thrust. From our position of financial strength, we are able not only to meet the challenges of today but also realize British Columbia's potential for a secure future for its people.

      Mr. Speaker, a moment ago I mentioned our government's long-term approach to fiscal and economic policy. With our first budget we established the basic strategy that the private sector provides the key to long-term economic growth and job creation. This means that government must restrain spending to facilitate private sector growth which will fund our social programs.

      The basic tenets of this approach, as expressed by Premier Bennett at the recent national economic conference, provide the foundations for the future strength of both the Canadian and British Columbia economies.

      It is now part of national strategy by governments to show restraint. British Columbia initiated this strategy and is pleased to see it receive such widespread approval.

      Longer-term objectives cannot be achieved, however, by piecemeal, ad hoc government policies. Rather, a fundamental and continuing re-assessment of the size and economic role of the public sector is clearly required.

      To meet this challenge our government has directed and continues to direct its policy efforts towards the practice of fiscal responsibility to control public spending and reduce the government's share of total economic activity, the achievement of greater efficiency or better value for your dollar in public sector spending, and the reduction of government constraints on the free market system.

      This government's commitment to spending restraint is not based on any simply perceived notion of the "appropriate" size of government. A "properly sized" public sector must ultimately reflect society's demand and willingness to pay for government services, balanced with the requirements for long-term growth in the private sector.

      Such determinations are clouded, however, when government resorts to deficit financing or allows inflated revenue returns to fund ever-increasing levels of public sector spending.

      Over the last 15 years, government spending increases in Canada have exceeded the growth in GNP by about 30 per cent. This fact indicates a fundamental re-assessment of the "proper" size of the public sector is overdue.

      To facilitate this basic re-assessment and provide additional room for the private sector to expand and create new jobs, our government has adopted a long-term program of fiscal responsibility.

      This policy includes a continuing commitment to both balanced budgets over the long term, and to holding provincial spending increases below the rate of increase in gross provincial product.

      Our belief in balanced budgets does not represent rigid political dogma, but an appreciation of the inflationary problem caused by excessive competition for limited productive resources between government and the business community.

      However, we should remind ourselves that in the externally dependent, resource-based British Columbia economy, government deficit spending has a more limited impact on increasing domestic production and employment than in a more diversified province producing more products for its own consumption.

      Furthermore, continuous government deficits are inflationary and ultimately undermine the growth potential of the private sector, further reducing domestic production and employment.

      Such realistic concerns demand an enlightened view towards deficit spending.

      Annual balanced budgets are not necessarily required if the economy is in a temporary period of slow growth and finds its productive resources are underutilized.

      When private sector demand increases, however, government spending must be restrained to avoid an inflationary spiral.

      This requires that public sector budgets must be balanced over the period of the economic cycle, Mr. Speaker. The surpluses accumulated in high-growth periods can and should be employed to bolster and stabilize economic performance in a slow-growth year.

      The common deficit-upon-deficit policies of governments must be avoided, however, if sustainable long-term growth by the private sector is to be encouraged.

      Responsible fiscal policy also requires that limits be placed on the total size of government.

      Our government has consequently pursued the objective of holding provincial spending growth below the rate of increase in gross provincial product to stimulate private sector expansion.

      For the next three years we are further committed to restrain budgetary spending growth to a rate at least one percentage point below the annual growth rate in the economy.

      Through our efforts, the ratio of provincial spending to gross provincial product has been reduced from 17 per cent in 1975-76 to less than 15 per cent in the coming fiscal. year. Our eventual target is 12 per cent. We firmly expect the wisdom of our long-term policy to be reflected in the continued growth and expansion of the British Columbia economy. Spending restraint will not alter the government's long-standing commitment, however, to provide better government services. In total, this government's continued commitment to spending efficiency will ensure that the public receives the best value for its tax dollar while allowing for the improvement of government services in line with our program of fiscal responsibility. Long-term considerations must also focus on the impact of policy actions on the free market system.

      Government activities, Mr. Speaker, can and do distort the allocation of economic resources and frequently produce undesirable or unintended results. National trade and tariff policy provides a classic example. This policy has fostered inefficient and non-competitive industries in central Canada to the direct detriment of the nation's longer-term growth potential. Mr. Speaker, this policy has proved particularly burdensome for British Columbians and our government will continue to push for a substantial liberalization of national and international trade restrictions.

      The government is also convinced that Canadian industry faces excessive regulation and reporting requirements - "red tape, " if you will. We have initiated an extensive program of provincial forms review which is designed to ease the regulatory burden on the private sector. A similar co-operative effort by all Canadian governments was urged by our First Minister at the national economic conference.

      And finally, the government is well aware that its own direct actions can have profound effects on the free economic market.

      The area of public sector compensation is of particular concern, given the impact of government wage settlements on private sector demands. We have addressed the problem of public sector compensation through the establishment of the Council of Public Sector Employers, an organization which will assist the co-ordination of public sector wage settlements and provide better information for the collective bargaining process.

      Furthermore, the government is committed to the principle that the rate of public sector compensation increase should follow and not exceed appropriate private sector compensation patterns.

      So in summary, Mr. Speaker, our government's long-term policy thrust is designed to promote the province's economic future by providing the opportunity and the incentive for private sector growth and expansion. By constraining the demands of government for increased spending, we will provide the economic room for new competitive production and job creation. By reducing government-induced market distortions, we will encourage new confidence and incentives for investment. By improving government spending efficiency, we will insure the adequate and equitable provision of government services to our citizens.

      Our government's long-term commitment to fiscal responsibility does not detract from our very real concern over immediate economic difficulties. To meet current problems, the 1978-79 budget presents a significant set of new economic stimulants to provide for more jobs immediately and to provide for long-term employment creation through the active support of small business. Throughout the 1970s, British Columbia's unemployment rate has exceeded the Canadian average, despite the fact that employment growth has consistently outpaced the national experience. Substantial in-migration in conjunction with increases in natural population and the proportion of our people wanting to work has precipitated an even faster expansion in the British Columbia labour force. The magnitude of British Columbia's current unemployment level is directly related to the economic upheavals of 1975 when the provincial jobless rate jumped to 8.5 per cent from the 6.2 per cent level of 1974. Since 1975, British Columbia unemployment rate has stabilized and shows marginal improvement in the face of a continually deteriorating national situation. Mr. Speaker, despite this relatively favourable trend, the British Columbia jobless rate is unacceptably high.

      Economic projections suggest that slack demand conditions will persist in the labour markets until the impact of major construction projects, such as the Alaska Highway pipeline, is felt in 1979 and 1980. To bridge this gap, this budget commits millions of additional dollars to a program of direct job creation. Our attack on unemployment will not, however, entail massive and inflationary public sector make-work projects. Rather, we will employ money made available by our past achievements of fiscal responsibility and good management to expand and accelerate existing programs which offer lasting benefits and which will encourage British Columbia's long-term economic growth and expansion.

      Our employment strategy also calls for a strong and expanded role by the small-business sector. Small business is a vital source of future economic expansion and job creation, which this government intends to encourage immediately. I will introduce today a comprehensive package of incentives and new development programs to encourage small business. The small business we encourage today will provide economic growth and employment for tomorrow.

      Mr. Speaker, our long-term commitment to sound financial management and fiscal responsibility provides the leverage to deal effectively with immediate economic problems. This budget employs this leverage to ease both short-term unemployment and to promote long-term job creation.

      And now, just a few comments about the national economy. This government's short- and long-term objectives, and the measures outlined in this budget to achieve these goals, can be affected by national events. For example, Mr. Speaker, our government is concerned about the sharply increasing budget deficits of the government of Canada, from just under $1 billion in fiscal year 1973-74, to an estimated $11 billion in 1978-79. The total budgetary deficits of more than $33 billion for this six-year period have serious consequences for investor confidence in Canada, including British Columbia.

      The federal government would require an additional $470 for every man, woman and child in Canada, just to balance its 1978-79 budget. The 20.3 per cent increase to $6.5 billion in federal 1978-79 debt-servicing costs, compared with the 9.8 per cent increase in the federal expenditure budget, acts as a fiscal drag upon the Canadian economy and is an impediment to the realization of social objectives for Canadians today and in the future. Even with improved Canadian economic performance, federal government tax rates must be maintained, or even increased, for these debt obligations to be discharged.

      Mr. Speaker, it's well known that some 13.5 cents of each federal tax dollar are now siphoned off to pay debt cost. That's 13.5 cents of every federal tax dollar. Government spending restraint must be linked with a commitment to balancing revenue and expenditures over an economic cycle. A balanced budget objective compels government to perform in a more fiscally responsible manner. This must benefit the economy and the taxpayer in the longer term.

      Mr. Speaker, the federal budget imbalance is partly evident in the government of Canada's intrusion into areas totally within the constitutional responsibility of the provinces. Recent financial arrangements between Canada and the provinces, in which cost-sharing of actual provincial expenditures on hospital, medical care, and post-secondary education was replaced with a federal transfer of income taxes and an annual cash payment, may be seen as a partial correction of this imbalance. British Columbia supports the transfer of income tax points for Canada's contribution to all provincial programs. Only in this way can the responsible government's attention be focused on the policy action appropriate for its particular set of problems.

      The budget for the fiscal year 1977-78, the year just concluded estimated revenue and expenditure at $3.829 billion.

      I will table in the House today the interim financial statements for the 1977-78 fiscal year, prepared by the comptroller-general, which, for the first time, report upon the first 11 months of the fiscal year. Hon. members will note there is an overall surplus for the 11 months of $221 million. Provincial budgetary revenues in the 11 months are reported at $3.657 billion, and these reflect an increase of $158 million in oil and natural gas revenue, stemming from this government's policies which spurred renewed interest in the energy resources within the province.

      It reflects an increase of $83.3 million in social services tax revenue, partly as a result of increased business investment.

      It reflects $47.7 million more from the forest industry, reflecting the excellent performance of the lumber segment of the industry.

      It reflects the new federal payment for extended care, which totals $45.9 million for the 11 months and $125.5 million in reduced income tax payments resulting from the federal government's error in estimating.

      Budgetary expenditures for the 11 months total $3.42 billion and reflect the higher expenditures authorized during the year. The additional authorizations were in response to this government's initiatives to introduce new program s in the formative stage at the date of the budget and to expand useful programs capable of creating more than 13,000 jobs. Higher expenditures include $33.9 million for the new long-term care program which started January 1,1978; $7.5 million additional for the Employment Opportunity Program; $63 million more for highway construction throughout the province; a doubling to $12 million of expenditure on rural development under the Agricultural Rural Development Agreement program; $4 million for the first year of a five-year program to provide low-interest loans to small businesses; $7.5 million for the development of the coal reserves in the northeast of the province.

      In all these cases significant benefits were to be gained and, equally important, our government was completely satisfied revenues were available to meet the additional expenditure.

      Non-budgetary revenue in the 11 months totaled $57.3 million and non-budgetary expenditure was $72.8 million.

      The usual practice of keeping the government's books open until late April for the inclusion of expenditures relating to the fiscal year ending March 31 will result in a sharp reduction in the 11-month surplus. The expectation, however, is for a revenue surplus for fiscal year 1977-78.

      Current indicators provide both a source of encouragement and an indication of British Columbia's future economic challenge. The British Columbia economy remains on a solid recovery path despite a difficult national and international environment.

      The real growth in 1977 in the provincial economy, as measured by the gross provincial product, was 4.3 per cent, compared with only 2.6 per cent for Canada. A real growth of over 5 per cent is expected for 1978.

      The most predominant features of the British Columbia economy remain an abundant natural resource endowment and a pronounced dependence on export markets. Despite further progress in 1977 toward the development of secondary manufacturing and diversification of the productive base, total economic performance continues to centre on the output of forest, mineral and energy products destined primarily to the United States, Japanese and European Economic Community markets. While economic growth in each of these market areas was relatively slow, the total value of exports loaded in British Columbia increased by 16.3 per cent over 1976 levels.

      Lumber shipments accounted for the most significant export gains, reflecting the strength of U.S. housing demand. Lumber volume and price prospects are expected to remain strong in 1978, with a small reduction in U.S. housing demands being off set by a resurgence in non-residential construction, increased penetration of the Japanese market and the improved competitiveness of British Columbia producers. Newsprint is enjoying high plant utilization and is predicted to perform strongly in 1978.

      The pulp sector, however, is in a less fortunate position. In 1977 British Columbia pulp producers faced weak demand and intensive competition from a world-wide industry characterized by under-utilized capacity and large inventories. The total volume of provincial pulp production was down 9 per cent from 1976 levels, and only modest expansion can be expected in 1978.

      The mining sector's performance and outlook is also mixed.

      Copper and molybdenum production was up in 1977, but copper price declines put a damper on the prospects for an expansion in copper output for 1978. However, molybdenum production increased 9.2 per cent in volume in 1977, and 46 per cent in value, and the prospects are for another good year in 1978.

      British Columbia's 1977 coal production increased substantially from 1976 output levels, which were affected by strike action, but the relatively slow growth projected in the Japanese economy indicates 1978 may be a challenging year.

      The mining sector was strengthened by a substantial expansion of oil and natural gas exploration in 1977, and further strong advances are expected in 1978.

      Natural gas production will increase sharply with the completion of the pipeline to the Grizzly Valley field.

      As I said earlier, the Vancouver consumer price index rose by only 7.2 per cent in 1977, the lowest rate of increase for any Canadian city. This was down from the increases of 11.1 per cent in 1975 and 9.7 per cent in 1976.

      The delayed effects of currency adjustments and the effects of new federal import restrictions will create difficult price pressures in 1978.

      In 1977, only 138,138 man-days of work were lost due to labour-management disputes within the jurisdiction of the province, compared with 1,452, 646 man-days in 1976. This extremely low work-interruption record was a significant factor in the province's strong economic performance in 1977.

      Mr. Speaker, this 90 per cent decrease reflects a significant improvement in the province's labour-management relations and provides an important contribution to our competitive position and reputation as a reliable supplier.

      These relatively harmonious relations coincided -~.with a 9.7 per cent increase in the level of British Columbia average weekly earnings, which provided an increase in real consumer purchasing power.

      Private and public sector investment spending in British Columbia in 1977 increased 12.6 per cent, exceeding the national performance by more than 2 per cent and representing one of the highest rates of increase for any province.

      Significantly, the largest increase was in the manufacturing sector, where British Columbia investment spending rose by more than 30 per cent.

      Data on investment intentions indicate similarly strong performance in 1978, a factor which will enhance British Columbia's productivity improvement and employment growth.

      It has already been stated that British Columbia was a leader in employment creation in 1977, creating 27,000 jobs, which accounted for 15 per cent of total Canadian new jobs, while British Columbia has only 11 per cent of the national labour force.

      Unemployment continued as a pressing problem area, but at an average rate of 8.5 per cent, the provincial jobless index was down from 1976, whereas total Canadian unemployment increased by more than one percentage point.

      Continued, broadly based economic growth, in conjunction with the beginning of major construction projects such as the Revelstoke Dam and the Alaska Highway pipeline and expanded government expenditures on hospitals and other projects, will strengthen the province's future employment prospects.

      Mr. Speaker, the government's budget I'm introducing today proposes total expenditures for 1978-79 of $4.28 billion.

      This is 9.8 per cent above the revised budget for 1977-78.

      This is a rate of increase that meets the stated objective of this government to hold public spending at least I per cent below the growth rate of the provincial economy.

      This increase in expenditure includes our new long-term care program, which alone accounts for 3 per cent. In other words, the increase would have been only 6.8 per cent without this new and important program.

      Our proposed expenditures for the year were reviewed closely by the newly expanded Treasury Board staff to ensure that the government's resources were allocated to provide the most effective and efficient service possible for the public of this province.

      Mr. Speaker, I am introducing here a table of expenditures for the past year, and for the year 1978-79, totaling $4.28 billion. Revenues are estimated at $4.28 billion to balance the expenditure budget.

      The provincial economic outlook over the next 12 months indicates this revenue level can be achieved.

      Here I introduce, Mr. Speaker, the schedule of revenue estimates totaling, as I said, $4.28 billion.

      Now in the important fight against unemployment, the government considered there were two main opportunities open to it. One was to enlist the aid of the private sector in a way that would achieve a quick and measurable response. The other was to provide direct employment through expanded or accelerated government programs that will open the way to growth in new or neglected areas and so create many permanent jobs. We tried, where possible, to avoid strictly make-work programs that provide only short-term relief.

      So, Mr. Speaker, our job stimulation program is therefore made up of two parts:
1. Encouragement to small business and individuals to expand production and employment; 
2. An accelerated development program that will provide immediate and long-term employment. 

      We believe, Mr. Speaker, that small business, the individual enterprise, is the basis for a strong economy. Small businesses are creative and adaptable. They are able to move quickly to seize on and make the most of opportunities. We believe small business has the capacity to provide the greater economic strength we require now, given the proper encouragement.

      Big business has many strengths which enables it to mobilize resources to ensure growth and survival. Unfortunately, bigger businesses and industry are not always able to adapt quickly to changed circumstances.

      Mr. Speaker, this government believes small business has been impeded to some extent in its productive effort by government red tape and reporting requirements. If our economy is to respond to meet our current needs it must have a vibrant small business sector encouraged by fiscal change and relief from regulation overkill. We are ending the bookkeeping and reporting wherever we can to get small business rolling.

      Our budgetary proposals have been developed as part of a package of measures to assist small business in developing, expanding and providing permanent new job opportunities.

      Our government is therefore proposing the following tax changes:
1. The social services tax on new and repair production machinery purchased for use by small businesses will be completely removed, effective at midnight tonight. 

      Mr. Speaker, this, it is hoped, will encourage small businesses to expand. The duration of this exemption is limited. It will remain in effect for one year, to March 31,1979. To qualify for this exemption, a small business must, if it is incorporated, qualify for the small business deduction under section 125 of the Income Tax Act (Canada) in the most recent taxation year but limited by $150,000 of taxable income. The same conditions apply for unincorporated businesses, but their net income for income tax purposes, inclusive of rental and investment income, must not exceed $150,000 in the most recent taxation year.

      Mr. Speaker, the cost of this exemption, which will apply to all purchases over $100, is estimated to be $15 million in the 1978-79 fiscal year.
2. The corporation capital tax is a burden for small business, and we are proposing relief in this area. 

      So, Mr. Speaker, the exemption limit below which corporations pay no tax will be raised from $100,000 to $500,000. This change will remove the tax completely from 13,000 firms, about 70 per cent of those companies now paying the tax. We will also make provision for a graduated tax for companies with capital between $500,000 and $600,000. These changes will be effective April 1,1978 and will cost the government an estimated $6 million a year.

      Thirdly, because farming is an important section of the small business community, the social services tax will be removed from a number of additional farm item , effective midnight tonight; removal will be effective for a period of one year. These items, include such farm necessities as metal silos, fence posts, drain tile, cloches, stainless steel wash-tanks and auxiliary generating equipment used exclusively on farms.

      The social services tax will be removed, effective midnight tonight, from survival suits purchased by fishermen.

      Mr. Speaker, we have other assists for small business. In addition to these fiscal measures, our government proposes other moves to enlist small business in the fight against unemployment. The Ministry of Economic Development will begin, in this fiscal year, a new program of small- business training costing $1 million.

      Most small businessmen have no formal training in modern business techniques and, therefore have to learn on the job. Our program will provide an opportunity to those businessmen who wish to involve them elves in an executive development program. The program will develop management, accounting and marketing skills, and show businessmen how to plan for economic uncertainties and to make their needs known to government. It is expected that this program will have real impact in improving the quality of small-business management in this province and enhance, as much as possible, the gains that will be made under our proposed fiscal changes. Our government will attempt to ease the reporting requirements that now irritate many businessmen. These requirements are a real cost to small business. The Treasury Board staff will, in the coming months, co-ordinate a review of all provincial I government forms which businessmen are required to submit. This will be of particular benefit to small businessmen who generally lack administrative capacity and can ill afford the time required to fulfill all the I reporting requirements. But this change will benefit larger businesses too. I Mr. Speaker, small business and individuals hold one of the keys to the development of a successful and dynamic economy which can I provide jobs and social programs in this I province. We believe these assists we are providing will encourage small businesses to expand and play a major role in our economic development. I Mr.Speaker, the second part of our job-stimulation program relates to the provision of immediate employment. I am pleased to announce that the government proposes to spend an additional $76,129, 730 in a special program to combat unemployment. This $76.1 million is the surplus resulting from our government's sound management of the 1976-77 provincial budget. Mr. Speaker, we can now harness this surplus from two years ago to create new jobs today. I would like to emphasize that these surplus funds, which are part of our job-stimulation I program, are over and above the spending this government proposes to support general operations and social programs in the coming year. We will finance projects in resource development, transportation, social capital programs and industrial assistance to provide employment. This program will help maintain a smooth expansion in the provincial economy to carry us through until major capital projects, such as the Alaska Highway gas pipeline, are underway. I Mr. Speaker, 11 special programs will be I funded with the excess revenue of $76.1 million from the fiscal year 1976-77 budget.

      First of all, an accelerated industrial development program will be undertaken with $10 million which will buy shares in the British Columbia Development Corporation. The funds generated by this share purchase will be used to make loans to promote industrial development in this province.

      An accelerated re-forestation program~ will receive $10 million. This will provide for a new intensive forestry genetics program~ to produce trees of improved height, diameter and quality. In addition, increased funds will be pent tending young forests, including spacing and thinning. This program particularly will read to new, permanent employment in our No. 1 industry.

      An accelerated summer works program~ will be provided with $5 million to supplement the regular employment opportunity program in the Ministry of Labour.

      An accelerated mining development program will receive $5 million. Included in this will be a mineral exploration assistance program to encourage the discovery and development of few mineral deposits in British Columbia. The provincial highways program will receive $27.6 million to augment the already large program of upgrading and extending the province's highway system.

      An accelerated recreational facilities program will have $5.5 million to supplement the regular public recreation facilities program in the Ministry of Recreation and conservation.

      An accelerated elderly citizens housing construction program will receive $2 million to augment the ongoing program. Mr. Speaker, these funds will be used to improve housing facilities for the elderly in British Columbia's smaller communities. An accelerated agricultural program will receive $2 million to provide for further development of the province's necessary agricultural resources.

      An accelerated fisheries program~ will receive $2 million to assist in the expansion of the shellfish industry. This industry has the potential to add a valuable new dimension to our important fishing sector.

      An accelerated rural water treatment program will be provided with $2 million to improve water facilities in the non-municipal areas of the province.

      A local airport assistance program will receive $5 million to aid smaller centers in the provision of airport facilities. This program will help give British Columbians in emote areas access to air travel which is presently limited to those in larger centers.

      Mr. Speaker, this special job stimulation program alone will create direct employment for an estimated 10,000 people in 1978, and help speed a decline in our unacceptable level of unemployment. Furthermore, the program will have lasting value as it creates projects and develops resources that will continue to offer employment.

      Mr. Speaker, our government believes the encouragement we are offering to small business, plus our own contribution from surplus, will do much to expand job opportunities in British Columbia this year. We urge all British Columbians to support this program by their active participation and by continuing to restrain their demands on the economy and thereby moderating inflation.

      And now, Mr. Speaker, I would like to deal with other job stimulation measures in this budget.

      Part of this government's long-term economic strategy involves the development of industries in which British Columbia has a competitive advantage in the world economy. Economic development programs must fit into this strategy by assisting the establishment and growth of industries which have a long-run potential to be able to compete effectively in international markets. The initiatives detailed here are of this competitive type. They build on British Columbia's strength rather than attempting to hide our weaknesses. They are sound long-term investments rather than short-term protection for industries with no future. They will build the economy of tomorrow rather than perpetuate the economy of yesterday.

      The Canada-British Columbia Industrial Development Subsidiary Agreement was signed in July, 1977, under the terms of the 1974 General Development Agreement. The industrial agreement is a f five-year, $110 million program to be funded as follows: $70 million for community industrial development, financial assistance to small enterprises and funding for research and analysis of specific industrial opportunities. This amount is 50 per cent recoverable from the federal government. The 1978-79 estimates include $14 million for this part of the agreement, $20 million to the British Columbia Development Corporation - $4 million in 1978-79 - for low interest loans to business enterprises, and $20 million for investment in northern areas of the province by the federal Department of Regional Economic Expansion.

      The British Columbia Development Corporation will be active on a number of other fronts as well this year. As stated earlier, the job stimulation package includes $10 million to be provided to the corporation for industrial development through loans to business.

      Mr. Speaker, good highways are a necessity rather than a luxury in this land of mountains and valleys. They provide the vital links which bind our communities together both economically and socially. Construction of highways also provides benefits in the form of jobs. The extensive highway construction program of this government has created jobs all over British Columbia as well as making, up for earlier neglect of the road system.

      This large program of highway construction will continue in the next year and will include some of the following projects: completion of the new highways between Sayward and Port McNeill, and between Castlegar and Salmo; a new highway to provide access to the new ferry terminal at Port Hardy which will provide a shorter voyage between Vancouver Island and Prince Rupert; accelerated construction on the new Laird Highway in the northeast part of the province; upgrading of existing highways, with four-laning being extended on Vancouver Island and in the Okanagan; and reconstruction continuing on Highways 16, 37 and 97 in the north.

      Increased highway construction will be required in future to service the proposed Alaska Highway pipeline. It is hoped an increased f federal contribution under the Western Northlands Highway Agreement will be made in recognition of this need.

      Also signed in 1977 under the auspices of the General Development Agreement was a new five-year, $60 million Agriculture and Rural Development Subsidiary Agreement. The primary objective of the ARDA program is to join with the private sector in expanding economic opportunities and bringing about further resource development for longer-term benefits. Mr. Speaker, a supplementary appropriation of $6 million was provided to double the size of this program in 1977-78. The 1978-79 budget provides a further $12 million, demonstrating this government's commitment to further development of the agriculture sector.

      In addition to the expanded ARDA program in the budget, the job stimulation package provides an appropriation of $2 million for an accelerated agricultural program which also has the aim of expanding the resource base of this industry.

      The Ministry of Agriculture will expand activities in weed and insect control this year to help farmers combat their age-old enemies.

      The food promotion program to encourage increased consumption of B.C. home-grown food will continue this year to assist in the expansion of markets for local produce.

      Mr. Speaker, the farm income assurance program is to be extended to include all eligible commodity groups at appropriate levels of support. This government is committed to the stabilization of incomes for the farmers of British Columbia to reduce the risk of investment in agriculture. The budgeted amount of $35.4 million for this program is the largest appropriation for farm income assistance in any province in Canada.

      Mr. Speaker, all members of this House are aware of the crucial importance to British Columbia's economy of our forests. The year 1978 will be remembered for many years as a significant one in the history of forest policy. A process of forest policy review stretching back several years is now complete. At this session, new forest legislation will be presented by my colleague, the Minister of Forests (Hon. Mr. Waterland) . The amendment will reflect this government's intention to ensure the sound management of British Columbia's most essential natural resource.

      Related to this is the inclusion in the job stimulation package of an accelerated reforestation program of $10 million. This program will provide for the intensive forest management which is now necessary as we near the exploitation of the province's original timber stands and begin to rely on second-growth timber. With the regular budget appropriation of $19.8 million for reforestation, a total of $2e.8 million will be spent for this purpose in 1978-79.

      Mr. Speaker, during this government's first two years in office, substantial measures have been implemented to reverse the decline in our important mineral industries.

      New incentives offered by this government have led to an unprecedented level of exploration for oil and natural gas. Punitive royalties have been replaced by a more equitable profits tax, to ensure the survival and growth of metal mining. A coal policy has been enunciated to provide the basis for future development of our vast coal reserves. These actions have resulted in a dramatic turnaround from the gloomy outlook of two years ago.

      However, Mr. Speaker, they are not yet sufficient. The mining industry continues to suffer from uncertain world markets and resultant low level of exploration for minerals. This government cannot do anything about world markets but we can encourage exploration and development so that British Columbia will be ready when markets recover.

      To that end, the job-stimulation package includes $5 million for an accelerated mining development program. This will consist, in part, of a mineral-exploration assistance program to encourage private-sector efforts to discover new ore bodies in the province. The Ministry of Mines and Petroleum Resources will continue surveys of coal and uranium resources to increase the knowledge of the province's energy potential. The 1978-79 budget includes provision for payments to producers under the new Copper Smelting and Refining Incentive Act. An estimate of $500,000 is provided for payment to Afton Mines Ltd. near Kamloops, for the operation of British Columbia's first modern copper smelter.

      Mr. Speaker, mining has always played a central role in British Columbia's economy. This government's policies will ensure that it will continue to be a strong factor in our future development.

      Another industry which has always been vital to British Columbia is fishing. With the world's growing requirement for protein and Canada's new 200-mile fishing zone, the importance of the industry will increase. To ensure that we take advantage of this opportunity, government will be making some investments in the fishery resource.

      The salmonid enhancement program is a 15-year, $750 million program, being undertaken by the province and the federal government. The program is presently in the first phase, which will require $150 million over five years. It is expected this intensive program of resource management will double salmon populations over the next 15 to 20 years. The 1978-79 budget provides $2.1 million for this program.

      An accelerated fisheries program in the job-stimulation package provides $2 million to assist in the expansion of the potentially valuable shellfish industry.

      These initiatives will help ensure the contribution of our marine resources to the future economic development of British Columbia.

      There has been a great deal of public discussion recently on the problem of Canada's tourist industry. The recent decline in the value of the Canadian dollar provides an opportunity to recapture the losses of recent years. This government is taking action to ensure British Columbia does not miss this opportunity. The budget of the travel division in the Ministry of the Provincial Secretary and Travel Industry is increased in 1978-79 to $7.7 million. The division being transformed from an administrative body to an action-oriented, sales and service organization with developmental and promotional capabilities, to enable British Columbia to compete more effectively in today's complex, highly sophisticated and fiercely competitive worldwide tourist market.

      The ministry also has an appropriation of $1 million for the Captain Cook Bicentennial celebrations, which are expected to generate increased tourist interest in British Columbia this summer, as well as making British Columbians more aware of their heritage.

      This province's climate and scenery are important natural advantages in the tourist market. With proper development and promotion, the tourist industry will become an even more significant contributor to British Columbia's economy than the $1.345 billion of revenue generated in 1977.

      Another subject of much recent public discussion in Canada is research and development. We are all aware of the importance of technological change in the economic growth process. It is widely perceived that Canada is behind among industrial nations in the field of research and development.

      This budget provides for the establishment in the Ministry of Education of a research secretariat to co-ordinate research activity in government, industry and the universities.

      My colleague, the Minister of Education, has announced his intention to ensure that British Columbia becomes the research centre of Canada. One has only to look at recent developments in the computer industry to appreciate how this could contribute to the creation of vital new industries in this province.

      Two other major projects worth noting are related to the construction of hydro dams, for which the cost will be recovered from British Columbia Hydro.

      The Ministry of Highways will spend $11.75 million in 1978-79 on a program to relocate Highway 23 between Revelstoke and Mica Creek. This relocation is required because of the construction of the Revelstoke Dam.

      The Ministry of Forests will spend $6 million on the reservoir waterway improvement program in which merchantable timber will be salvaged from reservoir areas. The major portion of $4 million relates to the Revelstoke Dam, with lesser amounts being allocated to the Peace River and Duncan Dam areas.

      Mr. Speaker, the many programs for industrial and resource development which I have just outlined are important investments in British Columbia's future. They will help us to develop the strongly competitive economy which will be needed to ensure prosperity in the world economy of tomorrow.

      This government's commitment to public sector restraint and private sector development fosters the expansion of social programs. We believe that it is only through increased growth in the private sector that the people of this province can afford new social programs.

      While the level of growth in our economy is not yet satisfactory, it has been sufficient to allow for the introduction of some new and expanded programs for people and local governments.

      A high priority is given to the Ministry of Health in improving the delivery of health care services to the people of British Columbia.

      For the first time, Mr. Speaker, this ministry will spend more than $1 billion in 1978-79. The budget includes a number of important new initiatives in the health field:

      A new long-term care program, which went into effect on January 1,1978, receives $120.5 million for the new fiscal year. This program provides extended-care services to thousands of persons formerly unable to obtain them, as well as being an important element in the effort to provide a more balanced health care system.

      The expanded hospital construction program will continue. Of particular note are the expansion of Vancouver General Hospital and the construction of a new hospital in the Victoria area.

      Community mental health services will be extended in 1978 to Port Hardy, Burns Lake, Vanderhoof, Smithers, Kitimat, Quesnel, Dawson Creek, Oliver-Princeton. Queen Charlottes, Merritt, Fernie and Salmon Arm.

      Premium assistance under the Medical Services Plan will be extended to reduce the cost of medical insurance for 110,000 low-income residents of the province. As a result of the new income tax exemption provision introduced in 1977, premium assistance of 90 per cent will be provided to an estimated 52,000 people presently receiving 50 per cent assistance, and to 58,000 people not presently receiving assistance at all.

      A new program for the treatment of heroin addicts will be introduced to combat the crisis level of addiction in this province on a medical rather than criminal basis.

      Mr. Speaker, the province's educational system is currently undergoing structural changes as a result of population shifts and the need for job-related training to meet the demands of the labour market. The growth areas at the present time are occupational training and adult education. The Ministry of Education budget, which, like Health, exceeds $1 billion, contains a number of provisions designed to respond to the changing needs of society:

      Colleges and provincial institutes receive an increase of 23.6 per cent to $146.6 million as a result of enrolment increases, forecast at over 9 per cent, and the incorporation of the Pacific Vocational, Justice, Marine Training, and Emily Carr Art institutes. This reflects the government's intention to increase educational and training opportunities leading to marketable skills.

      Mr. Speaker, school districts and colleges will receive increased funding for adult and continuing education. Funds are earmarked for a new distance education system, which will eventually permit programs to be delivered for home study by many people otherwise unable to further their education.

      Grants for independent schools are to be provided for the first time in recognition of the role these institutions play in providing diversity in our educational system. A total of $9 million will be paid to independent schools on behalf 6f some 18,000 students.

      Universities will receive $208.6 million, an increase of $16.7 million over 1977-78, including funds for an expansion of medical teaching. The universities will play an important role in the development of the government's research and development programs.

      And, Mr. Speaker, the public school system continues to be the largest item in the Education budget at $591.6 million, an increase of $27.9 million. Stabilization of the school age population accounts for the reduced rate of growth in the cost of this program. The combination of increased provincial grants and the effect of the new assessment system mean that the basic levy for local school district purposes will rise by only 2.25 mills, the smallest increase in three years.

      The human resources area is one in which this government has reduced costs and increased benefits. By eliminating abuses in the system we have been able to provide more to those who need help, Mr. Speaker. As a result, several new programs have been introduced in the past year which are incorporated in this budget. The new universal Pharmacare program, introduced in June, 1977, will require $33.6 million, $7.6 million more than in 1977-78. And to mention just one other, the handicapped workshop guild will receive $625,000, while the Living Independently For Equality (LIFE) program for the handicapped will receive $450,000. These programs are important elements in our effort to provide more independence and dignity to handicapped members of our society.

      Mr. Speaker, housing policy will be the focus of a great deal of attention in 1978. The changes to be introduced, when combined with those already implemented, demonstrate this government's effort to reduce the cost and increase the availability of housing.

      The Shelter Aid For Elderly Renters (SAFER) program of rental subsidies for the elderly begins its first full year of operation in 1978-79 with a budget of $12.2 million. This will provide benefits to more than 15,000 households.

      The homeowner grant for the elderly will again be increased for 1978. The increase of $50 for the third consecutive year will bring the maximum property tax grant for senior citizens to $480. This is another step toward the goal of eliminating property taxes for persons 65 years of age and over who have made their contribution to our country and now deserve this benefit which allows them to live out their lives in their own homes. Mr. Speaker, many seniors who now live in modest accommodation do not now pay property taxes because of the homeowners grant.

      Elderly citizens housing assistance will be expanded from $4 million to $6 million, with the $2 million provided in the job stimulation package to increase availability of housing for senior citizens in smaller communities. These funds will assist in the creation of more than 700 housing units for senior citizens.

      A first-home purchase plan will be introduced in 1978 to increase the existing home purchase assistance grant of $1,000 to $2,500 for families with children purchasing their first home. This new program will be financed from the home purchase assistance fund, which has reached the level of $260 million and is able to fund the new program from interest earnings on its mortgage portfolio.

      The housing fund's resources have now reached $215 million and are on a self-sustaining basis, allowing the provision of assistance for housing to a larger number of municipalities.

      Federal-provincial negotiations are underway to reduce the complexity of the existing wide range of intergovernmental housing programs and provide more efficient and effective administration of housing assistance *

      This government is proud of its record in consumer protection. New and updated legislation has provided British Columbia with a first-rate system for promoting fair dealing in the marketplace.

      The consumer affairs budget for 1978-79 is increased to $2.9 million to allow for the:
registration of travel agents in the province to protect travelers from losing deposits or being stranded; licensing of motor dealers to provide a larger measure of security and trustworthiness, particularly in the used-car business; and bringing the chartered banks' lending practices into line with the requirements of provincial law.

      The beneficiaries of consumer protection activities are not only consumers and MLAs, but also the vast majority of businessmen in this province who are far and honest in their dealings.

      Governments must respond to the growing problem of crime with increased law enforcement. Despite British Columbia's period of fiscal restraint, spending on the justice system has increased by almost two-thirds in three years, from $112.5 million in 1975 to an estimated $186.7 million 1978-79.

      The increase in costs occurs at all levels of the justice system. Let me detail some of the factors in the 1978-79 increase of 27 per cent:

      RWP costs are up $5.2 million to $31.2 million under the contract with the federal government.

      The Coordinated Law Enforcement Unit receives an increase of 38.4 per cent to $2.1 million to step up its fight against organized crime. Courts will cost 17.1 per cent more in the coming year.

      Corrections will require an increase of 31.6 per cent as facilities are expanded and modernized, including a pre-trial services centre in Vancouver, new buildings at the Alouette River Corrections Centre, forest camps in the Kamloops area, and other projects.

      The Legal Services Commission will receive 31.5 per cent more to provide legal aid to persons unable to afford their own counsel.

      This is of serious concern to this government; but increased resources are required to improve our capability to deal with criminal behaviour.

      This budget shows that financial responsibility in government does not mean cutting back on social programs. Careful management and attention to private-sector growth provide the means by which new program s may be financed.

      Mr. Speaker, local governments will be particularly pleased with this budget because of a number of new and expanded programs.

      The new revenue-sharing program will provide $138.3 million for municipalities and regional districts, an increase of 20.6 per cent, or $23.7 million, over the equivalent allocation in 1977-78. The provincial government will begin in 1978 to pay grants to municipalities equivalent to full, general municipal property taxes on government buildings.

      New initiatives will be taken in the field of urban transit to prepare for necessary future expansion.

      The accelerated rural water treatment program, in the job-stimulation package, will provide needed facilities for growth and development of several rural areas.

      Public recreational facilities grants, including the accelerated portion in the job-stimulation package, will total $12.5 million to provide for improved amenities in many communities in the province.

      A revised and expanded system of library grants will provide assistance among communities on a more equitable basis.

      The local airport assistance program included in the job-stimulation package will make remote communities more accessible and improve the economic viability of these areas.

      The importance in particular of the revenue-sharing program is so great that I would like to make a few additional remarks about it.

      This program marks the beginning of a new era in provincial-municipal financial relations in British Columbia. For the first time, local government grants will be based on a formula which effectively gives municipalities and regional districts a share of provincial revenues. The Act provides local governments with one percentage point of each of personal income tax and corporate income tax, and six per cent of revenues from sales taxes and natural resources. In 1978-79 this formula is expected to generate $134.3 million which, together with a special, initial-year contribution of $4 million, will be transferred to the revenue-sharing fund. The revenue-sharing fund will be used to finance eight grant program including an unconditional grant program of $106 million, which was announced by my colleague, the Minister of Municipal Affairs and Housing, in December. The additional $23.7 million provided to municipalities and regional districts by this new formula will allow them to improve their services and lower the property tax burden an both homeowners and businesses. The increase is equivalent to $31.60 for each municipal taxpayer.

      The many improvements and expansions in our local government assistance programs back up this government's policy of shifting decision-making to the level of government closest to the people and their needs.

      Improved control of public service has been a policy of this government ever since we took office. I think it would be worthwhile at this point to note some of the actions which have been taken to gain control of the expenditure of the taxpayer's dollar.

      During the tenure of the previous administration, the size of the public service grew enormously. It has been a challenge since then to restrain growth in the number of public servants while improving the level of services.

      Members will recall that in this government's first budget the concept of staff-reduction salary savings was introduced. These savings were amounts deducted from each ministry's estimates, to be covered by a reduction in staff through attrition. This program has now run its course. In the 1978-79 estimates, this deduction is eliminated and vacant positions identified as supernumerary have been deleted.

      Another change this year is the transfer of positions which were formerly classified as temporary but which were, in reality, permanent, to the established-positions category. As a result, the estimates now portray accurately the full-time complement of all ministries.

      Concern has been expressed recently in the financial press about the present and future costs of public service pensions. I am happy to report, Mr. Speaker, that British Columbia's pension plans are better financed than those of most other governments in Canada. While the costs of these plans are substantial, the current contributions are placed in funds and fully vested in government-guaranteed securities.

      A study has recently been conducted by Wood Gundy Ltd. of the investment performance of the British Columbia Teachers' Pension Fund. This study concluded that the total return on the fund's investments was in the top 25 per cent of a sample of funds representing more than one half of all the pension fund investments in Canada.

      Actuarial studies have reported that the Public Service Superannuation Fund and B.C. Teachers' Pension Fund do have substantial unfunded liabilities, indicating the need to increase current contributions. Studies are underway to determine the appropriate funding levels for the public service and teachers' pension plans.

      For 1978-79 the provincial contributions to these plans are as follows: Public Service Superannuation Fund, $30.6 million; Teachers' Pension Fund, $40.6 million.

      The period of rapid growth in the size of government resulted in a greatly increased need for internal monitoring and control of expenditure programs. In response to this, the government has increased the resources provided to the Treasury Board staff and the office of the comptroller-general.

      The comptroller-general, Mr. Speaker, is responsible for internal audits and accounting systems used in the government. The need for more and better information has increased this responsibility and, as a result, more staff has been provided.

      Treasury Board is responsible for managing the operations of the government and determining the allocation of government resources. The necessity of restraint and improved efficiency has made this role more crucial than ever, requiring increased staff support.

      This increased activity has resulted in a number of new initiatives including a stepped-up effort to evaluate the ongoing programs of all ministries to ensure services are delivered in a manner which gives maximum value for the cost; a new policy on government vehicles which will provide the most economical means for meeting public-service transportation needs; and the introduction of zero-based budgeting, on a trial basis, in three ministries for the 1979-80 budget.

      Mr. Speaker, the ultimate control over public spending must reside with the public. To improve public knowledge and understanding of government finances, we have introduced two important changes over the past two years. These are the quarterly financial reporting of provincial and Crown corporation financial activities, and an auditor-general, responsible to the Legislature, who took office September 1,1977, to audit and report on the financial activities of the province. These innovations will help make the government accountable to the public, for whom the government exists.

      Now I would like to deal briefly with the financing of Crown corporations. In excess of $1 billion was made available to provincial Crown corporations for capital investment projects during 1977-78. This was made up of $491 million of provincial trust funds, $237.4 million of Canada Pension Plan funds and $275 million from market borrowings. Canada Pension Plan funds were allocated principally to Crown corporations other than British Columbia Hydro and Power Authority. Provincial trust funds were almost entirely allocated to British Columbia Hydro, which also had the only market borrowings. And here the budget presents a schedule of borrowings from British Columbia Hydro, British Columbia Railway, British Columbia School Districts Capital Financing Authority, British Columbia Regional Hospital Districts Financing Authority and the British Columbia Buildings Corporation.

      British Columbia Hydro's capital investment requirements were funded by $475 million from provincial trust funds, $40.4 million from Canada Pension Plan funds, and $275 million from market borrowings, for a total of $790.4 million. The market borrowings comprised a May, 1977, $75 million U.S. funds Eurobond public issue, with a 7.75 per cent coupon, maturing in 1985, and a June, 1977, $200 million United States public issue, with an 8-3/8 per cent coupon, maturing in the year 2007. Both issues were sold at par.

      British Columbia School Districts Capital Financing Authority provided $93.7 million to school districts throughout the province for the construction of schools.

      British Columbia Regional hospital Districts Financing Authority made available $66.3 million to regional hospital districts for hospital construction.

      British Columbia Railway Company received $32 million in long-term financing from the Canada Pension Plan Investment Fund and $81.1 million under the B.C. Railway Company Grant Act, representing the net federal contribution to railway development in the northwest.

      British Columbia Buildings Corporation borrowed $21 million for the construction of government buildings during the year.

      The government invested $20 million in short-term notes of the British Columbia Development Corporation, which has used the funds mainly for its industrial development program.

      Now for fiscal year 1978-79, the Crown corporations are estimated to require $1.108 billion in capital investment funds, made up of $682 million for British Columbia Hydro, $116 million for British Columbia Buildings Corporation, $100 million for hospital construction, $100 million for public school construction, $40 million for university construction and $70 million for the British Columbia Railway.

      To meet long-term financing requirements in the 1978-79 year, pension and sinking funds administered by the government are estimated to yield $470 million, and the Canada Pension Plan, $260 million.

      At March 31,1978, British Columbia Hydro had $450 million towards its 1978-79 requirements.

      The government is demanding more forward planning by the Crown corporations by requiring the submission of five-year capital budget forecasts.

      Mr. Speaker, I am happy to report the province has now transferred the assets promised to the British Columbia Resources Investment Corporation. The corporation will soon be offering its shares to the public to afford British Columbians an opportunity to invest in their province.

      On March 9,1978, the province transferred to the corporation its holdings of 81 per cent of Canadian Cellulose Company Ltd., 100 per cent of Plateau Mills Ltd., 100 per cent of Kootenay Forest Products Ltd. and 10.6 per cent of Westcoast Transmission Ltd., as well as certain petroleum and natural gas rights. This was another important step toward the creation of a unique enterprise which will allow the people of British Columbia a chance to participate directly in the province's development.

      Now, Mr. Speaker, I turn to the revenue measures for the year 1978-79. 1 would like to summarize these revenue measures that form part of our economy and job stimulation programs. These changes are:
1. To exempt from the social services tax for a period of one year, effective midnight tonight, new and repair production machinery purchased for use by small business - metal silos, fence posts, drain tile, cloches, stainless-steel wash tanks, auxiliary generating equipment purchased for farm use, and survival suits purchased by fishermen. 
2. To increase the exemption limit under the corporation capital tax from $100,000 to $500,000 and to provide a graduated tax for companies with capital between $500,000 and $600,000 effective April 1,1978. 

      In addition to these proposals which have a broad impact, the government proposes to help the horse-breeding industry in British Columbia. The parimutuel betting tax rate will be reduced by one half per cent to 6.5 per cent. This reduction in the tax rate will be matched by a levy of one-half of I per cent on all betting with the proceeds to be used to provide incentives to horse breeders in the province to improve breeding stock. This change will not affect people betting at the tracks.

      The reduction in government revenue from this measure is estimated to be $500,000 a year. I will recommend to the house that the Pari Mutuel Betting Tax Act be amended accordingly, effective midnight tonight.

      Mr. Speaker, a recent decision by the Supreme Court of Canada has eliminated borrowing for working capital purposes from capital subject to tax. This has had the effect of substantially reducing the base upon which the corporation capital tax is calculated. Until this supreme court decision, these borrowings had been included in the tax calculation. If we do not correct this situation, revenue from the corporation capital tax could be reduced substantially.

      Accordingly, we are proposing an amendment to the Act to include borrowings for working capital as part of the tax base. This change will be effective October 1,1977.

      Mr. Speaker, there are other tax reductions which will reduce the burden of tax upon the individual citizen. Last October an order-in-council increased the exemption level of the personal income tax to $1,715 of taxable income for the 1978 taxation year. In addition, the automatic inflation indexing of the personal income tax reduced provincial tax payments for individual taxpayers by over $57 million. All these revenue measures result in a substantial reduction of tax burden upon business and individuals and, at the same time, have the potential of producing long-term benefits for the British Columbia economy.

      Mr. Speaker, we believe our revenue measures for small business and our ability to harness our surplus in direct job creation will provide significant impact on the unemployment problem in British Columbia this Year.

      I would re-emphasize, Mr. Speaker, that we are only able to take this strong, positive action because our policies have built a sound economy in this west-coast province.

      With this government's first budget we were forced to introduce a number of tax increases to restore balance to provincial finances.

      Our second budget, while providing significant tax relief, was also limited in terms of fiscal stimulation by the pressing need to restrain government spending increases.

      We resisted demands for less stringent financial controls which might have had a greater short-term political appeal. Now it is evident from British Columbia's renewed economic strength that our government took the proper policy direction during those difficult years.

      Mr. Speaker, this government will continue to adhere to its long-term policy of spending restraint and efficiency. By virtue of the past achievements, however, we are now in a position to reduce significantly the cost of living for all British Columbians.

      Therefore, Mr. Speaker, the government proposes the following major general tax reduction: effective midnight tonight, the social services tax is reduced by two percentage points to 5 per cent on all taxable purchases, except an sales through Liquor Distribution Branch retail stores and winery outlets. For the 1978-79 fiscal year the revenue cost of this measure is estimated at $230 million.

      For the average British Columbia family the tax savings will be approximately $125 a year, providing for substantial additional help in reducing the cost of living.

      The business sector will not only be encouraged by the reduced sales tax on machinery and equipment purchases, but with the general sales tax cut will enjoy the effects of increased consumer demand.

      Mr. Speaker, the overall reduction in provincial revenues as a result of all our tax reductions is estimated at more than $250 million for this fiscal year.

      To offset that slightly, the government proposes to increase the revenues from tobacco and liquor sales through the following measures:
1. The cigarette and tobacco tax is to be increased 12 cents for a package of 25 cigarettes, effective midnight tonight. There will be a proportional increase in the tax on tobacco and cigars. 
2. The price of liquor sold through Liquor Distribution Branch retail and agency stores, and winery outlets, along with liquor license fees, will be increased to yield an additional $20 million this fiscal year. 

      The total estimated increase in provincial revenues from these two measures in fiscal 1978-79 is estimated at $44 million.

      So, Mr. Speaker, the budget our government has placed before this House today has something, obviously, for everyone.

      I would like to summarize our proposals for the benefit of the hon. members and the citizens of this province.

      For every citizen - an increase in disposable income through a major tax reduction that also reduces the cost of living.

      For those seeking work - a special job stimulation program that will produce thousands of new temporary and permanent jobs in British Columbia.

      For all business - an inflation-fighting, business-stimulating tax reduction.

      For small businesses and individual entrepreneurs - additional tax incentives to expand and increase employment, management training assistance, and less "red tape."

      For senior citizens - increased homeowner grant and development of the long-term care program.

      For young people - increased financial assistance for first-time home buyers.

      For farmers - tax cuts on farm equipment and supplies, weed control and incentives to improve horse breeding.

      For municipal government - a start on revenue-sharing and grants equivalent to full general municipal property taxes on provincial government buildings to produce greatly increased revenue that should keep mill rates down, plus more community libraries.

      For those who are ill - more community health centers, increased hospital construction, increased premium assistance to low-income users of the Medical Plan.

      For fishermen - a program to double the salmon population, sales tax removed from survival suits.

      For education - more money for schools, colleges and universities, and grants to independent schools.

      For travelers - more and better highways to speed communication between provincial centers, and more airports.

      For forest companies - a new forest policy to keep the industry competitive and promote long-term growth, increased reforestation.

      And, Mr. Speaker, for mining companies -incentive programs to discover new mineral and petroleum resources.

      These programs and many more, Mr. Speaker, are possible because of the sound financial management our government has given to provincial affairs.

      A continuation of this policy through succeeding years will do much to ward off the fear of unemployment, develop the unique potential of our province, and, in the process, enrich the lives of all our citizens. So, Mr. Speaker, I am pleased to move that Mr. Speaker do now leave the chair f or the House to go into Committee of Supply.