Province Législature Session Type de discours Date du discours Locuteur Fonction du locuteur Parti politique Nouveau-Brunswick 47e 4e Discours sur le Budget 15 mars 1974 M. Jean-Maurice Simard Ministre des Finances PC Mr. Speaker, this is the fourth occasion on which I have been privileged to present to this House the traditional motion of supply and the budget speech. In the course of my speech, I will present a brief review of past economic and intergovernmental events and then propose to the House the fiscal plan for the year to come. Last year, Mr. Speaker, at the beginning of my budget speech I expressed my conviction that you would carry out your new duties with authority and competence. Your conduct in office has more than lived up to these high expectations, and I would like to take this opportunity to compliment you on the effective and impartial manner in which you have performed your difficult task. Mr. Speaker, for the fourth successive year I am bringing down a budget which does not increase taxes. Since 1970 we have held the line, and have made significant decreases in taxation. I am happy to announce that this budget will propose further tax reductions for the people of New Brunswick. The effect of our policies has been to restore stability to New Brunswick's finances and build confidence in our economic future. This budget will move New Brunswick forward on three main fronts: First, this budget is strongly oriented to future economic development and growth. It is designed to take maximum advantage of the momentum that has been generated in New Brunswick's economy. Second, this budget provides for significant increases in financial assistance to municipalities to help support local services. We attach a high priority to finding workable solutions to problems that have been inherited by the provincial and municipal levels of government from the previous Liberal administration. This budget reflects this determination. Third, this budget underlines to New Brunswickers the firm resolve of this government to continue to pursue progressive social development policies within a tax framework that is careful and realistic. Mr. Speaker, before I outline the budget proposals in detail, there are some related and important matters which I would like to bring to the attention of the House. First, I would like to review briefly the performance of the economy in 1973. I will then report on intergovernmental relations, the financial operations in 1973-74, and comment on our future fiscal planning program. The Economy in 1973 Canada A few days ago, Mr. Speaker, I tabled the annual review of the New Brunswick economy entitled "New Brunswick Economy 1974". This review contained an assessment of the main events, international and national, which affected economic development in New Brunswick, together with a description by sector of economic changes in the province. I will, therefore, limit my remarks this afternoon to outlining a few of the highlights. The Canadian economy continued to show strong growth during 1973. Preliminary estimates indicate that the nominal increase in Gross National Product will have been in the neighbourhood of 14 per cent. This, some seven per cent is accounted for by the inflation factor, so that the increase in real national product will have been close to seven per cent. In historical terms, these rates are exceptionally high. Unemployment rates in Canada in 1973 declined to an average of 5.6 per cent, from 6.3 per cent in 1972. It is disquieting to note, however, that while unemployment decreased during the year, the average level was higher than is usually the case when the economy moves toward full utilization of productive capacity. The emergence of the oil crisis and subsequent price and supply problems brought special concerns to Canada east of the Ottawa Valley. I will have more to say about this subject when I discuss federal- provincial matters. New Brunswick Mr. Speaker, preliminary estimates indicate that Gross Provincial Product-the market value of all final goods produced in the province during the year-increased to a level of about $2.4 billion from the revised 1972 level of $2.1 billion. This estimated 13.5 per cent advance represented the largest year-over-year increase in nominal GPP since 1951 and followed the substantial 11.6 per cent rate of 1972. As in the nation as a whole, however, much of the increase in nominal GPP was attributable to the increase in prices during the year. Using an estimated seven per cent increase in the National Accounts GNE price deflator as an indicator of price inflation in GPP, it is estimated that real GPP advanced by about 6-1/2 per cent during the year compared to five per cent per year in 1971 and 1972. The year 1973 witnessed a continuing high rate of population growth in this province. By June 1, the population had increased by 10,000 persons from the June 1 level of 1972, rising to 652,000. Increasing population leads, of course, to a rapidly growing labour force. In 1973, 13,000 new workers joined the labour force-an increase of 5.8 per cent. I am happy to be able to report that job opportunities for these new workers also expanded rapidly. In 1973, 11,000 new jobs were created-an increase in employment of 5.3 per cent. The relatively high rate of unemployment in the nation and in this province continues to be a matter of special concern. During 1973 the rate in New Brunswick reached 9.2 per cent. Of special importance is the fact that about 50 per cent of those unemployed are young people in the 14-24 age group. This problem can probably be traced to unusually rapid increases in population growth in the 1950's which are now being reflected in rising numbers of young people entering the labour force. As a result, the economy has had difficulty in fully absorbing this unusually large flow of entrants into the work force. Mr. Speaker, it is my feeling that, given the factors I have just outlined, this problem of unemployment should become much less severe in future years. In the meanwhile, governments must do their part to minimize the social dislocation inherent in this situation. The budget I am bringing down today is designed to help carry out this responsibility. In this connection, Mr. Speaker, I feel it is necessary to mention that according to Statistics Canada data the number of employed persons in New Brunswick has increased by over 20,000 since 1970 when this government took office. This compares with 3,000 in the last three years of the previous Liberal government. Price rises were also a matter of major concern in Canada in 1973. We in New Brunswick did not, of course, escape this phenomenon. The world-wide inflationary spiral has a strong influence on the upward trend of prices of goods and services in the province. Although there are few comprehensive price indices available for the province, the nature of New Brunswick's economic structure a dependence on primary and resource industries whose products are sold mainly to external markets and the importing of many finished goods-suggests that price increases occurring outside of the province's boundaries are indicative of those occurring within it. The importance to the health of the New Brunswick economy of high levels of demand in international markets was fully reflected in the increased revenues of most sectors in 1973. Indeed, the increase in exports was one of the main factors in the growth of the provincial economy during the year. Federal-Provincial Relations Mr. Speaker, in my last budget statement I reported that federal-provincial discussions would be held during the year with respect to the sharing of postsecondary education and health costs. I also noted that consultations would proceed with respect to income security and other financial matters. Shared-Cost Programs Postsecondary Education I can now report that in the case of postsecondary education, agreement was reached to extend the existing formula for two years to March 31, 1976. I would expect, therefore, that this matter will be reopened in late 1974 or early 1975. The existing arrangement has served New Brunswick well. We will, however, be reviewing its operation in the light of changing circumstances, particularly since university education is now to be planned on a regional scale in the Maritimes. Health No substantive progress has been made with respect to renegotiating health-sharing arrangements. As I explained last year, the main characteristics of the federal proposal for new financing arrangements include a per capita grant system with a growth escalator tied to long-term growth rates in Gross National Product. I also indicated that the federal offer is, in principle, attractive to New Brunswick. The government has not changed its position in this regard. However, it shares with other provinces one important reservation about the proposed sharing formula, and that is, since the formula is related to long-term growth in the economy it is not readily adaptable to short- term fluctuations in the economy. For example, the recent relatively high rates of inflation would not be reflected in federal contributions and would leave the province to bear a disproportionate share of cost increases. The federal government has responded to this problem with a proposal designed to share the risks of inflation. I expect that this matter will be discussed further by Ministers of Health and Finance during this year. Indexing Personal Income Taxes I also referred last year to the federal government's plan to index personal income tax exemptions and tax brackets. I pointed out at the time that the government of New Brunswick welcomes a lessening of the tax burden on the province's taxpayers. At the meeting of Finance Ministers in Ottawa in January this year, I expressed two concerns with respect to indexing. The first relates to the potential paradox in the joint sharing of the personal income tax field. The federal government has consistently refused to allow the provinces more room in this tax field on the grounds that if provinces require more revenue they can very well raise taxes. However, at the same time, the federal government has, by introducing indexing into the system, unilaterally reduced the structure of the base of the tax. This reduces provincial tax receipts even with unchanged provincial rates. The second point I raised with regard to the effects of indexing on New Brunswick finances was the demonstrated under-financing of the provincial/local sector relative to the federal level of government. It is still my contention that the federal government, given its higher fiscal capacity, should contribute more to help the provincial/local sector to meet its increasing responsibilities. Further, I must point out that research carried out in my department indicates that revenue losses will be much higher than was originally implied by the federal proposal. A computer-based analytic model developed by my staff in cooperation with the Computer Services Center shows that the losses will compound over time. Accordingly, it is estimated that the reduction in personal income tax revenues, due to federal indexing, will be about $7 million in 1974, rising to $35 million in 1977. The cumulative reduction over the period 1974-1977, inclusive, is estimated to be about $83 million. This result is corroborated by similar analysis developed in Ontario. I am suggesting, therefore, that the longer-run revenue loss is significantly higher than originally implied in the federal budget in February 1973. The federal Minister of Finance has not, in my view, responded satisfactorily to these points, nor the table any federal assessment of the longer-term effects of this measure. new of this situation, I will continue to press him to reconsider his position not to compensate provinces for some part of their losses. Income Security Review Mr. Speaker, as most members will know, the federal government has initiated in cooperation with the provinces a review of the social security system in Canada. The goal is to develop a model social security system incorporating in an integrated way programs such as social insurance, income supplementation, training and rehabilitation, and minimum wage legislation. The discussions to date have been carried out under the auspices of welfare ministers. The overall strategy is still in an exploratory stage, but changes in the Canada Pension Plan were agreed to which will increase the level of pension benefits to our senior citizens. Modifications have also been adopted to ensure that women receive the same benefits as men under the plan. These changes were overdue and are welcomed by the government. My colleague, the Minister of Social Services, the Hon. Brenda Robertson, must be complimented for the positive contribution she made in securing a consensus to implement these changes which will be so beneficial to our senior citizens. Equalization The fundamental purpose of equalization payments is to reduce regional disparities by providing financial supplements which will encourage a national average level of public services. It is in every sense a national income redistribution program operating through the public sector of the economy. It is no different in principle; therefore, from other income redistribution programs which in modern times have become indispensable to the economic well-being and social and political stability of Canada and many other countries. Moreover, the economic stimulus associated with such redistribution programs must not be overlooked. In large measure, these payments are re- injected directly into the local economies and indirectly into the national economy, thus in the final analysis, also benefiting the richer provinces which are net contributors to such transfers. Mr. Speaker, I want to dispel today once and for all any notions which may exist that equalization payments are a dead-weight subsidy from one region in this country to another. They have evolved in recognition of the fact that in a large and diversified country like Canada the natural endowments and other comparative advantages accruing to one region must, to some extent, be redistributed to further the economic, social arid political objectives of the nation. Let me suggest some probable consequences if this proposition is not accepted. Canadian history, including the more recent experience in New Brunswick, has shown that people will move in accordance with economic and social opportunities. For example, for many years there has been a net out-migration of population from this province in response to higher income and better job opportunities in other parts of this country. As conditions have improved in New Brunswick, this situation has reversed itself. In each of the last two years there has been a net migration into the province. In 1973, population increased 1.6 per cent and for the first time in four decades this rate exceeded the national average growth rate. I submit, Mr. Speaker that this shift has been in response to the improved opportunities and living standards available in our province. Mr. Speaker, the conclusion that must logically emerge from this discussion is that equalization payments have served as an indispensable ingredient in generating our improved social and economic fortunes. Our success will benefit the nation as a whole. If equalization had not existed, the opposite situation would have occurred. People would have continued to leave this province to seek a higher standard of living elsewhere. This would have resulted in a movement of our people to other parts of the country with its concomitant pressure on jobs, housing, education and other social costs in those provinces. More importantly it would mean the underutilization of the people and resources of this region to the detriment of all Canadians. Mr. Speaker, I could go on, but I don't think that I need to. The mutual benefits of national redistribution within a federal system are, in my view incontestable. It is in the context of these remarks that I want to review the relationship of equalization to the energy problem. In recent debates in this House concerning energy problems, the Premier reiterated a basic principle which he enunciated at the First Ministers' Energy Conference in January; that is, that the principle of equalization is basic to the very concept of Confederation and should not be sacrificed to the expediency of interim energy arrangements. I would be remiss, Mr. Speaker, if I did not take this opportunity to draw attention to the contribution which the Premier of this province made to this principle at the First Ministers' Conference. He was the first one to stand up and be counted when the federal government attempted to compromise this principle and, irrespective of what the opposition in this House may say, the people of this province will have seen and will be able to judge our Premier's leadership qualities and the tenacity he displayed in defending this province and the Maritime region. Mr. Speaker, equalization payments are now an accepted way of fiscal life in Canada. A single price for oil, and the subsidy required to attain it, should also be, but we must be very careful that we do not confuse these two issues. This government does not have a mandate to trade off equalization revenues in exchange for a lower oil price for New Brunswick consumers. Indeed, as the Premier has made clear that we are committed to defending both these principles because they are important to New Brunswickers and to the future of Canadian economic and social well-being. Now, Mr. Speaker, this is not to say that we are insensitive to or unaware of the difficulties inherent in the present equalization formula should the revenues of one province increase very dramatically relative to all other provinces. It may well be that under certain circumstances the present formula will not successfully serve the needs of national redistribution. In this situation, it is not sufficient to simply ignore the problem or set a precedent with respect to equalization that might jeopardize the very principle itself. If a fundamental readjustment to the present formula appears necessary, the Premier has indicated his readiness, as have a number of his colleagues in other provinces, to sit down and discuss this issue with our federal and provincial partners. In putting forward this consistent and reasonable position in defence of New Brunswick's interests, the government has had, unfortunately, to contend with partisan criticism. To suggest that New Brunswick's stand on the principle of equalization is simply a question of trying to cash in on Western revenues from the export tax and oil royalties is to underestimate grievously the dangers the province confronts in the present situation. Such an attitude plays into the hands of those who would jettison the principle of equalization for reasons of expediency. As Minister of Finance, I wish to say to this House that the opposition would do a service to New Brunswick to put aside partisanship and make it clear that on this vital issue our two parties speak with one voice for New Brunswick. Maritime Regional Affairs Mr. Speaker, the emergence of the energy problem last year served to emphasize the importance and the advantages of developing and presenting common regional concerns through the medium of the Maritime Premiers' Council. The government of New Brunswick believes that the Council of Maritime Premiers has an important role to play in coordinating joint policy development to encourage greater efficiency through the integration of regional services. Through the work of the council, basic and longstanding issues such as the need for improved freight subsidies and better transportation have also been brought to the attention of the federal government. In addition, the Council of Premiers and the Economic Council of Canada will cooperatively participate in a study of the effects of income security programs on labour productivity within the Maritime region. The long awaited Maritime Higher Education Commission will come into operation this year. The government intends to give the new commission the same solid support that it gave the New Brunswick Higher Education Commission. Financial Review of 1973-74 Budgetary Operations Mr. Speaker, in accordance with usual practice, I take pleasure in reporting to the House on budgetary operations in 1973-74. I would ask the members to bear in mind that these revisions are still preliminary and that it will be some time before these accounts are finalized. As the 1973-74 fiscal year progressed, a number of changes took place in the revenue accounts. Ordinary Account revenues moved upward to $620 million from the original budget estimate of $606.3 million. Capital Account revenues increased to $35.4 million from the original estimate of $29.6 million. Overall revenues have, therefore, increased by some $18.7 million. The most significant changes from the original budget estimate are: Ordinary Account expenditures have been revised to $575.9 million compared to the original budget estimate of $577.9 million. Capital expenditures increased to $105.3 million from the original estimate of $96.3 million. The overall change in revised budgetary expenditures amounts to an increase of some $7 million. You will note, Mr. Speaker, that the revised figures show a healthy increase in the Ordinary Account surplus. This result has been achieved in good part as a result of improvement in the cost effectiveness of expenditures, which has increased efficiency and reduced costs to the taxpayer. Part of this saving was diverted into investment expenditures through the Capital Account and the balance was used to decrease the net debt by more than $13 million from the original budget estimate. This, I may mention, will be the third year in succession that this government has managed to reduce the actual net debt increase below the budgeted amount. I should also point out, Mr. Speaker, that during the course of the session the House will be presented with a bill setting out special warrants issued during fiscal year 1973-74. You will note that of these special warrants only one in the Ordinary Account exceeds $1 million: an increase in doctors' claims in Vote 35-23 for an amount of $1.5 million. The next two largest items are additional funds for road maintenance, $700,000, and for snow and ice removal, $600,000. Total special warrants in the Ordinary Account amounted to $5.1 million. Capital Account special warrants amounted to $4.8 million, most of it being spent for permanent highways, $2.7 million, and permanent bridges, $1.1 million. As for loans and advance warrants, $5.3 million was appropriated for Rodney Terminal, $1.5 million to Whittaker Textiles Limited, and $1 million for increased lending programs for New Brunswick Housing. I would point out that these funds were used to create jobs, employment and growth, and these expenditures were made possible by increased revenues. I would also like to note that the total of special warrants this year is the lowest total for at least the last six years. Capital Financing Before turning to the details of the government's 1974-75 budget plan, I would like to comment briefly on capital market operations in 1973-74. Financial markets last year operated under difficult conditions, including factors such as high inflation, excessive demand, the energy crisis and foreign exchange problems. Interest rates, especially short-term rates, reached very high levels. During the year, the prime rate climbed to 9-1/2 per cent in Canada and 10-1/2 per cent in the United States. During the 1973-74 fiscal year, the province floated one debenture issue of $50 million in the United States paying a coupon rate of 8-3/8 per cent. In addition, approximately $33 million in financing was secured from the Canada Pension Plan Investment Fund at an average rate of interest of 7.53 per cent. A further amount of nearly $5 million was debentured from the federal government under the 1971 Employment Loans Program. The rate on these funds is 6.9 per cent. The province also guaranteed the following New Brunswick Electric Power Commission debentures during 1973-74: $25 million sold in the Canadian market in November 1973. $45 million sold privately in the United States in April 1973, a total of $50 million which is to be dated April 1974 and to be sold in the United States market. Future Fiscal Planning Mr. Speaker, you will recall that in my budget speech last year I indicated that the government intended to refine its approach to financial planning and the development of budgetary policy by establishing a Taxation and Fiscal Policy Branch in the Department of Finance. I indicated at that time that its first concern would be to evaluate the province's revenue structure with a view to recommending adjustments which would reduce tax burdens, particularly on families and individuals most in need. I am able to report to the House that this unit has been in operation since last summer and has made considerable progress in reviewing our tax and fiscal situation. This group has responsibility in a number of areas, including preparation of the budget, federal- provincial financial relations, revenue forecasting, tax policy and analysis, and fiscal planning matters. During this year, this unit has been primarily concerned with evaluating the province's revenue structure, tax analysis and federal-provincial matters. An inventory of all provincial revenue sources is now completed and will be reviewed by the government in the coming year. In the year ahead, this group plans to review shared-cost programs with the objective of ensuring the maximization of federal flows from these arrangements. A financial model will be developed to improve the government's ability to predict financial flows. This will be of great assistance in financial planning and could lead to substantial savings in costs. In matters of tax policy, there are two areas which will receive special attention. The first one relates to the property tax system. We have recently introduced a property tax credit plan based on a study of property in the province. This plan has reduced the immediate impact of recent increases in property values. We must, however, face the possibility that property values may continue to increase rapidly-perhaps faster than incomes. One immediate concern in this situation is the plight of those on fixed incomes such as pensions. We are aware of these and other problems related to property taxes and will examine ways to remedy the situation. As a first step, we will undertake a review of the operation of the market value system of assessment and its impact on property owners. Plans are also being formulated in cooperation with other departments and agencies in the government to examine the role of fiscal actions on the government's policy objectives with respect to resource development. We are aware of the province's comparative advantages in these areas and we are determined to harmonize our tax policies with our goals to encourage output, promote conservation and rehabilitation, provide incentives to increase processing within our borders and to ensure that an equitable share of the benefits accrue to the citizens of New Brunswick. The Economic Environment and Fiscal Plan for 1974-75 the Economic Environment In my review of the 1973 performance of the provincial economy, I indicated that there is an expansionary momentum in economic activity and output. I will now project my assessment of our economic prospects further into the coming year in order to gauge the economic environment in which our 1974-75 fiscal plan has evolved. Let me say at once that I am optimistic that the expansion generated in 1973 will carry forward into 1974. This optimism must, however, be tempered by the uncertainties surrounding the energy question and by the possibility of supply shortages in some sectors of the economy. In this respect, our fortunes depend to some degree upon international events. In my view, the impact of these events on the provincial economy will be relatively mild. Encouraging reports from international sources on Arab oil policy tend to reinforce this optimism, as does strong forecast growth in demand for our agricultural, fish, mineral and wood products. Nevertheless, growth in Gross Provincial Product in 1974, in line with the national trend, will not attain the unusually high level of 1973. Accordingly, I am estimating that Gross Provincial Product will increase by 12-1/2 per cent with the real increase between, 4-1/2 and five per cent, which has been our approximate long-term rate of growth. Economic expansion in 1974 will receive added impetus from three factors. These are: - The demand for agricultural and natural resource products which should remain high; - Plans being implemented in the province with respect to transportation which will stimulate economic activity; - The expansionary base provided by a fast increase in investment intentions for 1974. All these should provide a large stimulus for the creation of the new jobs that are going to be needed for our growing labour force. The Fiscal Plan for 1974-75 Mr. Speaker, the government's fiscal plan for 1974-75 has been devised in the context of the economic environment which I have just described. It takes two primary considerations into account. The first concerns the uncertainty surrounding economic predictions for 1974, and the second takes into account the moderation in the growth in the provincial economy which we anticipate in the coming fiscal year when compared to the exceptionally high 'rates experienced in 1973. In the light of these circumstances, our fiscal plan calls for a moderately expansionary swing in the impact of the provincial budget. In my view, an increase in the net debt of about $40 million is an appropriate fiscal target if the government is to play its role in providing a positive impetus to economic growth and job creation. As I have mentioned many times before, there is nothing magic in a balanced budget. A budgetary surplus is not inherently good and a deficit is not inherently evil. If the latter were the case, every government in Canada and in most of the United States would be guilty of an infringement of some form of natural law. Furthermore, a deficit of the order I have planned is well within the financial capacity of the province. Indeed, our research indicates that our increase in net debt relative to the value of Gross Provincial Product is among the lowest in Canada. In addition, this ratio has been declining significantly since 1971-72, as the table below reveals : […] I would also like to emphasize that in terms of fiscal impact, the composition of the budgetary deficit is extremely important. For example, if the deficit were incurred exclusively by increases in government expenditures, the distortions which could be caused by attempting to accelerate the government sector unduly in the short run could be counterproductive in terms of achieving the economic objectives we have set for ourselves. I would like to point out, therefore, that the increase in net debt which I am proposing is divided almost equally between the public sector through expenditure increases and the private sector by means of tax reductions to people. Let me demonstrate to the House, Mr. Speaker, how we propose to use our expenditure and revenue programs to attain the goals I set out at the beginning of my speech, namely, economic development, improved financing of municipal responsibilities and the attainment of social equity within a fairer tax framework. Economic Development This government is committed to increasing economic growth and job opportunities in New Brunswick. Among the major expenditures that will help fulfil this purpose is the planned General Development Agreement which is presently being negotiated with the federal government. This agreement, which could be finalized soon, is aimed at permitting the province to pursue jointly with the federal government specific development opportunities in all regions of the province. The agreement is planned to run for 1 0 years under a blanket arrangement, but individual development plans will be negotiated through separate sub agreements for varying periods of time and with specific cost-sharing clauses. It is anticipated that within a relatively short time, subsidiary agreements will be concluded in the general areas of forestry, agriculture, mining, development planning and the further construction of the throughway in Saint John and Wheeler Boulevard in Moncton. Discussions are also well advanced on subsidiary agreements relating to fisheries, industrial and municipal infrastructure, tourism, and assistance to local development, with a special program for Kent County. Our best estimate at this time of the gross amount required in the 1974- 75 program will be $25 million. Within this overall long-term program we hope to determine the directions of the future growth of the province and to build a base which will permit long-term economic expansion. A second major development program under the auspices of FRED agreements provides for $17.8 million for new and expanded programs. The federal government has assured us that these existing programs, such as FRED, ARDA and other special agreements, will continue to help expansion in the province up to their expiry dates. Transportation is an indispensable component of economic development strategy. This government's recognition of this fact is reflected in the allocation this year of $58 million for capital construction of highways and bridges. An essential ingredient to a balanced economic: and social development is a healthy and well educated population. To ensure that our human resources are developed to the fullest, the government plans this year to spend $18 million for school construction and renovation and $15 million in capital expenditures on hospital and other facilities. Loans and Advances 'Of $26.4 million reflect in a practical way the emphasis this government has placed on economic growth and development. These are disbursements to a wide range of projects for industrial development; transportation and housing which we believe will assist in providing jobs which are going to be needed in New Brunswick in the years ahead. These include $7.5 million to the Department of Economic Growth, $5 million to the Housing Corporation, $3.5 million to transportation and highways, $1.4 million under the Industrial Development Act, $5.3 million to Fisheries and Environment and $2.5 million to the Farm Adjustment Board. In addition, Mr. Speaker, we are also providing for financial assistance for the expansion of the fishing industry and for small and part- time farmers, as well as a crop insurance program. Efforts will be made to expand tourism through intensified promotion efforts and advertising. Provincial-Municipal Relations Mr. Speaker, I am devoting a separate section of my statement to provincial-municipal affairs because these matters are allocated a high priority by this government. This fact has been amply demonstrated over the last three years by the actions and policies of my colleague, the Hon. Horace Smith, Minister of Municipal Affairs, for which he should be highly commended. The fundamental difficulty faced by the municipalities is the same as that of the province; that is, an inability to finance the demands being made upon them for local services. This problem is not unique to New Brunswick. It is being aired on a national scale through tri-level conferences which include the federal, provincial and local governments. As you know, Mayor J. W. Bird of Fredericton is the President of the Canadian Federation of Mayors and Municipalities and he has played a positive and energetic role in presenting the municipal side of the story. I was a delegate at one of these national gatherings and I would like to congratulate Mayor Bird for the constructive and effective job he is doing in this regard. Mr. Speaker, a good deal of progress has been made in the area of provincial-municipal relations in the last three years. For example, in 1972 a task force was formed to report on municipal structures and financing in the province. A number of recommendations contained in the report have been accepted by the government and initial steps have been taken to improve provincial-municipal financial arrangements. One result has been that grants to municipalities have been increased significantly. In 1973 the Provincial-Municipal Council was formed, to be jointly financed by the province and the municipalities. This, too, provides a clear indication of the government's desire to share in an ongoing dialogue with the municipalities. As a result of the meetings of this council, this government has a better awareness of the problems of local government. Mr. Speaker, this government believes in deeds, not words. Let me review for you the improvements in municipal financing which have come about as a result of this government's positive attitude to provincial-municipal affairs : - Unconditional grants to municipalities increased 74 percent between 1971 and 1974. - In 1974-75 unconditional grants will be increased by $10.5 million with about $7.4 million of this amount attributable to the new grants formula introduced in 1973. - Stimulation grants in 1974 will amount to $5 million. These grants are designed primarily to help install new services and upgrade existing services in amalgamated areas. - About $1 million will be paid to cities and towns in 1974 for maintenance and snow removal on roads designated as provincial highways. - Approximately $1 million has been made available in the last three years in direct and indirect financial assistance to municipal and regional planning. - $8 million is being allocated through a property tax reduction program to home owners and tenants. - $1 million will be granted to municipalities in lieu of university property taxes in order to further reduce local taxation. Mr. Speaker, I wish to emphasize that the progress made in the last three years constitutes the initial steps taken by this government in the field of provincial-municipal relations. We realize that in many instances intergovernmental arrangements must be constantly reviewed. For this reason the government believes there are a number of areas where continued cooperation between the province and the municipalities can lead to mutual benefits. Some of these are: - Continued review of the province's role in containing the levels of local taxation without eroding the level of local services; - Research into longer-term financial planning, including all aspects of the questions of revenue- sharing by municipalities; - Recognition that the provincial government has an interest in the growth and development of cities and towns through cooperative planning processes; - Recognition that the province can synchronize the impact on municipalities of federal-provincial programs such as the new General Development Agreement; - Awareness that the overall provincial strategy with respect to economic growth must be coordinated with urban growth within the province. Mr. Speaker, my case for the importance of provincial-municipal relations is made. This government sees the need for a better coordination of these activities and will continue to assist municipalities to play an important role in the future development plans of this province. Social Equity and Fiscal Responsibility The third goal which the Hatfield government has set for itself in this budget is social equity in the framework of fiscal responsibility. This is consistent with the government's determination to develop in this province the social infrastructure which we must have if the people are going to be equipped to deal with rapidly changing conditions of life. Social Equity The government wishes to maintain and improve basic services such as health and education and spends a good part of its budget to do so. For instance, in the field of health, operating expenditures in 1974-75 will reach $142.6 million, and in the field of education, expenditures on operating the province's school system will amount to $148 million. This covers, of course, a multitude of health and education needs encountered by most, if not all, of our citizens at some time in their lives. The cost of servicing these needs increases with general price rises and with improvements in the quality and type of services offered. It should be expected, therefore, that the bulk of the funds in these fields will be spent on maintaining a high level of services in existing programs. My cabinet colleagues will, of course, discuss these matters in the course of debates on the budget and the estimates. This government, however, also tries to identify the needs of certain groups who must be provided with particular care, and endeavours to satisfy these needs to the greatest extent possible. The ability to discern these special needs and to help the people affected is a measure of the responsiveness of the government to the demonstrated needs of its citizens. In order to fulfil this responsibility, the government will, this year, spend funds on a number of new and expanded programs to meet this type of special need. These programs include : -An expansion of the program for the prevention and treatment of alcoholism; -Nursing care in senior citizen complexes; -A phased program of dental care for primary schoolchildren; -Home improvement loans for low-income families; -A restructuring of the social assistance program; -Grants to nursing home construction to help elderly citizens; -A home-care program for the aged; -Lower rents for senior citizens in non-profit housing; -Integration and planning of ambulance services; -Family courts in Moncton and Edmundston; -Increased assistance to the blind and disabled. These, Mr. Speaker, are expenditure programs designed to make possible a more comfortable standard of living to people who, through no fault of their own, are deprived of some of the necessities of life. Fiscal Responsibility Mr. Speaker, I come now to the other main component of the fiscal plan-revenue policy. As I stated earlier, we believe that an appropriate fiscal stance in the coming year calls for lower taxes. This will enable the impact of our fiscal plan to be distributed between public expenditures and a redistribution of funds to people in the private sector of the economy. Accordingly, this House will be asked to approve a number of reductions in taxes. Prior to turning directly to these matters, I would like to take a moment to review this government's record with respect to tax policy since it took office in October 1970. The present government inherited an overloaded and unwieldy fiscal structure from its predecessors. During the previous regime, everything that moved or didn't move was taxed. All kinds of terms were used to make tax increases more palatable. They were called tax adjustments, changes in fees, corrections of inequities, removal of exemptions, administrative refinements, and so on. But the result was the same: an ever-increasing tax burden on the taxpayers. When we came into power, we made it clear that we believed that taxes were too high. We committed ourselves to remedying this situation, realizing it would be necessary to introduce stability and flexibility into the province's finance if we were to attain this objective. Mr. Speaker this government has moved a considerable distance in the right direction. I would like to take a few minutes to review our progress. I could merely report to the members of this House that the government has honoured its pledge, but to stop at this would, Mr. Speaker, be unduly modest, for as the record shows, this government, through prudent and effective fiscal planning, has been able to reduce the tax burden on the citizens of New Brunswick and at the same time has expanded and improved public services without impairing the good financial standing of this province. It has, moreover, in some measure been able to redistribute the burden of taxation so as to provide greater relief to those least able to pay. That, Sir, is fiscal responsibility. The following is the record of tax changes brought in by this government since 1970: - In November 1970, within two weeks of assuming office: Removal of eight per cent sales tax on building materials. - On August 10, 1973: Reduction of sales tax on mobile homes from eight to two per cent. - On December 31, 1973: Elimination of succession duty and gift tax. - On January 1, 1974: Introduction of credit on property taxes and $30 tax rebate to renters. Mr. Speaker, I come now to the tax reductions which I am introducing in this budget. These represent the next stage in this government's program of tax reform. As of midnight tonight the eight per cent social services and education tax will be removed from all clothing and footwear. This step has been taken to help ease the impact of rising living costs on our citizens. It will provide greatest relief to those with young families and those on fixed incomes, such as the elderly. I should also add, Mr. Speaker that this measure is a positive response by this government to restrain rising prices. It is estimated that the revenue loss from this measure in 1974-75 will be between $8 million and $9 million. As of midnight tonight, the level of tax exemption on prepared meals will be doubled to $2 from the present $1. The last time this level was increased was in March 1956, by another Progressive Conservative government. This exemption should be of special benefit to students and working people. The revenue cost of this change in the coming fiscal year is expected to be $600,000. As of midnight tonight, Status Indians in New Brunswick will be exempted from the eight per cent provincial social services and education tax. Goods valued up to $300 purchased off the reservation for delivery on the reservation may be purchased without paying any tax. In the case of goods having a value in excess of $300, the tax will be paid and a refund claimed. This measure is a positive response to previous representations of the Union of New Brunswick Indians who stressed the inequity of being taxed by the provincial government for services already financed by the federal government. The revenue cost of this exemption is expected to be $125,000 in 1974- 75. As of midnight tonight, microfilm purchased by a library will be exempted from the eight per cent social services and education tax if it contains information equivalent to a book that would ordinarily be exempt. This exemption should help libraries and encourage them to modernize. Mr. MELDRUM: How much will it cost you ? Hon. Mr. SIMARD: This, Mr. Speaker, is our government's record of tax reform since 1970. In 1974-75, tax savings to New Brunswickers from all these measures will be equivalent to more than $30 million. This is approximately four per cent of ordinary revenue. Given the difficult financial situation this government inherited in 1970, I submit, Mr. Speaker, that this represents a significant reduction of the tax burden on the people of our province. Budgetary and Financial position in 1974-75 As a result of the fiscal plans which I have outlined, our budgetary position in 1974-75 will be as follows : […] Mr. MELDRUM: That is really something to be proud of! Hon. Mr. SIMARD: As we can see from this table, the expenditure plan calls for ordinary expenditures of $665.5 million. This is an increase of 15.6 per cent over the revised estimates for 1973-74. On the other hand, taking into account the revenue changes which I have just announced, gross ordinary revenue in 1974-75 is expected to amount to $702.5 million.-up 13.3 percent from last year. The level of revenues and expenditures which I have just outlined, Mr. Speaker, will result in a surplus on Ordinary Account of $37 million. I would like to underline that this surplus is one of the highest in recent years and follows on the heels of a revised Ordinary Account surplus of $44 million for 1973-74. It is clear, Mr. Speaker, that this government has succeeded in controlling its expenditures to the point where the large and increasing surplus on Ordinary Account covers a very large part of our capital expenditures. This, Mr. Speaker, is good management. Investment in capital spending is $128.5 million, the highest in the province's history. On the other hand, capital recoveries are estimated at $42.3 million. As I have mentioned in the description of expenditures, Mr. Speaker, this capital spending will permit us to fulfil our basic goals of capital development and municipal financing while permitting us at the same time to construct the education and health facilities that are needed in New Brunswick. Gross non-budgetary disbursements through the Loans and Advances Account are expected to be $26.4 million in 1974-75. Repayments are expected to be $7.5 million, leaving a net increase of $18.9 million. In summary, total expenditures including Loans and Advances will amount to $820.4 million, an increase of 15 per cent over the current year. Let me underline that investment expenditures through the Capital Account and Loans and Advances will amount to $154.9 million, an increase of 12.7 per cent over the same figure in 1973- 74. On the other side of the equation, we are anticipating total ordinary revenues and capital recoveries plus sinking fund earnings of $752.3 million. Mr. Speaker, I want to extend the financial reporting in this year's budget. It is our intention to make financial reporting to this House more comprehensive. Accordingly, I want to report on the position with respect to non-budgetary transactions, capital financing and financial requirements of the province in the year ahead. There are a number of points, Mr. Speaker that I would like to stress with respect to our financial operations. As I mentioned, the financial requirements will be $82.3 million. This, Mr. Speaker, is well within the limits of our financial capacity. I should also point out that a significant portion of this borrowing will be used to finance the capital investment program which will reach the high level of $128 million. This investment will produce benefits now in terms of jobs and services and will be added to the social infrastructure for use by future generations. I would also like to refer to this government's excellent record in terms of acquiring assets against the funds it borrows. On March 31, 1971, for example, the ratio of capital assets to net debt in the province was 1.23 to 1. By March 1, 1973, this ratio was 1.34 to 1. The evidence that capital assets are accruing more rapidly than financial liabilities is also reflected in the fact that in the same period capital assets increased by $92.5 million while net debt only increased by $38.5 million. I might also point out that between the years 1971-72 and 1974-75 the cost of the public debt as a percentage of total expenditure has declined from 5.7 to 5.5 per cent. Conclusion Mr. Speaker, let me summarize the contribution this budget makes towards attaining the goals which this government set for itself in 1970 : -It provides funds for an expanded long-term economic development plan which will help create the new jobs that will be needed in our province in the next decade. After many years of effort and experiment by various provincial and federal governments, I believe we have found the right framework for future provincial-federal development programs. I use the term "provincial-federal" rather than "federal-provincial" because I believe the General Development Agreement concept should give us a greater opportunity to set our own priorities and obtain federal help to carry them out. This will allow the government to play its proper role in assuring that the resources of this province are developed to a maximum that is in accordance with our own priorities and in a way that preserves the best of our traditions and way of life. It demonstrates the importance which this government places on provincial-municipal relations. Financial and other forms of assistance have been improved and a plan of interaction has been proposed which will allow us to respond effectively to future needs. -It lays out some of our future fiscal plans. In particular, it gives top priority to reviewing the future usefulness of the market value system of assessing properties. As was said, we inherited this system from the Liberal regime. The property tax credit brought in by our government will help ease the impact for those least able to carry the burden. But we realize that rapidly escalating property values can make paying taxes on a home an almost insupportable burden for some, and we are determined to remedy this situation. We must reconsider the criterion of true market value established by the Assessment Act 1965-66. -It reaffirms this government's commitment to a policy of social development in a framework of social equity and fiscal responsibility. Expenditures directed to education, health and welfare are indispensable to the government's objective of ensuring that all New Brunswickers share in the economic benefits and the improvement of the quality of life in New Brunswick. The Minister of Social Services has shown what can be accomplished at the community level when recipients of social assistance who can work are given the opportunity to do so. Mr. Speaker, we can take pride in what we have accomplished to date. Our three previous budgets have laid a solid foundation for future progress. Today's budget reduces taxes, improves services and contains economic development plans to provide the jobs we need for our expanding labour force, but the government is far from satisfied or complacent. We must turn our attention to the unfinished business of our province and the even more challenging goals that lie ahead of us. I look forward with enthusiasm and confidence to playing a part in the days ahead in helping New Brunswickers attain these goals.