Province Législature Session Type de discours Date du discours Locuteur Fonction du locuteur Parti politique Colombie-Britannique 32e 4e Discours du budget 5 avril 1982 Hugh Curtis Minister of Finance British Columbia Social Credit Party Mr. Speaker, in speaking to the motion now before the House, may I say that it is an honour to present to this House the British Columbia budget for the fiscal year ending March 31, 1983. In spite of the inherent wealth and diversity of the British Columbia economy the repercussions of inflation, high interest rates and international recession are being felt throughout the province. Members will know that ours is an open economy. Our linkages are outward, with a national and international economy. These links are the basis of our past and future prosperity, but they also represent a fundamental and intractable reason for the economic turbulence we face today. Our industries have grown, developed and competed in markets beyond this province and beyond this country. By forging these strong links we have contributed to and shared in the growth and prosperity in such parts of the world as the United States, Japan and Europe. We have become an integral and dynamic part of the international economic community. While we share in international growth and prosperity, we also share in the effects of market weakness and instability when they occur. We could not avoid the current international recession. As with all regions and communities in North America, we are feeling the impact of high-interest- rate policies established in Ottawa and in Washington. We are feeling the effects daily and directly, through the crushing burden of interest rates on mortgages and personal and business loans; and indirectly, through the loss of sales opportunities and markets for our business. So it is that a province of boundless economic potential is in the midst of a period of layoffs, unemployment and uncertainty. In assessing what can be done, we must have the wisdom to recognize those forces beyond our control, but similarly we must resist the temptation to say that nothing can be done. To be sure, we are only one of ten provinces in Canada, and Canada is only one of many industrial nations. It is also true that primary responsibility for domestic interest-rate policies and management of the national economy rests with the government of Canada. But I believe, and this government believes, that economic leadership and perseverance by a provincial government can make a difference. Mr. Speaker, this government will not abandon the battle against unemployment against inflation and against high interest rates. We will intensify the fight. Our overriding goals will continue to reflect a commitment to provide rewarding employment for British Columbians, to maintain a dynamic and a prosperous economy led by a thriving private sector, and to provide public services of the highest quality. These are basic and essential goals - goals never to lose sight of. But we have an open, outward-looking economy and our tools are limited. In last year's budget we had some , choices. At that time the economy was strong and was expected to remain relatively strong. We could continue to provide a diverse array of high-quality public services, although it required restraint measures, and, just over a year ago, it required tax increases. Today we have fewer choices. The cost of providing public services continues to escalate, revenue growth is down substantially, the economy is faltering and people are hurting. What was affordable last year is not affordable this year. Major tax increases are not an option, for they would impose a burden on our citizens and bring harm to the economy. I do not propose to increase a wide range of personal, consumer and business taxes for the new year. The objectives I have set for the 1982-83 budget are the following: to provide economic stimulation and create employment, particularly in those sectors and communities hardest hit by world recession; to ensure that the burden of restraint and adjustment to current economic circumstances is shared fairly among all British Columbians; to maintain the high quality of public services provided by the government of British Columbia. Mr. Speaker, the actions of one provincial government can make a difference. This budget reflects my commitment and the commitment of the government of British Columbia to provide economic leadership. This budget will make a difference. We can, and we shall, provide economic stimulation to soften the blows struck by world recession and draconian interest-rate policies. We can, and we shall, ensure that the burden of restraint is shared fairly among all segments of the population, and not shouldered only by those without sufficient power to protect their incomes when conditions are adverse. Mr. Speaker, we can, and we shall, protect and preserve the high quality of vital public services available to all British Columbians. As I indicated a few moments ago, we are prepared to say today that increased taxation is unacceptable. that major tax increases would impose a burden on the private sector, on those with fixed incomes, on the poor and on the unemployed. We are reaching the point beyond which heavier taxation would undermine our economic future by discouraging investment initiative, by removing incentives to work, and by penalizing those who take risks in pursuit of economic betterment. We are prepared to say that government is large enough, that the public sector is consuming a sufficiently large share of our limited economic resources. We are prepared to say that increased public services can be provided only if government becomes more efficient or if savings are made elsewhere. Finally, Mr. Speaker, we shall continue to resist the borrowing trap into which many other governments have fallen, seldom to emerge. Prudent families would never borrow to buy groceries, although many borrow for a new car, and most will borrow for a new home. This government adheres to similar rules of careful financial management. We shall not borrow to finance the ongoing operation of programs. although it is both appropriate and necessary to borrow for major capital purchases such as schools, hospitals and railway facilities. The government of British Columbia has earned the highest credit rating - the AAA rating - in international financial markets. That rating represents a direct endorsement of responsible fiscal management by this government. It is a direct endorsement of the fact that only once since 1952 has a British Columbia government borrowed directly to pay for the operation of government programs. It is a rating that saves our people millions of dollars annually in reduced interest costs, and it is a rating we shall not risk for reasons of short-term expediency. Achievement of our goals would be difficult even under more favourable fiscal circumstances. The challenge is doubly difficult in light of the currently weak revenue situation, Extraordinary measures have been and will continue to be necessary. But leadership is what government is all about. I am confident that with public support from all segments of British Columbia society we shall succeed. We shall do so fairly, firmly and with collective will and determination. I can report, Mr. Speaker, that this budget is very much a collective effort and a collective statement from all members of this government. My colleagues have been fully supportive and deeply involved in many aspects of the budget process. Their cooperation was freely given and that has been an essential element. I pay tribute to them today. Current economic circumstances need little elaboration Far too many British Columbians are seeing firsthand the effects of high interest rates and weak markets for our products. Nevertheless it is helpful to look at the national and international economy, to which our provinces economic fortunes are closely linked. Internationally, the war against inflation is being fought vigorously, particularly in the United States and the United Kingdom. In both countries the selected anti-inflation weapon has been a restrictive monetary policy - high interest rates. In both countries it is felt that the appropriate method to hold down prices is to reduce the ability of people and corporations to make major purchases. This has been accomplished by interest rate policies designed to make the cost of borrowing money virtually prohibitive. Few will argue with the importance of arresting inflation, and few will debate that high interest rates have reduced demand in the economy, but there are many who question the insensitive way in which these policies have been applied. High interest rates hurt most those people and industrial sectors that rely heavily upon borrowed money and those with the least access to pools of money of their own –homeowners, would-be homeowners, farmers, fishermen those working in the construction industry and small business people for whom the cost of borrowing to run their business has become unbearable. The consequences of these policies are well known by the governments that practice them. They have recognized the cost and have made a conscious decision to accept that cost of driving down inflation. So vigorously, however, have these blunt and inequitable measures been applied that a major recession has been inflicted on both the United States and the United Kingdom. Canada*s own economic policies bring no comfort. for we are following the same path. The federal government has pursued high interest rates in lock-step with those in the United States. We are told that high interest rates in Canada represent a deliberate policy to deal with inflation in this country. We are told that we really do have a made-in-Canada economic policy. If this is the kind of policy we make in Canada, then perhaps we should look elsewhere. As an example, the Japanese government has succeeded in adopting interest rate policies distinct from those in the United States. The prime lending rate in Japan in February was less than 7 percent, compared to more than 16 percent in Canada and the United States. This has been achieved by saving more and consuming less that other countries. Japanese savings in 1980 represented some 31 percent of gross national product, compared to 22 percent in Canada. Higher domestic savings allow that country's capital needs to be met without the necessity of high interest rates to encourage and attract foreign capital. They have been able to finance their own economic growth, rather than relying on others. Although Canadian savings are relatively high among western industrial nations, our young resource-economy requires massive amounts of capital to finance its development, When these capital needs are not met from our own savings, we have to look to others to fill the gap. Attracting international investment dollars, particularly in the hostile climate for investment created by federal government policies, has locked us into the use of high interest rates to compete for capital with the United States. Mr. Speaker, I shall not debate Canadian monetary policies in this forum, except to say that there are alternatives to high interest rates. The Premier of the province presented a series of policy proposals to the economic summit of first ministers in early February. British Columbia's proposals called for government to show leadership by exercising fiscal restraint, by expediting major developmental and energy projects, by pursuing measures to enhance our transportation system, by promoting exports, and by providing low-interest development money through encouraging Canadians to save by way of federal-provincial tax-free bonds. We offered proposals that ultimately would have allowed some reduction in Canadian interest rates, while creating employment opportunities and continuing the battle against inflation in a less destructive manner. There was little willingness on the part of other governments in this country, particularly the federal government, to pursue or examine these initiatives. Nevertheless, the government of British Columbia has proceeded with important measures, and this budget will outline yet more steps to be taken. The consequences for British Columbia of high interest rates have been devastating. Business bankruptcies are increasing and the values of some investments, representing lifetime savings and hard work, are literally being wiped out. Added to these difficulties are the effects of the North American recession on our major industrial activities - forest based industries, mining and manufacturing. Approximately 60 percent of British Columbia lumber, for example, is sold in United States markets to supply a housing-construction industry which is experiencing its worst slump since the Second World War. We have kept a close watch on the economic situation during the past year. In 1981 the provincial economy performed surprisingly well, in spite of serious work stoppages and market deterioration in the second half of the year. Real economic growth is estimated to have been 2 percent, with business investment continuing to be a major source of strength, increasing an estimated 16.6 percent over 1980. Similarly, housing starts reached a record level of close to 42, 000 units last year. Unemployment rates continued to be relatively low, averaging 6.2 percent until August, when the effects of international recession began to have a serious impact. By February of this year the unemployment rate had reached 8.7 percent. The effects of market weakness hit the lumber industry first and hardest, as lumber production in 1981 declined by 13 percent from 1980 levels. Lumber prices remain low and unemployment in the forest sector has become a serious problem in many communities. Continued high interest rates and the prolonged United States recession have created unemployment and economic hardship throughout the province. The situation has been aggravated by the recent pattern of inflation and wage settlements. British Columbia's 14.3 percent inflation rate was a primary factor behind a substantial increase in settlements in 1981. Settlements in the private sector averaged 14.2 percent, while those in the public sector escalated by 14.4 percent. With the serious and extensive weakening in economic conditions, many employees in the private sector have accepted wage and salary rollbacks or shorter work weeks as a way of avoiding layoffs for an unfortunate few. This recognition that low prices and production levels cannot support high levels of employment unless there are limitations on wage increases is both responsible and commendable. It underscores a general attitude of fairness which I believe appeals to most British Columbians - a willingness for many to make minor concessions so that a few will not carry an inordinate burden. Although the short-term economic situation is troublesome, we must not lose sight of the great opportunities in British Columbia's future. Our strong and varied resource base will continue to provide rewarding employment for British Columbians: through our forest resources; our mineral wealth our diverse and abundant supplies of energy; and the natural magnificence and magnetic attraction of our province to visitors from around the world. The problem we are facing is serious, but it is short-term. National and international recovery will come, inflation is beginning to moderate, and interest rates are expected to move downward. Although real economic growth for British Columbia is forecast to reach only 1.4 percent in 1982, it is projected to rebound to an average 3.5 percent over the period 1983 to 1986 inclusive. This compares with the Canadian economy as a whole which is expected to experience a decline of 0.5 percent in 1982 and to average 3.4 percent growth over the 1983 to 1986 period. Inflation this year should decline to the 10 to 11 percent range in British Columbia, compared to last year's 14.3 percent. With inflation in the United States now moderating, and with the recent weakening of international oil prices, the prospects are good for a continued improvement in the rate of inflation during the next few years. Responsible economic management by all governments in Canada is essential, however, if these anticipated gains are to be realized. Speaking of the province, Mr. Speaker, to a considerable degree the province's finances are dependent upon major developments in the economy, most of which in turn reflect our close relationship with the national and international economy. Revenue from income taxation falls if unemployment rises and economic activity declines. Growth in sales tax revenue weakens if individuals and businesses are cautious and restrain their purchases of taxable items. Revenue from fuel taxes falls or rises depending upon conservation efforts and the level of activity in industries which consume large quantities of fuel. The factors affecting revenue from resources are similar, because this revenue represents a return to the owners of those natural resources - all British Columbians -over and above the costs of extraction and processing. When markets are weak and prices for resource products are low, revenue from this source will be correspondingly low. Because markets for resource products are extremely volatile and because government sometimes forgoes revenue to maintain employment in resource sectors, such revenue is subject to exceptionally wide variations. Looking at the expenditure side of the ledger, a somewhat different picture emerges. Although program costs inevitably expand to meet the needs of a growing population, short-term economic weakness does not lead to reduced demands for government services. Health programs, for example, must respond to citizen needs for health care services -needs which bear little relationship to existing economic conditions. Similarly, the demands on the educational system remain the same, or may even increase, during periods when job opportunities are more limited. There are, in fact, many government programs which require increased expenditure during difficult economic times. Social assistance programs such as GAIN must fill a greater need when the economy falters. In addition, the government has a key role to play in providing jobs and economic stimulation to counter short-term unemployment problems. As I mentioned earlier, the provincial government alone cannot influence international markets, but it can provide some stimulus where it is most needed. Looking at the fiscal year which ended March 31. 1982, I am pleased to be able to report to the House that in spite of revenue weakness and expenditure pressures greater than anticipated, we've been able to meet our fiscal objectives for the year. This has been possible only because a number of steps were taken to increase revenue and a rigorous expenditure restraint program was put in place. Together these actions produced savings of approximately S150 million, In reviewing the 1981-82 fiscal year one observes that forest revenue was particularly weak, reflecting the major strike and severe market deterioration which occurred during the year. Forest revenue was 64 percent lower than the level of the previous year and only one-fifth of the 1979-80 level. In fact, as I have indicated repeatedly in our quarterly financial reports, revenue from natural resources has been the main factor in the erosion of our revenue position during the last two fiscal years. We have seen total revenue from natural resources fall from $1.3 billion in 1979-80 to $613 million in 1981-82 - a decline of 53 percent. This alone demonstrates the volatile nature of natural resource markets, but it also reflects the actions of the federal government, which has taken a larger share of energy revenues as part of the national energy program. Since that program was introduced in 1980, the retail price of natural gas in Vancouver has risen from $2.48 to $4.35 per thousand cubic feet. Of this increase, more than 60 percent has been taken by the federal government, while the government of British Columbia has received less than 5 percent. Taxation revenue was particularly strong early in 1981-82, although a number of serious weaknesses developed later in the year as a result of poor economic conditions. The most pronounced effects were observed in sales tax collections. After adjusting for inflation and the higher tax rate, sales tax revenue during the second half of the year actually fell below the level of the previous year. One positive revenue development was a significant upward revision to the province's personal income tax entitlement under the federal-provincial tax collection agreement. Hon. members will know that personal and corporation income taxes are collected for the province by the federal government, with interim payments made until final tax collections are assessed and appropriate adjustments occur. A major upward adjustment of $281 million was received in 1981-82 in respect of tax collections for earlier years. Late payments such as this have resulted in interest-free loans to the federal government, and last year alone represented a loss to the province of $69 million. The fact that such a major adjustment payment was necessary reinforces British Columbia's view that the tax collection arrangements with the federal government are inadequate and should be restructured. Overall operating revenue on a cash basis is estimated to have reached S6.66 billion for the 1981-82 fiscal year. This represents an increase of 15. 1 percent from the previous year and is approximately one-half of I percent more than the forecast contained in last year's budget plan. I must stress that it was only through careful monitoring and additional revenue measures that it has been possible to stay within the 1981-82 budget plan. Once such revenue initiative was the review and adjustment of literally hundreds of fees charged by the government for a variety of licenses and services. In man, cases the government of the day has been providing services such as safety inspections and motor-vehicle title searches for fees well below the cost of providing the service. The common element in all cases has been a service provided to individuals or organizations at a cost that has been largely or partially borne by the general taxpayer. The central objective of the fees and licenses review has been to shift a greater proportion of the cost of such services to the recipient of the service and away from the taxpayer. I must stress that the cost of the program has not changed as a result of this policy. The only change has been a reduction in the amount of costs recovered from taxpayers and an increase in the proportion of costs recovered from users. In this way we have been able to supply additional taxpayer dollars to the funding of universally available public services such as health and education. A further significant revenue initiative was the increased rental charged to utilities for the use of provincial rivers and river valleys for electricity generation purposes. The increase in water rentals w as intended to bring the price of electricity more in line with oil and natural Gas prices and to reflect to a greater degree in electricity prices the cost of hydroelectric power projects. British Columbians place a high value on the magnificent heritage of rivers and river valleys for recreation, farming and wildlife purposes. It is quite appropriate that these values be reflected in the price of electricity and passed on to those who benefit from its use. Some critics have suggested that government fees should not have been increased, that poor economic conditions made it a bad time for such increases. Let us be clear that these critics are also saying, in effect, that it was a good time to place a greater burden on the General taxpayer. That, I submit is very questionable logic. In total, adjustments to fees, licenses and water rentals brought in revenue of more than S50 million in 1981-82. In the absence of these measures, total operating revenue would have been an estimated S6.6 billion, slightly below the projected figure contained in last year's budget. Reflecting for a moment, Mr. Speaker, I recall that at this time last year, approximately, members of the opposition and some individuals in the news media were repeatedly accusing me of deliberately underestimating government revenue. Today I am reporting that those careless and erroneous charges have been refuted by the facts. Objective observers - and there are many - would be interested to read in Hansard the many comments made by the members opposite on this topic during the spring of 1981. Looking at the expenditure side for 1981-82 reinforces the earlier comment that while a slumping economy can sharply reduce revenue, expenditure pressures continue and may even increase. Last year's budget plan forecast total operating expenditure of S6.61 billion. I now estimate that actual spending reached S6.75 billion. Unanticipated expenditure pressure was particularly acute in the Ministries of Health and Forests. Now, Mr. Speaker, 1982-83. The lean financial picture that I have described for 1981-82 is expected to carry on well into the current fiscal year. In fact, 1982-83 revenue growth will be down significantly from last year - in large part because of the economic situation, but also because of reduced federal contributions for health and post-secondary education. This year alone British Columbia faces a $122 million reduction in federal contributions for health and post-secondary education programs. During the next five years the reduction will reach almost $700 million. Hon. members will recall that in the November 1981 federal budget the Minister of Finance for Canada presented a proposal to reduce transfers to the provinces. The 1982-83 reduction for British Columbia was estimated at that time to be $108 million, although the federal minister stated quite clearly that negotiations would follow. Mr. Speaker, since the beginning of 19811 or my officials attended 25 meetings on federal -provincial fiscal arrangements, 12 of them since the federal budget was tabled. In spite of genuine attempts by provincial governments to find a compromise, the federal government failed to show any flexibility. There was no negotiation in any sense of the word. In fact, the anticipated revenue loss to British Columbia is now greater than the original estimate contained in the federal budget. Reduced contributions from the federal government, coupled with the downturn in the economy, have limited considerably my budget choices this year. In the absence of other initiatives, a continuation of prevailing revenue and expenditure trends would have led to a substantial fiscal gap in the 1982-83 fiscal year. Our projections show, for example, that if no corrective steps were taken, the gap between revenue and expenditure in this new year would have exceeded $1 billion. Closing such a gap with revenue measures would have required, for example, an increase in the social service tax rate from 6 percent to 11 percent. In terms of expenditure, this is equivalent to the entire cost of operating the Ministry of Education in the year just ended. These are dramatic and unlikely examples, but they show the magnitude of the problem and the limited options available. The budget framework for 1982 is, therefore, one of restraint. But it is restraint with a difference. It is restraint which serves the goals of fairness and equity among British Columbians. It is restraint which serves the goals of continued financial responsibility in government. It is restraint which creates rather than suppresses opportunity by allowing us to do more with less. The centerpiece in the budget framework is the two-year economic stabilization program announced by the Premier of British Columbia in February. The program contains a number of elements which together represent a responsible approach to restraint. It is a program of economy for government which is far more sensitive than the severe and heartless program of restraint so bluntly imposed on the private sector by high interest rates and sagging markets. Let me review briefly the major elements of the program. First, the program puts in place an overall 12 percent limit on spending increases by the provincial government, municipal governments, school districts, hospital districts and a host of other provincially funded agencies. While some program-by-program flexibility is both necessary and desirable, we shall adhere to the overall guidelines. Second, the program includes the compensation stabilization program, which applies compensation guidelines to all provincial public-sector employees. The program will be administered by an experienced and impartial commissioner, Mr. Edward Peck, and includes a basic inflation-protection factor of 10 percent for the first year. Provision has also been made in the first year for an additional 2 percent for special circumstances, such as improved productivity performance or skill shortages, and for a possible further 2 percent adjustment to be added or subtracted to correct serious distortions resulting from past compensation experience. Salaries of the most highly paid public-sector executives are frozen pending a review of compensation relationships among public- and private-sector executives. Mr. Speaker and hon. members, we too have a direct responsibility for showing leadership. Members of this Legislative Assembly received, by formula, an 11.9 per cent pay increase on January I of this year. During this session members will be asked to approve a legislative amendment which will roll back that increase to 8 percent in 1982. I am hopeful that this proposal will receive the unanimous support of this House. The compensation stabilization program is designed to meet several objectives, the most important of which is the need for an equitable sharing of the burden of restraint imposed upon British Columbians by the world economic situation. Employees in the private sector are all too aware of the sometimes insensitive and unyielding way in which the marketplace restrains - through layoffs, unemployment and business bankruptcy. Responding to these realities, many employees have accepted wage and salary rollbacks or shortened work weeks as a way of assisting employers to hold on to markets and avoid widespread job loss. Such pressures are not present in the public sector, particularly if governments are willing simply to borrow and tax to pay an ever-increasing wage bill. Shifting to the taxpayer the cost of large wage settlements is unacceptable to this government. So we have chosen instead to put in place a program that will ensure equity between employees in government and employees in the private sector. By restraining growth in public-sector salaries the need to lay off public employees to meet overall expenditure objectives will be minimized. Wages and salaries directly or indirectly account for more than 60 per cent of government expenditure. Achievement of expenditure restraint in the absence of limitations on compensation increases would have required major social-program reductions and the loss of jobs for many of our employees - an unattractive prospect for the government, its employees and the taxpayer. In order to obtain authority for the compensation stabilization program, I shall introduce legislation which defines the scope of the program, sets the framework for the guidelines and provides for the establishment of the office of the commissioner. Upon legislative approval, detailed regulations relating to the administration of the guidelines will be issued. Public opinion has been sought and will be reflected in the legislation, the guidelines and the regulations. A third major element of the economic stabilization program will include measures to stimulate the economy and create much-needed jobs. Economic stimulation requires that the government put more money into the economy than it takes out in the near term. We must take a leadership role in maintaining the level of demand in the economy, but it must be done in a financially responsible manner. To repeat, we shall not resort to borrowing for operating purposes in order to accomplish this. Rather, I shall present a program involving more rapid expenditure of moneys now held in special purpose funds, combined with a program of capital spending, for which financing over a longer period is both necessary and appropriate. Hon. members will note that the estimates of revenue and expenditure for the current year are presented on the new basis of accounting, which I announced in last year's budget and applied in subsequent quarterly financial reports. The new policy adopts generally accepted accounting principles and is part of our overall program to reform and update government financial practices. Detailed discussion of he changes will be found in a background paper to this budget. The budget plan I am proposing today projects general fund expenditure of $7.23 billion, balanced by revenue of the same amount. A broader, more comprehensive perspective is obtained from consolidated revenue and expenditure figures, bringing general fund revenue and expenditures together with that of special purpose funds and accounts. On this basis, revenue for the year is projected to be $7.33 billion, an increase of 7.2 percent from last year. This is substantially less than the 10 to 11 percent rate of inflation projected for this year, and it is a significant real reduction in revenue from last year. The estimate of consolidated expenditure for 1982-83 is $7.69 billion, an increase of 8.1 percent from actual expenditure in 1981-82. This is well within the 12 percent expenditure growth limit established by the economic stabilization program. Mr. Speaker, the difference between consolidated expenditure and revenue for the current year is $358 million. The budget I am tabling here today injects $358 million more into the economy than we are withdrawing in revenue. Directly and indirectly this stimulus alone will create some 9, 000 jobs in British Columbia. It is an economic stimulus to assist British Columbians during this period of short-term weakness. Further stimulation will be provided by the massive program of capital spending the government has underway. Two months ago, I announced a review of capital spending by the government. The purpose of that review was to assess approximately 600 capital projects, or requests for approval of capital spending. We now have completed that review, having paid special attention to the needs of certain communities for projects that will create employment and bolster a sagging construction industry. Projects now underway, or beginning this year, represent a total capital spending program of S3.6 billion'. Of this total, S 1. 2 billion will actually be spent during the 1982-83 fiscal year, providing close to 40.000 jobs. Included in this amount are northeast coal development, British Columbia Place, a light rapid transit system for the greater Vancouver region, schools, hospitals, courthouses and other capital projects -projects that will provide jobs for today while building our economic and social capital facilities for tomorrow. The northeast coal project merits special mention. It deserves comment because of its many critics in the opposition and because this project is such a driving force in our economy. I want to spend a few moments with it. Northeast coal alone will account for nearly one full percent of British Columbia's real economic growth and will create 5, 800 jobs in the current year. That is an essential contribution to our economy today, and it will be an engine of northern growth and development for years to come. Mr. Speaker. I challenge the critics of this vital project to come forward and tell us they would cancel the northeast coal development. I challenge the critics to show a better way to stimulate the economy today, while securing our economic future. I cannot overemphasize that we are able to provide this major stimulus without borrowing to fund ongoing programs. It is an accomplishment made possible because this government has, in the past, funded programs responsibly. We have not allowed the provincial finances run down to the point where there would be no funds available to deal with the difficult situation such as we face today. Rainy-day money has been set aside in special purpose funds and in the revenue surplus account. This careful financial management combined with the economic stabilization program allows us to maintain essential social and economic programs as well as to provide for the economic stimulation now called for. As I announced in last year's budget, in future we shall stabilize revenue and expenditure by means of the resource revenue stabilization fund. I shall therefore table legislation which formally creates this special government fund. At the same time most other special funds will become accounts of the general fund, their purposes to remain unchanged. The resource revenue stabilization fund will build up a contingency balance in periods of strong economic growth to be used to counter future economic and financial weakness. This special fund will become a central element of responsible financial management in British Columbia in the years ahead. The budget framework I have outlined will enable us to reach our goals of providing economic stimulation, of spreading the burden of restraint fairly among all British Columbians, and of maintaining the high quality of public services in our province. The fiscal course I am charting today is narrow: there will be little room to maneuver if revenue or expenditure deviates negatively from the fiscal plan. At the end of this fiscal year our cash balance is expected to be only slightly more than the revenue collected by the province in one week. If the economy fails to respond as we are anticipating more difficult decisions will be required, but I am confident that the toughest decisions have been made and that the worst is over. Mr. Speaker, the task of compiling the 1982 expenditure budget has been complex and has involved many difficult decisions. Without the cooperation and support of my cabinet colleagues, it would have been impossible. In all expenditure areas, three basic questions were asked. Firstly, how can we deliver a better service at lower cost? Secondly, do programs provide a service fairly, efficiently, and to those with the greatest need for the service'? And thirdly, does the program represent an appropriate use of limited resources during a difficult year in the economy? The measures taken have been balanced and realistic. Programs that support citizens most in need have been fully funded, while programs not meeting the test of necessity during a tough year have been trimmed back. In order to achieve their objectives in the current year, ministries will have to operate at maximum efficiency. Program managers and others in British Columbia's dedicated and capable public service will be challenged to the limit. I am confident that the challenge will be met positively and with enthusiasm. The expenditure guideline contained in the economic stabilization program called for a limit of 12 percent on expenditure increases in 1982-83 over last year. Most programs will meet the guideline, and those that exceed it will be balanced by programs where expenditure will increase less than 12 percent. Overall government expenditure growth will be within the prescribed limit. I shall review briefly some of the major programs that are to meet the 12 percent guideline. First, grants to school districts will be limited to a 12 percent increase. School enrolment in British Columbia has been declining in recent years, while the number of teachers has continued to rise. The average number of pupils per teacher has declined from 22 in 1971 to 17 in 1981, a 23 percent reduction. Our teachers are better paid than those of any other province and our provincial educational system now stands as one of the best in Canada. Although further improvements are possible, it will not be a simple matter of spending more money. Rather, we must harness more effectively and innovatively the talents of our professional educators. I am confident that they, as well as other professionals in the public sector, will meet the challenge of restraint with continued dedication and commitment to excellence in our schools. While expenditure restraint in the education area is clearly essential, this budget also makes provision for a program of assistance that will reduce the burden of education costs on local property tax payers. This program, announced last month by my colleague the Minister of Education (Hon. Mr. Smith), will bring about a fundamental restructuring of the education financing system in the province and provide a substantial reduction in residential property taxes for school purposes. Mr. Speaker, in 50 of the province's 75 school districts, school taxes in 1982 will be less than they would have been under the former system. For example, a typical taxpayer in Vancouver will pay $121 less, in Vernon $108 less and in Terrace $144 less. Under the old system, residential property taxes provided 12 percent of the total cost of education. Under the new system the residential taxpayer will shoulder an even more modest share of these costs - less than 10 percent. The provincial government will assume responsibility for the financing of some 90 percent of school operating costs. In addition to paying directly for 75 percent of these costs, the province will continue to contribute to education financing by way of the homeowner grant, payments to school districts for debt servicing, and contributions to the teachers' pension plan. The total contribution of the government of British Columbia to public school education in the 1982-83 fiscal year will amount to approximately $1.65 billion, or $3, 400 per student enrolled. Under this financing arrangement the provincial government will assume responsibility for nonresidential school taxes. A uniform non-residential mill rate will be set by the province, although no increases will be made in 1982 for those school districts where the 1981 mill rate was below the uniform rate of 55 mills announced for 1982. As a result, non-residential mill rates will decline in areas where previously they were comparatively high and will remain at last year's level in areas where they have been relatively low. In addition to property-tax relief for those carrying the greatest burden, it is appropriate for the achievement of equity that those paying minimal property taxes make an increased contribution. I am therefore announcing two other changes to provincial property taxes. First, there will be an increase from $75 to $125 in the minimum property tax payable in British Columbia. The new minimum, which is approximately $10 a month, in our view represents an extremely small minimum contribution on the part of most property owners in this province. The minimum for seniors and others eligible for the supplementary homeowner grant will remain at $1. Secondly, the rural property mill rate, which has been set at 10 mills since 1917, will be raised to 12 mills for the 1982 taxation year. For the average rural taxpayer this will mean an average monthly tax increase of $1.60. Finally, Mr. Speaker, I am establishing today an education cost stabilization account, from which a total of $75 million will be expended for purposes of restraining increases in school property taxes. Still within the area of education, operating grants to colleges and universities also will be restrained. Here again British Columbia has funded and developed a college and university network which ranks with the best in the country. Our advanced educational system offers diverse opportunities, provided through internationally reputable universities and research facilities, community-based colleges and institutes. The average operating cost per full-time equivalent student in British Columbia's colleges and universities has risen from $2, 560 in 1971 to $7, 227 in 1981 - an expenditure increase well ahead of the rate of inflation over the same period and well ahead of most other provinces in Canada. At the same time, Mr. Speaker, tuition fees at British Columbia colleges and universities are among the lowest in Canada and actually have declined by 34.9 percent after accounting for inflation over the past decade. Similarly, the share of operating costs covered by student tuition fees has declined substantially in recent years. During the early 1960s student fees provided more than one of every five dollars required to operate our colleges and universities. Today, less than one of every ten dollars comes from student fees. During a difficult year it is necessary and appropriate to limit operating grants to colleges and universities. I must emphasize, however, that the government pays the full cost of servicing the debt associated with the capital facilities of colleges and universities. These commitments must be met and will be met. A number of important restraint initiatives also will apply to provincial programs of assistance to local government. In the past there have been several different programs involving expenditure to or revenue from local government. This has resulted in an excessively complicated administrative structure which will be simplified and improved this year. In particular, the Revenue Sharing Fund, which was introduced in 1977 by this government to provide an assured and predictable method of sharing provincial revenue with local government, will be broadened to include several additional programs. The sewerage assistance program, the utility underground program and the restructure assistance program will be financed now from the Revenue Sharing Fund. Most significantly; the requirement that local government pay a share of social welfare costs will be phased out over two years. This will result in an important cost saving to local governments. For example, the saving to municipalities will be $26.6 million in 1982-83 alone. In the future these costs will continue to be carried by the senior levels of government. With this program consolidation it now will be possible to reduce the diverse and costly financial interaction between the province and local government. Program efficiency and service to the taxpayer will be improved. Mr. Speaker, payments to local government under the Revenue Sharing Fund have increased by an average annual rate of 23 percent since 1979-80. That's a generous increase by any standard - far in excess of the 9 percent growth in provincial revenue during the same period. It should be emphasized that the revenue-sharing formula does not require local government to share in provincial revenue losses resulting from cutbacks in federal transfer payments. Therefore, 1982-83 payments into the Revenue Sharing Fund will again grow faster than provincial revenue, although the changes in funding arrangements I have outlined will reduce unconditional transfers to municipalities. Local property tax payers will be protected from substantial tax increases by the application of the 12 percent guideline to the budgets of local government, including school districts. Mr. Speaker, this government's commitment to a high quality of life in our urban areas is by no means restricted to programs to assist local government. The province has taken a direct leadership role in a number of key urban development areas. The Premier last week confirmed that Expo'86 will go ahead. It will include the Canada Pavilion on Pier B-C, later to become a trade and convention centre that will bring significant lasting benefits to British Columbia. The light rapid transit system for the greater Vancouver region represents a historic undertaking dedicated to improving the movement of people within this large and growing urban area. British Columbia Place will make a major contribution to life in the city of Vancouver by providing housing accommodation for a broad range of income groups and by giving British Columbians a stadium that will serve athletes and spectators alike for many years to come. Similarly, Mr. Speaker, the new Annacis Island crossing over the Fraser River will substantially ease traffic congestion in the southern part of the Vancouver urban region. While grants for transit will be held to less than 12 percent, I've been assured that the high quality transit services in numerous centers around the province will not be jeopardized by this restraint measure. In some program areas the government commitment to vital services can only be met by expenditure growth in excess of 12 percent. The provision of policing services to smaller communities, for example, has been threatened by reductions in federal expenditure commitments for RCMP contracts. This government is not prepared to sacrifice community safety and protection, leaving us little choice but to provide funds that will replace those withdrawn by Ottawa. Similarly we will not compromise the high standard of services to the needy and the elderly in British Columbia. In fact, the troubled economy will place additional expenditure demands on such programs of assistance as GAIN, Pharmacare and services for families and children. This expenditure is essential; therefore the increase will exceed 12 percent. Mr. Speaker, governments often are criticized for failing to maintain high standards of health care. In this regard may I say that the entire health-care delivery system of British Columbia occupied a great deal of time and received careful consideration during the past year. The Minister of Health (Hon. Mr. Nielsen) has consulted extensively with Treasury Board and with me as Minister of Finance. I want to commend and express appreciation to the Minister of Health for the manner in which he has contributed to British Columbia's first-class health care system. Frankly, sir, it is my view that, as a government, we have not fully emphasized the extent of the health services which are offered to the people of this province. One need not took far beyond our provincial boundaries to appreciate the fundamental principle to which we adhere. That principle is this: that no individual and no family in British Columbia will face devastating costs as a result of illness or injury. Health care in this province, in every respect, is among the best to be found anywhere in the world. This government undertakes to maintain the integrity of that service. Expenditure on health care will exceed the 12 percent guideline. In particular, the government will continue to commit substantial resources to priority health-care areas. For example, the budget proposes a 24.6 percent increase in spending on the long-term care program. With approval of this funding it will be possible to provide 675 new long-term beds. Despite our revenue constraints, necessary improvements in the health delivery system must proceed. Offsetting economies must be made elsewhere in the budget so that vital health services to British Columbians can be maintained. In order to meet this undertaking I propose a special appropriation from which to maintain the quality and integrity of the health-care system in this period of sluggish revenue growth. As provincial revenue recovers, it is my intention that support for the health-care system will again be met from the normal operating revenue of the government. But for the current year I am creating the health cost stabilization account for the purpose of protecting the standard of health care in this province. This fund will provide $77.8 million to help cover the cost of medical and hospital service for all British Columbians. In some activities, Mr. Speaker, significant additional expenditure is required when it is not appropriate for the cost to be home by the taxpayer. In the area of fish and wildlife resource management, expenditure increases will be offset by enhanced revenue from the sale of fishing and hunting licenses. Again, this reflects a desire on the part of this Government to have a greater proportion of the costs for services such as these shifted from all taxpayers to those who primarily benefit from services provided. Turning again to economic development, the focus will be on provision of short-term stimulation of employment, consistent with building the long-term economic base of our province. I discussed at some length the way in which this budget provides for an overall expenditure injection into the economy - through consolidated expenditure exceeding consolidated revenue through the current year, and through a program of capital construction that will create employment and assist the slumping construction sector. In particular, provision is being made for a number of direct employment initiatives. Today I am proposing to establish a special account, the employment development account with an initial allocation of $132.9 million. The account will be managed and coordinated by a special cabinet committee on employment development which will start immediately to set priorities and to expedite the necessary program initiatives. This account will bring together into a single policy framework a number of programs from different ministries, in addition to receiving $25 million in new funding. The new cabinet committee will give priority to training programs, the objective being to prepare people now for the employment opportunities that will emerge as the economy recovers and a series of major projects go forward. Effective manpower planning and training programs will be a critical element in avoiding skill shortages and giving maximum employment opportunities to British Columbians in the years ahead. Short-term employment opportunities will also be created by the Ministry of Forests programs to protect and enhance the forest resource base. Silviculture and forest protection will both receive a substantial expenditure boost. It must be stressed that this is only a first step toward a major employment development program which will include initiatives in job creation, housing, forest resource development and human resource development. For every program where expenditure exceeds the 12 percent guideline, there must be other programs where expenditure falls short of the guideline. Ministries where expenditures will be restrained to increases below 12 percent this year include Transportation and Highways; Energy, Mines and Petroleum Resources; and Agriculture and Food. In addition, Mr. Speaker, I am proposing that the $26.1 million annual installment payment required to retire the debt incurred by the previous government in 1975-76 be refinanced. This is a year of restraint, during which it is more appropriate that such expenditure be directed to employment creation and social programs. I shall therefore table legislation authorizing the government to refinance the 1982 debt retirement payment. Restraint involves more than reductions in particular programs; it also involves improved overall government efficiency. Across government, steps are being taken to improve the efficiency and effectiveness of programs. The provisions of the Financial Administration Act implemented this year will provide new and improved approaches to financial management and control. The estimates of revenue and expenditure that I've tabled today have also been restructured to provide an improved vote structure, to be more informative, and to provide superior accountability for expenditure of public funds. We shall also continue to implement cash management and investment policies that will ultimately offer considerable savings to taxpayers. Interest earned by careful cash management and investment of public funds totaled more than $100 million and saved taxpayers millions of dollars in 1981-82. I outlined earlier the high priority given to containing the growth of government and limiting the tax burden on British Columbians. The economic stabilization program will hold in check the cost of government cost savings that will be passed on to citizens through restraint on tax and government fee increases. There will be no increase in personal or corporation income taxes this year. We will continue this year to apply the small business tax rate at 8 percent, which is one-half of the general corporation tax rate. There will be no increase in the social service tax rate this year. In last year's budget I announced a provincial personal income tax credit. The benefits of this tax credit are now available to 40 percent of British Columbia families and about 75 percent of elderly tax filers in this province. Depending upon income and deductions, a family of two adults and two children could receive a credit of up to $214. I shall also table legislation to authorize British Columbia housing and employment development bonds, as a new mechanism to put the savings of British Columbians to work. Provision will be included for the issuance of bonds on which the interest is exempt from provincial income tax and, if agreed to by the government of Canada, exempt from federal income tax. The funds raised by these bonds will be made available through the Cabinet Committee on Employment Development for low-interest housing programs and employment initiatives in the province. The legislation will initially authorize up to $250 million in bonds to be issued. I have stressed repeatedly that a primary government objective is to ensure that the burden of restraint is spread fairly among all British Columbians. I have also stressed, sir, that our current economic difficulties owe their origins primarily to high interest rates. These rates have placed an enormous cost burden on many segments of our population. Unfortunately, high interest rates have also provided inadvertent benefits to some that most people would agree are not appropriate. One such group is Canada's chartered banks. Since 1977, for example, chartered banks have realized an average after-tax return on shareholders' equity of more than 21 per cent, significantly and consistently higher than other financial institutions and industrial sectors. Not all of these excessive profits have resulted from high interest rates. The banks have, since 1977, benefited considerably from federal government tax provisions, enabling them to reduce their income tax liabilities by enormous amounts. As a result, some of Canada's banks have recorded very large net incomes and yet have paid very little federal or provincial income tax. For example, in 1976 income taxes paid to British Columbia by the chartered banks totaled $15.5 million. In 1980, in spite of large profits, those banks paid only $5.8 million in British Columbia income taxes. At a time when many families, individuals and businesses are struggling to cope with high interest rates, are paying their fair share of taxes, and are faced with widespread economic uncertainties, this privileged position for banks is both unfair and inappropriate. It is a problem that governments have avoided for too long. I shall therefore table legislation providing for a tax increase which will apply only to chartered banks, effective May 1, 1982. The increase in revenue from this measure, estimated at $15 million for the 1982-83 fiscal year, will be used to partially fund the new British Columbia employment development program outlined earlier in this budget address. Mr. Speaker, I am committed to a restraint program that is fair to all British Columbians. I believe, and I am confident that those in the financial community will agree, that this is a reasonable and fair contribution to those British Columbians being hurt seriously by high interest rates and unemployment. Today I am announcing another significant tax change in connection with provincial energy policy. Considerable interest has been expressed recently in having motor vehicles converted to use compressed natural gas or propane. These are clean, efficient gasoline substitutes which are in plentiful supply in British Columbia. To encourage substitution of these fuels for gasoline, effective midnight tonight, there will be no provincial fuel tax applied to propane or compressed natural gas. This represents an estimated reduction in the average fuel cost per kilometer for vehicles using propane or compressed natural gas of approximately 20 per cent. As a further measure, this government will provide to individuals grants of $200 each to assist with the conversion of automobiles to compressed natural gas. These initiatives will complement the federal grants available for this same purpose. I am also announcing today, Mr. Speaker, a number of minor taxation-related amendments. They include additions to the list of items which farmers may purchase exempt from social service tax; and an increase in fines and penalties under a number of taxation statutes, to ensure prompt payment and full compliance. Finally, I am announcing the government's intention to negotiate a reciprocal taxation agreement with the government of Canada. Under this new agreement the federal government will agree to pay grants in lieu of provincial social service tax, fuel taxes and a number of other provincial taxes not previously paid by the federal government. In return, the government of British Columbia and its agencies will pay all constitutionally valid federal excise taxes. Under this agreement it is estimated that the government of British Columbia will realize a net financial gain of approximately $8 million in the first year. In addition, Mr. Speaker, I shall continue discussions with the federal government on other areas where reform can and should be pursued. I am particularly concerned about the current federal-provincial arrangement governing the collection of personal and corporation income taxes. As I mentioned earlier, under this arrangement the federal government administers the collection of income tax for the province, remitting the revenues collected over a period of years as final information becomes available. Our taxpayers are losing millions of dollars due to slow payments under this must unsatisfactory arrangement. Moreover, the federal government has used its dominant role in the tax collection agreement to unilaterally force upon provinces a substantial amount of the cost of federal tax initiatives. Such actions have been taken without full consultation and with no recognition given to the provincial contribution. The lack of a suitable amending formula with respect to both the tax collection agreement and the established programs financing arrangement is clearly inappropriate. It is a persistent federal-provincial problem and one for which I shall continue to seek a cooperative resolution. If fundamental problems with these taxation arrangements cannot be resolved, the government of British Columbia is prepared to develop its own personal and corporation income tax system to serve better the needs of British Columbians. Some provinces have done this successfully and several others are currently giving consideration to self-administration of income taxes. Our ultimate decision, however, will be determined by how we can most effectively meet the social and economic aspirations of British Columbia citizens. I have advised the federal government of our intention to withdraw from the tax collection agreement if satisfactory progress is not made toward removing the deficiencies in the current system. Mr. Speaker, not long ago a newspaper in greater Victoria ran a very humorous cartoon portraying the Ministry of Finance as a group of marauding pirates out to fleece a bewildered pair of British Columbia citizens in a small rowboat. The message was clear enough that the Ministry of Finance is single-mindedly using tax and fee increases to ravage an unsuspecting public. But as I thought about that cartoon it occurred to me that it illustrated a deeper contradiction that has emerged in British Columbia - in fact in much of the western world - in recent years. Many of us have lived through a period of plenty - a period of growth, prosperity and rising expectations. As citizens, we have also come to expect high quality. We've come to demand much of government - high-quality health care, first-rate education system; we expect protection in our communities from crime and fire, a clean environment and rewarding employment opportunities. Yet there is a contradiction: we are all citizens with great expectations of government but at the same time we are all. in one way or another. taxpayers, and as such we understandably do not wish to pay higher taxes; most would prefer lower taxes or no taxes at all. The contradiction is this: we cannot go on placing greater and more costly demands upon government for new and better public services and for solutions to new and more complex problems unless we are prepared to pay. Government has no money of its own -only the taxpayers' money. The citizen demanding services and the taxpayer footing the bill are one. Such contradictions are not isolated. We are also consumers at the same time as we are either employers or employees. As consumers, we abhor inflation: yet how many will refuse a wage or salary increase when productivity has not improved? How many producers will reject a price increase when their product has not improved? Mr. Speaker, if you will forgive me, I am reminded o'--hat most memorable quote by Walt Kelly: "We have met the enemy, and he is us.** All of us - taxpayers, citizens, employers and employees, even those of us on both sides of this House - at times have lived such contradictions. We have become victims of our own prosperity. We have allowed ourselves the luxury of drift. A missing ingredient has been leadership - economic leadership. In a rising sea of conflicting currents we need a steady hand at the tiller - not at the till aimlessly taking more and giving less. This is a leadership budget to lead us through the storm. This budget will attain the objectives I have set out to meet. First, it will provide economic stimulation in the short term, while building the economy for the long term. Second, it will help to ensure that restraint is shared equitably among all British Columbians. Finally, it will protect and enhance the quality of public services in our province. This is not a budget of illusions. It will not turn the international economy around. But it will carry us through without harsh and inequitable sacrifice, and it will pave the road to recovery. I believe the greatest accomplishment of this budget has been the meeting of our objectives without major tax increases, without substantial cuts in public services, and without mortgaging our future and our children's and our grandchildren's future by borrowing for operating purposes. I believe that the budget framework I have outlined today will hold government expenditure in British Columbia to a level which our economy can support in the longer term. This budget will preserve our province's status of having one of the leanest, most effective government sectors in Canada. This is a status in which we can take pride. It is a status which, by avoiding government strangulation of the private sector, will assure the continuing health of our economy. It is also a status not enjoyed by many governments in Canada. The federal government currently spends one of every five dollars received in revenue just to meet debt-servicing obligations. If we in British Columbia had followed the federal example, we would have a financial disaster on our hands today. The sales tax today would be 11 percent, not 6 percent. Our personal income tax rate would be 54 percent, not 44 percent. Mr. Speaker, our province has vast economic potential. Lasting prosperity can be ours, but this is a turbulent and competitive world. There are no quick fixes; there are no free rides. All British Columbians must pull together and we must dedicate ourselves to the effort and ingenuity required to turn our potential prosperity into real prosperity. We hope that the worst of the world recession is now over and that the international economy will recover. Mr. Speaker, we shall be ready. Our industries will be strong and our workforce willing and able. The sacrifices we make today will ensure strength, stability and prosperity tomorrow and from tomorrow's prosperity we shall again build up our finances. We shall use the resource revenue stabilization fund to provide the financial security that will see us through the difficulties of future years. Last year in concluding the budget speech, Mr. Speaker, I referred to our good fortune. I referred to our resource heritage and wealth, our unsurpassed recreational opportunities and our public services which are among the finest in the world. Looking back over this past year and looking toward the future I am thankful that we have been able to provide economic stimulation at this difficult time, that we have imposed financial discipline on ourselves to make this possible and that as a government we have applied restraint in a fair and a forward-looking manner. Finally, I am thankful for the good fortune, Mr. Speaker, to be part of a government that is offering leadership to British Columbians through these challenging times.