Monday, May 10, 1993 - 1:30 p.m.
Speaker: I will now call the House to order. At this time, we will proceed with Prayers. I will ask everyone to bow their heads in prayer.
Eulogy to Joan Veinott
Hon. Mr. Phillips: I rise today to regretfully inform the House of the passing of a well-known and well-respected, long-time Yukoner, Joan Veinott - or as most of us know her - Rusty.
Rusty has worked for the Government of Yukon since 1963. I knew Joan - Rusty and Dutch - as their MLA and as very close friends of my parents. When my parents passed away, Rusty was the chief coroner and I can remember having to deal with her on these issues. She was always very compassionate - not only with me because we were friends of the family, but I have heard from many others who did not know her, that she was just as compassionate in dealing with them at their time of loss.
I would like to send our condolences out to Dutch and the family at the passing of Rusty. She is going to be missed by all Yukoners.
She was a member of the Canadian Cancer Society and was very prominent in the community promoting literacy. I know she will be missed by all Yukoners. I would like to send our condolences, from the Legislature, to all members of her family.
Ms. Joe: On behalf of our caucus, I would also like to extend our condolences to the family of Joan Veinott. I have known Joan for a long time, so much so that she still calls me Mugsy and I would call her Rusty.
I also had the opportunity to work with her in Justice and I would like to add that she had a very difficult task in some of the work she did. She did her job to the best of her ability as coroner and public administrator, adding a personal touch to the individuals she dealt with through both of those positions.
She certainly will be missed by everyone who knew her and certainly her presence will be missed in the Department of Justice.
Mr. Cable: I had contact with Rusty over the years in her capacity as a public administrator. She was my idea of what a public servant should be. She was open, she was helpful and she was cheerful.
I would like to extend my personal condolences to Dutch Veinott and the family.
INTRODUCTION OF PAGES
Speaker: I would like to inform the House that G. A. Jeckell School has selected two additional pages to serve the Legislature this spring. Their names are Nicole Johnston and Mary Finch.
Nicole is with us today and I would like Members to welcome her at this time.
Speaker: Introduction of Visitors.
Are there and returns or documents for tabling?
TABLING RETURNS AND DOCUMENTS
Mr. Penikett: I have a document for tabling.
Hon. Mr. Devries: I have a legislative return.
Speaker: Are there any Reports of Committees?
Introduction of Bills.
Are there any Notices of Motion for the Production of Papers?
Are there any Notices of Motion?
NOTICES OF MOTION
Ms. Joe: I give notice of the following motion:
THAT, in the opinion of this House, the Government of Yukon should immediately live up to its obligations under the umbrella final agreement and commence negotiating in good faith with the Kwanlin Dun First Nation.
Mr. Harding: I give notice of the following motion:
THAT this House regrets the attempt by government Members to filibuster Motion No. 36, and further
THAT this House urge the Government of Yukon to show economic leadership by abandoning their misguided positions and policies and to immediately undertake serious negotiations with Curragh Inc. and other interested parties to keep mining operations alive at Faro in order to turn around the Yukons worsening economy and rate of unemployment.
Speaker: Are there any Statements by Ministers?
Yukon elk export protocol with Alberta
Hon. Mr. Brewster: I am pleased to announce the recent signing of the protocol to facilitate the export of elk from Yukon into Alberta.
Alberta and Yukon have a mutual interest in facilitating the importation by Alberta game growers of elk of superior health and genetic status raised by Yukon elk producers. Alberta and Yukon have developed a mutually acceptable protocol for the importation of healthy weaned elk calves from Yukon into Alberta without undue health risk to wildlife or domestic animals.
The protocol procedure is both stringent and rigorous. An inspection team representing government and the industry have been appointed. This team will ensure that proper procedures are followed. The protocol does not alter, in any way, the obligation of importers and exporters of elk to obtain such permits and licences as may be required under the laws of Alberta, the Yukon and Canada.
A revised game farming policy and game farming regulations are now being developed in the Yukon. The Alberta/Yukon protocol is consistent with the soon-to-be released policy and regulations, in that every effort is being made to ensure that only disease free and genetically pure animals are found in the game farming industry.
Game farming is a very important sector of the agricultural industry in the Yukon. The recently released Yukon farm census indicated game farming accounted for $228,000 in reported sales. This protocol will enhance the ability of Yukon game farmers to market their stock and thus continue to enrich the economy of the Yukon.
Mr. Harding: I was a little bit surprised today when I got this ministerial statement regarding Yukon elk export protocol with Alberta, especially in light of the situation with elk in Alberta and some of the problems that have come to light in the past couple of years. One of the problems has led to an inquiry in the industry. There was an outbreak of disease in the new Premiers own riding. It has caused quite an uproar regarding the industry in Alberta. I am not sure how the Alberta government will be viewing trade in this industry on that basis.
Once again, I would urge the government to show due diligence and caution with regard to their support of this industry. There are still a lot of concerns in many jurisdictions about the spread of disease, the escape of animals and the interbreeding of domestic animals with non-indigenous wildlife. I am concerned that this announcement prejudges the regulations and the consultative process surrounding the regulations that we are expecting the government to bring forward here in the Yukon.
Mr. Cable: I am particularly pleased that the Minister has been able to work out the arrangement with Alberta. I think the operative word in the ministerial statement, with respect to health risk, is undue. This is a recognition by Alberta and the Yukon that there is no absolute guarantee against disease infection, and that some risk, no matter how minimal, will always be present in this attempt to diversify the Alberta and Yukon agricultural economies.
We, here in the Yukon, are faced with the same risk question. It is my hope that the Ministers first step in developing the guidelines will be to try to get some general consensus on that risk. An informed decision can then be made on whether the benefits of diversifying the economy outweigh that risk.
Hon. Mr. Brewster: I am not sure whether the Member for Faro thinks that Alberta can bring elk into the Yukon. That is not what the protocol says. We can export our elk out to them as breeding stock. The elk have been raised here. The industry was not created by me. It was created a number of years ago. They have nowhere else to go with these elk at the present time. They are in great demand as breeding stock; therefore, we proceeded with this goal.
As for the question of risk - yes, there is risk. There is risk if you cross the highway right in front of here. You can get knocked down here just as fast as any place else. There is a risk in anything you do. They had their experts in here a year ago, and they felt that these were the best elk that there were. We have gone through and done everything they asked. They have had all their vaccinations and everything that was required. Everybody feels that they are quite safe.
Speaker: This then brings us to the Question Period.
Question re: Unemployment statistics
Mr. Penikett: On Friday, the statistics branch published new unemployment figures showing that in April the Yukon had an unemployment rate of 16.4 percent, and that unemployment has climbed every single month since the Government Leader came to power.
Has the Government Leader grasped the seriousness of the situation? Does he appreciate that businesses that are normally hiring more staff in May are, instead, now laying off people?
Hon. Mr. Ostashek: I thank the Member opposite for the question. Yes, we realize how serious the situation is. I do have to make a few qualifications. He says that employers are laying off staff in the month of May. That is not the message we are getting.
The statistics figures go to the end of April. My understanding is that there are a lot of employers who are hiring people now. As the Member opposite well knows, construction jobs are starting up now; people are going to work; students are back and going to work in the Yukon.
Other than that, this is not a new phenomenon. Unemployment always climbs in the winter in the Yukon.
Mr. Penikett: In April, 1992, this territory had 1,400 people unemployed. In April, 1993, the number had grown to 2,300. In light of the Government Leaders comment about construction, and given that the government has killed the Taga Ku project and postponed the hospital project until 1994, does the government plan any Faro-style relocation assistance - a one-way ticket south, for example - for all the carpenters, plumbers, electricians and others in the building trades who will have no work this summer?
Hon. Mr. Ostashek: There we go again with the doom-and-gloom party. Doom and gloom is all they can preach from that side of the House.
While there are 900 more unemployed people in the Yukon today than there were a year ago, those all relate to the Curragh shutdown. I want to draw to the attention of this House that there were 200 more people employed in the month of April, 1993, than there were in the month of April, 1992.
Mr. Penikett: If there are 900 people more unemployed this year than last year because of Curragh, it cries out for a solution to the Curragh problem.
Let me ask the Government Leader the following, since he may not be able to see that the reality is that we have a full-blown economic crisis here: since the Government Leader refuses to listen to the Legislature on this subject, or the cries for help from the people of Faro, will he, at least, convene an emergency meeting of the Council on the Economy and the Environment to brainstorm ways to work our way out of this increasingly desperate situation?
Hon. Mr. Ostashek: We are looking at everything available to us so that we can turn the situation around. We are not as pessimistic as the Members opposite; we have not ruled Faro out.
Question re: Economic forecast
Mr. Harding: It is hard to be optimistic when I gaze upon the Statistics Canada unemployment figures from April of last year to this year.
There is no doubt about it, any way you cut it, the economic situation in this territory is becoming scary - mine shutdowns, record unemployment, higher taxes, higher power and phone bills. What is the Yukon Party government doing to inspire optimism in the economy that was existent until they came into power?
Hon. Mr. Ostashek: We tabled the largest capital budget that has ever been tabled in the history of the Yukon. We cut operation and maintenance spending to ensure that we had money for capital projects, and we have not given up on the Faro situation.
Mr. Harding: This government is not going to spend the money on the hospital nor the land development. The capital budget is false. Unemployment has gone up every month since the Yukon Party government took over.
In Faro, the government had put more emphasis on getting people to leave the Yukon, rather than providing retraining and community works for the people in Faro, Watson Lake and Whitehorse who have been affected by layoffs and mine shutdowns.
Why is the governments answer to unemployment having people leave the territory?
Hon. Mr. Ostashek: We are doing what we can to keep people working in the Yukon. As I said, we brought forward a $129-million capital budget that will put a lot of Yukoners to work.
Mr. Harding: That remains to be seen. There are no community works in Faro, precious little re-education, no career counsellor, no child care, no small business help and, worst of all, there is no hope.
What is the Yukon Party doing to repair this disastrous economic situation in the Yukon, which they have presided over and helped to create with their incompetent economic policies?
Hon. Mr. Ostashek: As I said, we are not the doom-and-gloom party, unlike the party opposite. We are working with Curragh Inc., and we are trying to get that operation back on track.
Question re: Education review
Mr. Cable: I have some questions for the Minister of Education.
The Ministers timetable for the education review had an April 16 deadline for the community to submit the names of nominees for the committee.
Can the Minister report the names of the persons whom he has selected to sit on the education review steering committee?
Hon. Mr. Phillips: I cannot report the names of the education review committee at this time, because not all the groups who were requested to submit names have done so at this time. A reminder letter was sent out a few days ago and I hope that we will get those names in shortly.
All groups have indicated that they will submit names. Some groups had annual meetings and the date for submitting names did not coincide with those meetings.
We are hoping that they will be submitting names very shortly, and we will have the committee up and running sometime in June.
Mr. Cable: Can the Minister confirm that his staff has been actively seeking the names of students from the schools and nominations from the Chamber of Commerce?
Hon. Mr. Phillips: I wrote a letter to all the student councils where there are high schools, as well as Yukon College. A letter was written to the Chamber of Commerce. Some student councils have replied, and I am not sure if the Chamber of Commerce has replied yet.
Mr. Cable: In view of the lack of response - according to the deadline - has the time frame for the education review been amended to take into account the lack of response by the community?
Hon. Mr. Phillips: I have been advised, since we set the four-week deadline, that it is a tight deadline for a lot of groups to meet when nominations are asked for. No, we did not really expect a lot of work to be done this summer. We hope to get the committee up and running sometime in June so they can start their work in June. We had intended that the committee would not do any type of public hearings until sometime in September or October when school was back in, because a lot of people leave for the summer. I am still hopeful that we can still meet the September or October deadline, so that the committee can travel around the territory and hear from all Yukoners who want to participate.
Question re: Extended care facility, financing
Mr. McDonald: I have a question for the Government Leader. On Thursday, in the context of questions about the extended care facility, the Government Leader said that the Yukon Party government was doing everything in its power to cause the deficit of last year to climb. All this was said in the face of their own admissions of massive lapses and padded budgeting in the supplementary estimates. Can the Government Leader confirm that the Yukon government has changed the financing arrangements for the extended care facility previously developed by the NDP government?
Hon. Mr. Ostashek: No, I cannot confirm that at all, because there is no truth to that allegation.
Mr. McDonald: The Government Leader indicated during Question Period on Thursday that they were interested in booking the cost of the extended care facility into last years budget. Can he explain precisely how the government is going to do that?
Hon. Mr. Ostashek: It would be difficult for me to explain precisely on my feet here, but I certainly will bring the information back to the Member. It is going to be booked into the last fiscal year because that is where the money was spent. It certainly is not going to be spent in 1993-94, as the facility is complete and it has not yet been booked.
Mr. McDonald: This constitutes a very significant change in the previous financing arrangements for the extended care facility. The Minister has contradicted himself. Can the Minister indicate whether or not the Government of Yukon is going to be booking the full cost of the construction of the extended care facility in the 1992-93 budget year?
Hon. Mr. Ostashek: No, I cannot confirm that at this point. I said I would get back to the Member. I know there have been ongoing discussions with Yukon Housing Corporation and CMHC at this time.
Question re: Extended care facility, financing
Mr. Penikett: On the same question, can the Government Leader confirm that the effect of booking the total capital cost of the extended care facility into last years budget will have the effect of increasing the total cost of the project to the taxpayer, since the previous financial arrangements spread the cost over a number of years and reduced to a minimum the cost to the territorial government?
Hon. Mr. Ostashek: Nothing has changed in how the extended care facility is going to be booked. At the time we took over office, they were still exploring options. We are trying to do it at the most reasonable cost to the taxpayer.
If we had wanted to make the Members opposite look bad, we could have written off the $2 million loan to the Champagne/Aishihik Band against the last fiscal year instead of putting it in this years budget.
Mr. Penikett: The fact that this is the third time the Government Leader has said, If we wanted to make the Members opposite look bad, we could have ... suggests that he had some kind of slander on his mind. Could I ask the Government Leader, in addition to his contemplation of writing off the Taga Ku loan, a project he killed in a way that would be damaging to the previous administration, he hoped, could he tell me what possible justification he had, given the previous financing arrangements for the extended care facility, which would have spread the cost over a number of years and have them shared by a number of agencies, including the federal government, for booking the entire cost into last years budget, other than a purely crass political move designed to pad his deficit, which he has been bragging about so much for the previous year?
Hon. Mr. Ostashek: The fact remains that the Members opposite never did anything about booking that. All they did was talk about it, and it was still outstanding when we took office.
Mr. Penikett: The Government Leader, in his capacity as Minister of Finance, is as wrong in his capacity as Minister of Finance as he often is in his capacity as Government Leader. The financial arrangements were clearly a matter of public record.
I would like to ask the Government Leader again: did Management Board meet in this fiscal year to make a decision to book the total cost of the project into last years budget and, if so, has the Auditor General or any other reputable chartered accountant approved of or sanctioned this crass political act?
Hon. Mr. Ostashek: As I said, there are ongoing meetings on how this is going to be booked. There were meetings last week with the Yukon Housing Corporation and CMHC, and I think the Members opposite are fully aware of those meetings.
Question re: Extended care facility, financing
Mr. McDonald: Prior to the construction of the extended care facility, there was an arrangement made for financing it by using, in part, Canada Mortgage and Housing Corporation funding. It was agreed that would be the lowest cost option to the government for building the facility. Has the Government Leader, the Minister of Finance, abandoned the commitment to secure CMHC funding to help support the extended care facility construction?
Hon. Mr. Ostashek: No, we have not.
Mr. McDonald: The previous NDP government established a financing arrangement for the extended care facility that would pay back the construction costs using, in large part, a CMHC contribution, according to CMHC guidelines. The Government Leader has indicated that they have not contemplated a change to those financing arrangements and yet has indicated that they still want to book the full capital cost of construction into the 1992-93 fiscal year for their own political purposes.
How is the Government Leader going to accomplish that task?
Hon. Mr. Ostashek: As I said, officials are investigating the best and most reasonable way to do it. The Members opposite had every opportunity to book that whichever way they saw fit. It is another one of the incomplete things that they left hanging.
Mr. McDonald: There was nothing incomplete about the financing arrangements for the extended care facility. In fact, there was an arrangement made to ensure that not only would the facility be funded, but that we would seek a maximum contribution from the Canada Mortgage and Housing Corporation so that the taxpayers of the territory would not suffer.
I would like to ask the Government Leader if it is his intention to ensure that the lowest cost option for financing the extended care facility will be adopted by his government, or is he going to insist that the full cost of the facility is going to be booked into the 1992-93 fiscal year in order to raise the projected deficit?
Hon. Mr. Ostashek: If that was our intention, we would have done it before year-end.
Question re: Extended care facility, financing
Mr. Penikett: This is an extremely serious question. I want to ask the Government Leader whether the government has actively considered making a loan to the Yukon Housing Corporation so that it can lend the money back to the Department of Health and Social Services? Did they make that decision in April so that they could book the $11.2 million cost of the extended care facility into last years budget?
I want to ask the Government Leader a very simple question: can he confirm that Management Board made such a decision in April and can he tell this House why?
Hon. Mr. Ostashek: As I told the Members opposite, we are looking for a way to do it in the most cost-effective manner.
Mr. Penikett: A cost-effective manner I think probably refers to the political cost, not the financial cost. We are now extremely interested in knowing the timing of the governments decision. Will the Government Leader give his assurance that we will get a full report on the new financing arrangements, designed to pad the previous years budget, prior to the completion of this legislative session?
Hon. Mr. Ostashek: I cannot give him the assurance that we are going to give it to him because we are trying to pad last years figures; I certainly cannot do that; that is not the intention at all. I will do the best that I can to get those figures back to the Members opposite.
Mr. Penikett: The Government Leader still has not indicated whether or not there was a decision made by Management Board on this question in April and why the House still has not had an explanation of it in May. Can I ask the Government Leader, with respect to the decision so far, which clearly his own statements indicate has been made, enabling an effort to exchange the financial arrangements of the extended care facility, if this is a decision of himself as Minister of Finance, or is it a decision of the entire Management Board, which, as it operates today, I understand includes all Members of Cabinet.
Hon. Mr. Ostashek: Decisions such as this are made by Management Board.
Question re: Whitehorse General Hospital, construction
Mrs. Firth: I have a question for the Minister responsible for Health and Social Services. On April 13, I asked the Minister about the extra costs to build a new hospital in the winter. The Ministers response was that the intention was not to stop this process because of winter weather and that an analysis has been done to compare the costing and that he was assured the way that this is being done is the most cost-effective.
On May 7, when the Minister found out that the project was going to be delayed until 1994, he said that launching it in the dead of winter would not be cost-effective. I would like to ask the Minister why he contradicted himself?
Hon. Mr. Phelps: The fact is that I did not. The issue was very simply one where a project is started before the ground is frozen in the wintertime, in which case it would be acceptable and prudent to carry on throughout the winter. That is a far cry from starting out a project in the dead of winter, like January, and breaking ground unnecessarily when it would be much more cost-effective to wait until April 1. The decision was based on not being able to do the preliminary work required on unfrozen ground prior to winter hitting and being able to build hoarding and so on to mitigate the disadvantages of the cold weather.
Mrs. Firth: That was the exact issue I raised when I asked the question. A winter project is a winter project. The tenders were not going to be ready until November. The project was probably not going to start until January. A winter project is a winter project. Why is it that one day it is cost-effective and the next day it is not?
Hon. Mr. Phelps: I thought I had explained that. If the foundations were commenced prior to the ground freezing, then it made sense, through the use of hoarding, to carry on right through the winter. That was the position we understood ourselves to be in a month ago, or whenever the question was raised.
Since that time, it has become clear, as a result of negotiations with the architect, that it would be impossible, in any way, to break ground before the ground was frozen. Therefore, for those reasons, we are waiting until the ground has thawed.
Mrs. Firth: It is interesting that it is cost-effective when the Minister is announcing that a new hospital is going to be built but, when he is announcing that the project is delayed, all of a sudden it is not cost-effective.
Will the Minister table, in the House, the cost-benefit analysis he refers to regarding the comparative costing? Could he table that for us this afternoon in the Legislature so we can decide for ourselves?
Hon. Mr. Phelps: I am not sure what documentation the Member is speaking of. I will ask my department what there is on that score and, in due course, make it available.
Question re: Unbudgeted government spending
Mr. Harding: The NDP supports, and has in the past supported, fixing Danny Langs rotten sewage system in Dawson. However, we would like to know how the Yukon Party government claims that their proposed budget is balanced, when it has just added $2 million in expenditures that were previously unbudgeted.
Speaker: Before the Minister of Community and Transportation Services answers that question, I would remind the Member for Faro of guideline 8 for oral Question Period: a question should not cast aspersions upon persons within the House or out of it. I think that is what the Member was doing in referring to a person outside the House.
Hon. Mr. Fisher: The Dawson City sewage system is in very bad condition and is costing the residents there approximately three times what it would cost in the City of Whitehorse or in any other community in the territory. What we hope to be able to do is find money from within the department by reducing the scope of some projects. We hope there will be some lapses or, possibly, reductions in tendering.
Mr. Harding: I am not asking a question. I am fully aware that the Tories built an inefficient sewage system there. I am talking about the public and the publics right to know what is in the budget. They expect budget items to go ahead as promised, and they do not expect to pass or agree with the budget, only to be duped out of items in the budget later.
I ask the Minister, which projects that he just talked about will be cancelled to pay for this unbudgeted expenditure?
Hon. Mr. Ostashek: The Member opposite goes on and on as if $1.00 items in a budget are a rare occasion. Members opposite in 1991-92 had 20.
Speaker: Order please. I would ask the Government Leader to address the question as directly as possible.
Hon. Mr. Ostashek: Thank you, Mr. Speaker. We will find the money the same place they did to cover their $1.00 items.
Mr. Harding: The government now, as when they were in Opposition, is obviously more concerned about politics than they are about principle.
The people are counting on these projects for badly needed jobs; our economy is in terrible shape. The people in this Legislature and the people in the Yukon must know now, before we debate the budget, what the projects are that will be cancelled and where these supposed lapses will be found.
I want to know, specifically, which projects will be cancelled, curtailed or pulled back?
Hon. Mr. Fisher: Because there is some time before funding will start flowing for the Dawson City water and sewer project, we will look at lapses that we do not have all of the information on yet. We will be able to look at other projects. Some projects may very well come in under estimate and that is where we are going to find the money for this particular project.
Question re: Unbudgeted government spending
Mr. Harding: The government has already proposed 10 amendments, totalling $399,000 in the proposed 1993-94 Community and Transportation Services budget.
Now the Minister says on the radio that he can find another $1.8 million.
My question is: why ask Yukoners to pay increased taxes that the government now knows are unnecessary, because the government has said that cuts are readily available?
Hon. Mr. Ostashek: The Member opposite knows full well that some projects probably will come in under what was budgeted, and there will be some lapses.
As the Minister said, the money does not have to start flowing for several months yet, so I do not see what the big problem is.
Mr. Harding: The government is incompetent. We said the Yukon Party caved in to federal bureaucratic requests to unnecessarily raise Yukon taxes, and the Yukon Party said they had absolutely no choice but to raise taxes to balance the budget. My question to whoever is running this government is: now that we have a previously unbudgeted expenditure of almost $2 million this year, in keeping with the Yukon Partys old theme, how much more will taxes be raised to balance the budget?
Hon. Mr. Ostashek: Not at all. In fact, as the Member opposite said, we have cut the taxes and phased them in over a two-year period in order to balance the budget.
If we would have had the $58 million more that they overspent, these decisions would have been very, very easy.
Mr. Harding: A half billion dollars is not enough for the Yukon Party. I want to read the quote this morning on the radio by the Minister of Community and Transportation Services, There is only $1.00 in the budget for that item so there is a little problem balancing this budget. If $2.2 million in his department in total budget amendments will only present a little trouble in balancing the budget, my question is: why did they falsely claim the government was broke, inflate their newly proposed budget and then tell people they had no choice but to pay more taxes?
Mr. Penikett: Good question.
Speaker: Order please. It might have been a good question in the opinion of the Leader of the Official Opposition but, in the opinion of the Speaker, it was argumentative. If the Minister of Community and Transportation Services wishes to respond -
Hon. Mr. Fisher: The Members opposite have told us numerous times right in this House that we will have $15 million in lapses, or $18 million in lapses. We did not want to have to budget for this. The reason we did is because the NDP did not do a darn thing in the last seven years toward this project. It would have been ...
Speaker: Order. Order please. Just to be fair, I should tell the Minister that a response to a question should not provoke debate and should be relevant to the question.
Hon. Mr. Fisher: ... wrong to put a budget figure in at the time we were putting the budget together when we had no idea what the cost was going to be. We put $1.00 in to identify it and now we do have a problem; we have to find the money from within, and that is what we are going to do.
Question re: Whitehorse sewage system, planning
Mr. Cable: I have some more sewage questions for the Minister of Community and Transportation Services. Can the Minister provide the House with an update on the Whitehorse sewage system - like the when and the what?
Hon. Mr. Fisher: Department officials are negotiating with the City of Whitehorse at this time. All that will happen in this particular fiscal year is the water board licensing and some design work.
Mr. Cable: Is there a definitive estimate on the cost yet?
Hon. Mr. Fisher: The estimated cost, as given to us by the City of Whitehorse, is $27 million and some odd dollars.
Mr. Cable: Is the Minister aware of how many jobs will be created in the present fiscal year by the expenditure that has been booked for this year?
Hon. Mr. Fisher: I have not received the information on how many jobs that will entail. I can check with the department and see if they have any idea of the numbers. Remember, most of this money is for the water board licensing requirements and some design work. There will be very little in actual physical construction.
Question re: Unbudgeted government spending
Mr. McDonald: The government, in announcing changes to their taxation structure for this current fiscal year, indicated that they would be losing $1.7 million in expected revenues. Consequently, they would have to amend the main estimates to be fair and right and to ensure that they had achieved a balanced budget.
When the Minister of Community and Transportation Services announced that an increased amount of $1.8 million was going to be cut from the Community and Transportation Services expenditures, why does the government feel that they do not have to amend the expenditure side of the budget to ensure that the budget is, in fact, balanced?
Stand up and say it.
Hon. Mr. Ostashek: Sorry, I thought the Member addressed the question to the Minister of Community and Transportation Services.
I did not see the Members opposite amending the budget every time they had a $1.00 line item.
Mr. McDonald: The government indicated that the budget - if all else failed, despite the tax increases or the record spending - was going to be balanced. They indicated that they would have to amend the expenditure side 44 times in these estimates in order to balance the budget and account for the $1.7 million reduction. Why is it that they feel they do not have to amend the budget when they make a new expenditure, not budgeted for, that amounts to $1.8 million?
Hon. Mr. Ostashek: The Members opposite seem to have great difficulty understanding the answers we give on this side of the House. The Minister said that the money would come from within the existing budget. It was identified in the budget as a $1.00 line item because there was no price tag that could be attached to it when the budget was prepared.
Mr. McDonald: The Minister did not answer the question, so I will ask the Minister of Community and Transportation Services a question. He indicated that he felt it was impossible for the government to provide an estimate in the budget for the Dawson water and sewer system until such time as they determined the precise figures. Is the Minister saying that all other expenditures in the Community and Transportation Services are not loose estimates but are real and potentially actual expenditures that they will have to make, and there is no further room for any expenditure reduction in the Department of Community and Transportation Services?
Hon. Mr. Fisher: The Member opposite was the Minister of Community and Transportation Services for a number of years and he knows that regardless of how well the civil service budgets, they hardly ever - if ever - come in dead on target. That is why we have our supplementaries. It is going to be very difficult to come up with $1.8 million; there is absolutely no doubt about it. We may have to cancel some projects, but we are hoping that there will be lapses and that some projects come in under budget.
Question re: Unbudgeted government spending
Mr. Penikett: I would like to ask a question to the Minister for Community and Transportation Services on the same subject as my colleague from McIntyre-Takhini. Would the Minister of Community and Transportation Services agree that had he made a rough estimate of the Dawson water and sewer project - whether he had shown $5 million, $4 million, $3 million or $6 million - that the Government Leader could not then have presented a balanced budget? Is that not the case?
Hon. Mr. Fisher: If we had taken a wild guess at what that project would cost - yes, indeed, it would have been, as the Member opposite is alluding, more or less dishonest.
Mr. Penikett: Given the condition of the Yukon economy, does the Minister of Community and Transportation Services believe his budget for $20 million for land development in the coming year is an honest statement of what will actually be spent?
Hon. Mr. Fisher: As the Member opposite is very aware, the lands budget in the last 10 years has never come in on target at all. The Member opposite also knows that whatever goes on the one side of the lands budget, is also on the other. It is a straight recovery program. In fact, I do believe that the amount in the lands budget is overly optimistic, but it is on the other side of the recovery. If only half of that is spent, or three-quarters of it, or 97 percent -
Speaker: Order please. Could the Minister conclude his answer?
Mr. Penikett: We have not approved the budget for 1993-1994 yet. One of the Ministers has said that real construction on the hospital is not going to start until next year. Would the Minister of Community and Transportation Services, a department that has a lot of expertise in construction, agree that the $13 million estimate for construction in the budget is not an honest statement of probable expenditures?
Hon. Mr. Fisher: I have not even looked at that project. I do not believe that any of the people in my department have looked at it. It is not for us to say whether it is an accurate figure. That is up to Health and Social Services.
Speaker: Time for Question Period has now elapsed. We will proceed to Orders of the Day.
ORDERS OF THE DAY
Speaker: Government Bills.
Bill No. 20: Second Reading
Clerk: Second reading, Bill No. 20 standing in the name of the Hon. Mr. Ostashek.
Hon. Mr. Ostashek: I move that Bill No. 20, entitled An Act to Amend the Income Tax Act, now be read a second time.
Speaker: It has been moved by the Hon. Government Leader that Bill No. 20, entitled An Act to Amend the Income Tax Act, now be read a second time.
Hon. Mr. Ostashek: The purpose of this legislation is to increase personal and corporate income tax rates. Our present personal income tax rate is 45 percent of the basic federal tax. This bill will see that rate rise to 48 percent, effective January 1 of the current year, and a further two percent on January 1, 1994.
In addition, as of January 1, 1993, a high-income surcharge of five percent of Yukon income taxes paid in excess of $6,000 will be implemented. This latter measure will only impact upon those with taxable incomes in excess of approximately $64,000 per annum. With the full five percentage points added to our personal income taxes in the Yukon, we will still have a rate higher than only two other jurisdictions in Canada.
Given the high cost of living in the north, and a consequent higher relative tax burden, I think that it is only appropriate that we be on the low end of the scale. However, this approach can be carried too far. I think it is also incumbent on us to carry a reasonable portion of the cost of operating the territorys government.
These personal tax measures will yield approximately $3,060,000 per annum, when fully implemented. The Yukons existing general corporate income tax rate is 10 percent, while the small business corporate rate stands at five percent. The proposals contained in this legislation will see those rates rise in the case of the general rate to 13 percent as of January 1, 1993, and 15 percent effective January 1, 1994. The small business rate will rise to six percent as of January 1, 1993.
When these rates are in full force, that is of January 1, 1994, the Yukons general corporate rate will be higher than only two jurisdictions in Canada.
In the case of one of those jurisdictions, the Northwest Territories, a payroll tax has just been implemented that has the effect of substantially raising the total tax burden on corporations.
At the same time, our small business corporate rate will be tied with one other province as the fourth lowest in the country. The corporate tax measures will increase our revenues by $1,545,000 per year after January 1, 1994.
The increases we are proposing are not insignificant, by any means. On the other hand, they are far from unbearable when one considers the alternative of public sector layoffs and the reduction of essential services provided the public by the government.
Our Department of Economic Development was asked to analyze the impact of these tax changes on the Yukon economy. The conclusion was that it will not have a significant impact.
It is apparent that tax increases are never popular and, while it may be slight, they must have some negative impact on consumer and business spending powers and inflation rates. It is also apparent that monies must be raised through these taxes to fund government operations. The trick is to find an appropriate and competitive tax regime when the total range of taxes is taken into account.
We believe we have achieved that balance with rates that are more than competitive with all jurisdictions in Canada when all taxes are considered. At the same time, we will have made a significant step toward becoming more self-sufficient and less dependent on federal handouts. Finally, we will not have to implement layoffs or reduce services to any great extent. Yet, at the same time, we will maintain a balanced budget.
Members are well aware that we originally did not intend to phase in the income tax rate increases. Representations received from the general public, the business community and Members indicated these changes would be best phased in over a two-year period, and we have come to the same conclusion, based on that advice.
The previous An Act to Amend the Income Tax Act that I tabled in this House, Bill No. 46, will, therefore, not proceed any further and is replaced by the current legislation. As mentioned in my ministerial statement of April 26, the phasing in of the rate increases reduces the 1993-94 funding available to the government by some $1.7 million. Since we must maintain a balanced budget, we intend to introduce amendments during the main estimates debate that will reduce the estimates by a similar sum.
While not inconsequential, we believe that these amendments to the appropriation bill will not result in any layoffs and will have a relatively small impact on the level of program service provided by the government.
Mr. McDonald: I intend to be relatively brief this afternoon because I think most of what we said in second reading to the governments previous attempt at taxing the public still applies today.
There are a number of changes to the economic circumstances that we now face since the introduction of the first tax bill that the government tried to pass last month.
I recall indicating in my second reading remarks that the economy of the territory was facing the potential for a real decline. I recall indicating that the unemployment rate was 14 percent and seemed to be climbing, and that this was not the right time for the government to be implementing record tax increases on the general public.
What has changed is that the unemployment rate has indeed climbed from 14 percent to 16.4 percent since the time the first tax bill was introduced. Consequently, the timing for tax increases now is worse than it was before. It is our contention that the economy is in no shape to absorb tax increases of such magnitude.
We indicated, and we indicate now, our continuing puzzlement at the Yukon Partys direction, in part based on their own criteria and by their own standards.
The government has indicated in the past that they do not believe in big spending. They have the largest spending budget in Yukons history, much larger than the proposed spending requests by the previous NDP government and the Yukon Party government combined, for the 1992-93 fiscal year.
They have indicated that to raise taxes would be obscene. Now they have indicated that they have changed their minds and say that taxes are not obscene, but we should have raised taxes four or five years ago, despite the fact that we had surplus budgets during all those years.
We have been told by the Government Leader that they intend not to raise taxes further, yet at the same time, they announce fee increases across the board in the coming year. In the past, they would argue that fee increases constitute tax increases.
We hear the government indicating now that taxes are desirable and necessary; yet, when the federal government raises taxes we hear the Government Leader indicating in the media that, higher taxes are not the way to go. Canada is in a financial crisis. If we are to get the costs of government under control, we cannot do it by continually raising taxes. The people have said they do not like tax increases.
It is very difficult to read a government when they are taking all positions on every subject; it is very difficult to anticipate their next action, whether it be on the revenue generating side or on the expenditure side. We do not know what is going to be in the main estimates budget. We have been told that we can expect 44 amendments to the budget in order to accommodate a $1.7 million decline in expected revenues. Yet, the government, at the same time, can announce blithely that it is going to make a spending change of $1.8 million and they will simply find that money from within; lapses are always expected; do not worry; budgeting is always loose and we have nothing to concern ourselves. One department alone is going to be able to find the $1.8 million they require in order to change spending priorities.
The government has indicated that, if nothing else, it is going to see the government show a balanced budget, that no matter how one feels about the high taxes or the high spending or the change in priorities, this budget is going to be balanced; that is the bottom line.
There is nothing that gives us confidence that the budget is balanced. If they go to such an extent to re-jig their main estimates to accommodate $1.7 million in changes and then, in the next breath, feel that $1.8 million can be found easily from within from lapsing funds, one might think that there is a contradiction there. One might believe that perhaps the budget in the end will not be balanced at all.
So, when we get to subjects such as the abattoir or the ombudsperson, we will have to ask the question of whether or not these items they have announced and items to be initiated in the coming fiscal year will also come from this loose budgeting and the lapses they expect to occur.
When we first started debating the supplementary estimates and there was a claim that we were $58 million in the hole, we were told originally that every dime of that $58 million was required. We were told that there was no padding and that the government had tight budgeting. We were told that, of course, lapses do occur and we should expect them. We were told that because the government has been forced to admit that their budgeting has been very loose. They have padded their budgets and there are many things that they intend to do or plan to do, about which they have no intention of telling this House until the House convenes for the spring sitting.
We have established that not only the revenue side is a moving target, but so is the expenditure side. It makes it very difficult to debate a budget. Constituents ask me if we have debated the budget, and now my response is What budget? Is it the real supplementary budget or the one they tabled? Is it the real main estimates budget, or the one that has been amended 44 times and may be amended some more? We do not know.
When it comes to making a major decision, such as to extract $7.1 million from the taxpayers pockets, one would think that we, in the Legislature, would have a better and more thorough plan established and would feel more confident about the figures and that the government had a set direction. Consequently, we would feel more comfortable defending such a serious measure as this tax bill.
What has happened in the last six months is that the government, who simply wants to re-jig the priorities, has indicated that they are not cutting back simply because they want to spend money somewhere else, but because there is no money. We have heard that the government feels that, because there was deficit last year, they cannot possibly meet all the expenditure priorities that even they have in mind, because they only have $483 million with which to meet the expectations of Yukoners.
We hear from the Minister of Education that they cannot build a school, because they only have a record capital budget to work with and, consequently, do not have the money to meet that particular priority. We hear from other Ministers that they cannot do things because they have record spending to deal with and cannot meet everyones requests. The reason why they cannot is not because they have record spending, but because the NDP last year ran a deficit with the Yukon Partys help.
With respect to the estimates from last year, we still have some distance to go in order to estimate precisely where we stand, so that we know whether or not we have money in the bank for this year. That is a critical factor in determining whether or not one is going to seek more revenue. We hear from the government that they are prepared to do everything in their power to increase the projected deficit for last year, only because they want to ensure that there is a high deficit. They have been walking around saying that there is a $58 million deficit for last year, and they do not want to change their story.
Even though Minister after Minister announces lapsed funding and padded budgeting, in the millions of dollars for many of the departments, they still do not want to change their figures.
Consequently, they do everything they can to book expenditures for last year, even though it is going to cost the Yukon government and the Yukon taxpayer more than the original financing schedule had anticipated. What really galls most Yukoners about this tax increase is that we appear, very much, to be following a federal bureaucratic imperative, an agenda decided outside the territory by non-Yukoners, an agenda that does not have Yukoners interests at heart but, instead, has a federal agenda closest to their hearts.
The Government Leader has introduced no information, no argument, no justification to suggest that the Yukoners tax burden should be increased. He has kept his language on the subject of tax rates, because he knows that the federal government - the federal bureaucrats - want the tax rates to be increased. If he were to engage in the subject of tax burden on the Yukoner, he would have to admit that the average tax burden for a Yukoner is already the national average or higher; consequently, it would be manifestly obviously unfair to be raising taxes at this time in Yukons history.
What is the Government Leaders argument? The Government Leader suggests that we should have raised taxes in 1987-88, when we were operating with surplus budgets. We should have been doing what he calls the responsible thing in taxing ourselves more. Why? Because he is using the federal bureaucratic argument, which is unfair to Yukoners.
Federal negotiators have never suggested, to my knowledge, that Yukons tax burden is not already high. They are just saying that, if they engaged in that debate now, they would have to face the same debate from Newfoundland and other have-not jurisdictions in this country.
So, no matter what you might think of their argument, Yukoners know that rate increases now are not the thing to do. I am convinced, to use the Minister for Renewable Resources expression, that real Yukoners, whomever they may be - whether they have been here for 100 years or for one year - would not do this if they had Yukoners interests at heart.
We have been listening to the public carefully over the course of the last five or six weeks - since the measure was first introduced. We have gone so far as to conduct some polls on what people thought about the tax increases and if they thought the government should be raising taxes and whether they should be allowed to break their promises about no new taxes. The overwhelming response was that they oppose the taxes and do not believe that the government should be allowed to break their promise on the question of tax increases.
They repeated over and over again, despite the words of the Government Leader that these tax increase do not constitute pocket change, that the tax increases are not merely symbolic in nature, they are real, hard hitting and they are going to extract - even with the phased-in approach - $7.1 million out of the economy. The more we talk about the budgeting by the Yukon Party government, and the more they know about the main estimates, the more they come to realize that the expenditure side of the budget is very imprecisely stated. Even today in Question Period it became manifestly obvious that the government is not committed to the expenditures that they are bringing before the House.
We feel the government is ill prepared to enact this measure. We do not have confidence in their competence to use the expenditures wisely; in fact we do not even know how they are going to use the expenditures. For the reasons I gave at the second reading and the reasons I stated now, we cannot support the measure and we will consequently vote against it.
Mr. Cable: I rise today to state my objection to both the principle behind the bill and the timing of this bill. Firstly, I wish to address the presentation of the bill. The governments decision to introduce this bill and expect the consent of this House before the budget debate is curious to say the least. The government is asking the Members of this House to approve a revenue measure before we have approved how this money will be spent.
I would like to use the analogy of a bank borrowing, with which some of the Members opposite ought to be familiar, having been in business.
If you went to the bank and asked to borrow a sizable sum of money before you definitively knew what was in your bank account, and before you had your bankers approval for the expenditure, you would almost certainly be refused.
The case in this instance is very similar to the analogy that I have just referred to - the government is asking for money before it has the authority of the House to spend the money.
What I find to be more objectionable is the notion that the government wants to take money from Yukon taxpayers, before the Yukon taxpayers, through their elected representatives in this House, have approved how the money will be used. This is simply not acceptable.
I also want to address the broader question of the wisdom of tax increases and the governments apparent desire to regularly amend this budget.
There have been enough questions in this House raised in Question Period and during debate to convince me that we do not have a clear picture of the governments finances.
I am uncertain as to whether the Yukons balance sheet for the year ending March 31, 1993, is going to show black or red, although there are indications that the balance sheet may be in the black.
I also recognize that the income side of the equation may not be too encouraging, and I accept that there may have been financial decisions in the past that will affect the governments financial position today.
The question is this: during rainy days, should government raise taxes or go to their bank account - if in fact there is money in the bank - or cut expenses?
There is, in my view, a possibility that the Auditor Generals report will show that, through lapses and other events, the Yukon will have a small amount of money in the bank and I say a possibility.
The use of that money makes more sense than do tax increases. We should also recognize that there has been a material change in the Yukons fortunes in the last seven months. People are worried about their jobs, their businesses and their homes, and they are worried about their future here. In that light, I have to ask the question: is this the time to raise taxes?
Yukoners need some measure of confidence and placing an additional tax burden on them will not accomplish that. A budget is as much a signal to the community as it is a matter of preparing financial statements. The signal that I would like to see is a recognition by the government that the best economic development is to leave an additional dollar in the taxpayers pocket, so that he or she can recirculate that dollar and create or maintain jobs in the interim.
In closing, I cannot accept the timing of the bill nor the intent of it, and I will vote against it.
Mrs. Firth: I am finding this a very interesting debate that we are having here in the Legislature today. I have to go back some years to a comparable situation when the New Democrats were forming the government - they were a new government - and the Conservatives had lost the election and were Opposition Members. I have been getting some enquiries from the media about the length of the session. This is a record length of time for us to be sitting here in the Legislature debating supplementary budgets.
I go back to April of the year 1986, which was also a record year for sitting and having debates in the Legislature. I believe at that time we sat for 10 weeks and one day. The circumstances then were that we had a new government, a New Democratic government, which had been in office for 10 months. We have a new government here, a Conservative government, that has been in office for some six months. I went back into Hansard to research comments that had been made by our esteemed government Members when the government-of-the-day, the New Democrats, brought forward a tax initiative to increase taxes - the Act to Amend the Liquor Tax and Tobacco Tax. The debate was extremely interesting and I will share it with other Members of the House in a minute.
Todays Minister of Justice, who was the Leader of the Official Opposition then, got up and responded to the initiative by the government by stating that taxes were really quite an objectionable approach to take to raise revenue. Some of his comments, on April 3, 1986, page 188 in the Yukon Hansard, included the statement, as we all know, when a government first gets into power it takes them quite a while to get their names embossed on the cheque-writing instruments, and figure out who is supposed to do whatever they are supposed to do.
This government has managed to get on track in marvellously short order, and spent and spent and spent and spent and spent.
It is obvious the Yukon Party Members got their cheque-writing instruments embossed, and whatever else had to be done, four months earlier than the previous NDP government did. I suppose we have to give them credit for being a little quicker there.
This Member went on to say that the government was so intent on spending and spending - and spending and spending - without having put much in the way of new policy in place, that they were going to the people of the Yukon and saying they were also going to increase taxes.
He criticized the government for their willy-nilly spending sprees and gave us a lesson on how these taxes would severely affect people with lower incomes, as opposed to those in higher income brackets. I do not know if the government has corrected that with their new tax measures, but I cannot support their tax measures, so it really is not a point.
He said that it was not necessary to increase the role of government in society in order to effect stimulation of the economy, at least not to do it entirely by that means, which was taxing. He talked about the pressure that was going to be put on small business, which portrays and makes up the live and real values of Yukoners. He particularly objected to the goody-goody philosophy of the government and the attitude of we know what is better for you than you do. This is the Member who is now advocating tax increases like we have never seen here in the Yukon before.
He also went on to talk about how most constituents and Yukoners want less government, not more government. Most of them think they can spend their money possibly as wisely and as well on behalf of themselves and their families as the wise men across the way would do it for them. It is quite interesting.
The Member went on at great length about the private sector and how he did not need the Minister of Justice of the day telling us how to spend our money, and so on, and he finished up his comments by saying, For those reasons are we going to support Bill No. 10? No bloody way., and that was that.
A couple other Members spoke. Todays Minister of Education spoke about the tax initiative; he stood up to say that he would be opposing any tax increase at this time simply because it was poor money management on behalf of the government.
He expressed some serious concerns about the attitude of the vice dean of the House and got up and talked about how it was the first time that he or any other Members of the House had had an opportunity to debate a tax bill. He said, It is pretty important - in fact, everything we do in this House is important - but it is even more important when we are raising taxes. I guess what we are doing right now is pretty important, too. We are raising unprecedented high taxes for all Yukoners. This is something that I never would have thought that the previous critic, who is now the Minister of Education, would have agreed with.
He went on to say that the government had not done all its homework. What had happened was that we had watched a new and inexperienced government scramble in the House, huddle in a corner, asking what they should now do. I found that quite interesting, because I sometimes see the present government Members doing exactly that.
The Minister of Renewable Resources also had some comments to make. His final comment was the most interesting, because he expressed opposition to the increase to the alcohol and tobacco tax, but his last parting comments were, This government is completely incompetent and it is losing the support of the Yukon people, even though they have flooded the Yukon in a ridiculous and irresponsible fashion with money. In closing, I would like to remind the government that they have been in office for 10 months. Let us stop blaming the former government. You are big boys now, stand up on your own feet. That was met with applause from the colleagues of the government. Hansard tells the truth, if the Minister and the Members speak the truth.
Some Hon. Member: (Inaudible)
Mrs. Firth: Ah, yes, the flip-flop in Faro. I am so glad the Member raised that. I just happen to have that debate with me. Although I do not want to digress from the subject that we are debating this afternoon - raising taxes - I think this may have some bearing on it.
I was accused, of course, by the Members opposite of flip-flopping and about the fact that I had opposed this government - they did not say exactly what I had opposed - but the $5 million was something I had opposed.
I had spoken out very strongly against the previous government giving a $5 million sum of money. I had spoken in favour of the loan guarantee. That is not what had been given out. It had just been a $5 million sum of money. That is what I spoke against. Read Hansard. I had also objected to the fact that we had not been consulted prior to the commitment for the $5 million being made. It was no flip-flop - none at all. I may have been able to support a loan guarantee, but not an outright grant.
When I search through Hansard to find out what previous Members have said, I find that now that previous Members are in government, there is a whole different set of rules for them. There is a whole different set of values and a whole different set of principles, thin as they may be. One thing is said at the door during election campaigns, one thing said in the Legislature in previous years, another thing done in the House when they are government, another thing said in the House when they are government Members.
I know the word for that is not permissible in this House because it is considered unparliamentary; therefore, I will not use that unparliamentary word that means government Members pretend to support some particular intiative, or pretend to be offended by and opposed to some particular initiative. That is what we have had from these Members. Yukoners are wise to them now. They have caught on to this.
I have asked the Government Leader, the Minister of Finance, questions about taxation policy. He has no taxation policy except to raise taxes when they need extra money. We have asked the Government Leader why we need this tax increase. He has given us every answer in the book, except one legitimate answer to indicate why we need these tax increases. Now his latest line is that Yukoners have been on a tax holiday, and that a year after his colleagues were standing up in the House here objecting and outraged about these tax increases that the previous government was imposing, he was advocating that they should have been raising taxes way back then, and that Yukoners have been on a luxury tax holiday, which I think is absolutely untrue.
I still maintain that Yukoners have been paying their fair share, despite what propaganda the government Members have been putting out to Yukoners. They have been trying to talk them into the fact that they do not pay their fair share. They actually have some people going around parroting that line.
Something that distresses me to no end is the Minister of Finance standing up in this House, when he introduced tax measures in his budget, telling us it was to get rid of the perversity factor. He said that we had to have these tax measures, because it was in Yukoners best interests to get rid of the perversity factor. It was not for us to become more independent and self-sufficient, but so we could get more money from Ottawa.
Some three or four weeks later, when I was questioning the Minister of Finance about a fuel tax exemption for recreational vehicle users, the Minister stood up in this House and said that tax increases had absolutely nothing to do with the perversity factor.
The Government Leader, the Minister of Finance and his colleagues, the Cabinet Members, cannot constantly stand up in this House, and in public, and make statements that are not accurate, that are untrue, and, when they are found out, correct the statements and expect that they should not have to suffer any of the consequences of having done that.
What is now happening is that the Members in the Opposition in this House no longer have any confidence in the government to do its job. Members in the public have rapidly lost confidence in the government Members ability to do their job, and they are starting to ask questions and strenuously lobby the government against some of these tax measures.
I have a letter from the Whitehorse Chamber of Commerce that all of us received as Opposition Members, expressing a great deal of concern about one of the proposed tax initiatives that we are debating this afternoon.
I do not know if the Government Leader, who is also the Minister of Finance, has responded to the Chamber of Commerce yet, or if he has phoned them and said they are ignoring the request and lobby to reconsider the governments position with respect to corporate income taxes. The Whitehorse Chamber of Commerce is advocating that the government reconsider that particular initiative and not proceed with it but, if the government feels that they absolutely have to, to proceed only with a one-percent increase.
We got this letter today, and the Government Leader - the Minister of Finance - has brought the tax measures forward for second and third reading, prior to considering the Chambers request - unless he has considered the request and decided that they are going to ignore it.
If I am not mistaken, the Minister has made arrangements to meet with other individuals to discuss the matter. Obviously, there is no point in the meeting, no point in this letter and no point in discussing it, because the government has made up its mind to proceed with second and third reading this afternoon.
The government is feeling confident that the measures are going to proceed, and it is completely ignoring whatever consultation and whatever ability the Whitehorse Chamber of Commerce or the Yukon Chamber of Commerce had to lobby the government to change its mind.
So they are not even listening to the constituency that they purport to represent. I do not know who they are listening to. I do not know who this government gets its advice from. Nobody in the Yukon Party seems to know who this government get its advice from, because I have made enquiries.
I thought maybe I would be able to slip a positive suggestion or two to the Government Leader through somebody who had his ear, but no one in the Yukon Party knows who the Government Leader gets his advice from or who his Cabinet colleagues get their advice from.
I object to having a person from Kelowna come here to encourage the government to raise our taxes because we do not pay our fair share and that our taxes here are less than what they pay in Kelowna, B.C. That is the kind of advice the government got and I completely disagree with it.
Why is the government not listening to Yukoners? It is quite incredible. I can recall on election night the Minister of Education saying to one of the media people - as he was looking over the new offices they would be moving into - We have to be careful. We got arrogant last time and that is what got us kicked out of office. We know that the New Democratic government were very arrogant, we are going to have to be very careful that we do not get arrogant and we are really going to watch out for that. That must lasted for about five minutes. He held that thought for five minutes.
Ever since these Members have moved up into their new offices, the circle of loyal supporters and advisors has become smaller and smaller. We do not know who advises the government. They obviously do not listen to Yukoners. We have the representation from the Chamber of Commerce, which is going to be ignored. We have a consultative meeting tomorrow that is going to be ignored because the government is proceeding with the tax initiatives today - so that they can meet the printing deadline of the federal bureaucracy - tax initiatives that some person from Kelowna suggested and that some federal bureaucrat thought was a good idea as well.
I actually heard the Minister of Finance stand up in this House and say - when I was complaining about the tax increases during second reading of the budget - and I will quote from Hansard of March 31 on page 350, Then we have Members complaining that we are overtaxed in the Yukon because we have a little higher cost of living here. I agree we have a higher cost of living, but each and every one of us gets a $5,000 tax credit for living in the north.
Take that northern allowance and add it to the equation and see where we are. Well, that is absolutely wrong. It is an absolutely incorrect statement to make in this House. To have the person stand up to make such statements, then come forward to this House and expect that we should support his governments tax initiatives, when he does not even know what he is talking about, is a very frightening proposition.
If the government could give me one shred of hope that they knew what they were doing, I may be able to support some of their initiatives. But what have we seen? - a small huh from the Minister of Education, a cynical huh. Another favourite line of the Minister of Education, the person who was not going to become arrogant and who held the thought for five minutes was just join the NDP - is his favourite line, for want of something more creative.
I think that debate has ended; except for the Member for Riverdale North, that debate has ended. I feel very comfortable about the positions I am taking on behalf of my constituents. I have a mandate from my constituents to represent them in the Legislature, and I am going to fulfill that mandate because I still keep in touch with my constituents and listen to them. I remember who I am here representing.
The government Members have become - how shall I say it without becoming unparliamentary - so full of the task at hand of governing, of I am the government now, and we are going to lead the charge; we are going to make decisions about your lives; we are going to do this; we have the power to do this; it is our turn to be government.
Who are these people representing? Themselves? The government? What about the people who voted for them? What about the business constituency they claim to be supportive of? Are they supporting them with corporate tax increases, personal tax increases, fuel tax increases - tax, tax, tax - particularly the corporate tax increase?
My position has been that they either remove it or look at reducing it. It is interesting that that is the same position the Whitehorse Chamber of Commerce is taking. I find it very alarming that a government would want to choose a short-term policy of killing a source of tax revenue and related industry for the purpose of obtaining additional funds from Ottawa. This strengthens and emphasizes the point I make that these government Members are sitting here representing government, taking comfort in the money they get from Ottawa, and they want to kill initiatives that might generate tax revenue from real businesses here in the Yukon. They have wanted to protect government all along.
The Minister of Finance stood up in this House and said that one of the reasons we had to have tax increases was to balance this budget if we did not want massive layoffs. Nobody was advocating massive layoffs, but the Minister of Finance had indicated, during the election campaign and when he first became Minister of Finance, that he was going to get these $100,000-a-year salaries under control. He was going to look at that. There was going to be some change there, but there has been no change. The Minister of Finance is shaking his head and saying no. Well, there was a small reduction, which is a temporary measure - a small, small temporary measure - but we still have 19 assistant deputy ministers. There have maybe been one or two assistant deputy ministers - there is one lower assistant deputy minister. Other departments could do well with less personnel. The Minister of Finance stood up just recently in the House regarding a $70,000-a-year position in the Executive Council Office, saying that the reason they had to have that position was, I guess we needed it or we would have cut it. That is not a justification for needing a person year, when the Minister stands up and says it is their policy to proceed with attrition to downsize government.
I do not know why we have to proceed with these tax bills immediately. I share some of the concerns the Liberal Leader has raised about the process, but I am prepared to be flexible. If the government has some good reason why we should proceed with this now, I am sure the Minister of Finance will be prepared to stand up and share it with us this afternoon. I cannot think of a really good reason other than the debate we got into some weeks ago about meeting the time line for printing the tax increases in the federal printing department, and that is not a good enough reason for us having to debate this initiative right now.
I guess I have made no secret about the position that I am going to take this afternoon regarding these tax measures. I want to reinforce the concern that is in the public about the publics confidence in these Ministers and their confidence to run government. If we do not feel that the public has confidence in them, then we are not going to have confidence in them either. I am sure that government Members are aware of what the potential outcome of that can be.
Although people like to say that, well you know, we do not think people want an election right now. It might not be a good idea. People will be unhappy with it. I have more and more people coming up to me and asking, When are we going to have an election? I was collecting for the Canadian Cancer Society a week or two ago and I heard it regularly. I was unable to discuss the particular issue because that was not my purpose for visiting, but I had an opportunity to go back and talk to people about the issue. I do not get the message that people do not want an election right now. Yukoners can make the choice. Yukoners will decide whether they have confidence in this government. They may get an opportunity to do that.
I have some comments to make about the supplementary estimates that we have been debating, and the new budget. I want to make one thing very clear. I am not presently in any negotiations with the Yukon Party regarding any changes to the budget. When there is speculation about who this government is making deals with, or having negotiations with, or making arrangements with, I just want to say for the public record, and I want people to know, it is not with me. I have had one meeting with the Government Leader, which was attended by the Liberal Leader, the Member for Riverside, and by you, Mr. Speaker. We had some preliminary discussions, and I have had no further communication with the Government Leader regarding any proposed changes to the main budget, to the supplementaries, or any budget.
I have a great deal of concern about the Minister of Finance completely refusing to present us with the financial printout that we have been requesting in this House - information that the Government Leader is so concerned about being misleading. He certainly would not want to bring misleading information into this House. I have to question his assertions, when we look at a supplementary budget that has been shown to have extra funding in it, or padding, as it has been called.
I have some concerns about monies that are being requested in the governments new budget. We just had a perfect example of it this afternoon, where we are being told by the Minister of Community and Transportation Services that they can find $1.8 million within one departments budget - more money than the government has been able to find in the entire budget so that they can phase in their tax increases.
When people in the public hear that, they are really going to start questioning the sensibility and the need for tax increases, and I think they should question it. I have maintained all along, as have other Members, that we did not need the tax increases. I think virtually all Members on this side of the House have maintained that.
If the Government Leader can by some miraculous method - and it would have to be a miracle - show that there is a real reason for these tax increases, and if he is prepared to withdraw his comments about the big tax holiday my constituents and other Yukoners are supposed to have been on and show where Yukoners are not paying their fair share, perhaps I would be prepared to change my mind. It would have to be a miracle, because I do not think that the Government Leader can demonstrate any of that.
The economy in the Yukon is severely depressed right now. People are without jobs and income. They are facing higher electrical rates, higher telephone rates, increases in taxes and a reduction of revenue coming in. The Government Leader keeps standing up and saying that it is pocket change. Perhaps the Members opposite have more pocket change than others. The money this government is asking for in increased taxes is real money to some of the constituents I represent. The government has dug itself into a very deep hole. Personally, I do not see how they can get out of it. Maybe, as I have said, the Government Leader has something profound and new to reveal this afternoon.
I am not going to support these tax increases. In fact, I am not going to support any of the tax increases. I have asked the Government Leader to reconsider the fuel tax exemption for recreational users. He has refused to do that. He has now indicated that there will not be one department working on it - just the Department of Finance - but they are going to have two departments working on this administrative nightmare. The Government Leader has indicated that he is absolutely unwilling to compromise, negotiate or meet anyone part way with these tax initiatives. He is prepared to give absolutely nothing.
Phasing in a tax increase is not giving up anything. It is just delaying it over a two-year period. It is still the same tax increase, with absolutely no change. The Government Leader has demonstrated that he is completely inflexible and completely unwilling to make any changes with respect to his tax initiatives.
I am now firmly convinced that we do not need these tax increases; therefore, I will not be supporting any of them.
Speaker: The Hon. Government Leader will close debate if he now speaks. Does any other Member wish to be heard?
Hon. Mr. Ostashek: I will not be long in my closing remarks, but I certainly want to touch on the concerns and statements made by Member opposite.
The Member for McIntyre-Takhini, in his opening remarks, said that we have increasing unemployment in the territory and I have to agree. I guess that is one of the main reasons that these tax increases are necessary, so that we do not add to the unemployment figures in the territory at this time.
We have enough problems now with the Faro operation on the verge of collapse, without adding to it by including a substantial number of layoffs in the government. That is what we were faced with when we were putting this budget together.
The Member went on to say that now is not the right time to increase taxes. I agree; I do not think there is a right time to increase taxes and no politician, especially one in a minority government wants to take that risk, Iunless it is absolutely necessary, and we believe it is necessary.
Upon taking over office, and finding out the real financial health of the government and the territory of the Yukon, we had to turn around a trend of deficit budgets. It was $13 million in 1991-1992, and $58 million in 1992-1993. I have no problem standing here today and saying that our calculations are going to be very, very close to what we said at the start, plus or minus $5 million. That is without taking into consideration some of the issues that were not accounted for in there such as the extended care facility, which they are now trying to make a big issue out of. They are saying that maybe we should calculate it for all of 1993-1994, because they spent too much money, even though they built the facility. We should not put it on their record. They would just like to take the credit for building it. I do not want the credit for building that building. I certainly do not.
Besides that, there are the leave accruals for the Department of Education, which I believe are $3.2 million, which still has to be calculated somewhere. There is also about a half a million dollars in MLA pensions that certainly cannot be laid at the feet of this administration. It has got to be calculated somewhere. They accuse us of trying to pad the supplementaries, yet when the Yukon Development Corporation wanted to get rid of their $2 million loan to Champagne and Aishihik, we did not put it to 1992-1993, we put it in 1993-1994. We could have very easily put it in 1992-1993.
The fact remains that we had to raise taxes. We did not have any alternatives.
Two years of deficit budgets exhausted what surplus we had to work with. The Members opposite keep referring to a statement I made in the debate that raising taxes would be obscene. That is certainly a statement I wish that I had not made.
If they had not been obscene in hiding the true financial health of the territory, prior to calling an election, then I would not have had to make that kind of statement. That is what was obscene. What was obscene was going to the people without having the political courage to table a budget. That is what was obscene.
Now, they say that they have to debate a budget, and they do not know what budget it is. Even though I was not in this Legislature, I can go back and look at the budgets they presented. They threw a dart at the wall with the main estimates and said that they would make it up in the supplementaries.
We are trying to bring in something that is realistic. They talked about a dollar item for the Whitehorse sewage, of which we did not have any idea what the figure was going to be. Yet, they can put legal aid in at $1.00 and think that it is quite all right, even though they know they spend hundreds of thousands of dollars on it every year. There were 20 line items in 1991-92 with a dollar item on them.
Talk about loose budgeting - the Members opposite know full well what it is to loose budget. We said time and time again in this House that there would be lapses. We said it could be as much as two or three percent. Go back and look at the Hansard - it is in there, we said it.
They talk about the taxes that, because of the submissions and recommendations of the general public, we have decided to phase in over a two-year period to soften the blow to Yukoners. They talk about it having a devastating effect, because we are extracting the dollars out of the economy of the Yukon. If we were to have laid off 200 civil servants, it would have extracted many dollars out of the economy of the Yukon, because of the government being the largest employer in the territory.
We had to find that balance and I believe we did that. Certainly we are trying to come in with a balanced budget. We are trying to be realistic in the main estimates so that we will not have to come back with humungous supplementaries. We want to be able to get more realistic in the main estimates.
The Member for Riverside says he cannot support the tax bill because we are bringing the tax bill in prior to the budget - what he calls an unprecedented move. We checked other jurisdictions across Canada to see if this was an unprecedented move; clearly, it is not an unprecedented move. Newfoundland has no set pattern. In New Brunswick - and these concern the budgets for this year only; we know in other jurisdictions, in other years, tax bills have been brought in ahead of time in many jurisdictions - it was part of the departmental budget debate and debated simultaneously. In Prince Edward Island, they are debated simultaneously but tax bills are not passed until the budget is passed. British Columbia normally puts tax bills first but the strategy for this year has not been set yet. The Northwest Territories debates them simultaneously. Manitoba debates them simultaneously; after the budget, the tax bills themselves are passed. In Nova Scotia there is no set pattern. This is not unprecedented, as the Member for Riverside said.
We would have preferred to debate the budget first but, as everyone is aware - I think we are going into our ninth week now and we have not even completed the supplementary budget - and we have to get this tax bill through.
As I said, we brought in the tax bill so that we could try to have a balanced budget. Certainly, I am not going to stand here today and say we are absolutely going to have a balanced budget. I believe we will be close. We will be much closer than the Members opposite were when they tabled their budgets.
I remember when the Members opposite said they would prefer to see us cut expenses. We cut expenses, too, but we cannot do it overnight. We have said that we are going to continue to cut government expenses. We do not want to do it all at once and have a negative impact on the economy at a time when there is enough negativism already. The Members opposite keep forecasting doom and gloom. We want to do it in a rational and reasonable manner. We will continue on that course. We expect that government will be much smaller one year from now.
The Member for McIntyre-Takhini made much ado about the largest budget ever tabled in the Yukon and all the spending increases. The fact remains that eight out of 16 departments came in with a smaller O&M.
Some Hon. Member: (Inaudible)
Hon. Mr. Ostashek: The Member says from the supplementaries. They are still trying to blame us for their supplementaries. We came in with a lower O&M in eight departments.
The reason the budget is up is - and I will say it again - because of a massive infusion of federal government money and American government money into capital projects in the Yukon. The extended care facility is an example. They want us to write it off in our year, not in their year. We have to staff that facility yet. We still have to buy some supplies for it, such as furniture and other items. That is where the increases came in, as anyone who looks at the budget can easily see. There is a concerted effort on this side of the House to control the cost of government. We are going to continue to work in that direction.
The Member for Riverdale South made much of the statements from Hansard. She went on to read some of them. I find that quite interesting, because I am sure that the Leader of the Official Opposition sometimes wishes that no one would read Hansard when he stands up in the House now and demands that the government give Curragh Inc. $34 million. One year ago, he stood here and just as adamantly said that the territorial government could not afford a $34 million loan guarantee to Curragh. I am sure he hopes that people will not read Hansard or pay any attention to it. That is the reality of things.
The Member for Riverdale South says that she did not flip-flop yet; however, I have an excerpt from a speech in Hansard, dated April 27, 1992, at page 77, that the Member for Riverdale South gave saying, It is fine to give a big emotional speech about jobs, the town, mine shutdowns and the costs involved to get it running again. None of us disagree with that emotional argument that has been presented, but we have to look at whether or not it makes good business sense, as well. If the banks are not prepared to support this initiative, I have to ask why the government is so eager to do it. That was her statement in this House one year ago.
I believe both the Member for Riverdale South and the Member for Riverside talked about not having a clear picture of government finances. I believe our forecast is fairly accurate and I would love to be able to table more information in the House, and I will do so as soon as it is reasonably possible.
What we have right now is raw information; it is not tallied yet. The present schedule for year-end is as follows: accruals and adjustments are now being completed and a new computer print-out incorporating this data should be available around May 13. Subsequent to that, formal statements will be prepared and the final grant calculations and sundry and other adjustments that depend upon year-end actuals will be made. These draft statements will be completed no later than June 9.
If we were to table figures that do not have all of the adjustments - making the deficit look worse than it is - we would be getting a terrible barrage from the other side of the House.
As I said, the figures for leave accruals are out by $3.2 million and there is $11.2 million for the extended care facility; somewhere between $7 million and $11 million has to be accounted for somewhere in that year. There is approximately $500,000 in MLA pensions. Those are all figures that are not calculated in yet. I think in fairness to this House and to the people of the Yukon that we should have something that is close to what the Auditor General is going to accept before we begin tabling those figures in the House.
The Member for Riverdale South said we are giving a different story now than we gave at the door during the election campaign, and she is right. We did not know that the previous administration had squandered all the money. They did not have the political courage to table a budget when a budget was due. They wanted to fool the public and get another four-year mandate. I do not know what they would have done to deal with the situation. Deficit finance? Is that what the Members opposite would have done? I suspect so.
Certainly we have a different story from when we were at the doors, because we did not have those figures. The Members opposite did, but they were not sharing them with the public.
The Member for Riverdale South goes on to say that when these Members were on that side of the House, and those Members were on this side of the House, and the same debate took place over the increase in taxes, and how condemning these Members were to the other Members, and on and on. However, I believe that, when those Members took over from the former Conservative government, there was something like a $40-million surplus, plus an agreement for a very lucrative formula financing to put infrastructure in place in the Yukon, so the Yukon would not be so dependent on the federal government, and they failed miserably.
The Member for Riverdale South says we have not consulted with the Chamber of Commerce. I disagree. We have had several meetings with the Chambers of Commerce, both the Whitehorse Chamber of Commerce and the Yukon Chamber of Commerce. For us to not increase the corporate tax rate, when we are increasing the personal tax rate, would have been very irresponsible.
I want to point out again, as I did in my opening remarks on second reading debate, that we are still among the lowest in Canada. The Northwest Territories is lower than we are, but they brought forward a payroll tax that will have a devastating effect on corporations in their jurisdiction.
The fact remains that tax increases are never popular, and I wish we did not have to bring them in. We would not have had to if the Members opposite had not spent all the money. I would have loved to have taken over government with a surplus like they had when they came to power. I can assure you it would not have been wasted on Watson Lake sawmills.
We would not have been giving loans to American oil companies to come in here and compete with our service stations. We had to bring these taxes in. We felt that we had to find that balance between cutting back on services. The Members know full well that we did. We cut grants to almost everybody out there. We cut municipal grants; we cut grants to Yukon College; we cut grants all over the place. To come in to a government that, in one year, has to go from a $58 million deficit to a balanced budget is a tremendous undertaking. It will be a lot closer to being balanced than that budget was, I will tell you that.
When the Members opposite were on this side of the House, their idea of putting the budget together was to throw a dart at the wall, pick the figure up and catch up in the supplementaries. We are going to forecast a $19 million deficit, and let us hope that everything works out. If we are lucky, it might come in at $40 million or $45 million. Well, it did not. It came in at $58 million.
We have raised taxes. We are not proud of it, but we needed to do that to keep people working in the Yukon. We are going to work to put more and more people back to work in the Yukon and not add to the unemployment figures, as the Members opposite would have liked us to do. That is what they are forecasting. Do not raise taxes, lay off 200 civil servants. Where does the money come from? The fact remains that, if we are going to provide services, we need money. That is why the tax increases are here.
Speaker: Are you agreed?
Some Hon. Members: Division.
Speaker: Division has been called. Mr. Clerk, would you kindly poll the House?
Hon. Mr. Ostashek: Agree.
Hon. Mr. Phillips: Agree.
Hon. Mr. Brewster: Agree.
Hon. Mr. Phelps: Agree.
Hon. Mr. Fisher: Agree.
Hon. Mr. Devries: Agree.
Mr. Abel: Agree.
Mr. Millar: Agree.
Mr. Penikett: Disagree.
Mr. McDonald: Disagree.
Ms. Joe: Disagree.
Mr. Joe: Disagree.
Ms. Moorcroft: Disagree.
Mr. Harding: Disagree.
Mr. Cable: Disagree.
Mrs. Firth: Disagree.
Clerk: Mr. Speaker, the results are eight yea, eight nay.
Speakers casting vote
Speaker: Because there is a tie vote, pursuant to Standing Order 4(2) I shall cast the deciding vote. Voting for a bill at second reading provides the House with another opportunity to discuss and decide the question. I therefore vote for the motion and declare the motion for second reading of this bill carried.
Motion for second reading of Bill No. 20 agreed to
Hon. Mr. Phillips: I move the Speaker do now leave the Chair and the House resolve into Committee of the Whole.
Speaker: It has been moved by the Hon. Government House Leader that the Speaker do now leave the Chair and that the House resolve into Committee of the Whole.
Motion agreed to
Speaker leaves the Chair
COMMITTEE OF THE WHOLE
Chair: I will now call Committee of the Whole to order. Is it the wish of Members to take a brief recess at this time?
Some Hon. Members: Agreed.
Chair: We will take a brief recess.
Chair: I will call the Committee of the Whole to order. We are dealing with Bill No. 20.
Bill No. 20 - An Act to Amend the Income Tax Act
Hon. Mr. Ostashek: This bill will increase personal and corporate tax rates. It replaces Bill No. 46, an earlier piece of legislation tabled in this House. As a result of representation received and acted upon by us, the bulk of the rate increases proposed for implementation in January 1, 1993 in Bill No. 46, will now be phased in over a two-year period.
The bill before us now proposes that the personal income tax rate will increase from 45 percent of the basic federal tax to 48 percent on January 1, 1993, and to 50 percent on January 1, 1994. A surcharge of five percent on Yukon income taxes payable in excess of $6,000 will still be implemented, effective January 1, 1993. The general corporate tax rate will rise from 10 percent to 13 percent on January 1, 1993, and a further two percent to 15 percent on January 1, 1994. The small business rate will increase from five percent to six percent as of January 1, 1993, as it did in the previous proposal.
When in full force, these amendments will raise $8.8 million per year - monies that are necessary to avoid layoffs and maintain service levels. An increase in locally generated revenues is also desirable as a means of reducing our relative dependence on federal transfer payments. While these apparent tax increased will inevitably increase the financial burden on individuals and businesses, we feel these increases are not so large as to cause significant dislocation or hardship. In any event, were we not to raise this money in this manner, the dislocation and hardships flowing from layoffs and a reduction of services to the public would be far worse.
As I mentioned in my remarks on second reading, the phase in of these measures will reduce our budgeted 1993-94 revenues by approximately $1.7 million. We will be introducing amendments to the First Appropriation Act, 1993-94 to reduce spending by a similar sum. These amendments will enable us to maintain a balanced budget. If Members have any questions of a general nature about this bill before we get into line-by-line discussion, I will be pleased to try and answer them.
Mr. McDonald: I have a few questions of a technical nature. I believe the positions that we have taken - respecting the necessity of having these taxes now - have been clearly stated on the record and unless others want to reiterate them I will not initiate that discussion. We have indicated our desire not to support this bill and have given the reasons for that.
I have a few questions that I think will be worth pursuing briefly. The first is that the Minister indicated that this measure to phase in the taxes was the result of representations made by various persons. We have not yet been made privy as to who was making the representations and whether or not those persons are satisfied. Can the Minister indicate to us who lobbied the government for phasing in the taxes, and could he tell us if they are now satisfied with the tax bill?
Hon. Mr. Ostashek: As I said in second reading debate, during my closing statements, we met with the chambers of commerce on several occasions, once when the budget was tabled. After that, both chambers requested meetings with us to discuss the tax measures. It was representation from them that if we felt that taxes were necessary it would be better if they were phased in. We also had representation from many people in the general public.
Mr. McDonald: So, the chambers of commerce both took positions with the government that they saw the need for taxes, but they requested that they be phased in over a couple of years. They are now satisfied with the revenue side of the budget. Is that correct?
Hon. Mr. Ostashek: That is not exactly correct. As I said, most of these organizations made several representations to us. Nobody likes tax increases, as I have stated in this House, and they do not like them either but, if there was any way that we could soften them up, they would really appreciate it, if we thought they were really necessary. So, that is what we did to soften them up.
Mr. McDonald: In terms of softening up, did they recommend that taxes be phased in? Was it their recommendation that the government is responding to?
Hon. Mr. Ostashek: As I said, there were many discussions. After taking into consideration everything that we heard, we felt that this would be the route to go.
Mr. McDonald: I appreciate that response, but I just want a specific answer to the question. Did the chambers of commerce, or anyone else outside of the halls of government, recommend that the taxes be phased in?
Hon. Mr. Ostashek: As I said, we discussed these issues with the chambers of commerce and other people in the community. The feeling was that nobody likes new taxes. They would prefer not to pay them at all but if we were of the opinion that we had to have these taxes and if there was anything we could do to soften them, it would be appreciated by those organizations.
Mr. McDonald: I am not going to get a precise answer to this question. I do not think the Minister is going to answer whether or not anyone recommended that taxes be phased in, specifically.
On occasion, though, the business community has expressed some concern about the corporate income tax rate. I believe the business and legal communities have indicated that the effect of the higher corporate tax rate is going to frighten off businesses that park large sums of capital with them as a result of the fact that the corporate tax rate is the lowest in the country, I believe.
Can the Minister indicate whether or not this provision, as he puts it, to soften the impact of the taxes, has any effect on the concerns expressed by the legal community with respect to their concern that tax rates are going up and the possible loss of investment income in the territory?
Hon. Mr. Ostashek: I do not believe that we have had representation by the legal community as a body on this issue. There have been some lawyers in town who have expressed their dissatisfaction with this, mainly because they generate quite a bit of revenue from setting up the corporations that use Yukon as a head office to realize a benefit of the lower tax rate.
I can tell you that this is a major concern of this government. There are indications right now that, while in 1991-92 the preliminary figures were about $4 million in corporate tax, it is forecast for this next year that this could be increased by $20 million.
The Member opposite, as a former Minister of Finance, realizes what that will do to us on the transfer payments, and that could cost us $9 million, if that is the case.
These are things that had to be taken into consideration. We felt that the corporations that are legitimately operating in the Yukon, not just setting up their head office in the Yukon as a tax haven, are not going to like this tax, but we still have a very comparable tax rate to other jurisdictions.
Mr. McDonald: Quite frankly - while I have not discussed this with my caucus - I do feel a lot of sympathy toward the Ministers and Department of Finances concern that the effect of the existing tax rate, increased volumes and the perversity factor could all combine to cause a very serious situation for the territory.
I would like to know - even though I do feel some sympathy for the Ministers predicament - whether or not the Ministers department has taken the trouble to discuss with the representatives of the legal community, who have expressed this concern, what the impact is. I have had conversations with a number of lawyers, and I have explained what this perversity factor is. I am surprised that everyone thinks this is such a new thing in the territory, because I was going through a public battle with a director in the Department of Indian and Northern Affairs on the question of the perversity factor years ago.
Has the Government Leaders department, the Department of Finance, had discussions with the legal community to educate them about the impact of the tax, so that they can understand the larger concerns of the Government of the Yukon?
Hon. Mr. Ostashek: I do not believe the Department of Finance had direct discussions with them, but I do know that I and other Members of my Cabinet have; in fact, as the Member for Riverdale said, there is a meeting tomorrow morning with a couple of the attorneys in town - one of whom is most upset with this. I must say at this point we are not getting a really strong representation from the legal community at large, but there are one or two attorneys in town who are upset by this tax increase. As the Member opposite says, he does have some sympathy for us in the Department of Finance when we are being stared in the face with possibly, if the calculations are right, a $9-million reduction in transfer payments next year. I am sure that, if we were to lose that $9 million out of the economy of the Yukon, it would have an effect on the legal community as well as other people in the territory.
Mr. Penikett: The Government Leader has now talked about a potential loss of $9 million as a result of the perversity element. The Deputy Minister of Finance has conceded on at least two occasions that we were likely to receive between $7 million and $15 million extra under the formula as a result of the population factor. Seven to $15 million is a fairly broad range and I would like to ask, as the ADM of Finance is present, if the department has refined that number more precisely yet, knowing that some of the census data has been more perfectly calculated since that statement was originally made?
Hon. Mr. Ostashek: It has not been refined any finer than that, but I can tell the Member that, as I have mentioned in this House before, there have been negotiations with the federal government and this is one of the issues that has been discussed. Even though we are very, very confident, as the Member opposite I am sure is, of the population figures, we are getting a lot of stonewalling from the federal people on accepting those figures.
Mr. Penikett: Recently, there have been a number of announcements in the national forum about adjustments to under counting by Census Canada, which has been a problem for every jurisdiction in the country, particularly in the hinterland. In fact, I recall seeing in the Globe and Mail recently a story where Census Canada itself had done a new computer model where they had retooled population numbers upwards. I believe there is under counting here, too, but the Deputy Minister of Finance said publicly that the increase for us would be seven to $15 million dollars. I believe, on a previous occasion, the senior fiscal relations officer in Ottawa said the potential for us is - because of the population factor under the new formula, over the life of the formula - an additional $40 million. My only point is that these numbers are of an order of magnitude that they may have an offsetting effect on some of the perversity element.
Let us not leave that point unsaid. I always took the advice from Mr. Hayes on the question of the perversity element. That is, what was wrong was not our tax rates, the problem was that the federal government did not understand the tax burden here. The fact of the matter is that the formula is now sufficiently complex that there are a number of factors to be worked out. It may be, in truth, some years before we know what the final accounting for the past year is, much less the current year. Some of the factors, such as perversity, reduce the amount of money we will get. They punish us for for improving the economy.
Let me make the point that in 1993 we do not have an improving economy. I would be very interested in seeing a calculation from the Minister some time, during the course of this budget debate as to the likely consequences under the formula of the economy going into a tailspin, as it is now, to the point where we have a 17 percent unemployment rate in May. That is another question. If the Minister would take notice of that, I would like to have an answer to that. I think the point is that while we lose millions due to perversity, I think we have every expectation of receiving something in the final accounting on population. The net effect may be that the Yukon government will continue to have the kind of funding from the federal government that it has had in the past. Indeed, under the formula, if our economy stays in the rotten shape that it is in now, the government - not the people - may do very well indeed.
Hon. Mr. Ostashek: I will certainly get that information for the Member opposite during the budget debate. I want to say to the Member opposite that I agree pretty well with everything that he said, except regarding the $40-million figure. I have never heard that figure. I will check into the other issue that he raised and get an answer back to him during the budget debate.
The fact remains that we are just making a calculated guess at the $20-million figure. It could be substantially more, if you listen to some of the rumours on the street. The fact remains that companies across Canada have been using the Yukon as a tax haven because of our very favourable tax rate. It is something that we have to deal with because, as the Member opposite can appreciate, as I am sure his former Minister of Finance does, while this is good for the legal profession and some accounting firms in town, it really does not create that many jobs. I do not know that we get enough benefits to offset what we are going to lose on the perversity factor.
Mr. Penikett: I do not want to prolong this discussion because it is probably best left for another time. The Government Leader has indicated that he does not know where my $40-million estimate may come from. Let me just read from one line in a document provided to our caucus by the Department of Finance. This is from an extremely cerebral chap by the name of Sanderson, who works in the Department of Finance. This is a calculation of the operating grant for 1993-1994, the bottom line of which is an adjustment for census and under count in September 1993. The worst case scenario under that would be that we lose $3,360,000. The main estimates have shown us receiving $5,893,000. The best case scenario in the document from the Department of Finance, shows $20,949,000 - in other words, $21 million - extra in one year.
It is not unreasonable to say, as someone has told me previously, that over the life of the agreement, the order of magnitude of the adjustment could be as high as $40 million, when the department itself is saying that it could be as high as $20 million in one year. I do not want to quibble about that, but I am suggesting that the truth, when we talk about balanced budgets, is that the most important element on the revenue picture is something we cannot calculate with any precision whatsoever.
Hon. Mr. Ostashek: I have no intention of belabouring the point, but I really think that the $20-million figure is for the three years of the agreement, to bring it up to date. I do not believe it is for one year. I think that is what we feel we have coming. It would be the best effort that we could possibly get in the 1993-94 year, if they were to catch it up.
I could be wrong on that, and I will check for the Member, but I believe that the indication I got is that it is to bring it up to the present date. I will leave it at that.
Mr. Penikett: I have never in my life ever criticized a document that came out of the Department of Finance before. If I were talking to a master of public administration class and, for example, I saw this document, I would only say that the document seems to imply that the adjustment in the operating grant is in the current year, not over the life of the agreement. The error may be in my reading, rather than by the author, but that is the impression that is left by this document. That is the only point I would make. I am not arguing it, however.
Hon. Mr. Ostashek: I agree with the Member opposite that, with the figure for 1993-94 at the top, that may be the impression that is left. I truly believe that the money would be coming in the 1993-94 year, but it would be for three years, not one.
Mr. Penikett: Let me try this on the Government Leader. It is late in the day, but would the Government Leader agree that, if he had anything like the $21-million adjustment coming in the 1993-94 year, he would have a surplus at the end of the year?
Hon. Mr. Ostashek: I would very much hope that we could have a figure like that and have a surplus at the end of the year.
Mrs. Firth: I have some questions about the corporate tax increase that the government is proposing here. The Minister of Finance has thrown out a figure of $9 million worth of revenue that we were going to lose. Can he tell me how accurate that figure is, and what it was based on? Can he give us the formula, or how they arrived at that calculation?
Hon. Mr. Ostashek: As the Member opposite knows, we get penalized $1.45 for every $1.00 we take in as taxes. Under the weird perversity factor - which nobody in this Legislature likes or even thinks is fair - if we are going to take in $20 million extra in corporate income tax we will lose $9 million in transfer payments, as we are penalized $1.45 for every $1.00 we take in.
Mrs. Firth: I find it quite puzzling because the issue here, as I see it, is that the government is choosing a short-term policy of killing a source of tax revenue - which is an independent source of tax revenue from corporations - for the purposes of obtaining additional money from Ottawa.
What the Government Leader is saying is that we would rather have the money from Ottawa, which is an artificial, dependent approach to take, as opposed to becoming more independent and benefiting from an independent source of revenue. Is it the Ministers position that he would rather have money from Ottawa than real tax revenues that are paid by corporations?
Hon. Mr. Ostashek: That is not the position at all. First of all, the $20 million is additional to the corporate tax, which was $4 million last year. This comes basically from dummy corporations that are set up in Whitehorse. If we raise our tax rates, we are raising our own revenues. We are raising our own revenues by raising our tax rates. Along with that, the spinoff is that we will not be penalized. We gain in two ways.
We have not gone totally out of the ballpark when you look at the other jurisdictions across Canada. The only place that is lower than us is the Northwest Territories, which has a payroll tax. The payroll tax is very regressive to operating companies. It certainly does not hurt the dummy corporations as their payroll is not in the Northwest Territories. The fact remains that we are raising the bulk of the $20 million in taxes from legitimate corporations operating in the Yukon - the biggest bulk of that is $12 million in taxes that we are raising - or could raise. It could be much more if you listen to the rumours on the street. It could run in the neighbourhood of $20 million, which would be very costly to us in the Yukon.
Mrs. Firth: I am still trying to understand where this government is coming from philosophically. Philosophically, the Minister of Finance has been saying that he wants Yukoners to be less dependent. He wants us to be independent. To have Yukoners independent, they have to increase and generate an independent tax base so that they reduce their dependency on the federal government.
The way I understand it, the Minister of Finance is saying that they do not want to jeopardize the money we get from the federal government. Therefore, what they are prepared to jeopardize is the tax revenue we can raise through independent means.
I would like to ask the Minister of Finance, in his discussions with the federal government regarding what taxes were going to be increased, did the federal government want this government to take this particular initiative? Was it the request that came from the federal government that our corporate rates were too low and we should be increasing them?
Hon. Mr. Ostashek: This administration did not talk to the federal government about raising income taxes or any tax rates. We did that to balance the budget. This just happens to be one of the spinoffs that we will gain by doing that. If we want to be responsible for ourselves, we have to be responsible for raising our own revenues; it is as simple as that.
Mrs. Firth: I wish the Minister of Finance would stop saying that they raised taxes to balance the budget, because it is not true.
The federal government did not ask for this tax increase, and they did not tell the government that they had to implement this increase. Has the Minister of Finance aggressively approached the federal government with respect to this particular initiative and asked if there could be some purpose of reducing the perversity factor so that we could continue to look at Yukoners becoming more independent in raising their own tax revenues? Did the Minister even discuss this with the federal government to see if they could make some arrangements?
Hon. Mr. Ostashek: This is exactly the argument that I have been making with the federal government since I took office. There was a meeting in Whitehorse, I believe on April 20 and 21, on this issue, and there will be another meeting on May 15 - I am not sure whether that meeting will be in Whitehorse or Ottawa - regarding the perversity issue and trying to find some relief from it.
Mrs. Firth: I would like to ask the Minister how much revenue this tax will generate.
Hon. Mr. Ostashek: When the tax is fully in effect, it will be $1.8 million.
Mrs. Firth: That is interesting, because that is just the amount of money that Community and Transportation Services was able to find in their budget for a particular project.
I would like to ask the Government Leader, the Minister of Finance, since he does have a budget in excess of $480 million - and they just happened to find $1.8 million in Community and Transportation Services, and they just happened to find another $1.7 million in general revenues - if he will consider removing this corporate tax, or at least reducing the tax to the one percent suggested by the Whitehorse Chamber of Commerce, until such time as he can discuss with the federal government the problem they have regarding this matter in wanting to achieve their philosophical objectives of becoming more independent and establishing their own tax bases.
Will the Minister of Finance consider putting the tax increase on hold until he can discuss it with the federal government and come up with a firm, conclusive answer, instead of imposing this tax increase immediately, which Yukoners are going to end up having to live with forever?
Hon. Mr. Ostashek: For the Member opposite, I would just like to clarify the previous statement. It will be $1.8 million in the first year and $3 million a year when it is fully implemented at the five percent.
What we have asked for here is not unreasonable. As I said, we have been getting complaints mainly from one or two in the legal community; we have not had a concentrated effort to remove or reduce this. As we have said, this was required and we need it and it would be impossible to remove it at this point.
Mrs. Firth: There has been a representation from the business community, from the Whitehorse Chamber of Commerce, which, as far as I understand, represents the business community. They are making a representation in a letter signed by Don Corothers, the president of the Whitehorse Chamber of Commerce, The members believe it is not the intent of the federal government to penalize the Yukon for raising our own tax revenue and decreasing our dependency on this funding. We believe negotiations could be undertaken that would allow the Yukon to keep the investment income lodged here without penalty and that, by limiting the investment income increase to a single percent point, further investment could be attracted to the Yukon, generating additional tax income at little or no cost. The economic situation in the Yukon warrants your urgent attention.
They are asking for the Minister to address this concern immediately, and I do not think it is fair of the Minister to stand up and say that it is just two lawyers. That is not a fair statement to make at all. This is coming from the Whitehorse Chamber of Commerce. This is a letter that was received by the Hon. John Ostashek, the Hon. Tony Penikett, Mr. Jack Cable, Ms. Bea Firth, Alan Nordling and Mr. Willard Phelps. I think it is a strong representation.
I am also getting a little concerned about the Minister of Finance insisting that the people in the Yukon, particularly the business community and the Chamber of Commerce, agreed with tax increases. Perhaps I will let the Minister respond to this particular issue first before I raise my comments about the other tax increases.
I would like to ask the Minister if he will tell me what consultation he has had with the Whitehorse Chamber of Commerce after receiving this communication from them.
Hon. Mr. Ostashek: I will tell the Member that, during the break, I went up to my office to see if I could find a copy of that letter. For some unknown reason, my office has not received that letter yet. I have a meeting scheduled with some people from the legal community, along with Finance officials, tomorrow to discuss the issue and show them what the ramifications are, and I have not got a copy of that letter as of 15 minutes ago when I was up in my office, trying to find out what happened to it. I checked and I checked, but I have not got it.
The fact remains that the investment income that comes in from corporations is often never earned in the Yukon; it creates no jobs in the Yukon. It is money that comes from outside and is invested in the Yukon to get the benefit of the lower corporate tax rate.
That is the issue here and it is an issue we have to deal with. If the Member opposite is asking if we could delay it, I would suggest to the Member opposite that if we are successful in our negotiations with Ottawa we could reduce it in future years.
Mrs. Firth: If that is the case, why does the Government Leader not just delay it? What is the purpose of putting a tax in, then saying that they might reduce it in a few years? I have never yet seen a government do that.
I am just trying to make a positive, constructive suggestion here. The Chamber of Commerce is asking the Government Leader to take another look at it. I do not know why he has not received the letter, because all the other Members of the Opposition have. I just do not understand it. I am sure that they would not have not delivered one to the Government Leaders office. There must be a problem with the Ministers letters; this is not the first time he has said that he did not get a communication that all the rest of us did. I have to ask about the process in his office for the receiving of letters.
My suggestion would be that the government not proceed with this initiative until they have discussions with the federal government, since it was not the federal governments intention that we proceed in this direction and since this government professes to want Yukoners to be more independent. Do not impose this new tax increase until these issues have been dealt with; do not impose it and then say that perhaps it will be taken away in a year or two. If it is not necessary, we should be looking at not imposing it now.
Hon. Mr. Ostashek: If we thought it was not necessary, we would not have put it in in the first place. If we do not go ahead with this, it is going to cost us $9 million next year that we need desperately to balance our budget. If we pull that $9 million out of the economy of the Yukon, it is going to have a trickle effect throughout the whole community, the legal community as well as everybody else.
Mr. Penikett: I cannot believe I heard the Government Leader right. Is the Government Leader saying that to not tax it would be to pull it out of the economy? He is saying we may have lost it from Ottawa, but the Government Leader is imposing, himself, $9 million in tax increases. That is pulling money out of the economy that could go to creating jobs, in the words of the Leader of the Liberal Party, by keeping the money circulating here and maintaining the peoples purchasing power. The government would be taking that money out of those peoples pockets by taxing it. Frankly, from an economic point of view, it does not make any difference whether the Yukon government or the federal government takes it, because it is taken out of the economy. It is gone.
Hon. Mr. Ostashek: The Member opposite is missing the point. This is money that is invested in the Yukon and does nothing. It does not go around in the Yukon at all. It probably creates a few jobs in the legal and accounting communities, but the money is not being circulated in the economy of the Yukon. That is a concern to us.
Mr. Cable: No, I am not here on behalf of the lawyers. I would like to ask a few questions of the Government Leader. Does he have any objection, in principle, to the Yukon being what they call a tax haven?
Hon. Mr. Ostashek: If it is not costing us, then I have no objection to it, but it is costing us at the present time.
Mr. Cable: Outside of the perversity factor calculations, would it be fair to say that this is probably the easiest of the money that the government receives as tax revenues? There is very little administrative overhead. There are no kids to educate. There are no social costs. There are no inspectors. All we have to do is collect the money.
Hon. Mr. Ostashek: We certainly need the money that we are losing to do all the things the Member opposite has just raised.
Mr. Cable: My understanding, and correct me if I am wrong, is that the taxes from these tax haven corporations are approximately $10 million per annum. Is that accurate or inaccurate? If it is inaccurate, let me know.
Hon. Mr. Ostashek: That figure has to be inaccurate, because the last figure that we have is $4 million raised for corporate tax. We have been advised that that could increase by an additional $20 million for the corporations that have their head offices in the Yukon but are not doing business in the Yukon.
Mr. Cable: I am sorry, Mr. Chairman, was that $20 million that we will receive in tax revenues? During what period?
Hon. Mr. Ostashek: Within the next year or two is the information that we have.
Mr. Cable: But for the perversity factor, would the government be supportive of attracting these tax haven corporations?
Hon. Mr. Ostashek: This government believes that the tax system should be fair and equitable for everybody. We could go to everyone saying, could we lower it, could we put it off? Sure, but there is a cost to all of that. If you are going to do that for the corporations and raise the personal tax, where does that leave you? That is an inequitable taxation system. We feel that we have tried to keep the taxation system as fair as possible and to have as few increases as possible.
Mr. Cable: I guess I was not phrasing the question properly. What I was asking the Government Leader is, but for the perversity factor, would the government be supportive of attracting these investment corporations?
Hon. Mr. Ostashek: I believe that I answered that with the first question. It deals not only with corporations but, with any volume of increase in taxes that we have a big volume increase, it costs us money under that stupid perversity factor that we have now.
Mr. Cable: It appears that there are very substantial tax revenues at stake here and, but for the perversity factor, we will be losing these revenues, if in fact taxes are increased. Is the Government Leader of the opinion that, if these corporations leave, they will come back again if the taxes go down? What will happen to these tax haven corporations that have come here, provided the government with essentially administratively free tax money, and then have been put in the position of having to move?
Hon. Mr. Ostashek: As I said in my earlier comments, we are still the second lowest corporate tax regime in Canada. The only place lower than the Yukon is the Northwest Territories, which has a payroll tax.
If some were to leave and we ended up in a year or two - with taxes being increased in other jurisdictions - becoming the lowest again, I am sure they would return. I do not expect that we are going to lose that many when we are still the second lowest in Canada.
Mr. Cable: My understanding - and I believe the Chamber of Commerce is coming from this position - is that the maintenance of these corporations in the Yukon is threatened by this tax. Perhaps it would be useful if the Government Leader got the Chamber of Commerce letter so that we could work their reasoning before the debate is finished.
Hon. Mr. Ostashek: I have just had the letter delivered to me if the Member would like to continue.
Mr. Cable: I will walk through the letter if I could. One of the points they raised is the $10 million figure.
I gather the information put forward a few moments ago from Mr. Hayes is that the number at the present time is unrealistically high; is there some dispute on that number?
Hon. Mr. Ostashek: The only comment I can make on that is that it is unrealistically high compared to the last figures that we have in front of us.
Mr. Cable: Can the Government Leader table a document that spells these figures out?
Hon. Mr. Ostashek: I have a document here and I will provide the Member with a clean, unmarked copy.
On the document that I have here it says that the last figure that we have is $4,125,000 paid in corporate income tax.
Mr. Cable: I do not want to belabour this point, but it appears to me that what is taking place is a short-term correction that hinges around the perversity factor and puts in jeopardy this very substantial investment in the Yukon and the potentially very substantial tax revenues.
I would ask the Government Leader whether or not he is prepared to reconsider his position on jeopardizing these potential tax revenues?
Hon. Mr. Ostashek: I have to reiterate that I do not believe that we are jeopardizing our potential tax revenues with this measure.
Mrs. Firth: I hope the document that the Minister is going to give us is not like the one we got from Economic Development telling us that the Grum was not a viable venture. I am concerned that we are going to get similar information because certainly the information that I have received is different from what the government is presenting.
The information I have been given is that, since 1989, an increasing number of corporations have located in the Yukon and thereby have been in a position to benefit from the lower taxation rates in respect to corporate investment income. The informal enquiries with banks indicate that there is an excess of $1 billion of investment assets owned by companies located in the Yukon. It can be, and has been, conservatively estimated that there will be at least $10 million of tax revenue generated in the fiscal period ending 1992-93, currently payable to the Yukon Territory.
The information I have been given is that all indicators were based on tax seminars and a growing trend among professional advisors to consider the Yukon, given its business environment. I will be looking forward to getting that information.
I gather from what the Government Leader is saying is that he is not prepared to be flexible at all on this issue. Is that his bottom line? Could he tell us what his bottom line position is? Is he prepared to look at changing it? Is it staying exactly the same and is he looking at changing it in the years to come?
Hon. Mr. Ostashek: I cannot speculate what will happen in years to come. I would hope that somewhere down the road all taxes could be decreased. I would hope that would be the case. That being said, in the time period we are dealing with now and the financial constraints that we are in, we have looked at this and we have phased in personal income tax over a two-year period. I think that is about as far as we can go with it at this point.
Chair: Is there any further general debate?
On Clause 1
Chair: Is clause one carried?
Some Hon. Members: Disagree.
Some Hon. Members: Division.
Chair: Division has been called.
All those in favour please rise.
Chair: All those opposed, please rise.
Chairs casting vote
Chair: The results are eight yeas and eight nays.
Beauchesne states that, in the case of an equality of votes, the Chair shall give the casting vote. In general, the principle to be applied to bills is that the bill should be left in its existing form. It is therefore my duty to vote for the clause, and I declare it carried.
Clause 1 agreed to
On Clause 2
Mr. Harding: That was an interesting event that just took place. I am certainly not surprised, although a little disappointed.
The thing I would like to say is that I am absolutely flabbergasted by the explanations for these tax increases that have come from the Government Leader. They say that the raising of corporate taxes will correct the wrongs of the previous administration, because we will now be in receipt of more money for the government from Ottawa, so the self-professed beacons of self-sufficiency are in fact making decisions for this territory on the basis of whether or not we are going to become more dependent on Ottawa. The new budget puts us firmly in that direction and does nothing of the sort that they talked of in the election campaign.
The Government Leader also said that he raised taxes to balance the budget, and there were no discussions with the people in Ottawa regarding this and the bureaucracies. That is incredible because, on March 23, 1993, in Hansard on page 220, the Government Leader referenced the previous NDP administration and said, They were quite prepared to continue to take the handout from Ottawa, even after being warned in 1987, and again in 1988, that if they did not pull up their socks and raise some money under their taxation system that they were going to be penalized. That penalty has cost Yukoners $120 million in this five-year period.
So, the Government Leaders idea of self-sufficiency is doing things to the detriment of Yukoners, so that the government itself indeed raises more money from Ottawa.
In questions regarding this statement that absolutely flabbergasted us, in Question Period on March 24, 1993, page 236 of Hansard, the Leader of the Official Opposition quoted the Government Leader on the day previous and he said, and I quote, quoting the Government Leader, Even after being warned in 1987, and again in 1988, that if they did not pull up their socks and raise some money under their taxation system, they were going to be penalized. That is what the Government Leader said.
The Leader of the Official Opposition said, Who said that? It certainly was not the Yukon Party, who opposed every fee increase and every tax increase that was contemplated under the previous government. The Hon. Government Leader stood up and said, I can just tell the Member opposite that it was in discussions with the bureaucracy in Ottawa. I would like the Government Leader to explain that amazing contradiction.
Hon. Mr. Ostashek: The fact remains that if the previous administration would have used the money to provide infrastructure for the Yukon so that we could be more self-sufficient, we would not be in the situation we are in today. Certainly, we want to get a hold of every dollar we can now, so that we can invest it in infrastructure in the Yukon, so that Yukoners can be more self-sufficient.
Mr. Harding: I believe that the people of the Yukon are straight shooters. They know what is going on in this Legislature. I will say this once more: the fact remains that he stood up in this Legislature and said he raised taxes to balance the budget. Now he says that it did not come out of discussions with Ottawa. On March 24, 1993, on page 236 in Hansard, in criticizing the previous administration for not raising taxes - something that he said, during the election, was obscene - he said I can just tell the Member opposite that it was in discussions with the bureaucracy in Ottawa.
I will let the people of the Yukon decide about who is telling the truth.
Mrs. Firth: I have just been sitting here thinking about a theory that the Government Leader and Minister of Finance has given us today.
The Minister of Finance stood in this Legislature and said, if we raise $20 million of our own independent revenue in the form of taxation, we would lose $9 million from the federal government in the form of transfer payments.
In his budget, where he has increased Yukoners taxes and is raising $8.8 million of revenue - we are raising our own revenue - does that mean that the federal government is penalizing us by $4 million, because we are raising that much money in our own revenue? If the Ministers theory applies, then we should be losing money, also.
Chair: Order please. I believe the Members are on general debate, which has now concluded. Is there any debate about the specifics of clause 2?
Mr. Penikett: I do understand the point being made by the Member for Riverdale South about the difference between tax volumes and tax rates, and about how an increase in volumes can cost us, and an increase in rates does not affect benefits. However, I want to pick up on the point made by the Government Leader on this clause.
A moment ago, with respect to infrastructure, I was asking the Minister if he can tell this Committee of any jurisdiction in Canada, in the last five years, that spent a larger percentage of its budget on infrastructure than did the previous NDP government?
Can the Government Leader tell the House that?
Hon. Mr. Ostashek: I think that we are getting away from line-by-line debate, but I will answer that question and hope the debate will not go any further on general debate.
We do not consider putting up fabulous buildings as infrastructure.
Mr. Penikett: Clearly, based on the document tabled, building ridiculous pipelines from Watson Lake to Whitehorse, or railways to Carmacks - which no one in their right mind and no one in the private sector would ever finance in this century - is considered a sensible infrastructure proposal by the Government Leader. Is that it?
I am out of order getting into this point, but I suppose the Government Leader did provoke it. I am being told that I am out of order by the Government House Leader. Can I ask the Government Leader this: when the federal government told him that he had to raise taxes, did the federal government take the view that we should have raised taxes back in 1987? Is that what he believes the federal governments view was?
Hon. Mr. Ostashek: The federal government did not tell us that we had to raise taxes.
Mr. Penikett: Why did the Government Leader say in this House that we should have raised taxes as far back as 1987, but he told people during the election campaign that it would be obscene to raise taxes? Why did he say that?
Hon. Mr. Ostashek: I think the Members opposite had plenty of time to get to all these issues during general debate. We are on line by line now.
Mr. Penikett: I take it that the Government Leader has no answer to that question. Perhaps he could explain this: since, in 1989, the then-Minister of Finance, Mr. McDonald, received a letter from the federal Minister of Finance, complimenting the NDP government on its fiscal responsibility, and not at all indicating that we should raise taxes, why does the Government Leader believe that we should have raised taxes back in 1987?
Hon. Mr. Ostashek: I have not seen a copy of that letter, and I will say again that we had to raise taxes so that we could balance a budget.
Mr. Penikett: Would the Government Leader be interested in seeing a copy of that letter from Finance Minister Wilson, complimenting the NDP government on its fiscal responsibility? The letter was tabled in this House.
Hon. Mr. Ostashek: I would like to ask the Member opposite if he would be willing to go into line by line and stop filibustering, as he has done for the last nine weeks.
Mr. Penikett: The only filibustering we have seen in this House for the last nine weeks was that on Wednesday afternoons when the Members opposite refused to let important questions, such as whether we should assist Faro or Grum stripping or take any initiative to show economic leadership, come to a vote. The Members opposite filibustered to prevent that from happening. Otherwise, given the complete lack of any policy information from the Ministers opposite, it is amazing that we have made as much progress on this budget as we have.
Ms. Joe: I have not had a chance to speak on this bill, but I have been observing. The Government Leader says that he is introducing this bill because he wants to balance his budget. He also stands in this House and says that, according to a document that was mentioned by the Member for Whitehorse West, it was possible that we could end up with a surplus.
The Minister of Community and Transportation Services has said publicly and in this House that he can find hundreds of thousands of dollars in his department that could lapse.
I get the impression that we are standing here, wasting our time on a bill that means absolutely nothing. They have sat there and contradicted almost everything they have said. I find that we are here dealing with something that is not absolutely necessary at all.
The Government Leader talks about presenting something that is fair to everyone. I think the fair thing to do is to kill this bill, because it is not necessary.
It is not necessary. He has already indicated that he has tons of lapsed money in all the departments and that this bill is absolutely necessary. It is not, and I think that Yukoners should know that.
We are dealing with clause 2 and the question I have for the Minister is in regard to the consultation he did in changing the budget that he presented in April. He has come back here with a budget that he tells us was based on information he received from the chambers of commerce, and based on that he has brought this bill in to the House. I really want to know if there is any other group of people out there with whom he might have talked who might have given him some information that might have changed his mind about introducing the bill at all?
Hon. Mr. Ostashek: No, there was no one who could make us change our minds on the fact that we needed the taxes. I think we have gone over this and explained why we felt we needed these tax increases.
I just want to say for record again, one more time, that lapsed funds are not something new in this or any other Legislature; it happens every year.
We intend to come in with as close to a balanced budget as we possibly can. Even if we were to have a bit of a small surplus, we are still a long way from building up enough of a surplus so that we do not have to pay for banking fees - something that has never has happened before in the history of the Yukon. Now we have to pay about $400,000 this year for banking services because we cannot maintain a healthy enough bank balance to cover those charges.
Chair: Order please. I have asked the Members to get to clause 2. Is there any debate on clause 2?
Mr. Penikett: I will give notice to the Government Leader and he can come back to it. I do not know what bearing it has on corporate tax rates - but did the Government Leader just tell us now that never before has the Government of Yukon ever paid banking fees in the history of the Yukon?
I would be almost certain that he is wrong about that. He may be talking about the last few years, but the Yukon government has certainly paid banking service charges in the past.
Hon. Mr. Ostashek: As the Member opposite is fully aware - he is playing with words again - we always pay banking charges, but we do it through compensating balances.
I will bring a written response back to the Member if it has ever happened before. To my knowledge and the best information that I have received, it has not happened before.
Ms. Moorcroft: I want to make a few brief remarks about this bill in Committee. I have talked with many of my constituents about the tax measure-
Chair: Order please. We are dealing with clause 2 and I would ask Members to stick to clause 2. Is there debate on clause 2?
Some Hon. Member: Yes.
Chair: I want the debate to be specific to clause 2.
Ms. Moorcroft: I have talked with many of my constituents about the tax measures associated with this budget and they have urged me not to support these personal income tax increases because they are unfair, unnecessary and inflationary.
Our economy does not need a tax increase at this time. People are hurting and we have seen the unemployment rate in the Yukon rise every single month since this government took office. The Yukon unemployment rate is now 16.4 percent, up from 8.1 percent when the government took office.
Small businesses are thinking of or already starting to lay off workers and they are facing increased taxes, too.
When you add the personal income tax increases in this clause, our shrinking economy and the fact that electrical rates are going up, municipal taxes are going up and federal taxes have taken a bigger bite out of peoples pocketbooks every year, it all adds up to a serious situation.
The government had a choice about this budget. It promised to cut costs, but instead we have the biggest budget and the biggest tax hike in the history of the Yukon, something the Government Leader sounded very proud of today in Question Period. It is an outright betrayal of what the Yukon Party promised during their election campaign.
The average person, and the average family in my riding of Mount Lorne, and in every other riding in this territory, are going to be hurt by these tax increases. That is why they must be opposed and that is why I am voting against them.
Chair: Is there any further debate on Clause 2?
Does Clause 2 carry?
Some Hon. Members: Disagree.
Some Hon. Members: Agree.
Chair: I think the yeas have it. I declare Clause 2 carried.
Clause 2 agreed to
On Clause 3
Mr. McDonald: I have a question about Clause 3. The government has indicated that the tax payable by corporations, on the basis of increased volume, is going to cost the Yukon government with its perversity factor. Has the government given thought to having a variable tax rate, or one for small businesses and one for the larger corporations, who typically park money in the territory? If the Minister could think about that over the break, as I realize that it is 5:30 p.m., I would like to have a serious discussion about it.
Chair: The time being 5:30 p.m., Committee of the Whole will recess until 7:30 p.m.
Chair: I will call Committee of the Whole to order. We will continue with clause-by-clause debate on Bill No. 20. We are on clause 3.
Hon. Mr. Ostashek: When we recessed for supper, the Member for McIntyre-Takhini was asking me a question, and I believe the question was to the effect of whether or not we could split the corporate tax between operating corporations and those passably investing.
I will say that we tried to address this issue but my Finance officials tell me that Ottawa would not have any part of a scheme to split the corporate tax.
If we find that this tax is going to be hardship to operating corporations in the Yukon, there may be some way of providing them with a rebate for creating jobs in the Yukon; we do have that ability, but we cannot do it through the income tax system. Corporations will have to use the two rates that we have: the small business rate and the corporate rate.
We were involved in discussion about the perversity factor this afternoon. The Finance people have drawn up an example for me that may help to explain to the Members opposite how that perversity factor works. I would like to walk the Members through this and I hope that this will give them a better understanding of what we are facing and why a low corporate tax rate is such a serious matter.
If we look at the figure for year 1 with a gross expenditure base of $300 million; add $30 million for income tax and $40 million for other taxes, totalling $70 million; and factor in the perversity factor at $31.5 million. The total then is $101.5 million. Deduct the $101.5 million from $300 million and the balance remaining as a transfer payment is $198.5 million.
To calculate the total revenue that will flow into the Yukon you add the $30 million from income tax, $40 million from other taxes and $198.5 million for the transfer payment, which totals $268.5 million.
Now, if we go to year 2 and use the same numbers, and suppose all taxes paid, et cetera, remain the same except that five different investment corporations registered in the Yukon paid an additional $20 million in Yukon income tax on investment income earned principally outside the Yukon, the situation would be as follows: we have the gross expenditure base $300 million; the income tax now goes to $50 million; other taxes remain at $40 million, for a total of $90 million. We factor in the perversity factor of $40.5 million, for a total of $130.5 million. We deduct that from the base and get a transfer payment of $169.5 million. Add in our income tax and other taxes of $90 billion and it works out to $259.5 million. As can be seen, that extra $20 million cost us $9.5 million in revenue.
I do not believe that Yukoners can subsidize anybody to that extent. This money we take in would not even create jobs in the Yukon. This is basically investment income and it is not creating a lot of jobs in the Yukon. Now, if it was an active corporation in the Yukon that was creating jobs in the Yukon and had a payroll in the Yukon and everything else, it would be a totally different situation. But that is the reason we have to address the issue - the more volume we get in taxes, the less money we have in total revenues for the Yukon.
Mr. McDonald: I understand the handout and I understood that this is what the Minister was trying to explain this afternoon. I would like to return to the question of different tax rates for corporations that do not operate actively in the Yukon - those corporations that simply park money here - and those that actually do business here and have employees.
Did the government exhaust all possibilities when it came to devising a tax rate, or even a new tax structure, for those companies that undertake no activities in the territory? Did they investigate the possibility of a new tax structure for corporations or for employers that have very large work forces, such as those that have populations larger than Northwestel? Have they considered some of those options?
Hon. Mr. Ostashek: We considered those options. The only way we could accomplish them is if we collected our own territorial income taxes. It would incur a huge cost to administer this. It is not possible to do it through the federal system. That is why I said it is possible that we may look at some other form of rebate if we see that it is going to become a hardship for active companies in the Yukon. Maybe we will be able to give them a rebate of some sort, depending on the economic activity that they create in the Yukon - that is not out of the question.
At this point it would take a huge tax administration bureaucracy in the Yukon to collect it and put those things in place.
Mr. McDonald: I am familiar with that problem. Is the Minister saying that Revenue Canada has assessed the options that the Department of Finance has given, including those options that I suggested and has rejected them outright?
Hon. Mr. Ostashek: Yes, my understanding, on the inquiry made by my officials, is that there is just not enough flexibility in the federal system to accomplish that.
Mr. McDonald: I know that the federal government does collect a lot of the income tax in the country, and I do know that other jurisdictions have attempted to institute new taxes, one tax being, for example, the large employer tax. In one case - I think it was Newfoundland, but I cannot remember - the government did institute a large employer tax, which effectively captured the very largest employers. It brought to mind the possibility that, for those employers who were, say, larger than Curragh or Northwestel, the government could very simply institute a tax on those. Is that option available to the government?
Hon. Mr. Ostashek: Perhaps, in that kind of an instance, the Member would be talking about either a payroll tax or a capital tax. That would be the way in which that would have to be addressed.
Mr. McDonald: It has come to mind in the past that if there is such a fixation by the federal bureaucracy on the fact that there are certain taxes we do not institute here, but which are common elsewhere, that we apply those taxes, or go through the motions of instituting a particular tax that Revenue Canada and the provinces are used to raising and collecting.
If one is trying to go through the motions of demonstrating to federal authorities that one is interested in raising rates and new taxes, then I understood there would be ways - and, certainly, some of the other governments have tried ways - to, as I understand it, raise tax rates without having a significant impact on the domestic population. I am wondering to what extent there is flexibility there.
Hon. Mr. Ostashek: I can appreciate the Member opposites concern, because it was a concern of mine, and it was one I asked my departmental officials to investigate. Apparently, there is no flexibility or area to manoeuver in under the federal taxation system.
We have not pursued it at this point but, as I say, it is something on which I am going to keep my options open and explore to see if we cannot do something to encourage large corporations to invest in and operate in the Yukon. If there is some kind of a tax benefit we can give them back for being here, that is a real incentive to get people to invest in this country and to provide jobs in the Yukon.
Mr. McDonald: I would like to first give the Minister notice that I would like to pursue this next year after the next round of negotiations, which are after the third year of the existing formula agreement. The lack of flexibility on the collection side - thanks to fairly strict procedures for Revenue Canada - means that we are not permitted to be innovative in our tax structure to help encourage economic activity. At the same time, as the Minister characterized it, we have got this stupid perversity factor, which does everything in its power to provide for a disincentive to any kind of economy activity whatsoever. The irony of this perversity is that the government would be enormously wealthy if there was no economic activity and nobody paid taxes. We would have all kinds of services. We would be living off the fat of the Canadian landscape with no economic activity, but we would have enormous amounts of money. It just does not make any sense at all.
If we do not have flexibility on the collection side, so that we cannot be innovative, I really do not believe - and this is something that brings us back to the principle of the bill in some respects - that the answer is to succumb to federal authorities, particularly prior to this election. I would hope that whatever happens, irrespective of this measure, which appears will pass in the Legislature, there will be efforts made, not only to reverse the perversity factor, but to restructure the tax structure in this territory - if the perversity factor can be purged from the formula agreement - but we should restructure the tax structure so that we can avoid some of the problems that we are now facing and that this bill represents.
Hon. Mr. Ostashek: I would comment to the Member opposite that I share the same views on the perversity factor and the disincentives to us trying to pay our own way and raise monies. I can assure the Member opposite that I will be doing everything within my power in all our discussions and negotiations with the federal government to try to come to some quick and reasonable solutions to the problems.
Mr. Harding: I want to make a few comments regarding this measure. I find the whole philosophy of the government probably the most confusing thing here. I do understand it. They want to put the government in the best revenue position. Unfortunately, as a result of the way this is set up, the government is now saying that, as a result of income tax taken in as revenue from corporations outside the Yukon, which is the main problem, it has a deterrent effect on the total revenues available to the territory to run the government.
While I can appreciate it, it is somewhat confusing hearing it from the Members opposite because it is money coming from a corporation rather than from the federal government. I guess the main inspiration for the change is that it decreases the total amount, even though a large proportion of it comes from the other corporations through the income tax versus the overall effect of the federal government contributing a lesser amount.
Having said that, I do understand the feelings of the Members opposite. I guess my major concern is that it paints everyone with one brush. The Minister of Finance has said that it was a concern of his, as well. I have a real concern about it and would make the same representation. I think it is important that this be looked at and dealt with. It hurts others when it is intended to go to a specific target group that is taking advantage of what we have here in the Yukon in the way of corporate tax rates.
I would just make the representation to the Government Leader that everything is done regarding this issue to prevent painting everyone with one brush. Also, I have some concerns about whether or not it was the correct way to go about it.
Mr. Cable: Maybe I could just work through these numbers here - I was just playing with some numbers and came up with a kind of loopy result. Looking at the first page, if the income tax is taken down to zero, we get a number that comes out at the bottom of $282 million - the total revenue inflow. I wonder if the Minister could explain that.
Hon. Mr. Ostashek: That is exactly why we call it the perversity factor, because if the income tax were to drop to zero, we would stand to gain $1.45 for every $1.00 we did not collect. That again is because of the way it is set up - they base it on the national average, which I think is totally unfair. It is not the amount raised - in fact, the more one raises, the more it costs because it is not up to what they perceive to be the national average.
Mr. Cable: Assuming that we have to live with this agreement, why would we bother collecting any taxes?
Hon. Mr. Ostashek: That is a very valid question. It is a question I am sure the Members opposite addressed when they were in power. There are even people within the federal system now who are agreeing that the perversity factor is unfair yet they are very hesitant to try to do anything about it until the next set of negotiations. That has been the argument I have had with the federal government since taking office - to try and get some relief from that perversity factor now, not another two years down the road.
Mr. Cable: Are we saying then that, of these tax increases, all we are getting is 55 cents on the dollar, or less than that?
Hon. Mr. Ostashek: No. It is costing us 45 cents for every dollar we take in.
Chair: Is there any further debate on clause 3?
Clause 3 agreed to
On Clause 4
Clause 4 agreed to
On Clause 5
Clause 5 agreed to
On Clause 6
Clause 6 agreed to
On Clause 7
Clause 7 agreed to
On Clause 8
Clause 8 agreed to
On Clause 9
Clause 9 agreed to
On Clause 10
Clause 10 agreed to
Title agreed to
Hon. Mr. Ostashek: Mr. Chair, I move that you report Bill No. 20, entitled An Act to Amend the Income Tax Act, out of Committee without amendment.
Motion agreed to
Chair: Committee will recess for 10 minutes at this time.
Chair: I will now call Committee of the Whole to order. We are dealing with Bill No. 6, First Appropriation Act, 1993-94.
Bill No. 6 -First Appropriation Act, 1993-94
Chair: Is there any general debate?
Hon. Mr. Ostashek: The main estimates for 1993-94 total some $482.5 million in departmental expenditures. While this is an apparent six-percent increase over the forecast expenditures for 1992-93, there are some matters in relation to this increase that should be brought to Members attention.
Given the fiscal situation this government is facing, it was clearly impossible to continue the spending patterns of the past. We faced a difficult task in arriving at these main estimates. Something had to be cut but, at the same time, inherited expenditure commitments had to be met. The bulk of these inherited commitments were for operation and maintenance expenditures.
We were also aware of the fact that neither the Yukon public nor our government wanted to see massive layoffs in the public service and the personal hardship and social dislocation that such layoffs would entail.
To meet these apparent contradictions - that is, to cut spending, meet commitments made by the previous government and, yet, at the same time, avoid large layoffs - required a delicate balancing act. As I have already mentioned, the bulk of our inherited commitments were for operation and maintenance purposes. This also happens to be the portion of the budget that employs the majority of our public servants.
Operation and maintenance expenditures are also the area through which the bulk of the government contact and service to the public occurs. It is the operation and maintenance expenditures that maintain our highways, provide policing services, pay for the ongoing cost of our school and medical care systems, and provide assistance to our communities.
For all of these reasons, we decided to maintain most operation and maintenance programs but with expenditure increases only where absolutely essential or where an inherited commitment to increase spending could not be avoided. This meant that discretionary capital spending had to be reduced. The results of these trade-offs can be seen in the estimates we have tabled in this House. The operation and maintenance expenditures have gone up by roughly $19 million, a six-percent increase. Gross capital expenditures have also increased, but the net capital expenditure has been reduced by some 41 percent.
I will speak to this shortly but, before that, I would like to make some comments on the increases in our O&M costs.
Some $3 million of increases is for the operation of the new continuing care facility. These monies have not, of course, been included in previous budgets.
In the past years, the Government of the Yukon has not had to pay the full cost of operating the Whitehorse General Hospital. Now that the facility has been transferred to the Yukon, this full cost will have to be borne by our government. This additional cost, and other increases in health care expenditures, including community and extended health, amounts to some $13 million. While our expenses increase with the hospital transfer, our grant from Canada also increases, so there is no net additional cost to us for hospital operations.
The main estimates contain over $2.5 million in commitments under the land claim for the training trust and the fish and wildlife enhancement trust. With the ratification of the claim by this House, it is now time to recognize these commitments in our budgets.
Approximately $700,000 is included in the estimates for the operational costs for the new Teslin correctional facility.
In addition to the detailed sums that I have just mentioned, the budget contains money for banking services and interest on borrowed money - items we have never had to previously budget, as well as for workers compensation premiums, which also previously have not been included in the governments budget.
There are also additional monies included in this budget for social services. It is no secret to anyone in this House that our social assistance expenditures have ballooned over the last several years and this has required very large supplementaries.
We have tried to budget a realistic sum, rather than wait for supplementaries. But this, of course, results in inflated main estimates, as compared to the previous estimates.
In a light vein, we have tried to do away with some $1.00 votes that appeared in the previous years mains and to replace those with an estimate of an anticipated cost. Examples of these are judicial recruitment, litigation costs and the costs of outside counsel. This change will make the main estimates a more accurate reflection of the costs of operating the government, but it does result in these mains appearing artificially higher than the previous main estimates.
All of these factors contribute to the increase in the 1993-1994 main estimates, as compared to the previous years main estimates and/or the forecast of the 1992-1993 expenditures.
The increase would have been much larger had it not been for the numerous actions that we have taken to reduce unnecessary expenses. Every department has had to cut, to identify efficiencies, forego discretionary spending, and our Ministers will be prepared to speak to these measures during the departmental debates. Discretionary capital expenditures, though, have had to bear the brunt of the expenditure reduction. While gross capital spending has actually increased some seven percent, or $9 million, the discretionary spending for capital purposes is down $31 million, or 41 percent from the forecast expenditure in the 1992-1993 fiscal year.
We were fortuitously able to increase gross spending because of the availability of several large recoverable projects. Most specifically I am referring to the capital works on the Alaska Highway, the Shakwak project, land development, and the new Whitehorse General Hospital. These projects alone account for some $42 million in new recovery monies. This increase is more than sufficient to offset the very large decrease we have had to implement in our discretionary spending.
Despite the expenditure reduction initiatives that we have taken, in order to maintain services and avoid layoffs, we have found it necessary to increase rates of taxation on incomes, tobacco and fuel. As this House knows, we have now decided to phase in these tax increases over two years. The result of this phase-in will reduce our revenues by approximately $1.7 in the 1993-1994 fiscal year. We will consequently be introducing amendments to the budget bill, Bill No.6, which will reduce the proposed main estimate expenditures by a like sum.
This reduction is necessary because we are committed to a balanced budget. Members will note from the main estimate documents that our total revenues have increased quite substantially. This increase is due to a number of factors. Territorial revenues are shown as increasing by $10.4 million. The bulk of this increase, $8.8 million, is due to the taxation rate increases. This figure will now have to be reduced by $1.7 million as a result of the phasing in of the tax rate amendments. Established programs financing shows a slight increase based on estimates received from the federal government. The transfer payment from Canada shows an increase of $34 million. Of this increase, over $13 million is due to base adjustments under the Formula Financing Agreement for native health care, which was previously a recovery item, and the transfer of the Whitehorse General Hospital. Another $6 million is an estimated sum of adjustments to the formula for the recent census. The remainder of the increase flows from the normal operation of the formula arrangements.
Recoveries are higher than the 1992-93 forecast by some $41 million, largely due to the recoverable capital projects I spoke about earlier. The net result of the main estimates is a surplus for the year of a little less than one half million dollars. While fairly small, this is a far cry from the projected deficit for the year just ended.
This budget will begin the process of restoring the health of our finances. I look forward to the support of the Members opposite in its passage.
If Members have any questions of a general nature before we enter departmental debate, I will be pleased to try to answer them.
Mr. McDonald: I have a couple of questions before we clear this budget and before we get out for the summer season.
We have said a lot on the record about this budget and the supplementary budgets. We have indicated our feelings about the ability of the government to project its expenditures and our concerns about their estimates, about padding the supplementaries, et cetera. We have also indicated our position with respect to taxes. I do not see any necessity at this point of going over that ground but, depending on the Government Leaders answers, we may re-enter some of that debate.
There are a number of questions of a technical nature I would like to put to the Government Leader, just to see whether or not my understanding of what the government is doing jibes with what I understood to be the case in the past.
I would like to start off with formula negotiations. I would like the Government Leader to give us an update on what negotiations have taken place so far, what representations have been made by Finance to the federal government, what precisely the position is at the negotiating table or what the political objectives are of the government, and also any response that may have been received at this point from the federal side that would give us some indication as to what kind of arrangements may be struck in the future.
Hon. Mr. Ostashek: I can come back with a detailed written answer for the Member if that is what he would like. It would be quite an extensive document to outline exactly what has transpired and what positions we are taking.
I can tell the Member, as I did earlier today, that there was a meeting here on April 20 and 21 to discuss some relief from the perversity factor and to put forward the arguments that our government has on the updated population figures. I can tell the Member that there will be a follow-up meeting on May 15, to try to resolve those issues. As of April 21, even though there had been some political direction given to the bureaucrats from Ottawa to try to do something for Yukon, they were not very receptive to the arguments that we were putting forward. I can provide the Member with a detailed briefing if that is agreeable to him.
Mr. McDonald: It would not be the first time that federal Ministers have been ineffectual in seeking changes to federal bureaucratic policy.
I do not want to say too much that might embarrass them, but that is the brutal reality that we face.
I would like to see this detailed document and receive a detailed answer on the question of the negotiations.
Could the Government Leader provide us with a sense as to whether or not there has been an agreement in principle or any progress in any significant area of the Formula Financing Agreement, in particular, with respect to the perversity factor in the document?
Hon. Mr. Ostashek: I can report to the Member opposite that there has been some progress, but there certainly is not an agreement in principle at this point.
As the Member opposite is aware, we had a person in the statistics branch who was working on our behalf and the message that we are now receiving from Ottawa is that they will accept some of the proposals that he has come up with.
I will wait for that answer. I am quite interested in changes to the formula agreement. Also, I am particularly interested in the population factor. As the Leader of the Official Opposition indicated today, we understood that when the formula agreement was struck in this round of negotiations, the return to the Yukon could have been quite significant if there was a significant population increase in comparison to the national average. I understood from the census that was taken in 1991 that we could expect such an increase. I noticed in the Department of Finances calculation of the operating grant for 1993-94, they were projecting the census count to net the Yukon approximately $5.9 million, which is something less than what I understood might be the case during testimony given during the Public Accounts Committees investigation of the Consulting and Audit Canada report.
If the Government Leader has any information that he could bring to bear at this time to help me understand what is happening, I would appreciate it.
Hon. Mr. Ostashek: First of all, my understanding is that the problem is not so much with the census count as with the fact that in the previous census, there was no under count, so that they do not know what the actual growth is in the population. They are having trouble deciding that. The other issue that the Member just mentioned now, having to do with the calculations, is that we are still not certain what methodology they are going to use to come up with the figure. That is why there are some discrepancies.
Mr. McDonald: I understand that the contention of the federal government is that the base population count does not matter as much as the growth. If one uses the same methodology for determining the population as was used when the base was determined, one will get a sense of the growth, and the population adjustment factor is to account for growth, rather than to make any definitive statement about the population count today. Is that correct?
Hon. Mr. Ostashek: Yes, that is exactly the debate that is going on now. My understanding is that this deal is basically just involving the two territories and not the provinces. That is another difficulty we are facing.
Mr. McDonald: The pressure is on for the Finance officials who are negotiating the agreement, because if they are successful in the negotiations, half of the debate we had in the Legislature in the last six weeks could be avoided in the future, and could have been avoided in the past. I wish them well in their negotiations.
The Deputy Minister of Finance did give me the opportunity to analyze the formula itself, and he gave me a copy of it. I promised the deputy minister that I would not ask questions about the formula agreement, because there are symbols in this formula agreement I have never even heard of, and I took grade 13 calculus.
In any case, I would like to see the document the Department of Finance prepared. I am prepared to accept however much detail they can put in it, because I find that subject interesting.
In the past, I believe the government has done a fiscal impact study of the Faro mine closure and determined what would be the impact not only on the Formula Financing Agreement but, also, in terms of lost revenues, reduced expenditures in some areas, and increased in other areas. Can the Minister indicate whether or not this document is in a form that can be transferred to the Members of the Legislature to give us more information about it?
Hon. Mr. Ostashek: Yes, we will be able to get that information back for the Members of the Legislature.
Mr. McDonald: Could the Government Leader give us some sense of timing for getting the information back? This is obviously a fairly significant issue for the territory, with significant impacts on the territory, with the largest private sector employer disappearing. In debating the main estimates, to work without that information makes it an awkward, almost artificial, exercise, when we are not sure whether or not all the potential calculations have been taken into account in the main estimates.
I would like a statement of principle from the Minister that the Ministers budget was calculated on the basis of Faro operating. Is that correct?
Hon. Mr. Ostashek: Basically, that answer is correct, although we did know that it was down for the first three months of the year. As far as the information goes, we will try to get it back to the House by Thursday or Friday at the very latest, so the Members will have access to that information.
I have one thing I would like to add, and I do not want to get into an argument with the Member for McIntyre-Takhini. He says it is hard to analyze this budget if Faro is going to be closed, and the budget was based on it being open, but the fact remains that, perhaps, it is going to be open. We are still working on it, and we are not going to give up. I am a little more optimistic than I was in the past, and I am going to endeavour to work very hard to get that operation back on track.
So, one way or the other, whether it is open or closed, we still had to bring forward a budget based on the best information we had available to us at the time.
Mr. McDonald: As the Minister will understand, we, on this side of the Legislature, have taken every action we think we can to encourage the government to have that sense of optimism and to be more imaginative than we felt they were and are being. If there is a chance, whatsoever, of the Faro and Watson Lake mines operating, we should be pursuing those opportunities.
As has been mentioned in the House in numerous debates, and as we on this side have mentioned in numerous debates, we have not given up on this either, although we do have serious doubts about the governments ability to make this happen or encourage this to happen; it is all on the record.
We will be bringing up a number of issues in the budget with respect to operating the mine at Faro because we are puzzled about items such as spending on the Campbell Highway, both on the capital and operations side, and we are wondering why there appears to be reductions in those areas. We do not understand the rationale for those decisions; however, we will be questioning the appropriate Minister at the appropriate time.
The Minister indicated that the budget was developed on the basis of the first three months of the year showing the mine not in operation. Would the Minister tell us the year he is talking about? Is he talking about the 1993 calendar year or is he talking about the fiscal year 1993-94?
Hon. Mr. Ostashek: We were talking about the calendar year, but it is very, very important for the amount of tax revenue that we will generate.
Mr. McDonald: My thinking was more on the expenditure side, but I take the Ministers point with respect to tax revenue.
There may be some other questions in this area, so before I jump to some other items I will ask other Members to ask their questions.
Mr. Harding: The Government Leader said that they knew the mine was going to be shut down for three months of the year, and I assume when he made that statement he meant April, May and June, which disturbed me.
My colleague asked if the Government Leader was referring to a calendar year or a fiscal year. Would it be safe to assume that the months that he was referring to were January, February and March? Is it a result of the cutoff at December 31?
Hon. Mr. Ostashek: We are going to bring information on the impact back. The revenues come in during this fiscal year, but the income tax is based on the calendar year.
Mr. Harding: I am extremely interested - as I have said on the record - in the economic forecasts and the impact of the Curragh mine closures in Faro and Sa Dena Hes. I believe that information is critical in determining how we can look at this budget. I know that under the Formula Financing Agreement there is some cushion for the government as a result of the perversity factor. Unfortunately, what that leads to is a rich government and a poor population.
I do share a tremendous concern with my colleagues that the people of the Yukon need that type of information in order to make a decision about government commitment to the mines in Faro and the Watson Lake area. I did not hear when the Government Leader was planning to bring the information forward on the forecasted effect on the budget and the territory regarding the Faro and Watson Lake mine closures.
Hon. Mr. Ostashek: As I told the Member for McIntyre-Takhini, we will try to have that information by Thursday or Friday.
Mr. Harding: The Government Leader said that he felt that he was not giving up on Faro yet. I can assure him that I have not given up on Faro yet. Without getting into a big argument, I have sometimes questioned that the government themselves have not given up on my community yet. I guess we do not have to go into that tonight, unless he wants to.
He also said that he was more optimistic about the situation now. Perhaps he could elaborate on why he is more optimistic that there is a chance that the Grum ore body will get stripped and get back into production at the Faro mine?
Hon. Mr. Ostashek: The Member opposite is fully aware that when Curragh appeared in front of the court on the Companies Credit Arrangement Act hearing, on May 3, they gave indication that they had some interest from Asian investors - it came out in the paper that it was Korean investors.
Through my conversations with the local mine manager and the Chief Executive Officer, Mr. Frame, I am advised that he is on his way back overseas on Wednesday of this week to pursue those possible investments.
Mr. Harding: With regard to the Curragh situation and the two mines, am I to read from this that there are still two offers on the table: one a $5 million loan with full security - I guess the request the Government Leader indicated to the media was for nil security - and the $34 million loan guarantee? Can we assume that those two offers are on the table? Could the Government Leader tell us in what form the $34 million loan guarantee is and if there are any new proposals from the government regarding this - contingent upon the $50 million in new equity, for example?
Hon. Mr. Ostashek: I do not have much to add to the information that the Member opposite just laid out. The $34 million is still sitting in the wings. There is $5 million there at the point that Curragh wants to get involved in negotiations so that we could start to strip the Grum immediately. As I have told this House before, it seems that Curraghs first priority right now is to raise some equity and to get the company restructured. Stripping of the Grum seems to be a second priority with them at this time. I am having ongoing telephone discussions with Mr. Frame and Mr. Pelly, and I do not have anything further to report at this moment, but I may have in a couple of days.
Mr. Harding: The $34 million, as the Government Leader said, is still sitting on the table but I guess from what the Government Leader said, we could pretty much surmise that the conditions are similar. Has there been any discussions surrounding contingency? I know that the Government Leader has said that the two are not related. He has just said that the Grum stripping is a secondary consideration. I think the banks have made it pretty clear that Curragh does need some equity. The government made it pretty clear that they wanted to see some equity in the $34 million loan guarantee offer.
One would probably pretty safely assume from that that it would be smart for Curragh to make it a priority to get some more equity or some kind of working capital within the company to deal with the situation now. That would, in and of itself, make the Grum stripping a secondary priority.
As an investor, would the Government Leader not say that investors would be looking for an arrangement where they know that that end of the deal would be taken care of to some degree. I am talking about the $50 million, and the contingency between Grum stripping and working capital.
Hon. Mr. Ostashek: I do not want to get into a big debate on Curragh tonight during the discussion of the mains. As the Member is fully aware, raising some equity is a necessity for Curragh; $50 million is not going to solve all of their problems; even our $34 million for a loan guarantee is not going to solve all of their problems. The fact remains that they have about $220 million worth of debt that they have to be able to restructure so that they can be a viable company.
There are many, many things that this company has to go through yet to be able to come out of the CCAA and be able to survive as a viable entity in the Yukon. We are going to do everything in our power to help them. I do not believe that it is in Curraghs interests, or our interests right now, to be stripping the Grum deposit, unless the taxpayers do have some security for that money while the company is under CCAA. We have low zinc prices, which are devastating to all zinc producers. The Member, who I am sure follows the zinc market very closely, could not help but notice the article in The Globe and Mail last week where Noranda has cut back production by another 13 percent, and they do not expect to see any relief from those zinc prices this year.
So, there are still many problems but, at the same time, I am not giving up hope on the operation, and I believe the people involved in Curragh are very creative when it comes to financing; if there is any way they can pull this out of the hat, they are most certainly going to do it.
Mr. Harding: I would just say to the Government Leader that the debate regarding those mines is extremely relevant in the context of general debate in the main estimates, because it is pervasive in everything that is in these main estimates regarding our economy and this budget. The Government Leader has admitted that. He said the effects of a mine shutdown would be disastrous. So, I think it is quite appropriate that we discuss and debate this issue - and it does not have to be in a confrontational manner. I am just trying to find out some information regarding where the situation is at so that we, on this side, can make some determinations as to whether or not this main estimate budget in any way reflects appropriately the situation we are facing.
Besides, I know the Government Leader wants to hear the sound of my voice.
On the discussion around equity and what the Government Leader said about it is not going to solve all their problems - it is pretty easy in mining, especially these days, to find a zillion reasons to say why a mine will not survive or why a mine is viable. I guess that has been my major concern with the governments handling of this situation all along. There is certainly risk involved to the mining company and to the people of the Yukon who are employed in that industry, either directly or indirectly.
I guess that the Government Leader or I could say that it is not going to solve all of their problems, but I also know what will work toward solving those problems, and I think that is the emphasis and the direction that has to be taken to solve this problem.
With regard to the $221 million debt, the company also has a significant number of assets, and I would like to see - as I have said in this House - the bank looking at some form of debt restructuring and some of the creditors, including the noteholders, if possible, to try and renegotiate the notes and increase the period of time they have to pay back their debt and do some restructuring.
The Government Leader said that he thought - not using his exact words, but my interpretation of them - that it would be a folly to become involved in the Grum stripping while the company was under CCAA. Am I to assume from that the government has taken, as a policy directive, that while CCAA proceedings are in effect, they will in no way become involved with the company, even if they do raise $50 million in capital, for example?
Hon. Mr. Ostashek: Not at all. We have said that we would be involved in stripping the Grum now if we could get some security for the $5 million we are going to put up. I do not believe that the taxpayers of the Yukon should be enhancing the assets of the Bank of Nova Scotia. That is a position we have taken. At such a time as we have security for the $5 million, we will be glad to advance it for the Grum stripping.
Mr. Harding: Pardon my ignorance, but perhaps the Government Leader could tell me where I am wrong here. For example, the government got involved in the Grum ore body. Apparently it is encumbered right now. As they were stripping it, or getting involved in the stripping, the value of the asset would increase. The Government Leader can tell me if I am wrong on that. Is there no possible way or room to negotiate with the bank, as the government, by their action, increases the value of the asset, to take, essentially, a second charge on the increasing value of that asset? Is that not a possibility?
Hon. Mr. Ostashek: What we are saying is that we do not care how it is done. We just do not want to see the Yukon taxpayers lose another $5 million if the company is unsuccessful in restructuring. We do not want to be enhancing the assets that are going to be sold off, unless we get our $5 million back beforehand. That is all we are asking. We are prepared to get involved at any point.
Mr. Harding: We certainly do not want to see money thrown away on the operation to enhance the value of the assets for the bank. I guess that is probably the philosophy behind the call and pleas from this side of the House - me, our party and the Liberal Leader - to involve the bank in the discussions. That way, we could try to work out some arrangement where that is not what is happening.
I see a bit of a smirk on the Government Leaders face. Well, perhaps I did not. I believe that is a legitimate concern for the government to have. I certainly would share that with him.
If the Government Leader would consider it, my proposal is that there be some arrangement between the bank and the government where, as the stripping is going on and the value of the asset increases, the Government of the Yukon could essentially take second charge on it. I understand that that would take some agreement with the bank, and the Government Leader has said he does not care who does it. I guess it is a hypothetical look at a potential solution. Could he make some comment about whether or not that is a possibility?
Hon. Mr. Ostashek: On one hand, we get charges thrown from the other side of the House that the condition we placed on the loan for a first charge on the assets of the Faro division is unrealistic, unprecedented, and no bank is going to do that. On the other hand, we have the Member opposite asking us to ask the bank to back up and give us $5 million. I do not know. You cannot have it both ways. Either they give us $5 million there or, if they give us the security for the $34 million, we will advance the $34 million.
Mr. Harding: That is not what I said. I have been told by the government that the Grum deposit is presently encumbered, and it is worth a certain value, at present, to the degree it is stripped. I was talking about the government making a commitment of backing a loan but, as the work gets done, and the stripping goes along, because you are closer to the asset and it is more exposed, I would assume it would be worth more.
What I was proposing is that before you begin, you negotiate with the bank to come in and take a second charge, because the bank has a certain value right now but, as the Grum ore body is stripped, its value increases. As the value increases, the Government of the Yukon could step in and create their own security.
Has that ever been considered? Is there some reason that might not work?
Hon. Mr. Ostashek: As I told the Member opposite before, we have made the offer, and I am sure that if Curragh wants to strip that Grum ore body they are going to come back to us with a counter offer and start to negotiate in earnest for the $5 million to start stripping the ore body. That is the position we are in right now. The money is there and the company knows it is there, and they know we require some sort of security for it. I am sure when they want to start stripping that Grum ore body they will be knocking on our door to tell us what they have for security. That has not been done yet.
Mr. Harding: He could take that as a suggestion. Perhaps he could give me a written return on some thoughts on that proposal. I would request that of him.
Secondly, I would just like to say that I hope it is for reasons of negotiation that the government is still taking the position publicly that they want dollar for dollar, because I simply do not know if it is there. I can support the government wanting to see that, given some support, it would be worth some risk as an investment for this territory, simply because of the lack of other opportunities on the immediate horizon.
I hope that what I am hearing is a negotiating position and not a reluctance to say that they would be prepared to look at something other than dollar for dollar, given the right conditions because, as soon as the Government Leader said that, he would be weakening his negotiating position with Curragh.
I have nothing more to say regarding this. Does anyone else?
Mr. McDonald: A related subject is the socio-economic forecast that we have discussed in the Legislature in the last couple of weeks which, at one time, appears to have been a Cabinet document. I am talking about the forecast that would project the costs associated with a Faro closure. Can the Government Leader indicate to us now whether or not there is a document that he could share with us that provides the information that I am referring to?
Hon. Mr. Ostashek: The only thing that I can tell the Member opposite is that I will check to see if there is something that we can give him. I will give him that assurance. If there is, we will get it back forthwith.
Mr. McDonald: I appreciate the gesture. We are not really sure whether there is a document. We understood from the Minister of Economic Development that there was such a document, and we were told that we could not have it. I am very happy that the Government Leader sees fit that this document can be shared with other Members of the Legislature.
I have a couple of specific questions that I would like to put, and then I believe that the Leader of the Official Opposition has a couple of questions of a general nature that he would like to put. The first question that I would like to put to the Government Leader is in respect to the land inventory. In the past, land inventory has been approximately $12 million to $17 million, at any given time, depending on circumstances, such as land development activities and that sort of thing. I wonder if the Government Leader can indicate to us what would happen to the land inventory if the land development plans of the government were to be fulfilled in the coming year. How large would the land inventory be?
Hon. Mr. Ostashek: I am not sure how big it would be. I could check. I guess it depends on how much we would sell it for, how much we get out of it.
Mr. McDonald: What happens when one is developing land is that cash is tied up in land that is developed. On one hand, it is true that all the costs are recoverable so that they do not have to worry about making expenditures in this area because we can make the money back, we hope.
At the same time, we are tying up cash by putting it into developing land. If that developed land is not projected to sell, we are tying up very large amounts of cash in developed land. So, the consequence is that instead of having cash, we have land. If land does not sell, you do not get the recovery.
I am thinking about the problem associated with having this amount of money - a large amount of money, perhaps larger than $12 million to $17 million, which is the average, as I understand it, tied up in land development. If we had, for the sake of argument, a land inventory now worth $12 million to $15 million and the Minister of Community and Transportation Services develops another $10 million - half of what he has budgeted - if the land transactions are not expected to increase substantially, we will have land inventory of $25 million.
One has to ask whether or not that is a good use of the cash, particularly as the Minister has indicated the concern that not having cash in the bank is going to cost the government for banking services. I want to know if the Minister has a response to that?
Hon. Mr. Ostashek: I think the Member opposite has made a very valid point. We certainly do not want to have an excessive amount of developed land and have no market for it. I believe that the Member opposite is fully aware that there is great demand for land - especially in the Whitehorse area. In the last few years and as long as I can remember there never seems to be enough developed land around. The Member has made a very valid point and we certainly do not want to have an excessive amount of surplus developed land around; it is one of the things that you have to watch very closely.
Mr. McDonald: Ultimately, I would like to get into the question of how much land is needed with the Minister of Community and Transportation Services, because I think that he would be better versed in the land needs question than anyone else.
I cannot help but believe that 1,600 lots in the next year are really required, based on the fact that, in my constituency, I have For Sale signs everywhere; not only in my constituency, but in Riverdale and other places.
We have a situation where there clearly is not going to be a rush on land. I do not have any problem with a land reserve, but when we are investing a large portion of capital in what has been referred to in the past as Cadillac lots - meaning fully serviced, all the bells and whistles, curb and gutter, pavement, underground services, cable television, and all the amenities - those lots are projected to cost millions and millions of dollars. One can only see those lots sitting in inventory. If there is a cashflow problem in government, and if there is a problem where we are worried about the compensating balance to pay for banking services, it does not make a lot of sense to have a record land development budget for Cadillac lots in the neighbourhood of $20 million, when we are not certain that there is going to be uptake on those lots.
I would like to make that point and find out if there are any other comments from the Minister, and then I will be more than happy to follow up with the Minister of Community and Transportation Services to analyze his projections for land development needs.
Hon. Mr. Ostashek: The Member has made a very valid point, and I guess what you have to do is find the balance where there is enough land available and, yet, you do not have an excessive land inventory in reserve. One can only hope that the right decisions are made. I do not believe that, because we have indications that a major mine may stop production, you can all of a sudden put the brakes on everything and not do anything, because then you are reacting and not acting.
I agree that you do not want to have an excessive amount of land in reserve, but we have to try and find that happy medium, and I am sure, when we get into that department, the Minister will have a better idea of the demands for land than I do at this point.
Mr. McDonald: I have one last question. Can the Minister indicate to us what the impact would be if the expenditures in land development were to be much reduced? What would the impact be on the cash position of the government, the availability of funds and banking services and so on. We are projected to be spending $20 million on land development this year. If, for example, we were to spend historically what we normally spend, which is something in the neighborhood of $7 million or $8 million, for a reduction of $12 million, would this have an impact on the cash position of the government?
Hon. Mr. Ostashek: Well, it would certainly help. There is no doubt about that.
Mr. McDonald: Is there any way of calculating how much it would help? Perhaps the Minister cannot pursue it any further without some more thought. We would possibly pursue it a little bit more tomorrow. I am not proposing an amendment to the budget here, I am just saying that if there was much reduced land development, say by $12 million, would there be a compensating impact on such things like an expenditure we might have to make for, say, banking services?
Hon. Mr. Ostashek: Yes, there probably would be, but we will see if we cannot work something out for the Member opposite and get it back to him.
Mr. Cable: I have a couple of questions on the revenue side again.
When all the calculations are made and all the bells and whistles are finished under this Formula Financing Agreement, when will the transfer payment be definitively known for this present fiscal year?
Hon. Mr. Ostashek: This may be hard to believe - it is hard for me to believe - we will not know the actual figure for five years.
Mr. Cable: No, I will not ask why.
The negotiations that are going on now will be long concluded before the books are finally tallied up. Is this accurate?
Hon. Mr. Ostashek: Yes, negotiations will be well over. While we do have to come up with a figure for this year - the change in the GDP and the population figures - this is constantly changing and it will be five years down the road before what we got for this year is actually finalized.
Mr. Cable: The negotiations that are going on now, are they being carried on with a view that they would relate to the present fiscal year?
Hon. Mr. Ostashek: Yes, they are.
Mr. Cable: So we will not know definitively what the federal governments position is on some of these factors until when, in the Government Leaders estimation?
Hon. Mr. Ostashek: My understanding is that by June we should have some answers.
Mr. Cable: I have just one other question, as part of my education here. When will the effect of the other provinces raising their tax rates be known?
Hon. Mr. Ostashek: It is my understanding that as these increases come forward in the provinces, they are being worked into the calculations on an ongoing basis and it will have an effect on our formula for this year.
Mr. Penikett: I want to ask a question that, in some sense, follows up on questions asked earlier by the Member for McIntyre-Takhini, about the assumptions behind this budget. I am not going to focus specifically on the macro-economic forecasts, or the forecasts based on assumptions about how long Curragh is up or down. As I understand it, the Government Leader has indicated that he may get back with some more precise information on some of those questions today and previously.
The Government Leader may remember my pointing out the confusion I experienced upon receipt of the winter economic forecast that was tabled in this House, where there seemed to be some skewing, or let me put it this way, some light, between the message contained in the text and the charts in that document, between the words and the numbers. This perhaps indicates that different people, or perhaps even different departments, had worked on the different parts of it. I quite understand that the statistics branch might have run up the bar charts and the graphs, based on statistical analysis, while someone else, perhaps Economic Development, had done the words.
The Government Leader may remember that I was troubled by the fact that we had flatline projections in most of the charts. In the text, while talking about some modest expectations if Faro and Sa Dena Hes stayed open, clearly the implications of both those mines being closed were touched on, but not explored. They certainly were not laid out in the graphic material.
My question is to what extent the 1993-1994 budget is based on the same kinds of assumptions that were contained in that winter forecast. Let me explain my interest a little bit more. The Minister of Economic Development, some days ago, explained that he had been shown a piece of paper - I think were his words - from the Department of Economic Development, which contained some numbers and forecasts that dealt with the implications of a major mine shutdown here. We were not able to establish the nature of that document. Indeed, the Minister of Economic Development indicated that it was a secret document; it was a Cabinet document.
As we do not know exactly what the document is, we could never establish why it was secret, because those kinds of forecasts have routinely been tabled in the House before.
The Government Leader, on the same day, indicated much more openness and willingness to discuss, or make available to us, information on which some of the governments budgeting may have been based. I know the budgeting is largely the prerogative of the very excellent Charles Sanderson and his team of champion bean counters in Finance. There may be very different people involved in these things.
I often wished, but failed, that, during our time in government, we would have been able to get a better integration of economic forecasting and financial budgeting, but that was not the case, except on the occasion when we found someone - and there were not many people around who could do this - who were able to run the economic model that had been developed by Professor Reaume in Alaska. I remember that Ms. Ingram was one of the people in Finance, at one point, who knew how to run it. I am not sure if there is anyone on staff at the moment who does. I would be particularly interested if that computer model, which is quite a useful model, has been run to test different scenarios with Curragh up, Curragh down, Faro up, Faro down, Sa Dena Hes up or Sa Dena Hes down, if they were down for a short period of six months or one year or two years or if they were reopened. I know Mr. Sanderson is acquainted with this tool because it was used by the previous administration.
Without betraying any Cabinet secrets, because I do not want him to give away any of Mr. Devries secrets, I wonder if he could tell us anything about the nature of the foundation documents that were used - even the secret ones. Did they include the computer model I just referred to, and if not, why not? I would be interested in the answer to that question.
To go back to my most basic question: to what extent was this budget based on the same assumptions contained in the winter forecast - a forecast that, I will confess so that I am not playing tricks on the Government Leader, I find problematic?
Hon. Mr. Ostashek: It is my understanding that the computer model the Member opposite is talking about is no longer used by Economic Development. It was used basically to identify the ramification of the employment that was created by government, more than in the private sector. Anyway, it was not used, and basically this budget was based on the winter forecast the Member opposite seems to have some problems with.
Mr. Penikett: I want to make clear to the Government Leader that I am not being rude and abusive about the winter forecast. For me, it sends some confusing messages and, since it does not deal at all with the current reality - which is Faro shut and Sa Dena Hes shut - it is of limited usefulness, I think, and I do not think I am being unkind in saying that.
The Government Leader may want to consult with Mr. Sanderson about this, but my memory of the utility of the computer economic model I am talking about is different from the one just given by the Government Leader. If I am correct, I think we used it in 1985 and 1986, when the major budgetary objective of the government was to increase private sector employment, and we were doing runs to test the effect of different government expenditure scenarios on private sector employment. While, as are all such tools, it was an imperfect instrument, it was quite useful for Management Board, in that sense. I believe Mr. Sanderson can also confirm that we also used it extensively in the Faro negotiations, trying to get the Faro mine open in 1985-86, to try and run some kind of projections on the impact of not direct employment but indirect employment in the service sector in Whitehorse of the mine being run.
I freely admit that one of the problems we had in using it was, as I mentioned a moment ago, and I think Mr. Sanderson can confirm this, that there were unfortunately precious few people in our employ who knew how to run it. It may be the case that there is no one now - although I would be surprised if the econometrician in Economic Development did not know how - but I may be wrong on that score.
Could the Government Leader confirm or rebut these suggestions?
Hon. Mr. Ostashek: The Member opposite is partly correct. The Department of Finance was not aware that it was used in the scenario as to the impact the Faro opening would have, but that is not to say that they did not use it in that respect.
The person in the Department of Economic Development certainly knows how to run the program, but there are some grave doubts about its usefulness, and they are not using it at this time.
Mr. Penikett: Well, I do not want to sound like I am being wedded intellectually to Dr. Reaume, so I am going to leave that alone for a second. In failing this tool, I am curious as to exactly what analytical tools the government is using to measure impacts of extended mine shutdowns. I know that the Department of Finance must be able to run projections. I may be wrong about the Reaume model, but what I seem to remember about it is that it dealt with a large number of variables, and you could actually plug in the variables about revenue, employment, tertiary employment and other things, and play with the variables, enabling one to make some reasonable projections about the outcomes, according to different situations.
I say this to the Government Leader and I am sure he will understand but, whenever a Minister says they have a secret document, and it is a document that has never been secret before and there has been no rational explanation given for why it should be secret, there is always a certain fascination, or curiosity, in the House about it. I do not want to intrude on the Minister of Economic Developments secrets - he is welcome to them. What I do want to know is, if the Reaume model was not used, what other method was, other than the models in Finance - which I am reasonably well acquainted with, which is Mr. Sanderson and his calculator and his experience, or the budget bureau and their experience. I am not asking for the actual information now. Who was involved in the analysis, what kind of document has resulted, is it a piece of economic analysis, is it a financial analysis, is it something that combines the two, or is it something that just looks at capital experience, or is it something else?
Can the Government Leader help me at all here?
Hon. Mr. Ostashek: I guess the simple answer is, a little bit of both. As the Member opposite said, the Department of Finance does models of its own that deal mostly with the revenue side. Economic Development does run models of some sort for the economic impact. What we used was a combination of both to come up with the budget that we have tabled in the House today.
Mr. Penikett: I do not want to spend an excessive amount of time on this, but I would like to know something about the analytical tools of the Department of Economic Development. I know that the Government Leader is not the Minister. I know that the Minister himself has told us that the product - and I assume the document that he talked about the other day was a product of these methods or tools - was secret. I do not want to know about the secrets now. What I would like to know is something about the methodology.
Mr. Sanderson will understand my perverse interest in these things because he worked with me for a while. I am interested in the tools because I have seen some of the tools work. Some of them are the equivalent of using clubs to kill mosquitoes. Others are much more delicate instruments. I do not know who is doing the work in the department anymore. I am not asking ad hominem questions here.
What I am interested in knowing is what tools the Department of Economic Development is using. Are they using a computer model and, if it is not the Reaume model, what model are they using? Is it a model that has been developed internally within the last few years?
Before I sit down, I want to make it clear that I do not claim any ownership of the Reaume model - the Government Leader may know this - but that model was developed under the previous Conservative government, although not used, as I understand it. The model was paid for then. The last time that I had anything to do with it, I was under the impression that it was, in some ways, a useful tool. I do not want to overstate the benefits, but someone clever may well have refined the model in such a way that they we are using a successor, and I would like to know if that is the case.
Hon. Mr. Ostashek: If the Member will permit me, I will provide him with a written reply about the methodology used.
My understanding is that Department of Finance never had any problem with the Reaume model that the Member is talking about, but Economic Development did and, now, they have developed something of their own that they use for forecasting.
I will endeavour to bring back to the Member opposite a statement on the methodology used to come up with the figures in the budget.
Mr. Penikett: I have one other question, and the Government Leader may want to take this as notice, so that the Minister can come back with the information. Is there, at this moment, a professional economist in the Department of Economic Development, and is that the person responsible for this project?
Hon. Mr. Ostashek: Yes, there is. He is the person who is responsible for running this model.
Ms. Joe: I have asked questions about other tax increases by different departments. The answers I was getting back was that when we get into the mains, different Ministers will be letting us know whether or not they intend to increase permit fees or anything like that. When the government Members were in Opposition, they decided that any increase in a fine, permit or licence is a tax increase.
I was wondering if the Minister responsible or the Government Leader could bring back information from departments before getting into the line-by-line debate on the departments about whether or not they intend to raise any fees for this fiscal year. He assured me that he would let me know when we got to those individual departments. I would like to have that information prior to getting into debate on the individual departments.
Hon. Mr. Ostashek: I will see what I can do to get the information back to the Member. I believe that most of the licensing for this year is already done, apart from perhaps hunting licenses. I do not expect that there will be any more licence increases pertaining to this budget.
I believe I told the Member opposite that each department will be reviewing them and looking at them probably for the next fiscal year to see if there are going to be any increases, but I will canvass the Ministers to see if I can get some information back to the Member prior to our getting into line-by-line debate.
Mr. Chair, the time being up, I move that you report progress on Bill No. 6.
Motion agreed to
Hon. Mr. Phillips: I move that the Speaker do now resume the Chair.
Motion agreed to
Speaker resumes the Chair
Speaker: I will now call the House to order.
May the House have a report from the Chair of Committee of the Whole?
Mr. Abel: The Committee of the Whole has considered Bill No. 20, entitled An Act to Amend the Income Tax Act, and directed me to report it without amendment. Further, the Committee has considered Bill No. 6, entitled First Appropriation Act, 1993-94, and directed me to report progress on it.
Speaker: You have heard the report of the Chair of Committee of the Whole. Are you agreed?
Some Hon. Members: Agreed.
Speaker: I declare the report carried.
Hon. Mr. Phillips: I move the House do now adjourn.
Speaker: It has been moved by the Hon. Government House Leader that the House do now adjourn.
Motion agreed to
Speaker: This House stands adjourned until 1:30 p.m. tomorrow.
The House adjourned at 9:29 p.m.
The following Sessional Paper was tabled May 10, 1993:
Information related to the salary of the Cabinet Communications Advisor to the former New Democratic Government (Penikett)
The following Legislative Return was tabled May 10, 1993:
Financial assistance through the Business Assistance Program to the hotel industry in the Yukon, 1985-1992 (Devries)
Written Question No. 14, dated April 20, 1993, by Mr. Joe