Province Législature Session Type de discours Date du discours Locuteur Fonction du locuteur Parti politique Colombie-Britannique 31e 4e Discours du budget 2 avril 1979 Evan Wolfe Minister of Finance British Columbia Social Credit Party Mr. Speaker, it is my pleasure to rise now and present to the people of British Columbia, through this House, one of the most important budgets in the history of this province. It is important, because this budget proposes far-reaching benefits for every individual in British Columbia. It offers each individual, in addition, an opportunity to participate directly in the exciting growth and development of British Columbia. This budget marks a substantial advance in reducing the drag of big government on the individual. Three years ago, when I stood in this assembly to present our first budget, we were wrestling with the sorry results of runaway government spending and debt accumulation. When the previous Social Credit administration left office in 1972, the incoming administration was handed millions of dollars in cash and securities to begin work. Three years later, those millions were gone and we were staring at a provincial debt of $261 million. It is a mark of our financial management that this year, after three years of vigorous budget management, the first of ten yearly payments will be made that will restore this province to a debt-free position again. By 1975 the increase in provincial spending had reached runaway levels. In the 1,200 days of the former administration, the annual rate of increase in British Columbia government spending averaged 27.5 percent. What does this rate of growth. mean in dollar terms? It means that expenditures more than double every three years. In other words, if that annual rate of growth had been allowed to continue after 1975, the 1978 budget would have been $7 billion, or 64 percent more than the one I presented one year ago. It also means this extravagance of the previous government robbed individuals and business of the necessary room for expansion, with the result that British Columbia was plunged, in 1975, into the worst performance year of the decade. This excessive growth in government spending built a heavy burden for the ordinary citizen. In our first budget, certain tax increases were required to restore provincial finances. If this corrective action had not been taken, and if runaway provincial spending had been allowed to continue, the ultimate burden on the ordinary citizen would have been much greater. Our first three budgets faced the difficult tasks of regaining control over excessive government spending and restoring British Columbia to a solid financial basis. We have been successful in this challenge. This government has reduced the average annual rate of increase in provincial government spending from 27.5 percent to 8.4 percent - or by 70 percent. I repeat: we have reduced the rate of expenditures by 70 percent. At the same time we have increased services to people and reduced taxes. The performance of the British Columbia budget between the original estimates and the actual spending over the last six fiscal years is revealing. Over the three fiscal years 1973-1974 to 1975-1976, the Legislative Assembly authorized spending totaling $7.1 billion. Actual expenditures over that period exceeded the original budgets by almost $1 billion, or 14 percent. On the other hand, during the last three fiscal years actual expenditures are expected to exceed the original budgets by only $193 million on total spending of $11.7 billion, or by only 1.6 percent. Furthermore, Mr. Speaker, almost 50 percent of the higher expenditures in the 1977-78 period represented the transfer to British Columbia Railway of $81.2 million received from the government of Canada toward the cost of constructing the Dease Lake line. Removing these passed-through funds, the higher expenditure over these three years only amounted to I per cent of the original budgets, compared, as I say, to 14 percent in the previous administration. Mr. Speaker, I would direct the members to the schedule which compares the expenditures during that six-year period. This cut in the growth of government spending has been achieved without denying services to people in need. I refer to such programs as long-term care, first home purchase assistance, SAFER and municipal revenue sharing, which have been introduced, and others that have been improved and expanded over the past three years. Mr. Speaker, the growth rate in government spending will be reduced even further this new fiscal year, in keeping with our commitment to lighten the cost burden of government upon all citizens and business. This will leave more money in their hands to develop this province. Let me illustrate. Between 1972 and 1975 provincial government spending increased from 12.8 percent of gross provincial product to 17.1 percent. We expect the fiscal year just ended to show a decline to 14.9 percent, and our goal is to reduce the spending level even further to 12 percent. The policies of the previous government have been replaced with responsible budgeting. British Columbia's financial credibility and investment and economic growth prospects have been restored and enhanced. Mr. Speaker, this budget is the most rewarding I have ever prepared because it represents a maturing of our government's longer-term fiscal and economic strategies. Our first three budgets have renewed the provincial government's ability to respond effectively to the needs of today. While spending restraint and sound financial management remain primary objectives of the budget, the government is in a position to employ the dividends of our past efforts for the benefit of all British Columbians. Consequently this budget proposes dynamic new measures to stimulate the future growth of British Columbia and to extend and enhance the services provided to its people. It remains our belief that the individual in the private sector, rather than government, is the key to future economic growth and prosperity. To facilitate such growth, this government's fiscal strategy has been consciously directed toward opening up economic room for business expansion. British Columbia's economic performance in 1978 bears witness to the wisdom of this approach. The general economic recovery, which began in 1976, continued through 1978, substantially outpacing total Canadian economic growth for the second year in a row. Total employment expanded by 4.4 percent, reducing the unemployment rate below the Canadian average for the first time in the 1970s. With only 11 percent of the labour force, British Columbia was responsible for 14 percent of the new jobs created in Canada in 1978. British Columbia's inflationary performance was also superior to the nation as a whole, with the Vancouver consumer price index recording the lowest rate of inflation for any major Canadian city for the second consecutive year. However, do not diminish the challenge of the future. Economic growth must be sustained through further improvements in our international competitive performance and the continued resurgence of consumer demand and capital investment spending. Although certain inflationary forces appear to be intensifying, we can win the long-term battle against inflation as long as British Columbians exhibit responsible moderation in their wage and price demands. Capital investment can be a substantial source of strength in both 1979 and in the longer term if we seize the opportunities of our recently improved competitive performance and transform them into production and employment gains. Fortunately, British Columbia is in a position to respond directly to this economic challenge through the dynamic program of fiscal initiatives which I will outline this afternoon. Although certain tax increases were initially required to correct the financial distress left by the previous administration, this government has striven to lower the tax burden for all British Columbians. They say that taxes always go up - never down. That is not true in British Columbia. Through our past budgets we have eliminated succession duties and the gift tax and reduced the property tax burden for senior citizens by increasing the homeowners' grant by $150 - $50 in each of 1976,1977, and 1978. They now receive a total grant of $480 per year. We raised the exemption level in the personal income tax, so a family of four with a basic income of $7,726 in 1978 paid no provincial income tax. We reduced the sales tax - on a permanent basis - back to 5 percent and eliminated the sales tax on production machinery bought by small business before March 31,1979. We eliminated the corporation capital tax for 13,000 small corporations, completely exempted home insulation materials from the sales tax, and reduced the sales tax on mobile homes and on propane fuel used in the home. We eliminated the sales tax on certain equipment purchased by farmers and fisherman before March 31,1979. We reduced the parimutuel betting tax as part of a program to encourage the horse breeding industry in British Columbia. We encouraged mining exploration by providing additional expense write-offs against the corporation capital and income taxes. Also, we replaced mineral royalties with taxes based on profits and reduced the logging tax. Our responsible management of the public's money has given us the financial strength to accomplish these things. This same careful management will now enable further tax reductions to stimulate consumer spending and business investment and to dampen inflation. It will also enable the introduction of important new incentives to encourage capital investment and enhance the innovative role of small business. It will enable additional actions to reduce the burden of property taxation and a variety of new measures to improve the equity of the provincial taxation system. The benefits of lower taxes proposed in this budget will be shared by all British Columbians, provide direct stimulation to the provincial economy in 1979 and help build our prosperity in the 1980s. I am proud to say that the tax relief provided by this budget in no way compromises the province's renewed financial strength. The proposals we present today are within the framework of a balanced budget and entail no new debt burden for the people of British Columbia. Rather, our new fiscal initiatives reflect the benefits of this government's commitment to spending restraint and to reducing government's demands upon the individual and business. These benefits will now accrue to their proper recipients, the people of this great province. Nor will spending restraint and tax relief erode our social programs. Indeed, the broad range of social measures currently provided will be extended and enhanced. An exciting new dental care assistance program, enrichment of social assistance payments and increased assistance to homeowners provide a few highlights of this budget's commitment to people programs. We are also marshalling our spending powers to meet our economic development needs. Significant additional funds will be provided for investment in our basic resource industries. Ongoing efforts to facilitate the diversification of the province's economic base will be intensified. Additional millions of dollars will be dedicated to upgrading and expanding British Columbia's transportation systems. Employment opportunities in British Columbia for our young people will be substantially expanded in conjunction with the private sector, and exciting new efforts will be undertaken to enhance the development of our important tourist industry. All of these spending programs will add to our economic strength in 1979 and help build future growth and prosperity. Mr. Speaker, the measures proposed in this budget will be pursued in conjunction with our government's continued dedication to greater expenditure efficiency. By ensuring the public receives the best value for its taxation dollar, we will again demonstrate that society's demands for services can be fulfilled and economic growth fostered without increasing the government's share of production or resorting to deficit spending, while at the same time reducing taxes. In short, this budget represents an important step in the evolution of our government's long-term fiscal and economic strategies for the benefit of all British Columbians. Now I would like to summarize the broad elements of an economic strategy for British Columbians. First, the role of government must change. Errors and excesses of the last decade must be corrected. The burden of big government has to be lightened. Our efforts in this regard have concentrated on three areas: spending restraint; efficiency and responsiveness in government; removal of costly and unnecessary forms of government regulations. Restraint of government spending has been a major theme in each of my three previous budgets, and it continues as a theme of this budget. Government must hold its rate of spending growth below that of the private sector. This will allow reductions in taxes and will provide individuals more scope for putting our valuable resources to work and build a secure future for the province. We are committed to keeping the growth in government spending at least one percentage point below that of gross provincial product. This has been British Columbia's fundamental strategy at federal-provincial conferences on the economy. This budget again meets that goal and goes much further. If broadly based economic gains are to be made in Canada, the commitment to spending restraint must be taken up by all levels of government. For this reason the government of British Columbia has successfully spearheaded a move to have other governments in Canada commit themselves to a program of spending restraint. I particularly welcome the federal government's conversion to expenditure restraint even though I remain critical of federal savings at provincial expense. A cooperative effort from the federal and other provincial governments in the area of compensation for public servants has also been achieved. Senior governments in Canada have adopted British Columbia's proposal that public sector compensation packages should not rise faster than those in the private sector. Spending restraint must also be exercised by local governments. Municipalities, regional districts and school districts in British Columbia are responsible for the expenditure of more than $2 billion a year. More than $850 million of this is provided by grants from the province. These grants have increased markedly in recent years with the introduction of revenue sharing of major provincial taxes and fees, the expansion of sewerage facilities assistance, 'increases in homeowner grants and the payment of full municipal taxes on provincial government property. This government's intention in increasing these grants has been to reduce the property tax burden on the local homeowner. Unfortunately, far too often these funds have been used to increase local government expenditures, rather than to lower local taxes. To protect the local property taxpayer, the province imposed a program of spending restraint on local government in January of this year. Briefly, the program provides for increased scrutiny of school district budgets, freezing of 1979 municipal mill rates at 1978 levels, and limiting 1979 budget increases for municipalities and regional districts to 5 per cent. The Minister of Health (Hon. Mr. McClelland) imposed a similar 5 per cent limit on spending increases for hospitals. Exceptions will be made only in extraordinary circumstances. This program and the province's own spending restraint ensure there is restraint in all public spending under the provincial government's jurisdiction. Spending restraint does not necessarily require loss or dilution of government services. By implementing measures which reduce waste, inefficiency and excessive and expensive bureaucracy, valuable programs can be retained and improved. This government has taken positive steps to improve the effectiveness of government and to make program more responsive to peoples' needs. Our efforts have ranged from incentives to encourage efficiency to reorganization of government ministries. The Insurance Corporation of British Columbia is a good example of successful incentive pricing, introduced by this government to encourage efficiency. British Columbians now benefit from insurance rates that are among the lowest in Canada. This has been achieved without the corporation running as an un-_ manageable deficit. There are other examples. Placing operational responsibilities for transit in the hands of local governments will result in an operation more responsive to local needs. My colleague, the Minister of Human Resources, has streamlined income-support programs. Here is another clear case where we have created savings which have been directed to those who need the service the most. Efficiency is not just a matter of program design. It is also a question of tight financial control and better accountability to the public. Establishment of the auditor-general's office, quarterly financial reporting, and zero-base budgeting have resulted in a new attitude within government and a better understanding of the workings of government. Treasury Board staff has been enlarged and charged with responsibility for scrutinizing programs and forcing ministries to justify their demands on public funds. In preparing the 1979-1980 budget, the Attorney-General and Forests ministries have used zero-base budgeting: that is, building their budgets from zero and justifying every dollar requested. This budget process worked well with these two ministries. It is intended to continue it with Forests and Attorney-General, and to extend the procedure to at least two other ministries for the 1980-1981 budget. The role of the comptroller-general in maintaining control systems and internal audit procedures has been expanded. The Government Employee Relations Bureau has strengthened the province's abilities in collective bargaining with its employees. The British Columbia Buildings Corporation, established in 1977, has improved management and utilization of public buildings. Similarly, the British Columbia Systems Corporation is improving data processing services for all ministries. Through these two corporations ministries are made more accountable for their demands for these services. Also, in the area of accountability to the public, the public accounts for 1977-1978, which I tabled at the beginning of this session, were the first to be reported on by the auditor-general, who is directly responsible to the Legislature. Quarterly financial reports, issued by my ministry, provide the public with up-to-date information on the financial activities of the province and its Crown corporations. The Crown corporations reporting committee provides a forum for hon. members and the public to examine in detail the operations of the major Crown corporations. Government has no money of its own; it is therefore important the taxpayers receive the best value for their tax dollars. The third prong in our -attack on excess government is to reduce the burden of unnecessary red tape and regulation on the economy. We recognize that every regulation results from an attempt to solve a particular problem. Nevertheless, regulations have not always changed to reflect changing circumstances. Upon closer examination we have also found that regulation is not always the most effective way of handling a problem. To reduce the regulatory burden of government we are taking steps to reduce needless paper flow within government, speed up response to the individual's requirements for prompt government decisions, and to reduce the cost of complying with government regulations. The newly formed Ministry of Deregulation is now taking the lead in simplifying regulatory activities. Here are examples of the new ministry's early achievements: The rights of the individual in dealing with government officials on regulatory matters have been set out. Numerous redundant forms have been scrapped and pieces of obsolete legislation identified, with many more under review. Steps are being taken to speed up the process of local government zoning and development approval. Steps are being taken to coordinate the standards for building construction and for use and occupancy - with the necessary inspection systems in ensure compliance. Steps have been taken with the ministries to speed up payments to suppliers. In addition, the Ministry of Finance is undertaking a pilot project to assess the feasibility of making more direct payments from regional offices. The benefits of regulation can and will be achieved at lower cost to the taxpayer, the private sector and the economy. The second broad element of economic strategy concerns the growth and the development of our economy. Government must do everything to encourage this growth. Our review of development options had to recognize two overriding characteristics of our economy: (1) a traditional dependence on primary resource industries; (2) a heavy dependence on exports, particularly to foreign markets. The abundance of natural resources has been the source of economic well-being for British Columbians for more than 100 years. It is, however, an industrial base which leaves us vulnerable to the boom-and-bust of international commodity markets. British Columbians will continue to prosper. But we must begin now to plan for a new phase of development. Our economic base must be diversified, and barriers to income growth must be removed. Natural resources continue to be our strength as our employment base is extended into new activities such as: further processing; resources-related manufacturing; the service sector; and high-technology activities related to our resource base. Achieving our economic goals will not occur quickly and will require the help and cooperation of the federal government. British Columbia firms cannot thrive and grow on the strength of Canadian markets thousands of miles overland. They must have access to foreign markets - in the United States, in Japan, in other countries on the Pacific Rim, and in Europe. Market access will require changes in policies affecting Canada's international trade relations. It will require efficient federal port development. It will require an efficient national transportation policy and system. There are other federal policy options which are central to the economic well-being of British Columbians. Our reliance on exports and imports makes an effective anti-inflation policy of special concern to us. The performance of the Canadian exchange rate affects us deeply, both as consumers of imported goods and as suppliers of goods and services to the international market. Federal spending policies can have a decisive impact, and must be tailored to meet the developmental concerns of this province. It is concern with these policies, and many others which affect British Columbians, that has led this government to give priority to federal-provincial economic relations. Accordingly, British Columbia has presented detailed and precise policy proposals at the First Ministers' Conferences on the economy in February and in November of . 1978. We have recognized economic relations with the federal government constitute an important element of provincial economic strategy. I should add one final point on federal-provincial economic relations. I refer to this government's proposals for constitutional reform. These proposals call for a stronger provincial role in the formulation of federal government policies. If central government institutions can be made more responsive to our economic policy concerns, they will contribute directly and substantially to the economic well-being of British Columbians. Many developmental economic policies must involve the federal government. But the provincial government cannot, and should not, be passive in this area. There are initiatives we can undertake, and I shall outline a number of innovative developmental programs in this budget. Numerous steps have already been taken by the provincial government, of course, and I would like to close my remarks on economic strategy and the role of government by citing just a few examples. A Science Council has been created to enhance the level and quality of industrial research and development activity, and more initiatives are to come in this area. A number of major programs have been developed to assist and promote small business, tourism, and regional development. Employment programs are in place to handle both the longer-term problems of matching the skills of the work force with the requirements of the economy and the shorter-term aspects of the unemployment problem. The major revision of the Forest Act will go far toward increasing the efficiency of our forest industry and ensuring maximum benefits to British Columbians from their forest resources. Now, Mr. Speaker, I would like to make just a few comments on the economic situation in 1978 and the outlook for 1979. The year 1978 was one of accomplishment for the provincial economy. Despite a difficult international environment, British Columbia enjoyed a real economic growth rate of 4.4 percent, a full percentage point better than Canada as a whole. This is the second year in a raw that we have substantially outpaced the national growth rate. The provincial economy is expected to display similar strength in 1979. The export-led recovery, which began in 1976, continued through 1978. The value of British Columbia exports was up 18.9 percent over 1977 levels, with the value of manufacturing shipments posting an even more impressive 21.5 percent gain. The forest product sector made an important contribution to this growth, with renewed strength in pulp and paper shipments augmenting substantial lumber production. The total value of mineral and fuel production reached a record level. While exports continued strong, total 1978 economic growth arose from a broad base, with both consumer demand and capital investment displaying increases over 1977. The value of retail trade was up 13.5 percent, indicating a substantial improvement in consumer confidence. British Columbia's permanent sales tax reduction in 1978 contributed to this strong growth. Investment data indicate a 9.5 percent increase in total capital and repair spending, and a 9.1 percent increase in 1978 business investment. Preliminary 1979 intentions point to a further increase in investment; a federal survey of business indicates capital investment will be 10.5 percent higher this year than last. Mr. Speaker, this investment growth is broadly based and will augment substantially the province's economic strength. For example, over a billion dollars in new spending is planned by forest companies during the next few years. Included in these plans are a modernization and expansion of MacMillan Bloedel facilities at Port Alberni, Chemainus and Powell River; modernization of Canadian Forest Products operations at Vancouver; and the upgrading of Crown Zellerbach facilities at Elk Falls and Fraser Mills. The British Columbia mining industry is also on the verge of a major new round of development. Cominco Ltd. is committed to the expansion of its Sullivan Mine and Kimberley smelter operations, at a total investment cost exceeding $400 million. Climax Molybdenum Corp. is renewing its properties near Alice Arm at a cost of $135 million. The Fording Coal properties in the East Kootenays will undergo a major expansion at a cost of $15 million this year, and more is expected over the next two years. Esso Minerals Ltd. will reopen the Granduc copper mine near Stewart. Placer Development Ltd. is developing a new silver, copper, and gold mine near Houston with an investment of $85 million. And over $250 million in new northeast British Columbia oil and gas developments are scheduled by various companies in 1979 alone. In addition to the basic resource industries, substantial new investments are planned to improve the province's economic infrastructure and to expand the primary and secondary manufacturing base. Major port expansions are proposed for Roberts Bank, Nanaimo and Prince Rupert, and Burrard Drydock Company is planning to construct a new deep-sea drydock facility in Vancouver In ;he manufacturing sector, Tree Island Steel Company is committed to building a steel rolling mill in Richmond at a cost of $50 million. The continued improvement in the province's investment climate is a source of great encouragement, since it paves the way for future production and more employment. This budget ensures that these investment opportunities are realized. Businesses incorporated or registered in British Columbia in 1978 totaled 16,290, the largest gain in the last decade. In the last three years, 43,256 companies were incorporated or registered, 39.1 percent more than during the years 1973 to 1975. Last year established record income for the British Columbia tourist industry. Farm cash receipts expanded at more than double the 1977 growth rate. Important production-value gains were also recorded by the fishing and secondary manufacturing industries. Much of the increase in the 1978 consumer price index was related to higher food and import prices. The depreciation of the Canadian dollar appears to have run its course and import prices may have less impact on the rate of inflation in 1979. During 1978 British Columbians displayed a high degree of responsible moderation in their wage and price demands. The average increase in negotiated wage settlements was only 6.2 percent. Reflecting the termination of AIB controls, there was a modest acceleration in settlements in the second half of the year to 6.9 percent; but the wage explosion feared by some analysts did not develop. Continued moderation has occurred in the number of man days lost through work stoppages. In the three years 1976 to 1978, the 2 million man days lost in sectors under provincial jurisdiction were almost 1.5 million man days or 42.5 percent less than occurred in the three years 1973 to 1975. It is obvious that better labour-management relations provide important benefits for employees, employers, and the economy as a whole. Responsible, moderate wage settlements were important factors in the improvement of British Columbia's international competitiveness and the expansion of provincial employment. Continued moderation will be required in 1979, so that we can maintain employment at high levels and open up additional job opportunities. While our economic progress in 1978 was encouraging, our problems are not over. The British Columbia economy continues to depend heavily on the performance of other economies. We cannot be completely shielded if the anticipated economic slowdowns materialize for some of our major trading partners. In the year ahead we shall also be challenged in maintaining the cost competitiveness of our industries. We should not look to further devaluation in the Canadian dollar for assistance. Our competitive edge must now be honed in a more direct fashion. The success achieved in moderating wage gains must be sustained, and additional efforts made to modernize and upgrade our productive facilities. If we allow a new round of excessive wage and price increases, and if we fail to turn 'renewed profitability into new investment, then our recent progress will be quickly reversed. We should take the opportunity now to lay the foundation for strong income and employment gains in the 1980s. It is during this next decade that we can expect to make important progress in expanding the scope of our manufacturing base and in extending the processing of our natural resources. The challenge is there, but we must prepare for it today. I'm optimistic about 1979 even though the overall contribution of our export sector to economic growth will be more moderate. Lumber shipments could decline if a slowdown develops in housing starts in the United States. In contrast, pulp and newsprint production should maintain the peak levels achieved in 1978 and in the case of pulp may go higher. The positive effects of the government's tourist promotion program continue to bear proof and another good year is expected in the travel industry. Both consumer and investor confidence in this province remain high. Consumption and investment spending will make a strong contribution to 1979 economic growth. Real consumer purchases should increase by almost 4 percent. The business sector is expected to contribute more to total investment spending than we have seen in recent years. Overall, the British Columbia economy is expected to remain strong in 1979. With economic growth concentrated in the more labour intensive sectors, the increase in the number of new jobs should be close to 3 percent. The rate of inflation should continue to moderate in 1979. This year is important for collective bargaining in British Columbia. Attitudes and patterns of behaviour at the bargaining table will set the stage for our economic performance in the competitive 1980s. These are the economic challenges of 1979 and the eighties. I am confident that the measures I am introducing this afternoon will help us meet those challenges. Hon. members will find the graphs which are included in the appendix of my budget speech descriptive of British Columbia's recent economic performance. Last year's budget speech anticipated a balanced budget of $4.28 billion. The current outlook for last year shows no significant change from the forecast given in the third quarterly financial report covering the first nine months of the fiscal year, released in February of this year. At that time, a surplus of approximately $145 million was forecast for the full year. I shall table in the House today the interim financial statements for the 1978-79 year prepared by the comptroller-general. Hon. members will see there is an overall surplus of $226 million for the first ten months, but this is expected to decline sharply in the balance of the fiscal year due to expenditure commitments. The budgetary revenues of the province for the ten-month period are reported to be $3.7 billion and reflect variations for the same period in 1977-78. Firstly there is an increase of $115 million from the forest industry, resulting mainly from the very strong demand for British Columbia lumber, especially in the United States. Revenue from the forest sector for the entire year is expected to exceed the original budget estimate by more than $150 million. An increase of $72.2 million in corporation income tax revenue will be sharply reduced in March. Personal income tax revenue will increase by $165.6 million, including $117.4 million from the federal government under the sales tax reduction arrangement. A decrease of $79.4 million in social services tax revenue reflects the reduction from 7 to 5 percent in the tax rate in the budget of last year. For the full fiscal year, sales tax revenue is expected to be more than $50 million above the original budget estimate. Provincial budgetary expenditures for the ten months amount to $3.46 billion. This figure reflects additional spending on highways under authorizations of $85 million made during the year after the increase in revenues was noted. Additional spending authorizations also were made for the following programs: $21.7 million for Hospital Programs; $36 million for the GAIN program; and $4.2 million for new forestry programs required under the new Forest Act. There has been a considerable saving in Ministry of Agriculture expenditures due to higher farm product prices which have reduced demands upon farm income support programs. There have also been lesser savings in the programs of other ministries. There were no non-budgetary revenues in the ten months. Non-budgetary expenditures totaled $20.7 million including $11.7 million for reconstructing British Columbia Railway's extension to Fort Nelson in accordance with the government's commitment made last May. This is the fourth budget introduced by this government. Therefore it seems an appropriate time to review the results of the previous three budgets. First, there is the question of budget surpluses. It is true we have recorded a budget surplus in the first two fiscal years of this administration. And we will record another surplus in the third fiscal year which has just ended. Three years, three surpluses. We do not apologize for this record, however unpalatable it may be to the critics who would like the record to read: three years, three deficits. Mr. Speaker, I would like to summarize our budget performance over the last three fiscal years to show how the people of British Columbia have benefited and will benefit from government surpluses. I would refer the members to a schedule of these three surplus years and the disposition of these surpluses. In the first fiscal year of our administration there was a surplus of $76.1 million. That surplus was appropriated for spending in this past year on 11 special programs designed to create direct employment for an estimated 10,000 people. This I outlined in last year's budget. In the second year of our administration there was a surplus of $140.5 million. As I shall explain in more detail in a few moments, this second-year surplus is also being used for special programs, some of which will create additional employment and one of which will provide tax relief to the people of this province. The full second-year surplus will be allocated to these special programs. The financial accounting for the third year, which is the one just concluded - 1978-79 - is not yet complete, but it was a year in which significant tax reductions were made. The sales tax was the largest of those tax reductions; but we mustn't forget such things as the reduction in corporation capital tax, exemption of certain machinery from sales tax and exemptions in low-income tax rates. I am also proposing measures today which will utilize a portion of the surplus of $145 million expected in our third year of operation. last year, when we made our tax reductions, the hon. members on the other side of the House called our budget an election budget, Mr. Speaker. Strange. Mr. Speaker, we do not - like some governments - cut taxes only in election years. We like to do it every year. The important point to note is that we have now established a practice of returning surpluses as soon as possible to the people of this province. We will not build up huge surpluses intentionally. Every surplus dollar will be returned to the taxpayers - and this is along with tax cuts. This procedure ensures the provincial government is following the same policy for the use of surplus funds as municipal governments. It is true we have waited until the surplus funds have been received before spending them. This may have confused our critics who are more accustomed to governments which spend first and hope to receive matching revenues later. Most of the revenue surplus has been produced by strong growth in natural resource revenues. Two years ago the revenues from the natural gas industry were much higher than expected. Last year it was unexpectedly strong growth in forestry revenues which produced the major part of the surplus. The pricing of the province's natural gas for export is outside the control of the provincial government, being the responsibility of the federal National Energy Board and Cabinet. While striving to maintain low prices on natural gas used by our citizens, the export price of natural gas has increased from $ (Can.) 1.60 per thousand cubic feet at the end of 1975 to $ (Can.) 2.55 today. It is this government's policy to obtain additional price increases for our exported natural gas. It is reported that the National Energy Board recently recommended a further increase in the export price. We as a government are making -'sure the people get full value from our resources. We don't want to repeat the story of the low resource-income period of 1975. The natural resources revenue which we are receiving today is more than 75 percent higher than that received in 1975. The province is receiving increasing value from its forest, mining, coal and petroleum resources, and this allows us to reduce taxes. Our policies should provide steadily improving revenues from our resources over the long term. In the past two years the strength of these natural resource sectors was greater than anticipated by the industry or independent forecasters. It would have been very foolish for the government to prepare its budgetary estimates on an optimistic basis which may not have materialized. In recent years there have been several examples of overly-optimistic estimates of revenues by governments in Canada. For example, the government of Ontario received over $800 million less in the fiscal year 1977-78 than had been estimated in their budget forecast. In 1978-79 it is expecting a revenue shortfall in excess of $400 million and a budget deficit of $1.8 million. The government of Quebec reported a revenue shortfall of $154 million for 1977-78 and is forecasting a decrease of $320 million from budgeted revenues in 1978-79, with a resulting deficit of $1.4 billion. The government of Canada has committed the same error. In recent years, federal budgets have consistently overestimated revenues. In 1977-78, for -example, actual revenues were $1.9 billion below the original budget forecast and the budget deficit, $10 billion. This can only lead to cutbacks in programs or the creation of more deadweight debt. We do not intend to follow that road in British Columbia. Now, Mr. Speaker, for a few comments on the effect of debt on our national economy. The achievement of our goals is profoundly affected by the economic policies of the federal government and events which affect the national economy. For these reasons the government has devoted much time and effort to the First Ministers' Conferences on the economy and on the Constitution. In many ways the results of these efforts have been gratifying. British Columbia now has a much improved presence in national affairs. However, our government remains concerned with a number of developments at the federal government level which significantly affect British Columbia's ability to achieve its economic objectives. In particular, these concerns relate to the increasing burden of the national debt and the impact of the federal spending restraint program upon the province's finances. Canadians should be concerned about government of Canada budget deficits. For six consecutive years these deficits have increased sharply from just under $1 billion in fiscal year 1973-74 to an estimated $13 billion in this year. These deficits undermine investor confidence in Canada and British Columbia, and have contributed to an increasingly burdensome debt cost and the rapid accumulation of national debt. At March 1979, the national debt was about $64 billion, or nearly $2,700 for every man, woman and child in Canada. With deficits of between $12 billion and $13 billion forecast for both last year and this year, and little hope for a significant reduction in the size of the annual federal deficit in the short term, the national debt will continue to increase sharply into the 1980s. The payment of interest on this debt will also increase sharply from the estimated $8.4 billion this year. This debt cost represents 16.5 percent of Canada's budget spending this year -one out of every six tax dollars. As the national debt increases into the 1980s, these annual debt payments will take even more tax dollars from Canadian taxpayers and make it increasingly difficult for the federal government to reduce the deficits and restore balance to the federal budget. Mr. Speaker, a large national debt and continuing annual federal deficits exact a heavy toll on current and future taxpayers and on the national and British Columbia economies as well. The dangers are evident. First, as economic recovery continues into the 1980s, business will face increasing competition from the federal government for available investment funds. This competition will drive up interest rates, force out prospective business borrowers, and jeopardize the capital investment necessary to fuel Canada's and British Columbia's medium-term economic growth. Secondly, there is the danger the federal government will be forced into tax rate increases to meet these debt obligations. This would also act to undermine the prospects for medium-term growth. Thirdly, there is the danger the federal government will be pressured into financing its deficits the "easy way" - by printing money - thereby worsening inflationary pressures. Finally, there is the danger that the federal government will shift an inequitable share of the burden of federal deficits on to the provinces either in the form of further reductions in federal government transfers to the provinces or reduced federal program expenditures. This is in sharp contrast to the treatment we accord our municipalities. Instead of slashing back payments to municipalities, we have cut local government in on the richest revenue-sharing program in the country, and have begun to pay full general property taxes on provincial government buildings throughout British Columbia. It is our view that government spending restraint, combined with balancing revenues and expenditures over the economic cycle, is the most satisfactory means of avoiding dilemmas such as that now facing our federal government. It was to avoid such a dilemma that this government acted quickly in 1976 to restore balance to the province's finances and to provide for accountability and the sound management of provincial expenditures. As an aside, I would like to inform the members that I'm about to make some comments on our expenditure proposals for 1979-1980. Last evening I enjoyed a Chinese dinner and I opened the fortune cookie and the slip of paper said: "Avoid extravagance". Some comments regarding the expenditure proposals for 1979-1980. The estimates I am presenting today propose expenditures for 1979-1980 of $4,567.5 million. This is an increase of only 5 percent from the revised estimate of $4,350 million for last year. This government has previously committed itself to restraining spending to a growth rate 1 percent below the growth rate of the economy. This budget goes much further. A 5 percent increase in spending means a real reduction in the impact of government, since expenditures are increasing at a lesser rate than inflation. This increase is more than 50 percent lower than the ceiling allowed by our minimum spending restraint program. This reduces the ratio of provincial expenditures to gross provincial product to 13.9 percent, one whole percentage point below last year's level and more than three percentage points below the level of three years ago. This is a noteworthy achievement. This reduction will provide immediate tangible benefits for all taxpayers in British Columbia. Furthermore, hon. members will note this spending restraint has been accomplished with no reduction in the high level of services to which the people of this province are accustomed. It should also be noted that the budget is able to absorb the Impact of the federal spending cuts upon British Columbia, which are estimated at $56 million for this fiscal year. In addition to the regular budgetary estimates of $4.5 billion, I'm introducing today special appropriation bills which will dedicate some of the surplus funds accumulated over the past two years to create jobs and build facilities which will contribute to our future social and economic well-being. These surpluses have been earned by the government as a result of buoyant natural resource revenues and careful spending. Benefits from these past successes will be felt this year and for years to come. The first of these special appropriations will apply the revenue surplus for the 19771978 fiscal year, which amounts to $140,488, 978, as follows: First, $26,100, 000 is required for the first installment payment on the $261.4 million in deadweight debt arising from the 1975-1976 fiscal year deficit. Nine further annual installments will be required to retire the principal of this outstanding debt, which is a legacy from the previous NDP government. Second, a permanent increase of $100 in the annual homeowner grant will be given to all homeowners in B.C. Hon. members opposite don't seem to applaud that increase. Perhaps they didn't hear. A permanent increase of $100 in the annual homeowner grant will be given to all homeowners in British Columbia. This is the largest single increase made since the grant was introduced in 1957. This increases the basic grant to $380 and the grant for senior citizens and persons receiving the handicapped or war veterans allowance to $580. These increased grants, coupled with the municipal mill rate frozen at the 1978 level and the 5 percent growth limit on municipal budgets, should provide a substantial reduction in local property taxes for homeowners. This government is determined that British Columbians will not be taxed out of their homes. This determination is reflected in the fact that the special $100 increase in the annual homeowner grant will require $55 million more this year. This is the fourth successive year the homeowner grant has been increased by this government. Thirdly, $25,388, 978 will be allocated to an accelerated highway construction program to augment already extensive highway construction activity. Also, the British Columbia Railway Company will receive $14 million for reconstruction of the Fort Nelson extension. These funds will provide for the second year of a three-year upgrading program designed to continue operations of this vital transportation link to the north of the province. While British Columbia does not yet have a formal agreement with the federal government on the Alcan pipeline, we fully expect , to sign such an agreement under which the federal government will pay 50 percent of the cost of the Fort Nelson extension. I note, however, that there is no money in the federal government budget for this purpose. Therefore the British Columbia government will have. to pay the full cost this year. An additional $10 million is for the intensified forest management program to improve the management of our precious timber resources. Five million dollars will go for an accelerated job experience program to prepare young people for work. This will provide them with valuable experience. leading to future permanent employment. Five million dollars are also allocated for an accelerated recreation facilities program to raise the quality of life in our communities. These special programs, excluding the debt repayment and the homeowner grant increase, will create an estimated 8,000 direct jobs in 1979 and have lasting value for the future. How will last year's revenue surplus be allocated? As I've stated earlier, the province is expected to have a surplus of approximately $145 million in the fiscal year just ended. Although this surplus is relatively small in comparison with the overall budget, the government is prepared to dedicate' a portion of these funds to special projects to assist our metropolitan areas. 1. Ten million dollars will be directed to the building of the proposed Vancouver trade and convention centre. This contribution of the province is conditional upon acceptable federal government and city of Vancouver contributions to cover the $25 million estimated cost. This centre will be a focal point for trade show and convention activity which will ensure British Columbia capitalizes on its location to take advantage of the burgeoning trade opportunities with the rapidly developing countries of the Pacific Rim. 2. Special provincial funding of $2.5 million will be allocated to the proposed Victoria convention centre. This project will add a valuable new dimension to Victoria's tourist facilities. 3. A provincial contribution of up to $25 million will also be available for a sports centre or stadium in the lower mainland for the use of professional and amateur sports activities and events. These funds are conditional upon acceptable contributions from the federal and local governments. 4. A low-interest loan program for business in the metropolitan areas will be started with a $5 million allocation. A similar program introduced in 1978 to provide financial assistance to small and medium-sized businesses engaged in manufacturing or manufacturing related activities in the non-metropolitan areas has had a positive effect on investment. 5. To provide additional money for industrial development in British Columbia a further investment of $7.5 million will be made in British Columbia Development Corporation through the purchase of shares. 6. Five million dollars will go into British Columbia Discovery Trust Fund for the support of preliminary technological research to facilitate industrial growth in British Columbia. 7. Twenty-five million dollars will be allocated for the stabilization of health and hospital operating costs throughout the province. The provision of these extra funds will enable British Columbia to maintain the high level of health care provided in this province in the face of legitimate funding needs. These projects will provide jobs in the construction industry and create centers for recreational opportunities and economic benefits in the future. I now turn to budget proposals of some of the ministries. I direct your attention to the table which follows: Estimates of Expenditures, Fiscal Years 1978-79 and 1979-80. Policies and programs are being implemented in all industrial areas to strengthen and broaden the base of our economy. Provincial expenditures in this area contribute to both short-run economic stimulating and long-run development. It is recognized by British Columbia that our forest industry is the backbone of our economy, giving the people of this province a standard of living among the highest in the world. Our forests are, for the most part, owned by the people and managed for their benefit. In 1978 we entered a new era in forest management with new legislation marking the formal end of frontier-type developments. This new era will be characterized by intensive management of the timber resources to ensure sustained, long-run benefits for British Columbia. Accordingly, the funding of the Ministry of Forests has been increased 5.3 percent to $124.8 million to provide for implementation of the new Forest Act. In addition, the 1977-78 surplus appropriation, which I described earlier, includes a further $10 million for a special intensified forest management program. This program will ensure that we bequeath to our children and grandchildren a resource as rich as the one we inherited. The province is also in the final stages of negotiating a cost-shared intensive forest management program with the federal government. This agreement represents only one component of a federal provincial forest industry development program being formulated within the province's economic strategy. The recent government reorganization saw the creation of the Ministry of Energy, Mines and Petroleum Resources, bringing together all matters related to energy and minerals. The ministry has a mandate to develop and implement an energy policy for British Columbia to ensure British Columbians reap the greatest benefit from the production and use of our energy resources. The ministry is also charged with managing the province's mineral resources to ensure they are developed in a responsible and efficient manner to provide maximum benefit to the public. Mining has been associated with British Columbia since the earliest days of colonial development, with coal production on Vancouver Island and the gold rush on the mainland. Appropriate incentives will maintain this industry as a major contributor to our prosperity. The budget for the ministry is increased to $13.2 million this year. The tourist industry has been one of the fastest-growing industries in British Columbia in recent years. The Ministry of Tourism and Small Business Development will again be actively promoting tourism to help the industry achieve its potential. The tourism branch will have $10.3 million for this purpose. In addition, the federal-provincial Travel Industry Development Subsidiary Agreement provides for a five-year $50 million program to expand tourist facilities in British Columbia, particularly those which will help extend the tourist season into the winter months. Most notable in this category is the major development of skiing-related facilities in the Whistler area. A number of other projects which will increase the attractiveness of British Columbia as a tourist destination are in planning or underway. The Vancouver Trade and Convention Centre, the Victoria convention centre and the sports stadium for the lower mainland, for which revenue surplus appropriation funds from last year are to be made available, will encourage events which will attract visitors from all over the world. In Victoria, the Crystal Gardens project and the Inner Harbour development will also produce benefits. All these provincially funded activities will contribute to the growth of tourism, provide a large number of jobs in British Columbia and contribute to the strategic objective of diversifying our resource-based economy. The expansion of secondary industry and the removal of impediments to small business are major priorities of this government. The Ministry of Economic Development has responsibility for programs to promote industrial activity, including the Duke Point project in Nanaimo, and the federal-provincial Industrial Development Subsidiary Agreement. In addition, the Ministry of Tourism and Small Business Development will be cooperating with the Ministry of Economic Development and the British Columbia Development Corporation to assist small business through such programs as low interest loan assistance and Assistance to Small Enterprise Program. As I announced earlier, appropriation from the 1978-1979 revenue surplus will establish a small- and medium-sized business low-interest loan program in the metropolitan areas. The Ministry of Economic Development budget is increased 24.9 percent to $36 million, and a further $1.5 million is provided for the small business development branch of the Ministry of Tourism and Small Business Development. Fisheries have been key resources in British Columbia. Two major developments have a significant bearing on the future of the fishing industry. The first is the Salmonid Enhancement Program, which, under a recently signed federal-provincial agreement, will see $150 million spent over five years to double the number of salmon in the waters of the province. The second is the Canada-U.S. west coast fishing agreement. British Columbia is monitoring federal progress in these negotiations to ensure provincial interests are protected. The Ministry of Environment, which recently assumed responsibility for marine resources, will also be working in the coming year to enrich our harvest from the sea by encouraging the development of industries based on other fish species and on marine plants. The rapid increase in food prices over the past two years, which concerns us all as consumers, presents an opportunity and challenge to British Columbia farmers. The fact that the increase has been caused mainly by external factors, including the decline in the value of the Canadian dollar, means our farmers have a chance to provide substitutes for high-cost imports, with benefits accruing to consumers as well as to the farmers themselves. This government stands ready to assist farmers in this effort. Financial assistance programs, including farm income assurance and agriculture credit, are designed to reduce risks and costs for farmers. The five-year $60 million federal-provincial agriculture and rural development subsidiary agreement provides funding for projects to improve farm productivity. In addition, the Ministry of Agriculture is conducting a promotional campaign to encourage consumers to choose homegrown products, and to increase local processing of our agricultural products. The budget provides $55.2 million to the ministry to assist and promote the development of agriculture in British Columbia. Transportation has long been a key element in the development of British Columbia, and it continues to have a high priority with this government. This was recognized in the creation of the new Ministry of Transportation, Communications and Highways. This ministry will be formulating and implementing a new transportation policy to ensure government activities in this field are consistent with other provincial policies and thus make maximum contribution to economic development of all parts of British Columbia. Substantial funding will be provided for transportation this fiscal year from the province and its Crown corporations. Highway construction will receive a regular appropriation of $160.3 million, and an appropriation from the 1977-1978 surplus of $25.4 million. The surplus appropriation also includes $14 million for reconstruction work on British Columbia Railway's Fort Nelson extension. There is $2.1 million in the budget for the Local Airport Assistance Program. While not part of the provincial budget, the British Columbia Ferry Corporation has begun a capital program of approximately $70 million to expand and modernize the fleet. All these projects will create jobs and improve the essential transportation links which bind this province together. An important facet of British Columbia's economic strategy, which I discussed earlier, is research and development. The Ministry of Education, Science and Technology, through the Science Council of British Columbia, will be actively promoting research activity in the province. This budget provides $500,000 in direct research grants, and $5 million is available through the proposed British Columbia Discovery Trust Fund for this purpose. In addition, the ministry will ensure the educational system provides our young people with the opportunity to develop the skills necessary for the high-technology future which awaits them. Our objective is to coordinate and focus these many economic and resource development programs to maximize the current and future benefits realized from this use of taxpayer dollars. Now, Mr. Speaker, to turn to program expenditures for people, although the increase in this budget has been restrained to 5 percent, the government still has been able to expand its large commitment to people. The emphasis on business growth should not be seen to be in conflict with the expansion of social programs, but rather as a prerequisite for such expansion. Increasing tax revenues from a growing economy provide government with the resources necessary to finance new programs. This government has a continuing commitment to provide a rising level of social services as long as they can be afforded. British Columbia has the best health-care program in Canada, Mr. Speaker. The improvement of health care services continues to be a major priority, as evidenced by the allocation of $1.2 billion to the Ministry of Health, which is more than one-quarter of the budget. In addition, there is $25 million from last year's revenue surplus for the stabilization of health and hospital costs in the province, for a total health care expenditure of $1,238 million. Mr. Speaker, Hospital Programs and the Medical Services Commission continue to receive the largest share of funding at $649.2 million and $245.3 million respectively. The long-term care program, in its second year of development, receives $117.3 million for the fiscal year 1979-80. This program is expected to relieve some of the pressure on acute-care hospitals and reduce the overall cost of the health system. Sick people in British Columbia no longer have to fear the high cost of necessary long-term care. Our government's program has brought a tremendous sense of security to thousands of people, particularly those in their senior years. During the coming year the Minister of Health will be developing a new comprehensive dental care program which will provide those British Columbians who are not part of an existing dental plan with a measure of protection from the high costs associated with basic dental care. Legislation will be introduced during this session of the Legislature. The ministry will also devote increased attention this year to encouraging healthier lifestyles among our citizens. The burden of health care costs would be lightened and the quality of life increased if we could reduce the incidence of degenerative diseases caused by insufficient physical activity, improper diet and excessive use of alcohol and drugs. Mr. Speaker, nearly a quarter of the budget is allocated to the Ministry of Education, Science and Technology, which receives $1.1 billion this coming year. Colleges and provincial institutes will receive $200.7 million, an increase of $40.8 million, or 25.5 percent more than last year. Taxpayers in most parts of the province will be pleased to know they will no longer have to pay property taxes to support their regional college. We are providing $23 million in grants to remove all costs for the operation of colleges from the local school districts. This, Mr. Speaker, will affect practically every property taxpayer in British Columbia. This applies, of course, to Camosun, Capilano, Cariboo, New Caledonia, Douglas, East Kootenay, Fraser Valley, Malaspina, North Island, Northern Lights, Northwest, Okanagan, Selkirk and Vancouver Community Colleges, as well as provincial institutes such as the British Columbia Institute of Technology, the Open Learning Institute, the Pacific Vocational Institute, and the Emily Carr School of Art. Mr. Speaker, universities will receive $232.8 million, an increase of $24.2 million, or 11.6 percent over last year. The public school system receives $22.8 million more, or $614.8 million - over one half of the education budget. Of the increase, $21.4 million constitutes direct payment to school districts which will restrict the increase in the basic mill rate to 1.25 mills. Mr. Speaker, this substantial $44.4 million increase in grants for the support of public school and college education should greatly reduce the amount of school costs required to be raised through the property tax and bring further tax relief to the homeowner. This is in addition to the $100 increase in the annual homeowner grant, which is first deducted from school taxes, and which will cost an estimated $55 million. Now to the subject of the Human Resources ministry. The third-largest share of the budget goes to the Ministry of Human Resources at $648 million. Savings from increased efficiency in the administration and delivery of income assistance benefits over the past three years can now be passed along to the recipients of social assistance. Therefore the income assistance budget is increased $72.7 million, to $249.5 million. This is to cover the increased rates implemented effective April 1, as well as increased costs resulting from federal cutbacks in unemployment insurance. This government has a strong commitment to make home ownership available and affordable to as many British Columbians as possible. The new Ministry of Lands, Parks and Housing will be making Crown land available to individuals for the purpose of building new homes. By in-creasing the supply of land for housing we can stop the upward spiral in housing prices which has put home ownership beyond the reach of many of our people. The Home Purchase Assistance and Family First Home Grant programs, which assist British Columbians buying their first homes, are to be expanded and simplified. The government is determined to reduce homeowner property taxes by attacking the problem on a number of fronts. The most direct benefit for the homeowner comes from the freezing of municipal mill rates, which I announced a few months ago, in combination with the effect of the special $100 increase in the annual homeowner grant which is being financed from the 1977-78 surplus appropriation. A total $29.9 million is provided in the budget for housing programs. Local governments have been the beneficiaries of substantial increases in assistance from this government in the past three years. The new revenue-sharing program was introduced last year to give municipalities and regional districts a share in the more dynamic provincial revenues. Under this program they received $138.3 million last year, an increase of more than $20 million over the allocation under previous programs. In the coming year, this will rise to $141.7 million. In addition, the provincial government is now paying full municipal property taxes on its properties. Local school districts have also received substantial increases in provincial support. Despite these generous increases in financial assistance, the majority of municipal mill rates did not fall. Instead municipal budgets increased at a faster rate than the provincial budget. The people of this province, Mr. Speaker, are demanding restraint from their governments and no level is exempt from this demand. The provincial government has responded by restraining its own budget. As a consequence, we cannot continue to underwrite the excessive increases in local government spending where they occur. Accordingly I announced in January that, except in extraordinary cases, no increases will be permitted in general municipal mill rates this year and municipal budgets will not be permitted to increase by more than 5 percent. As I have stated, provincial expenditures are also being held to a 5 percent increase. To assist municipalities in achieving this target the province will be contributing, for this year only, an extra $7.5 million to reduce the local share of social assistance costs. The province will collect only $1.06 per capita per month from municipalities, rather than $1.40 which would normally be collected as the 10 percent share paid by municipalities with populations over 2,500. Thus welfare costs to municipalities will rise only 5 percent this year. As a matter of interest to hon. members, I want to say that while provincial public service staff establishment levels and salaries for those levels are provided in the budget, there are normally vacancies in every ministry as the result of staff turnover and delays in hiring. In the past these recruitment savings have been used as a "cushion" by ministries. We are now removing this cushion, a saving which amounts to about $60 million. This places a greater financial responsibility and accountability upon program managers to ensure their spending remains within the limits authorized by this Legislative Assembly. Also, as in all other provinces, and with the federal government, the expenditure estimates no longer list staff positions and classifications. I've touched upon only a few highlights in the spending budget. But it does indicate a broad range of new initiatives to improve the quality of government in this province. Turning to the financing of capital programs of our Crown corporations, almost $700 million in long-term funds was made available last year. Provincial trust funds, which are primarily public pension and sinking funds administered by the province, provided $425 million of this amount. Canada Pension Plan funds provided the balance of $260.5 million. There were no market borrowings during the year. As in previous years, Canada Pension Plan funds were allocated primarily to Crown corporations other than British Columbia Hydro and Power Authority. Provincial trust funds were allocated entirely to British Columbia Hydro. I would refer members to a schedule of borrowings by Crown corporations from provincial trust funds and the Canada Pension Plan investment fund. British Columbia Hydro and Power Authority's requirements were met by $425 million from provincial trustee funds, and $51.8 million from Canada Pension Plan funds. British Columbia School Districts Capital Financing Authority made $91.3 million available to school districts for school construction. British Columbia Educational Institutions Capital Financing Authority borrowed $25.3 million for university and community college construction. British Columbia Regional Hospital Districts Financing Authority made $57 million available to regional hospital districts for possible construction. British Columbia Buildings Corporation borrowed $35.1 million for the construction of government buildings. British Columbia Railway Company borrowed no long-term funds during the year, but $20 million in short-term notes was provided to allow the railway to meet its financial commitments, including debt-service requirements. For this fiscal year, the Crown corporations have estimated their requirements as follows: $671 million for British Columbia Hydro; $91 million for hospital construction; $91 million for public school construction; $83 million for university and community college construction; $75 million for British Columbia Railway; $60 million for British Columbia Buildings Corporation. The government expects to meet these financing requirements from the Canada Pension Plan and from pension and sinking funds administered by the province. The fact that we can dig into our own pockets and come up with these large sums of money to finance our own capital development shows the strength of our British Columbia economy. We don't always have to borrow from foreign lenders. At March 31,1979, British Columbia Hydro had approximately $350 million towards this year's requirements. Legislation will be introduced to allow B.C. Hydro to increase its borrowing limit from $4.9 billion to $5.65 billion. The increase is required to allow the Authority to borrow funds up to this point to meet its requirements for funds for capital construction. It had been planned to transfer transit operations from British Columbia Hydro on April 1- 1979, but a last-minute delay in reaching agreement with the Greater Vancouver Regional District has made it necessary to defer temporarily the proposed changes for greater Vancouver and greater Victoria. Agreements have been reached for cost-sharing arrangements for all other transit operations in the province. I would like to review our unique new plan which enables every eligible British Columbian to participate directly in the development of our natural resource wealth. Our government believes in personal economic freedom. It has constantly dedicated itself to providing greater investment and ownership opportunities for the individual in British Columbia. Our commitment is to individual ownership, not big-government ownership. For this reason the provincial government is undertaking the distribution of the shares it owns in the British Columbia Resources Investment Corporation. These shares were received as payment for the provincial assets sold to the corporation. Consequently, after British Columbia Day, August 6,1979, the government of the province of British Columbia will transfer five free British Columbia Resources Investment Corporation shares to every eligible man, woman and child in British Columbia who makes application by June 15. This will afford each of them direct ownership in the province's resource industries. The free shares are expected to represent up to 80 percent of the government's current holdings in the B.C. Resources Investment Corporation. It is estimated that some 2.4 million British Columbians are eligible to receive free shares. If the offer is widely accepted, the British Columbia Resources Investment Corporation will be the most broadly based public company in Canada. At a time when the control of industries is falling into fewer and fewer hands, this is truly a positive step. It is our hope all British Columbians will avail themselves of this unique opportunity. At the same time, the corporation is making available for sale additional common shares. These shares, with a limit of up to 5,000 per person, will be sold to those who have qualified and applied for free shares and wish to add to their holdings. They are being sold at a price of $6 per share, well below their appraised book value. These extra-purchase shares are not the shares once owned by the government, but are being sold by the Corporation to raise new money to invest in the development of the province. The people purchasing these additional shares are buying more shares in their own company. Too many of our citizens are content to put their money into savings accounts instead of investing directly in the province's growth. We hope that giving these shares to the people will provide them with a tangible sense of ownership and participation in British Columbia's economic future and encourage further investment on their part. The assets of the British Columbia Resources Investment Corporation represent an important part of the province's basic resource wealth. Included in these assets are: oil and gas exploration rights to some 2.3 million acres of Crown land in northeastern British Columbia; 81 percent of the common shares of Canadian Cellulose Company Ltd., a large-scale forest product firm with pulp mills at Prince Rupert and Castlegar and three sawmills; 100 percent of the common shares of Kootenay Forest Products Ltd., a medium-sized lumber and plywood manufacturer at Nelson; 100 percent of the common shares of Plateau Mills Ltd., a midsized lumber producer near Vanderhoof; and about 10 percent of the shares of Westcoast Transmission Company Ltd., which operates a major pipeline in British Columbia and is a partner in the Alaska Highway gas pipeline project. We have recognized there would be a cost to the distribution of these shares but we firmly believe this money to be well spent to get people to participate in their own company. Let us consider some of the major benefits of this share distribution. For the majority of people eligible for the free shares this will be an introduction to equity ownership. Provincial residents are being given the first opportunity to purchase additional shares in the corporation. This could mean active participation in the determination of the direction of the corporation's future activities. New investment money is being raised for the corporation to extend the investment base. And this offer of ownership in some of the province's resource wealth may encourage increased participation by our citizens in other business investment opportunities, thereby establishing greater control within the province over our destiny. The share distribution involves all financial institutions - credit unions, banks, trust companies, and investment dealers - in promoting local resource ownership. Companies and non-residents are not allowed to participate in this initial share offer. An amount of $9 million is allocated in the budget for payment of services provided by the financial institutions. These services comprise a major part of the total activity in the distribution and include: providing facilities and training staff; bringing in additional staff; providing information; brochures and the prospectus to applicants and subscribers; inspecting identification of applicants and subscribers; completing application forms; batching applications for submission to the Ministry of Finance; calculating remittance payments and transferring documents; remitting and balancing share purchase payments; handling stop-delivery orders; correcting errors; and completing requisition forms for share certificates. For this part of the procedure the financial institutions receive $2.50 per application. A further $2.50 per application will be paid for the following: handling NSF checks, cancelled subscriptions and stop delivery orders; sorting applications and subscriptions in name sequence; verifying and balancing receipt of share certificates; matching share certificates against customer's copy of application; delivering share certificates; accounting for all share certificates received; and returning the financial institution's copy of all application forms. Also in the budget is a figure of $3 million for data processing costs. A further $3 million special authorization was provided last year for printing, distribution and other initial costs related to the share distribution, for a total estimated cost of $15 million. The B.C. Resources Investment Corporation represents only one of our government's many efforts to encourage individual British Columbians to participate actively in the determination of their own economic future. This unique new plan, coupled with the other incentives which have been proposed in this budget, adds to the foundations of British Columbia's future economic growth and prosperity. I turn to the revenue measures for the 19791980 fiscal year. As I mentioned previously, the increase in the spending estimates this year is only 5 percent more than the revised spending level for last year. Because the province's revenues can usually be expected to increase at a rate in step with the gross provincial product - or by about 11 percent this year - the restraint and spending growth could normally be thought of as providing considerable scope for granting tax relief. Revenue this year is forecast at $4,567.5 million to balance with total spending - an increase of only 1.6 percent over the revised revenue forecast for last year. There are two main reasons for this lower than usual increase. First, and most important, are the tax cuts proposed in this budget. Second, the full effect of the tax cuts made last year will be felt this year. The social services tax revenue for last year, for example, included collections for one and one third months at the higher rate of 7 percent, providing $24 million extra. Also, personal income tax revenues last year included $117.4 million received from the federal government under the sales tax reduction program. Those revenues are not available to us in the coming year. The effect of these and other minor changes reduces this year's revenues by almost $200 million. Nevertheless, our program of spending restraint does allow for some tax reductions, and the revenue measures I am about to propose are those which will provide the most effective stimulus to the British Columbia economy. They will also remove some inequities in the tax system. The first change proposed to this House is designed to reduce the inequitable burden of property taxes upon farm and agricultural reserve lands. We wish to offer every encouragement to reserve these lands for agricultural production. To relieve farmers of part of the burden of property taxes, and to recognize the restrictions on lands in the agricultural land reserve, the government proposes to reduce, by 50 percent, the assessed value of land that is reserved for agricultural use. This applies to land classified as a farm under the Assessment Act or established as an agricultural land reserve under the Agricultural Land Commission Act. This change will come into effect on December 31,1979, and apply for purposes of the 1980 and succeeding years' assessments for general and school tax purposes. Legislation will be introduced to make the necessary amendments. Next we propose to increase the exemption limit under the corporation capital tax from $500,000 to $1 million and along with this provide a graduated tax for companies with capital between $1 million and $1.25 million, effective April 1,1979. This proposal to increase the exemption limit for the consecutive year will remove the tax completely from an estimated additional 3,000 firms and provide further tax relief to small business. In two years we have completely removed the tax from 16,000 smaller firms, leaving only the larger corporations to pay the tax. It should be noted that this tax was introduced on small business by the former government. The cost of this change is estimated at $4 million in a full year. Thirdly, the following items will be exempt from the social services tax effective midnight tonight: vitamins and dietary supplements; and diabetic and ostomy supplies. These items are necessities for a significant number of our citizens with health problems and I am satisfied there is no justification for continuing to levy the tax on these items. The cost of this change is estimated at $2.25 million. The government proposes to make a number of changes in the personal income tax, the first of which has to do with the renters' tax credit. The present tax credit is for $100, reduced by 1 percent of taxable income. This tax credit has the effect of reducing rental accommodation costs for persons with taxable incomes below $10,000. The government is proposing to this House to increase the annual renters' tax credit by $50 to provide a maximum grant of $150 beginning in 1979. The grant reduction factor will be increased to 1.5 percent which maintains the grant for renters with taxable income below $10,000. The largest benefit from the increase will be to persons with no taxable income as indicated by the proposed renters' tax credit benefits following table. The attached table shows various taxable income figures, the present tax credit of $100 and the new tax credit of $150. The renters' tax credit program is administered for the province by the federal government through the personal income tax. Renters will receive the first benefit from the increased grant when they file their 1979 income tax return. The cost of the renters' tax credit increase is estimated at $7 million. Through this increase in the renters' tax credit and the previously announced increase in the homeowner grant, every homeowner and most tenants should see their housing costs reduced. The second change to the personal income tax is an innovative one designed to encourage equity investment by British Columbians, to retain the head offices and senior managements of corporations in British Columbia and to make it easier for British Columbia companies to issue equity capital. A special dividend tax credit of 5 percent is proposed for British Columbia residents receiving dividends from public corporations, as defined under the Income Tax Act of Canada, that have their head off ice and central management located in British Columbia. The new dividend tax credit will be restricted to dividends from public corporations with their head office and central management in British Columbia and will be in addition to the existing dividend tax credit which can be claimed on the taxable income of the dividends from all eligible Canadian corporations. This proposal will allow a British Columbia taxpayer to deduct 5 percent of the taxable income of such dividends from his or her British Columbia income tax. The effect of this credit is to increase the B.C. dividend tax credit rate from 11 to 16 percent on qualifying dividends. To qualify, certain conditions must be met. The taxpayer must be a British Columbia resident for income tax purposes. The dividend-paying corporation must meet the conditions for eligibility for the existing dividend tax credit and, in addition, must maintain its head office and central management in British Columbia. Finally, it must be a public corporation as defined under the Federal Income Tax Act. It is important to encourage local control of corporate decisions which affect the British Columbia economy. When decisions affecting the province's economy are taken by managements remote from the province, we are not satisfied that the people making those decisions are as knowledgeable about provincial conditions as they would be if they were located in British Columbia. Economic policy does not favour all parts of Canada evenly. We have in this tax measure an opportunity to generate corporate interest in maintaining head offices and senior management in British Columbia. We do not intend to allow British Columbia to become a branch-plant economy. Most important, this government believes in individual ownership. Through tax measures that benefit the individual, such as the dividend tax credit, ownership of our industry by our citizens will be encouraged which will create further opportunities for the individual. This dividend tax credit is intended to benefit the average person who purchases shares. Legislation will be introduced to initiate this tax reduction measure. However, the government of Canada has not yet agreed to administer this benefit. I am hopeful arrangements can be concluded allowing for federal administration of the British Columbia dividend tax credit under our tax collection agreement with Ottawa. This legislative amendment will be subject to proclamation after agreement with the government of Canada concerning its administration. The cost of this measure is estimated to be $3 million in the first year. The third change, affecting both personal and corporate taxes, is an innovative one designed to stimulate investment in more risk oriented business. our government is proposing incentives for the establishment of a new type of financial corporation in British Columbia -a small-business, venture-capital corporation. The purpose of these corporations is to provide venture or equity capital to small business in British Columbia. To encourage establishment of venture capital corporations, and to encourage both individual and corporate taxpayers to put their savings into such corporations, special tax deductions from British Columbia income taxes will be provided to investors who place their funds in a venture-capital corporation. Individuals and corporations in British Columbia will benefit from reduced provincial taxes by placing their savings into venture capital corporations. In turn, these corporations will make these savings available in the form of equity and equity-related financing for innovative or high-risk, small business investments in British Columbia. By making such funds available at a reasonable cost to small business in the province, the corporations will aid the small business sector in realizing its growth potential and in contributing further to the overall strength of the British Columbia economy. It is our intention to introduce enabling tax legislation and legislation for the establishment and registration of small-business, venture-capital corporations during this session of the Legislature. The cooperation of the federal government will be sought to accommodate the administration of this tax program through the income tax under the tax collection agreement. Satisfactory implementation of the program will require participation of the federal government. The fourth change in the Income Tax Act is to propose to the government of Canada that it join with the province to provide an accelerated write-off or tax credit against income tax of the cost of adapting buildings to the needs of the handicapped. This is in keeping with proposed changes to the provincial building code to provide access to buildings for handicapped people. The province is prepared to allow the accelerated write-off or tax credit against its income taxes, and will ask the federal government to do the same and administer the tax change under the tax collection agreement. It is the clear intent of this government to assure equal opportunity for our handicapped citizens in the workplace and for everyday needs and enjoyment. It is also estimated that this new incentive will soon provide several hundred additional construction jobs. The fifth change will provide a sharp tax reduction for low income individuals now paying British Columbia income tax. Hon. members will recall this government enacted a change to the provincial Income Tax Act in 1977. That change provided that lox%-income taxpayers who paid no federal income tax would likewise not pay British Columbia income tax. More than 100,000 British Columbians benefited from that change. In 1978 we raised the exemption limit, and it will be raised again for 1979 to reflect the indexing of exemptions and tax brackets. However, British Columbia residents with taxable incomes slightly above the tax exemption limit are required to pay more British Columbia income tax than federal income tax because of the manner in which the federal tax credit is deducted. To correct this situation, I am proposing a change to the British Columbia Income Tax Act, so that no low income taxpayer will pay more British Columbia income tax than federal income tax. In 1979 the range of taxable incomes affected by this measure will be between $1,770 and $2,730 of taxable income. In future years this range will be adjusted upward to reflect indexing of exemptions and tax brackets. An estimated 65,000 taxpayers will benefit from tax reductions ranging up to a maximum of $89. The sixth change the government is proposing in the personal income tax will provide benefits for every individual taxpayer in the province. The provincial personal income tax rate is to be reduced two percentage points, from 46 to 44 percent of federal income tax payable, effective July 1,1979. At 44 percent, British Columbia will have the second lowest personal income tax rate in all Canada. In comparison, Saskatchewan has a personal income tax rate of 53 percent, Manitoba is at 54 percent and Newfoundland is 58 percent. The effect of these last two measures is to provide a tax reduction for all British Columbia residents who pay personal income tax. For taxpayers in the lower taxable income ranges the tax reduction is up to 98 percent. For taxpayers of average and high income the provincial tax reduction in a full year is 4.3 percent. In the case of a couple over 65, it is possible to have gross income of $10,500 without incurring any provincial income tax liability. For a family of four with a family income at the British Columbia average of $23,000, the tax reduction is $65, or 4.3 percent. The cost of these two measures in the first full year is estimated to be $53 million. And now, just as an aside, I would like to notify the hon. members of this House that in the income tax bill I will present today there is also a proposed amendment that will allow the deduction from British Columbia income tax of a portion of political contributions made by individuals and corporations to British Columbia political parties and candidates at elections to this Legislative Assembly. It is this government's firm belief that just as it is important to encourage individual support and business enterprise in this province, so it is to encourage individual support of political parties so basic to our democratic society. The Ontario commission on legislation in 1974 endorsed this principle of allowing a partial deduction of political contributions. The proposal to be introduced provides a tax credit against B.C. income tax payable of 75 percent of the first $100 contribution, 50 percent on the next $450 of contributions and one-third on the amount of contributions in excess of $550 in any one year, up to a maximum credit of $500 in that year. This proposal is the same as the tax credit allowed by the federal and Alberta governments. We do not anticipate any difficulty in obtaining federal government agreement to administer this additional British Columbia income tax credit under the tax collection agreement. Mr. Speaker, the parimutuel betting tax will be reduced one full point to 7 percent, effective immediately, which will be 5.5 percent net to the province. This is the second consecutive year the tax has been reduced, making British Columbia's parimutuel. rate the second lowest in Canada. The measure will stimulate the racing and horse-breeding industries. I would also point out to the hon. members that British Columbia does not tax the admission fee charged by the track operators as is the case in some other provinces including Ontario and Quebec. The final tax change which is proposed today is one which will provide benefits for all British Columbians. Effective midnight tonight, the social services tax is reduced by one percentage point to 4 percent on all taxable purchases except sales through liquor distribution branch retail stores, agencies and winery outlets. The revenue cost of this measure is estimated at $131 million in a full year. This will provide a tax reduction of approximately $70 a year for every British Columbia family, thereby assisting and reducing the increase in the cost of living. The business sector will benefit both from increased consumer demand and the effect of the tax reduction on their own costs. The new sales tax rate of 4 percent is lower than the rate in effect at any time in the last 25 years. British Columbia is the only province that has ever lowered the general sales tax rate permanently and now has the lowest sales tax rate of any province in Canada that charges the tax. It should be noted that Newfoundland imposes a sales tax of 11 percent; Prince Edward Island, New Brunswick and Quebec each charge 8 percent; Ontario has a 7 percent sales tax; while Manitoba and Saskatchewan levy a sales tax of 5 percent. The overall reduction in provincial revenues as a result of these tax changes is estimated to be $155 million this year and $205 million in a full year. For the benefit of the hon. members, let me summarize the revenue measures proposed by the government: 1. a reduction in school and general property taxes on all far m and agricultural reserve land in the province. 2. an increase in the corporation capital tax exemption level to $1 million. 3. a sales tax exemption for vitamins, dietary supplements, diabetic and ostomy supplies. 4. a $50 increase in the annual renters' tax credit. 5. introduction of an additional 5 percent dividend tax credit on dividends paid by British Columbia-based public companies. 6. introduction of a venture capital corporation investment tax credit. 7. an accelerated write-off for income tax credit for the cost of adapting buildings to the needs of the handicapped. 8. a reduction in the personal income tax for persons with low income. 9. a reduction in the personal income tax rate, from 46 to 44 percent, of federal income tax payable, effective July 1,1979. 10. a reduction in the parimutuel betting tax rate to 5.5 percent net to the province effective immediately. 11. a general reduction of 1 percent in the sales tax rate, from 5 to 4 percent, except on liquor sales, effective immediately. And, while not a revenue item, $55 million is provided for a $100 increase in the annual homeowner grant. I would refer hon. members to the table of comparative provincial tax rates in my budget statement. I made earlier reference to the higher personal income and sales tax rates in certain other provinces, and now would draw your attention to the motor fuel tax rates. British Columbia has the lowest gasoline tax rate, at 17 cents per gallon, of any province charging a gasoline tax. By comparison, Newfoundland levies a 27 cent rate, Nova Scotia and Prince Edward Island levy a 21 cent rate, New Brunswick collects 20 cents, Saskatchewan, Ontario and Quebec each impose a tax of 19 cents, and Manitoba is at 18 cents. B.C. has the lowest gasoline tax rate of 17 cents. The variances are even greater with diesel fuel taxes - from 19 cents in British Columbia to 26.6 cents in Saskatchewan, 27 cents in Newfoundland and Nova Scotia, and 25 cents in Prince Edward Island, Quebec and Ontario. It is obvious from this tax table that the burden of taxation upon the individual taxpayer in British Columbia is the second lowest in Canada. And, Mr. Speaker, I draw to the members' attention a schedule showing the estimates of revenues for the past year and for the coming years. In conclusion, these tax reductions and those made by this government in 1978 restore British Columbia to the position of having among the lowest rates of any province. We have been able to do this - to cut taxes -while at the same time maintain, improve, and add an impressive range of services to those in need. This budget provides more money than ever before for social and economic programs, while at the same time cutting taxes significantly for all the province's taxpayers. Our budgets over the last three years have restored integrity to the province's finances and careful spending has provided small surpluses that we are able to put to work to help in the tax reduction and to develop incentives for individual investment in new business in British Columbia. This will ensure that in this year, and in the future, our people will find employment as the result of new opportunities that are being created by our economic strategy. Mr. Speaker, we want the individual to have room to move and to grow in our society. We want the individual to seek out opportunity -to be able to seek out opportunity - and not have to depend on growing bureaucracy or big government to look out for him or her. Our budgets have reduced the impact of that government, and loosened its hold on everyone's pocketbook. We have provided more in services to health, to education, to welfare, and to individual comfort and development than any government in the history of this province. Now we are clearing the way for the individual to participate directly in the future growth of the province. We have given each and every British Columbian an opportunity to invest in their own land. We have provided incentives to the individual and to business to grow and expand. We have by restraint lessened the impact of inflation on people of this west coast province so everyone keeps more of what be or she makes. The way is now open for each individual to mature, knowing that this government will not sap his or her productive energies with state control or rob them of their rewards through excessive taxation. The many benefits flowing to the people of British Columbia from this budget result from the work of this government in restoring the province and its economy to a strong position. If anyone wants proof of the wisdom of our policies, this budget tells it all. This is a budget that should have the support of every hon. member of this House.