MR. CHAIRMAN: I would like to call the Subcommittee on Supply to order. This is Tuesday, April 25, 2000, and the time is now 2:05 p.m. On Thursday we left off on Resolutions E9, E10, Resolution E20 in regard to Acadian Affairs, Resolutions E22, E44, E45, E48, E49. At that time, we had the honourable member for Lunenburg West questioning the minister, he has 25 minutes left in his allotment.
The honourable member for Lunenburg West.
MR. DONALD DOWNE: Mr. Chairman, just to revamp what I recall from Thursday, there will be a pursuit to full consolidation of debt of the numbers from 1993. The only thing is, there is one member of your staff, in particular, who loves to golf, and I hope you are very patient with him or give him some extra time to take his golf game seriously, to be able to fulfil that obligation and commitment you made. (Interruption) Well, I do, and he is a lot bigger than I am. Just trying to be safe here.
It was agreed that the issues of cost benefits on Health, Education and the restructuring was not done by the department and/or any government department. I just wanted to make sure of that.
Mr. Minister, I would like to go into the issue of privatization. I am sure there are a number of sectors and groups within any of the departments you are looking at from an issue of privatization; it has been mentioned, whether it is the Liquor Commission or hotels, resorts, golf courses, and the list goes on. One of the issues I find intriguing is, again back to the whole issue of the study aspect of going into the privatization issue, if the government does get into the issue of privatization of the Liquor Commission, would the government do an economic cost-benefit analysis before that was entertained?
HON. NEIL LEBLANC: Mr. Chairman, two things. This is one where I want to make sure I know whether or not it is up to me to answer this question or the Minister responsible for the Nova Scotia Liquor Commission. I am not trying to be argumentative, I know that the ball, in this instance, is being carried by the Honourable Rodney MacDonald. He said in the House this would be reviewed, if it makes sense for the province or for the consumers, we would be prepared to move forward. We are in a situation where I am sort of in another area that doesn't come under Finance. I know you could say that as Minister of Finance it is also a global issue and as such is there, but I am looking, maybe from staff, as to whether or not it is for me to answer those questions or whether or not it is for my colleague. I am just being honest with the member for Lunenburg West as to how we do this. If you would bear with me for a second I will talk to my deputy.
Mr. Chairman, in talking to my deputy, basically any specifics in this should be coming from the minister responsible for that portfolio. In general terms, I am more than prepared to speak about it. Maybe if the member could ask me some questions, and I will try as much as possible, within that framework, to offer some suggestions.
MR. DOWNE: The question was not so much as will you or will you not privatize the Liquor Commission, I think that will be a decision of Cabinet, the question was more in terms of a broader perspective. You are the most powerful minister in government, this is your budget, you are the architect of this budget by all accounts, so clearly in developing that rationale and that strategy, the question is really, will the government undertake any economic cost-benefit analysis on an economic driver to the general revenue of the province of about, I am guessing here, $140 million a year? If a decision is made to privatize it, will the government, in a broad perspective, or will you as Minister of Finance demand or expect the government to do a cost-benefit analysis on the sale, if they do so, of the Liquor Commission?
MR. LEBLANC: Mr. Chairman, as a member of Cabinet, and the member is using glowing terms, the most powerful minister, I don't think any minister is more powerful than another. I know the member has sat in Cabinet before, and I think everyone has the right to exercise their opinion, and as such there is a consensus and move forward with it. The situation in regard to the Liquor Commission, using that one for an example, is that we are going to be, I think I can quote myself almost from what is there, whether or not it makes sense both for the taxpayers and consumers, stating that there has to be benefits. You could say economically or services, those are two types of quantifiable measurements that you could use. Obviously the government will have to give supporting evidence when they make those decisions.
MR. DOWNE: I used to play a lot of hockey down on the French Shore - skate around the issues. I will go back again and I will ask, specifically, has there been any study done by government on the potential sale of the Liquor Commission?
MR. LEBLANC: Mr. Chairman, there has been a great deal of dialogue that has taken place and there has been some review within government. I can honestly say to the member opposite that it is indeed a complex issue. There are very strong opinions on both sides, and I know the member is aware of proponents of full privatization, along the Alberta model, and I think the Food and Beverage Association has been vocal. On the other side, you had the union who represents the people who work for the Nova Scotia Liquor Commission arguing the other side of it and disputing facts. There are different modules across this country, Alberta is just one, New Brunswick has another type of model, and if you go to Quebec it is different, I can go across every province. I think there are options there.
One thing that we as a government have said is that we are going to look at those options and make a determination as to whether or not we should be moving to change it. We are the most regulated province in Canada, that is a fact, I don't think that is disputable, we are regulated from start to finish. I think as to whether or not there are some changes that can be accommodated, that is what the review will say.
MR. DOWNE: If I understand the answer, there has been some study done, which should be done before anything is privatized anyway, but there has been some study done in regard to privatization of the Liquor Commission. Is that safe to say?
MR. LEBLANC: Obviously, this isn't an issue that came yesterday, for the last, especially, three to four months and awaiting the report of the Fiscal Task Force and hearing what Nova Scotians had to say also, it is an issue that has been out there for some length of time. To say that we have looked at it, the answer is yes. Whether or not it is to the degree necessary to make a decision, the answer is no.
MR. DOWNE: I wasn't asking about a decision, I am not asking that. That is not really the question. Another one is the issue of resorts and hotels. I heard the minister, the government looking at management of the resort, having an outsider agent manage the resort, vis-à-vis doing it internally. Was there any cost-benefit analysis of the private sector doing it versus the public sector doing it?
MR. LEBLANC: On that, Mr. Chairman, you would have to ask the Minister of Tourism and Culture. I want to say for ourselves, as a government and as a Cabinet, when we looked at whether or not this is a core function of government, we said that this is not something that government has to do. So I want to be fair to the member, managing hotels is not what we consider to be a priority. I am not arguing that there are benefits and pros and cons from these establishments, but is managing these facilities something that is a core function of business? The answer is no. In regard to the specifics, I will let you refer that to the Minister of Tourism and Culture.
MR. DOWNE: One observation would be, to have somebody come in to manage, sometimes when they come in to manage short term, there is a lot of pain. You don't always
do better by having an outside manager come in, versus a government manager, if there are incentives from a government point of view for the management internally. Anyway, I have my views on that. I go back in my own mind to the Upper Clements Park. We had a private sector come in because we had the same kind of mantra that the private sector, rah, rah, rah, they can do it, they will make money. It cost us just a bucket of money having them in there because they just let the place fall down, and turned it over to community and it cost us to get the equipment back in running condition. I would assume that you will do some sort of analysis on that one.
NSRL is your portfolio, so I feel I will get a good answer on this one. Where are you in the analysis of privatizing NSRL?
MR. LEBLANC: Mr. Chairman, right now we are about halfway through the evaluation process that was requested.
MR. DOWNE: Would you be able to table the criteria of the evaluation of NSRL and what are the parameters, goal posts in regard to what you are reviewing as part of the value of NSRL?
MR. LEBLANC: Mr. Chairman, I would be prepared to table the RFP that went out for competition in regard to this evaluation.
MR. DOWNE: That RFP has stayed, there have been no changes to the RFP from the public since it was sent out, the work that has been done is absolutely per the RFP?
MR. LEBLANC: I have been told yes.
MR. DOWNE: I might just say that you have a deputy minister who has a good background in NSRL and I think he is one of the best deputy minsters in government and I am sure he will give you . . .
MR. LEBLANC: I agree. He also sits on NSRL, so it also gives me valuable information during the estimates here.
MR. DOWNE: There is a lot of discussion in regard to the number of public buildings that we have and looking at DOTPW, the Public Works side, to move toward a potential privatization of the maintenance of these public buildings, can the minister tell me, are there any results back from any work that has been done, research, in regard to the cost-benefit of that? Are you aware of any?
MR. LEBLANC: This is through TPW?
MR. DOWNE: Well, privatization and maintenance of the public buildings, I assume, would be under Public Works, if I recall correctly.
MR. LEBLANC: I would assume that also, Mr. Chairman. On that one, I would refer him to the minister. It hasn't come through my department.
MR. DOWNE: There has been no RFP go out that you are aware of?
MR. LEBLANC: Not through our department, if there has been, and I am not aware if there is one. I would suggest that might be even better directed toward the Minister of Transportation and Public Works.
MR. DOWNE: I know this will get repetitious after a while but there is a rationale for asking these questions of the minister. There is some talk within the health care system that hospital lab services could very well be privatized. Is the government interested in going into areas such as Health and other departments to that extent of looking at where the privatization line will start and end? Is health care open to the full scrutiny of privatization, whether it is to do with hospital lab services or other types of activities?
MR. LEBLANC: Mr. Chairman, we are getting back into an area that is within the Minister of Health's mandate. I know his estimates have already been up and he may have asked the same question at that period of time, so I don't know. I want to say that for ourselves, obviously, we have a situation that is difficult. I indicated during my previous estimates, I think it was the member for Sackville-Cobequid, who asked me whether or not we would be looking into the future as to what kind of cost savings we could achieve or whatever, and I told him at that time to say that I never have plans for anything, I can't do that, because I am going to keep an open mind. So when he is referring to the health care aspect of it, this specific question really should have been addressed to the Minister of Health because this is within his purview.
As to what lies ahead, it is difficult for me to say, because obviously until we reach that point it is difficult to speculate as to what will come down. We are keeping an open mind as to whether there are some cost savings. That doesn't mean there are any plans, as I am sitting here, that I am not willing to announce. I am just saying I am keeping an open mind.
MR. DOWNE: The Minister of Finance sits on the Priorities and Planning Committee, sits on the inner-Cabinet committees of government, and basically all aspects of government activities are vetted through that process. I am sure you are fully aware, specifically, of each department's activities on the broad policy initiative of the government and that is toward the issue of, if it can be done cheaper through the private sector, then do it. The minister is not wanting to talk for another minister but from a broad perspective, if I recall correctly, the items are discussed at those levels to which you are at. The issue of privatization and its potential, you would be aware of that.
MR. LEBLANC: Mr. Chairman, I have indicated to the member that we have to keep our options open as to whether or not there are some cost savings. I am trying to be as upfront as I can with the member. We are making sure that our options are left open and that may encompass some service we do change, in the way it is delivered. I am not arguing that because, as I said, we have to keep those options open. We still have a $268 million deficit this year and as we move forward we have to look at some cost savings, if we can achieve that. With regard to the Minister of Health's estimates, I would again refer him, specifically there, that is where those questions should have been addressed.
MR. DOWNE: I will move away from that for just a little bit. In looking at your overall numbers in your supplement, the Department of Finance is increasing its staff component. Its fees for the deputy minister's offices, I recall, the estimates are actually going down on this one but there is additional staff in the department. In reading over Page 6 of your opening statement, you say, that we will also be impacted by the creation of a Treasury and Policy Board. By the way it is worded, I assume that Treasury and Policy Board will be a body that will take over some functions that the Department of Finance currently has? If you are going to increase your budget in Finance, and I am not disputing the fact that you should have the very best of people in that department, then are we having a duplication? Where does the money all really go if Treasury and Policy Board will be, in fact, impacting on your department; by your own statement?
MR. LEBLANC: Mr. Chairman, first of all I want to start off by saying that our FTEs did not increase, they decreased, it went from 225 to 219. The forecast was lower than that. There had been some vacancies during the year that had not been filled and that is part of the reason that - I guess the word I want to use here is that the member is saying - there has been an increase. From forecast to estimate there has been an increase but that is due to vacancies that were there during the year. I want to say that first of all to make sure that we have that on the table.
The other point you are talking about, as to how the new Treasury Board and Policy Board will work and what functions will happen there that are currently being done at Finance, I guess is a good question. I want to say first of all, one thing that I have noticed in the past, when I was in government before, was that we did have a so-called Management Board, which is somewhat similar to what a Treasury Board concept is. In that, we were in a situation that if departments made expenditures, they would do so basically in line with an overall government perspective, government plan. We find ourselves in a situation, since coming back to government, that governments are given budgets and they are basically in power to live within those budgets. We also find ourselves in situations where a lot of times it can be that departments are making decisions which may not be to the betterment of the whole of government, they want to go in-line of developing a system that may be available somewhere else within government.
I have used the examples of the SAP Program, which I know the member would be very much familiar with because the reason it was brought in was to give the government the accountability, that they would have the details they require to make decisions but also to replace the system that was there that couldn't provide all those details. A lot of times departments were making decisions to whether or not people should be trained on it. If they wanted to make cutbacks or changes in their department, the training might be one of the things that got deferred. Well, that is not in line with why we brought the SAP.
To go back to the question, we really believe that a Treasury Board will be a central agency to make sure that expenditures are made with the government as a whole rather than isolation. I don't know if I have answered the question as much as you wanted. If you want to give me more questions, I will be more than prepared to expand on it.
MR. DOWNE: The Minister of Finance, under Acts within the Legislature, has more power and has encompassing powers of control within government, whether you take advantage of them or not, but it is pretty broad. With Treasury and Policy Board, in effect, that is taking away some of those responsibilities, or are they taking away some of the workings of Finance to some degree to go to this body that is going to be looking at everything at 20,000 foot elevation and view the whole sea of 14 departments?
MR. LEBLANC: Well, if you look at the Treasury Board concept, or Management Board concept, you could say it is a high-level review but it is also at a low-level review. It is something that ensures that the departments are working together rather than working in isolation. Within the system today, after the budget is done, to a great extent the departments are basically empowered to live within their budgets. If they want positions that have to be filled and so forth, that will go to Human Resources. Other than that, there is not the central agency that ensures that cohesiveness among departments. I think that is one of the reasons that we are doing the restructuring, to first of all reduce the number of departments overall, but to put similar function departments together. I think that in itself, will bring about some efficiencies. I get on to maybe explaining too long. I apologize to the member. If you want to go back into specifics, I will.
MR. DOWNE: The reason I am trying to walk through this, and there are a couple of more questions but I only have a minute left, that is why I posed the question earlier, has the government done any cost-benefit analysis with regard to the restructuring? Let's just leave the issue of restructuring, right, wrong or indifferent, on the sideline here and just not debate that at all. Just the fact that this is affecting thousands and thousands of people. I was in church yesterday, on Sunday, and a lady in our church took sick leave because her nerves are shot. She said it was work-related and she just had to leave because she couldn't take it any longer. That is why, the fact that the government has not done any cost-benefit analysis in regard to determining what the overall saving will be, we have increased staff positions in Finance by 7.4 to 219.7.
[2:30 p.m.]
MR. LEBLANC: Mr. Chairman, that is from forecast to estimate and not estimate to estimate.
MR. DOWNE: Well, that is the estimate of 2001 from the forecast. It is just all replacement staff. Even if you take estimate to estimate, you are down six, I realize that. So those six you are down will be - the corporate service unit itself, with the new technology and equipment, you probably won't need as many but actually it looks like you are going up. Anyway, the long and short of it is, that is why the cost-benefit analysis that I have gone back to, to me, would be so clean for government, and these types of questions would be able to be absolutely answered and we would have a clear understanding of what the benefit long term, short term, would be, what the costs would be and what number of jobs will be lost and what jobs are being lost, what benefit that would be to government and to the taxpayer of Nova Scotia.
As it is right now, nobody knows, and maybe government doesn't know exactly what is going to happen. That is what I am concerned about. I haven't seen the answers to that. That is why the questioning I have followed here, Mr. Minister, has been along those lines.
MR. CHAIRMAN: Your time has expired. We will take a short break.
[2:32 p.m. The committee recessed.]
[2:35 p.m. The committee reconvened.]
MR. CHAIRMAN: The honourable member for Sackville-Cobequid.
MR. JOHN HOLM: Mr. Chairman, the first question would be, is it your intention that the government will be being run in a business-like fashion?
MR. CHAIRMAN: The honourable Minister of Finance.
HON. NEIL LEBLANC: Mr. Chairman, I want to say that there are a lot of applications that government does that we can run it on a business-like fashion. I mentioned one is like Nova Scotia Resources Limited, and I have said on many different occasions that if we are going to make decisions on NSRL, we should do so. There are occasions that may not apply, but there are many instances throughout government that we are doing business-like, private-sector types of services that we should be providing in that type of manner.
MR. HOLM: I appreciate that, certainly I would argue that everything cannot be run exactly like a business, but when you come to making decisions, are you going to bring a
business-like approach in terms of doing a proper analysis and so on before decisions are made?
MR. LEBLANC: I would say the answer is yes. There many be some instances where we believe there are instances where we should not be into it, and I refer the member to the answer I gave before, should we be involved in tourist resorts? That is a good one. Should we be involved in golf courses? Either way, I don't think that those are functions that government should be involved in.
MR. HOLM: Before you got into politics and in your brief vacation, you were, I believe, involved in a business. I don't know if you still are or not. In the course of your personal business affairs, you would have been called upon to make some pretty hard decisions. Some of them may have dealt with maybe the investment of funds from your business and so on. When you were making decisions in your business, did you do an economic impact study or any kind of economic analysis before you were making those business decisions?
MR. LEBLANC: The answer is yes, we made projections.
MR. HOLM: Were those projections based upon the best research and study that you could do, or by the seat-of-pants decisions?
MR. LEBLANC: In business, there is probably a combination of both, because there are probably some of them that you make on gut reaction and other ones, when you have more time to review them, you might do some more, to a greater extent, with more research. If you look in business, I think if you look at them, most people do a combination of both.
MR. HOLM: But you prefer to be able to have the research done.
MR. LEBLANC: That is correct.
MR. HOLM: That brings me to the restructuring and to what we are talking about, or you were talking about with the member for Lunenburg West before. You have done no economic analysis as to the cost-benefit of this restructuring, of the reduction of the number of departments, et cetera, or the changing of the programs but you just said that it was common sense. That sounds to me to be a by-the-seat-of-the-pants approach, not the approach which you would have wished to follow in your own private business.
MR. LEBLANC: Mr. Chairman, I know that when we talk about the restructuring that we have put together programs of a similar nature which, in itself, would allow for multitasking for a lot of the things that we do, which would bring about efficiencies. I gave an example of one program, one specific that we talk about, the Nova Scotia Alcohol and Gaming Authority whereby the previous administration, at the time that they set up the
gaming industry, felt that it was very important to set up a different bureaucracy. It was maybe more to allay fears in Nova Scotia that there would be a regulatory and quasi-judicial type of separate institution. I think upon reflection, if they could have it back, they probably would have agreed with the decision that we had made to put that in under the URB. Those are the types . . .
MR. HOLM: And if it would have met the political objective of the time.
MR. LEBLANC: Well, I can't talk about the political objective of the time. I wasn't here but I do know that the lack of efficiencies that the structure has now and the changes that we are going to make will bring about considerable efficiencies that will save money. The direction that this government is going is into a smaller government with smaller amounts of departments working more closely together. I make no apologies for that and it is a direction that we took after considerable debate, especially within Cabinet and the decisions that were made are logical and will flow forward and I have no hesitation in saying that.
MR. HOLM: I would just say to the minister, not wishing to take a shot but I can't resist this one, you were a part of that government that sold off Nova Scotia Power at a tremendously under-valued price, probably somewhere to the tune of at least $150 million and making a decision that instead of insisting the politics get out of the operation of Nova Scotia Power but that it be run in an efficient, business-like manner, that has cost us many hundreds of millions of dollars in lost income that Nova Scotia Power has been able to make and those profits, of course, going largely to shareholders and that decision based upon a philosophical feeling, as Louis Comeau described it.
My concern is, and I think it is a concern of a lot of Nova Scotians, as we are looking at, or I should say that the government is looking at new privatizations, whether that be of lab services at a hospital, whether that be of the Liquor Commission or many of the other things that the government is doing, that we are being driven by a philosophical feeling rather than by the hard analysis done through proper research and study on the economic impacts and cost-benefit analysis.
I can appreciate that in business you often do have to make some snap decisions and you do in public life as well but when you are dealing with public money, you darn well better be making those decisions based upon the best hard-nosed economic impact analysis that is possible. By the minister's own admission, you put nice words out there and what you say sounds like common sense. We have seen an awful lot of businesses doing an awful lot of downsizing, multitasking and shrinking only to find out that the business started to suffer dramatically and that they had to turn around and reverse the earlier decisions that they made.
MR. LEBLANC: Two things, one of which, we could talk about Nova Scotia Power at length but I don't want to mention that. We have disagreed on this. We disagreed in the past and we still disagree today.
MR. HOLM: And in the future, no doubt.
MR. LEBLANC: And we will in the future. It may be ideology - if I could say that word, if it was French it would be easier - but on this one we keep talking about the fact that the profits are now paid to the shareholders. In the past, what people don't understand, is that we had a considerable amount of debt at Nova Scotia Power. The debt isn't there because those shareholders put their money into Nova Scotia Power and retired a lot of that debt so they are being paid a return on their investment which if they hadn't have put that money in there, Nova Scotia Power would be paying that in interest.
I do remember Nova Scotia Power when it was a public institution, it was a socio-economic type of industry. You could say that it was not, you could say that it shouldn't be but it was. Overall, Nova Scotia Power, since becoming privatized has been much more efficient and I am sure can compare against any other public utility in Canada in keeping its prices relatively stable. If we had high prices before in comparison to other parts of the country which have some advantages in hydro generation than Nova Scotia has, we probably aren't competitive. But overall, we have improved a lot since Nova Scotia Power become privatized.
The other thing as to whether or not, you are stating that we sold it for too less, I guess we could probably agree to disagree on that one and we probably have in the past, are today and will going into the future. That is my 2 cents, for what it is worth, and I think the member for Sackville-Cobequid and I will probably agree to disagree going forward.
To get back to the other question that we talked about, it slipped my mind, if the member could just remind me just one second, I will elaborate. Just give me a short summary on that one and I will pick up on it.
MR. HOLM: That was one of the things. We will get back to that and I am not going to get into it too much on that point, just to make the following observation. Had the approximately $700 million that has been made in the way of profits by Nova Scotia Power been returned to Nova Scotia Power as a publicly-owned corporation, the debt of Nova Scotia Power would have been paid down dramatically which would have meant that the power rates could have also been reduced significantly which would have been a tremendous, I would suggest, incentive for new businesses to locate in this province because of a cheaper energy source. We certainly do agree that politics played a big part in how Nova Scotia Power was run under the Tories and under the Liberals before that but that has been blown.
Anyway, we won't go back and revisit history. The fear is, of course, that some have the concern that the Donald Cameron mentality is rising again. It wouldn't be polite to say its ugly head but the ugly philosophy of that government is raising its head again under the John Hamm Government.
Budgets are, of course, about choices and one of the things that you have kept talking about is government delivering the core functions. Do you have a list of what you, and government, consider to be the core functions? (Interruption) So what are they?
MR. LEBLANC: I guess two or three things that come to light, and I think the member brings up a very good point, which is what government should provide, and one thing that we did hear from Nova Scotians, both in the hearings when we went across the province and also even in direct communication to the government, especially in regard to both Health and Education, there is also a core function in regard to Community Services. I think a lot of times it doesn't get the play, to be candid, it doesn't get the profile that the other two have and those are specifically three functions that were into it. As to whether or not we have made a list, as to what it is, I think that as we go on through our mandate, we will be sitting down once again and repriorizing what those core functions are.
I want to say, when I say that, in a sense government never stays the same. As much as we think that the environment around us will stay the same, it doesn't. I have learned that in my short term that I have spent in politics. The political arena that I entered into back in 1984 when the member for Sackville-Cobequid and I were elected on November 6th is no longer the same environment that is there today. I think that is a fair statement when I make that. I look at myself as being able to modify and government has to change too. If events change around it, then you also have to change with it.
MR. HOLM: Yes, indeed, we do have to change but that doesn't answer the question as to what government really sees as the core functions. There has to be some kind of dividing line here. I have heard it said by your good friends in the Metro Chamber of Commerce, like the incoming president, state that government shouldn't be doing anything, providing any service that can be done or offered through the private sector. In other words, anything and everything that government does, if the private sector can be contracted to deliver that service, they should be contracted. Heavens, why not? From their view, we can make a profit. If you want to carry the argument to the extreme, you can say, well every four years or five years, the people of Nova Scotia should go to the polls to elect a government that will be selecting the consultant who will be running the province. You can carry things to the extreme. There isn't much that can't be contracted out, including your job and my job and every body else's job, if you want to do it that way.
AN HON. MEMBER: No one could ever replace you, John.
MR. HOLM: Thank you, I appreciate that confidence in the former Finance Minister.
MR. LEBLANC: Put that in your record, Mr. Chairman.
MR. HOLM: That is a reality, okay? You are talking about government delivering core functions and of course your good friends in the chamber of commerce, who are the
driving forces, I would suggest, people like Murray Coolican who think that the cuts haven't gone far enough and want you to get out a bigger sledge hammer. Of course, $189,000 a year, which is what he would be making, not from the chamber of commerce position but from his employment. I think that was the figure that was in the paper not too long ago. Some of the things that face people in their real lives may not be the same in his. I want to ask the minister again, how are you deciding what are core functions? Who are you listening to other than the chamber of commerce?
MR. LEBLANC: Mr. Chairman, when the honourable member for Sackville-Cobequid says that we are only listening to the chamber of commerce or that they are driving force behind the government, I go back to the point that we said that we would bring about a balanced budget within three years and a tax reduction subsequent to that. I will say that the chamber of commerce is a very vocal group. They are organized and as such, perhaps, receive a lot of profile because of that. This is the same group that should be candid about it, that criticized me in the fall for not having gone far enough that we should do this and everything should be cut right now.
MR. HOLM: They criticized you again after this budget.
MR. LEBLANC: Mr. Chairman, I know one thing, in my short tenure as Minister of Finance, if I am looking to have everyone congratulate me on the job that I do, I think I am in the wrong job because no matter what you do, you are probably going to be criticized by those who want you to do more, make tough decisions and to only offer basic programs and other ones saying that you should expand them. I recognize the situation that I am in and it is one of the terms of the job when you accept it. I don't disagree that it is. I guess you can't be all things to all people and I never expected to be able to do that. For the Murray Coolicans and other people who are there, they are stating that we should live within our means. That is a message that they are sending.
There are also people on the other side who are saying that we should ensure that we deliver programs of quality. It is important that we keep an open mind to both sides. Now people could say, if we make a decision, that we have only listened to one side and I disagree with that. We have listened to both sides of the spectrum and are trying to come up with a balanced approach. I guess in a sense, whether I can ever convince everyone that that is the case, I guess that is probably difficult to do.
MR. HOLM: I just say to the minister, if you have been criticized by the Metro Chamber of Commerce, some might take that as a compliment. I wouldn't really worry about that too much. I think a lot of their employees might have a different view from some of the spokespersons because some of those employees are concerned about the education of their children and they are concerned about the health care that they and their family members will receive, even if others may be more interested only in their bottom line. The balanced
approach may be a different matter that some may take exception to whether or not what we actually have seen is a balanced approach.
A couple of questions just flowing from that, as you can probably tell, I am not following the list of questions that I jotted down for myself. I just want to touch into this area first. There are different tax rates for businesses. There is a small business rate and there is a larger business rate. What is the small business rate?
MR. LEBLANC: Just to make sure I am giving you the right rate, for the members of the committee, this is Liz Cody who heads our Fiscal and Economic Policy. She has all the answers, 5 per cent.
MR. HOLM: Five per cent is small and large is what?
MR. LEBLANC: Large is 16 per cent.
MR. HOLM: So there is a difference between 5 per cent and 16 per cent, an 11 per cent difference. Could you tell me where the difference starts? When do you classify somebody as small and somebody starts paying 16 per cent?
MR. LEBLANC: $200,000 of taxable income.
MR. HOLM: So once it reaches $200,000, that is after, of course, all the deductions, the free lunches and everything else that people get, if they have $200,000 worth of taxable income. So let's say that I am . . .
MR. LEBLANC: First of all, Mr. Chairman, taxable income is not determined by the province.
MR. HOLM: No, I appreciate that.
MR. LEBLANC: Taxable income is determined by the federal government.
MR. HOLM: But of course you are going to have a new Income Tax Act now.
MR. LEBLANC: Mr. Chairman, to be candid on that one, we are in a situation where the federal government is still going to control what taxable income is, just so you know that.
MR. HOLM: But of course in that legislation, you could have amended that had you wished.
MR. LEBLANC: No, the federal government is insisting that one of the things that - just one second - I want to say, first of all, we are changing personal income tax, not
corporate income tax. On the personal income tax, you may be aware of it, bear with me, one of the provisions that though they were encouraging provinces to exercise their option to go to TONI, tax on income, that one of the provisions was that taxable income would not be allowed to be modified.
MR. HOLM: That is one of their provisions. Of course, when you are rewriting the legislation, the feds may have been dictating it to you but if you had wanted to say to the federal government, no we aren't going to play that game and we are going to do it differently and we wish to be able to alter our corporate tax structure, you could have done that.
MR. LEBLANC: Yes, Mr. Chairman, but we would have had to collect the tax and . . .
MR. HOLM: Yes, okay, that is fine.
MR. LEBLANC: I don't think anybody wants to get into that kind of situation.
MR. HOLM: Or done some hard negotiating because I think, if I am not mistaken, didn't the Premier say that one of the areas that he was going to put more resources in was Intergovernmental Affairs so that they could fight harder and be more effective against the federal bad Liberals and the bad Liberals provincially where you are going to be far more effective?
MR. LEBLANC: Well, I think the big thing here, Mr. Chairman, is that we are talking about accessing programs that can give dollars to Nova Scotia. The federal government has told all the provinces that this is one issue where Nova Scotia will not be at a disadvantage to other provinces in this regard. So this is not the same thing when you are referring to Intergovernmental Affairs.
MR. HOLM: Let me just ask this question. Let's say that I am one of the Sobeys in business, just one. Who will I be? Maybe I can be Empire Theatres. I think they own that one and they also own a whole bunch of different corporations which own different shopping centres. Each one of them is probably a separate company. Let me just say that I represent one of those and I have $1 million worth of taxable income. On the first $200,000 I would pay 5 per cent, correct?
MR. LEBLANC: On this, my understanding of it, actually my director here is not altogether sure of this but I will get the answer, is if you have associated companies, the exemption is not done individually. So every company doesn't start afresh but I am going to check that out.
MR. HOLM: That is if they are separate.
MR. LEBLANC: But if they are owned by the same entity, I think the provisions are . . .
MR. HOLM: I think that if they are different companies, I would like to get that checked.
MR. LEBLANC: It is a good question, Mr. Chairman. I will check it. I believe that it would be pooled together.
MR. HOLM: Let me just separate it off then. We will leave Sobeys out of it. Let's say that I run a very profitable fish processing plant, okay?
MR. LEBLANC: Are there any?
MR. HOLM: I will be a fish wholesaler. Okay, let me be a fish buyer and seller. Let's say that the profits were $0.5 million. This is hypothetical. On the first $200,000 I would pay 5 per cent, correct?
MR. LEBLANC: That is correct.
MR. HOLM: On the second $300,000 I would pay the 16 per cent.
MR. LEBLANC: Provincial tax as opposed to federal.
MR. HOLM: Provincial tax, yes. So in other words, the large businesses are getting the same tax break as the small businesses. Correct? On the first $200,000 the are getting . . .
MR. LEBLANC: That is correct.
MR. HOLM: Do you know how many such businesses there are in Nova Scotia that are getting that, that really classify as big business because they have over $200,000 in . . .
MR. LEBLANC: I don't have that number with me. I am not sure whether that is something we could provide or not. She says she can probably get the projections. I don't have it here.
MR. HOLM: They would be very interesting projections to have because these big businesses which are getting the small business tax rate of 5 per cent, they are saving 11 per cent. So on $200,000 alone, that works out to be what, $22,000 a year in tax break by getting the lower tax rate?
MR. LEBLANC: Mr. Chairman, when people talk about whether or not companies should have tax breaks and whether they should only pay 5 per cent provincial plus the federal which I think is about 18 per cent, so if a company is making money and has taxable income, let's say they only make $100,000, it would be 23 per cent payable on that. People say, well, that is only 23 per cent and that is wrong, it should be higher. Eventually, some day, those profits will come out of the company. When they are, they will be into personal hands. You build up equity in the company to build up your company and to have resources and working capital that in time will allow your company to withstand ups and downs into it. Eventually that money has to come out and what it is, it will be taxed personally. So you have to look at both aspects of it and I think if you don't then it is somehow a little clouded.
MR. HOLM: Well, thank you and I am sure that the shareholders of Nova Scotia Power in New York, Toronto and other places are very pleased to know that because Nova Scotia Power would also be only paying 5 per cent on the first $200,000 profit as would MTT, as would The Bay, as would Wal-Mart, as would all these other businesses. Budgets are about choices.
MR. LEBLANC: Mr. Chairman, first of all, you talk about New York and Boston, we used to pay interest to those people in New York and Boston, too, because a lot of that borrowing was done out of province.
MR. HOLM: That is something I will congratulate this government and the other one and we have been saying something we have pushed for years. All we have to do is look at the newly, well lit, Macdonald Bridge with its $600,000 lights. Students who have sent me e-mails have asked, why did we spend $600,000 to light the Macdonald Bridge when we are having teachers who are being laid off? Yes, I recognize they are out of different pots but you tell that to the Nova Scotian because we only have one wallet to take the money out of and whichever department is taking it, it is all coming out of the same taxpayer and it is not necessarily going to those - as the government talks about - core programs.
[3:00 p.m.]
I go back and I would like to ask the question, why didn't the government do an analysis to find out how much money would have been generated by eliminating the small corporate tax rate for those companies that are actually not small corporations but are, in fact, the larger corporations, so that they start paying their fair share? Now I know that some of those in the Metro Chamber of Commerce, like Nova Scotia Power, may not have liked that kind of analysis but those parents out there who see the class sizes going up and the resources that the children are going to be deprived of, might have appreciated it.
MR. LEBLANC: Mr. Chairman, I guess, in a sense, two things, one of which is that it is also a competitive issue. Within the Atlantic Provinces, New Brunswick and Nova Scotia are very comparable. Actually, right now, I think with the changes that New Brunswick
brought in, they are a little lower than ourselves, which is an issue in itself. The member mentions the Bridge Commission and the fact that they spent the $600,000. That is one of the things that I am responsible for and the member had asked this. Actually, subsequent to the event happening, and I had told the member that it actually happened on my watch . . .
MR. HOLM: And it was a decision made under the former watch.
MR. LEBLANC: But actually it had been awarded before but I didn't bother getting up and correcting that because I didn't think it would add to the thing but since we are on the subject and it has been discussed here, when I had asked the question, the first response that I had, that it happened, it had been awarded subsequent. That is irrelevant. The money was spent. Since we are doing something here and the issue is being brought up, I did want to mention that. I got off the topic there and I have lost my frame of thought.
It is important for ourselves to be competitive. People look at companies only, I guess in a sense, as tax exemptions that they get and so forth. These also are the same companies that provide employment and I think it is important that we are competitive. One thing this year that we have done, we have also reduced the overall spending of the Department of Economic Development and have put in place a review of how we do economic strategies. Now tax rates are something that companies will look at.
MR. HOLM: I appreciate that and I have heard the old competitive argument used over and over again but what the minister is, in a long, round about way saying, is that no, we didn't do that kind of analysis, we didn't look at that to see what it would generate. Probably, also, although he is not saying this, this is my spin on it, Murray Coolican and the Metro Chamber of Commerce maybe wouldn't let you. I wonder if you have done any kind of economic analysis to figure out, when you are talking about those forces that will help to attract businesses and maintain businesses, what kind of an impact, destroying the health care system, destroying the education system will have on attracting and maintaining businesses in this province, businesses that we need to depend upon to pay good wages to the employees and to provide needed tax revenues for the province?
MR. LEBLANC: Mr. Chairman, I want to say that for ourselves, I think the message that we are sending to the business community, if you want to send one, is that we are trying to control the growing debt we have in this province. I think a lot of people don't want to talk about that but it did go up $85 million this year. No matter what we say, that is a fact. If we don't start controlling our expenditures and try to bring about some reduction in our deficit, that will continue to escalate and we can't argue with that. That is a fact.
The member continuously asserts that we are under the strict guideline of the Metro Chamber of Commerce and I tell him categorically, that that isn't the case. They have the right to express their opinions and I expect them to do so in the future and I expect the other groups who are talking for the social advocacy side of this issue to do the same. That has
been the case in the past and that is going to be the case in the future. As a government, it is our responsibility to listen to both but to make a decision. I know when I do that that I will not probably please either side, that we have to bring about some rationalization of the deficit that we had and the amount of debt that we have.
MR. HOLM: I guess I just have to say that it is quite obvious as to which side the government has listened to when you take a look at where the cuts have been made and whose advice seems to have had the greatest ear of government. Let me just go on to a few other things. First of all, in terms of the projected increased income in Nova Scotia, it is projected that the average income in Nova Scotia will increase by, what is it, 2.9 per cent?
MR. LEBLANC: Correct.
MR. HOLM: Every other body, other than the Department of Finance, has projected that the economy of Nova Scotia would grow by about 3 per cent?
MR. LEBLANC: No, the Conference Board of Canada just came out with a suggestion, I think two or three weeks ago, that showed 2 per cent pretty well across the Maritimes.
MR. HOLM: Across the Maritimes.
MR. LEBLANC: Pretty well, I think every province, they were saying the Atlantic Provinces, 2 per cent, approximately three weeks ago.
MR. HOLM: And what were they saying for Nova Scotia?
MR. LEBLANC: She will get it up for you.
MR. HOLM: The conference board is saying 2 per cent growth but personal revenues or incomes are still going up by 2.9 per cent. Do you hold to that?
MR. LEBLANC: I will get that from her.
MR. HOLM: Or have you adjusted the income levels in your budgets downward?
MR. LEBLANC: She is getting that information. Just ask the question again because she was getting . . .
MR. HOLM: You budget said 2.9 per cent personal income projected growth.
MR. LEBLANC: So you wanted to know, first of all, what the projection of the Conference Board of Canada was for Nova Scotia.
MR. HOLM: And do you still hold to that 2.9 per cent?
MR. LEBLANC: The conference board quoted 2 per cent for the Atlantic Provinces, quoted 2.5 per cent for Nova Scotia and I look here at some of the projections that we have, the TD Bank projected 2.2 per cent as did the Bank of Montreal. So there is quite a variety of different . . .
MR. HOLM: That is in the last . . .
MR. LEBLANC: This is for 2000.
MR. HOLM: That was just the most recent? They came out before or after your budget?
MR. LEBLANC: The TD Bank is March and the conference board is February.
MR. HOLM: Okay. They are still considerably higher than the provincial estimate of 1.8 per cent.
MR. LEBLANC: That is correct.
MR. HOLM: So obviously the Government of Nova Scotia is more pessimistic about the economy than any of the other major bodies that look at our economy. So one might ask whether or not, especially given the fact you are projecting that the income levels are going to increase by 2.9 per cent, the conference board, you said, said 2.5 per cent and yet you are showing in your revenue growth that personal income tax is going to increase by - what is it - $50,000-some odd?
MR. LEBLANC: A couple of things here that are all-important. There was information that came out by Statistics Canada that showed new investment intentions data and also the federal budget came out subsequent to some of these things coming out. Of course those are two things which bear into it. The other thing, I am sorry, John . . .
MR. HOLM: About the income tax. You say 2.9 per cent increase and 2.5 per cent by the conference board yet you project, on over $1.1 billion estimates you throw in a grand total of 2.9 per cent equates to, $54,000?
MR. LEBLANC: Well, there are a few issues that go into here and a lot of them are timing. The definition that the federal government has brought in, in regard to how capital gains is calculated, it went from 75 per cent taxable to two-thirds. It had an impact of about $7.7 million that we lost this year. The other issue that happened last year was that there were changes in the federal tax rate that took effect on July 1st which didn't have an impact for the full year which will have an impact this year in its entirety. That was a total of $11.9 million.
So those are things that impacted this budget that wouldn't have impacted last year. So those are just two issues in itself that are almost $20 million in that regard.
MR. HOLM: I will get to those two then. One was a change in the capital gains tax. You are saying the federal changes in capital gains cost us approximately $7 million, give or take?
MR. LEBLANC: Yes.
MR. HOLM: We are going to have a new Income Tax Act and you are passing through the changes that the feds have made on capital gains. Are you passing that through in the new legislation that is being brought forward?
MR. LEBLANC: Mr. Chairman, I have no option because the determination of taxable income is a federal one. There is an another issue, maybe we will come back to that.
MR. HOLM: I can't help but point out that capital gains taxes and benefits, who do they normally benefit? Most of the people who benefit from those, the big winners, are they the lower-middle income people or do they tend to be the people who are more well-heeled?
MR. LEBLANC: Mr. Chairman, I would imagine that it is people who have the means to invest.
MR. HOLM: That is right. That one is being passed through the feds, we aren't challenging that. The income creep, the tax creep that the feds are bringing in that would have seen the amount of a person's income tax payable decline with inflation, unless their salary increased by more than that amount. In other words, you are maintaining the bad Liberal practice of the income tax creep that would be quite favourable towards a Creep Party.
MR. LEBLANC: First of all, let me just give you a little more information. Out of the $7.7 million, in regard to the capital gains, $3.2 million of that is the capital gains side of it; the other aspect of it is the changes in the non-refundable tax credits that are given, which we have accepted the changes, which is basically for $4.5 million. That does help the low income earners, because everyone will benefit from that. The $3.2 million is due to the fact they have changed how they tax capital gains. I have already indicated to the member that I don't have the ability to change that, the member can say that I do, but I don't. One of the things the federal government has clearly said is that we will allow people to piggyback on our system and we will collect the taxes for you, but you are not going to determine what taxable income is, we will determine what taxable income is, and that is why that one is flowed through.
There is another issue that should be brought forward and discussed. The past year, 1999-2000, included about $18 million of revenue that could have been or should have been allocated in the 1999-2000 year, but by the time that information came forward the 1998-99
year had been closed out, so it was added into last year's income, which makes the comparative, again, even a little more cloudy, and I don't argue the point.
We have basically three different issues that are making the situation more difficult to read. The member brings up that if you compare estimate to forecast, it is only out about $54,000, which is amazing when you figure out that we collect huge amounts of revenue in personal income taxes. There are three different components, one of them I have just broken down for you which is the $7.7 million, which is between both capital gains, $3.2 million, and the increase in the non-refundable tax credits, $4.5 million, that we have given back to Nova Scotians. Even in these changes, there has been some tax benefit to Nova Scotians because of these changes, but they are minor in comparison overall to the system.
MR. HOLM: I guess the only real way to have a full understanding of all of the tax changes and everything there is if the minister wants to table his briefing book with all the details.
MR. LEBLANC: Mr. Chairman, that is a good try. On the ones we are referring to, it wouldn't be that difficult to list those four different items. I am sure I can get staff to analyze and give you that I am more than prepared to do so.
MR. HOLM: Maybe I will put in a FOIPOP for your book, it has been done before.
MR. LEBLANC: It probably wouldn't be the first time.
MR. HOLM: I know it wouldn't be, and it was successful before. Anyway, I won't get into that. Let me just close off that little chapter for the moment by saying this, is it fair to say that in terms of the revenue projections that you have brought forward, you have attempted to be conservative?
MR. LEBLANC: I can say two things - I always say that - let's say one thing at a time. One thing that is important for me as Minister of Finance is to let the staff that we have here, headed by Liz Cody, do those projections on the modules. I don't get involved in them, I don't pretend to, and I make a very specific point not to give guidance as to what numbers I want or what would be good or what would be bad. They take the information that is presented to them and is available to them by a multitude of projections, obviously, coming out, I have mentioned two or three of them, but also the modules coming out of the federal government, and they put together the budget on the revenue side of it. That is subsequently examined, obviously, by the Auditor General.
When those numbers are punched out, we put them into the budget, but it isn't something Cabinet decides whether or not these numbers look good, this is the way they are projected. I know the member brings up a good question, how could they be so close? And, of course, it brings up the question, it is hard to believe that the forecast and the estimate
could be that close in actuality. I have given some of the rationale here, and we will give it in a written form that also explains it.
MR. HOLM: I appreciate that, but that didn't really totally answer my question, and that is, would you wish to err on the side of being conservative or liberal in your revenue projections?
MR. LEBLANC: This is a loaded question. I want to say first of all that in the past, perhaps people have been more optimistic in revenue projections. My personal approach is always to be cautious. I am telling you what my approach is, and I am telling you Neil LeBlanc's position. That is not necessarily the case of the department. I want to speak very candidly, I don't even try to give guidance in these numbers because that would be . . .
MR. HOLM: I am sure you would.
MR. LEBLANC: I know the member believes that in all sincerity. I think it is important they have the latitude to do their job, as they were hired to do.
MR. HOLM: I do remember the days, sometimes philosophies even for right-wing Parties do seem to change, back in the Buchanan era you would come in, when a budget was brought in, with a very conservative debt projection or deficit projection for the end of the fiscal year, and then when the new budget came in, lo and behold revenues weren't what we thought, the debt was much higher, but it is going to be better. You always started off with good projections as to what it was going to be like the next fiscal year, and at the end of the year, of course, it never came in.
Now it seems to be the flip side. Now it seems to be that you come in with these bad projections as to what the debt is going to be and then you come forward at the end of the year and say, gosh, aren't we such great managers, look at this, we brought in way under, and look at this, we are almost a full year ahead of our election commitment, we are going to be able to give tax reductions in two years' or three years' time instead of in the fourth, and what the heck if we destroy the health and education systems in the meantime and they are driving all kinds of businesses away and we have to import skilled workers from abroad, what the heck, we are exporting all kinds of people. That seems to be a change of philosophy, but that is just my opinion.
MR. LEBLANC: Is that a question?
MR. HOLM: Not really, that is just a modest little rant in here. (Laughter) I will just touch on the debt for a second, if I can. We actually now have a total debt, showing on the books, of just shy of $11 billion.
MR. LEBLANC: I think that is correct.
MR. HOLM: Of that $11 billion that is shown as debt, how much of that is actual paper debt? I am not talking about the amounts of money, theoretically, that we have put on the books because of Sysco and that kind of thing. How much is hard debt for which we are paying interest payments?
MR. LEBLANC: I am looking at Schedule 20 of my speech. We have a gross debt this year, the end of 2000, of $12.389 billion with the net debt being $9.5 billion.
MR. HOLM: It is the net debt that we normally refer to as the $11 billion, because the gross debt is all those other things, like the school boards. When we throw around this figure of $11 billion, which everybody talks about, the reality is that the amount that we are paying interest on is $9.5 billion. I am forgetting about the gross part, that would be added on in either case.
MR. LEBLANC: It would be that $9.5 billion plus the P3 commitments that we have made, plus the NSRL commitments that we have, which will drive that up considerably.
MR. HOLM: I appreciate that. When people were throwing around the $11 billion figure before, that was plus the NSRL, plus the P3.
MR. LEBLANC: I don't think you recall me saying that but maybe some other people. I can't comment on other people.
MR. HOLM: I believe so. If I could go back to those P3s for a second, and then there are a number of things that I want to go to from this in the short time I have left today. The P3 leases - and if you don't have this information maybe you could just get this for me afterwards - and I know the figure is in here somewhere, $30 million or whatever it was, and that is for schools with a total value of, again I can't remember the P3 value that those schools covered, let's say it was $300 million and let's say it with $30 million, I know both those figures are wrong. I would like to know, if the government had built those and owned those schools, what the borrowing costs over a 20 year mortgage payment would have been for those facilities?
MR. LEBLANC: Mr. Chairman, the only problem you get into is when you would have actually made the borrowing, which is a little . . .
MR. HOLM: Yes, I appreciate that.
MR. LEBLANC: So you are going to have to make some assumptions on that.
MR. HOLM: I appreciate that too, and I know the rates now are a little higher than when those buildings were being built, and some of those buildings that we haven't taken over, the mortgage payments probably haven't been finalized on them, so we probably don't
have a firm lease payment amount negotiated for those either, because they are going to be dependent upon the going rates of the time.
I would like to get a commitment from the minister so we can actually see, on paper, what the costs of the structures were, the total cost of the P3 leases, skipping the maintenance because that would have fit in with both sides, and the costs of doing that as a government lease. That is something that should have been done, certainly it should be available through any analysis that was done on those leasing arrangements.
MR. LEBLANC: Mr. Chairman, I am not sure what has been done, going backwards. It is hard to say. I think the member is asking something that is reasonable. The only thing is that I am not sure whether or not it will be like comparing apples to apples or apples to oranges.
MR. HOLM: It could be pulled out very easily, I am sure the Department of Finance has information in its database as to what the borrowing rates at the very specific times that each one of those leases was finalized. Let's just throw in the lease arrangements at that time. I have a little rinky-dink computer program on my computer at home, it was even a share-ware, I could lend it to the Department of Finance if they want it.
MR. LEBLANC: Mr. Chairman, we will take as many donations as possible, if they want to give us the computer, but I think I would rather let him have his computer and work it out on ours.
MR. HOLM: I was just going to copy the program onto a floppy disk.
MR. LEBLANC: The deputy says we could try to make some projections, some of them actually aren't finished yet. When you actually access the funding, it will have an impact on it. When you were building the old way, of course, you had percentage of completion advances being given to the contractors. Under a P3, you don't pay anything until everything is done, so that has another aspect to it. Without trying to get into all the schools, I will try to see whether we can compile even some of them and see if we can make some projections. I think if the member can be agreeable to that, then we will try to work out some projections.
MR. HOLM: What kind of time-frame would that be? I don't expect it tomorrow morning.
MR. LEBLANC: I don't think so. The advice we are getting is two to three weeks. The only thing is, I want to make sure the commitment is abided by. I want to make sure the member appreciates that it would not be written in stone, it would be approximations. I think the member is aware of that.
MR. HOLM: I appreciate that.
MR. LEBLANC: Flipping ahead to Panuke, the NSRL pact. There is some dispute, and I am not going to get into who did what when, whether the decision to give away or sell, whichever phrase you want to use, our 50 per cent ownership in Panuke. Of course, we could have exercised another option way back when, the former government, we could have picked up 100 per cent ownership in those fields for nothing, instead we gave it away and left it back with LASMO and LASMO turned around and sold it to PanCanadian for $60 million. LASMO $60 million, we got nothing out of that one, and now PanCanadian owns 100 per cent of it, and we get 2 per cent of the revenues, eventually.
I just want to ask a question. Before the decisions were made to forgo our opportunities to own 50 per cent of a gas field that is probably larger than Sable, I want to know when Nova Scotia Resources Limited decided to try to farm out our 50 per cent to other companies, when was the decision made to make those offerings to other exploration companies to take our 50 per cent position in that and, what offer was made to them, exactly?
MR. LEBLANC: I will get Jim MacDonald to come to the table because he has the specifics on this. For the members of the committee, this is Jim MacDonald, General Manager of Nova Scotia Resources Limited. The information I am receiving here is that Nova Scotia Resources Limited had, at some time prior to the election, for some length of time felt this was a high-risk venture, and it had some difficulty going ahead with this. I think the member is aware that we had a deep-water well at Panuke that had been estimated to be a few million dollars to drill, and it turned out to be a considerable problem, and I think it cost us well over $20 million before it was finished. Anyway, by July 22nd, three companies had already been asked to look in regard to trying to . . .
MR. HOLM: When were they asked or approached to do it?
MR. LEBLANC: He says by July 22nd.
MR. HOLM: By, that could mean July 21st or it could mean January or February.
MR. LEBLANC: I am informed that it was just prior to that, a couple of weeks before, they had to have a data room together, the information is there. If people are interested in farming-out, obviously, the information they receive is confidential. They have to sign the confidential information - all the information is held on hand so that it doesn't get out. So basically, just prior to that.
[3:30 p.m.]
MR. HOLM: Okay, so they were given the information early in July and asked if they wanted to take Nova Scotia's position. When were they told they had to respond by? How much time were they given to make a decision?
MR. LEBLANC: My understanding is that there was no deadline as such. It was kept open.
MR. HOLM: When did the government make the final decision that PanCanadian gets it?
MR. LEBLANC: I think the day was in October. I can find that out.
MR. HOLM: So early in July they were notified, or three companies were approached, so that means they had part of July, August, and September, a little over two months. Were those companies told that if they didn't come back with a response by October, it was being given to PanCanadian?
MR. LEBLANC: I guess I am missing the point.
MR. HOLM: My point is I am trying to nail down some time-frames.
MR. LEBLANC: Why, if we are approaching the groups to see whether or not they would want to get into it, whether or not we were the shareholder or PanCanadian, what difference would that make to the companies?
MR. HOLM: Well, the difference is, these companies, and the minister surely knows, even though they are big boys with big deep pockets, deeper than the Province of Nova Scotia, they do long-term projections and plannings, and they make their commitments as to capital expenditures often for several years in advance. If we are going out to these companies and saying to them, look we have this parcel. Are you interested in taking our spot, in taking or assuming some of the risk with us? Those companies have to jump through a bureaucracy that is many times greater than the Province of Nova Scotia's. If they are going to be expected to make a decision within a couple of months, it isn't going to happen.
MR. LEBLANC: Mr. Chairman, my understanding from the oil industry, that farming-out is not unknown, it is a relatively common practice. A lot of times, especially when have a percentage of a well, the situation arises where you may not feel the same optimism as your partner as to whether you perceive it. Farming-out is a way whereby you can keep rights regarding that well and the other person puts their money up.
MR. HOLM: I understand that.
MR. LEBLANC: As much as I appreciate the member's comments that they need lead time. I think the fact of the matter was they felt based apparently on the evidence that was there, the information that was provided to them, it was not in their best interest to go forward with regard to this one well.
MR. HOLM: Did you get any correspondence back from those companies stating that they felt it was a poor risk, and turning it down on that basis? I would suggest that yes, indeed farming-out is quite a common practice. But if you are going to farming-out, those companies have to have the data, they have to have the information, they have to have time to analyze it, they have to have a chance for the executive management, or whatever you want to call them, to make recommendations. Those recommendations are going to have to go to the board. They are going to have to figure out whether or not the funding is available to switch around what their plans were for the capital investments for the coming year. Even the big boys don't just throw millions of dollars at the switch. They want and need to take some time to do due diligence.
MR. LEBLANC: Mr. Chairman, I go back to the fact that we made as much information available that they required, and we didn't hold anything back from these companies that were there. If they would have shown interest, the situation would have been one that we probably would have also delayed making our decision, because that would have been an option we would have had to consider when we made the decision to take a percentage of the Panuke well, rather than maintain a 50 per cent proprietary right in that. I guess you can always look back in situations and ask, did we do as much as possible? I think the answer is yes, to make sure we could farm it out. We approached companies, and I do know that PanCanadian, themselves, approached other companies.
MR. CHAIRMAN: The time for the NDP caucus has expired. Now back to the Liberal caucus.
The honourable member for Lunenburg West. You may start your hour of questioning. The time is 3:35 p.m.
MR. DONALD DOWNE: Thank you, Mr. Chairman and Mr. Minister. In the beginning of the questioning with regard to the restructuring of government, the 21 to 14 departments, you use an example of the Nova Scotia Alcohol and Gaming Authority where it was, in your view, a lack of efficiency because the Nova Scotia Alcohol and Gaming Authority was separate, a quasi-judicial body that was arm's length to regulate the whole issue of gaming in the province, and that, in your view, it would be a lot more cost effective if it is under URB. You use that as an example of poor management. Can you give me the economic analysis of that; do you have anything to prove where the cost savings will be within that amalgamation?
MR. LEBLANC: Mr. Chairman, I know the member has asked me this question in regard to the other ones, and I go back. A separate entity was created, whether it was the right move or not, it is not for me to go back to the time when the decision was made. The Nova Scotia Alcohol and Gaming Authority is one that, in this government's opinion, is not required. We can do the functions from within the URB, which will do the adjudicative functions of that commission or authority. The other functions of it can work themselves into
both - I would assert, Mr. Chairman, first of all, they will probably be into more than one government department because we are putting forward Environment, Labour, and Regulatory Affairs, which is to do the regulatory aspects of government. The other one is Business and Consumer Services, which will change to Service Nova Scotia, which does the service delivery.
There are the efficiencies that these commonalities of function that the reorganization will bring about. I stand convinced today, as I did when we made the decision, that will bring efficiencies and will bring cost savings to the government. So he is asking for cost-benefit analysis for that decision, it is the direction of the government that we will bring about efficiencies in this.
MR. DOWNE: Mr. Minister, you are saying it will give savings. Do you have anything to show me? Have you any piece of paper, any documentation, anything internal, anything at all to be able to say there are going to be savings? You are a nice person, and maybe everybody believes everything you say, but I am asking you, where is the proof? Internally, you wouldn't make that statement unless you had something to substantiate it. So I am asking, what do you have to substantiate it that I could see?
MR. LEBLANC: Mr. Chairman, I know the honourable member feels that the status quo is perhaps the way we should go. But I am telling you, the status quo still left us with a $497.6 million deficit in the fall, and we still have $268 million. I tell you, we have to move on this issue, and the longer we wait, the more difficult the decisions will be down the road. I am more than convinced, as is our government, that the streamlining of government will bring about the efficiencies that we require. The member can call that a gut feeling, and I disagree altogether. It is a streamlining of government, and that is what we have to do.
MR. DOWNE: Listen, Mr. Minister, I was the one who helped write the book regarding the status quo no longer being an option when we were in government. So don't tell me about the status quo. I simply asked a question, and you walk around it. I don't know if you are scared to answer questions, or if you are afraid of what you have to say, or you are intimidated by the questions, or what the situation is, but clearly, the simple question was, can you show me something to substantiate it? I am not arguing about it. I am not arguing that you are doing it. I am simply asking for some proof, and you refuse to give it to me. I assume that it might save money. Well, okay, but somebody in some department must have taken a look at this thing and said, look, minister, we have 50 people doing this job, we can do it under this auspices and it will save five jobs. We can give the same credible level of service, and we can provide the same regulatory body at arm's length of government.
Somebody must have come up with some analysis of that, as basic as that. Four or five less people, whatever it is. There must be somebody that did that. You couldn't have just simply thought it in your own mind and are sitting here saying that because you are not the type of guy who would get up and make a bold statement like that without something to
substantiate it. I simply asked if I could see or have or show me something that would substantiate the statement.
MR. LEBLANC: Mr. Chairman, if you look at the Nova Scotia Alcohol and Gaming Authority, just the administration, the board itself, is about $.5 million. Is that required? The answer is no, and that is one of the reasons we are moving the Nova Scotia Alcohol and Gaming Authority into the URB and into the other departments of our governments. We can't afford that level of bureaucracy, and that is one of the changes we are brining about. The URB is well positioned to make those decisions, and we don't need a duplication of that board. The facts speak for themselves.
MR. DOWNE: Mr. Minister, I wasn't going to go into this side of it, but I think I will just out of pure joy here. We are now going forward here. We are moving on Bill No. 34 to about nine boards in Health. An increase of four or five boards. Four or five CFOs, the number of boards increased, whatever the number, I forget the exact number we had before we got up to nine. Now we are going, in Health, from five to nine. Now the rationale for the Nova Scotia Alcohol and Gaming Authority is, we can do it all under one, save administration. Now we are going from five health boards up to nine. I would assume they will have some CFOs and CEOs and so on and so forth, so where is the saving of that? Where is the analysis of the saving if the agenda is clearly fiscal restraint? The agenda is clearly meeting target numbers. The agenda is clearly, putting our House in order. Then how do you justify, economically, Bill No. 34, where you have gone from five to nine boards? How do you justify that? Is it another warm fuzzy feeling?
MR. LEBLANC: Not at all, Mr. Chairman. I think if the honourable member believes that regional health boards were working well the way they were, perhaps he was the only one in Lunenburg County. I tell you, I have been in Lunenburg County, and I have been in Yarmouth County, and I have been in Shelburne County, and I have been in Queens. There aren't a whole lot of people who believe that the regional health boards were efficient the way they were structured. The level of bureaucracy that it created, and the requirements for prior approvals where decisions were left hanging for long periods of time, caused a lot of problems within that board. One of the reasons we moved to district health authorities is to bring about a more hands-on approach within those district health boards to make decisions in a more efficient way. The member is assuming we will do the level of remuneration that was put in place by the previous administration and the level of bureaucracy that was permitted to build up. The answer is no on both fronts.
Now this is one that I know the honourable member is of the opinion that regional health boards were working, and probably no matter what I could say here today will probably change his mind because it was part of your administration's vision to move along in those directions. But it is not one of ours. We clearly stated that in our mandate, in our platform, that we would be moving to reorganize regional health boards into the present format.
MR. DOWNE: Mr. Minister, I think, really, you have just answered your own question. It is a political agenda. It was a blue book promise, and there is no more rhyme nor reason for it than that. I am glad you have been to Lunenburg County. My wife even went to hear your speech.
MR. LEBLANC: And I spoke well of you.
MR. DOWNE: You spoke well of me? I appreciate that. You kind of take me off my stride when you do that. (Laughter) You have been to Lunenburg County. You are not a professional medical person. You are not an accountant.
MR. LEBLANC: Yes, I am.
MR. DOWNE: You are a B.Com., aren't you? You have a Bachelor of Commerce.
MR. LEBLANC: I articled three years with a chartered accountant firm.
MR. DOWNE: You articled? You are a chartered accountant?
MR. LEBLANC: No, I said I articled three years with them.
MR. DOWNE: You articled three years. You flunked?
MR. LEBLANC: No, I went on to my family business.
MR. DOWNE: You articled for three years for a CA, and you didn't finish? You didn't write the exam?
MR. LEBLANC: No, I didn't get to that point.
MR. DOWNE: How many years do you article before writing the exam?
MR. LEBLANC: Anywhere two to three, depending on the circumstances. Usually three and a half, something like that. It depends on what the circumstances are. That is irrelevant here.
MR. DOWNE: Now wait minute. If you article with a company for three years, and you were ready to write your CA exam, did you write any exams?
MR. LEBLANC: It was a one course - look, I am saying . . .
MR. DOWNE: Wait now. I . . .
MR. LEBLANC: Mr. Chairman, he asked me whether or not I was an accountant. I say my background is accounting. I worked with Peat, Marwick and Mitchell and received a good education and experience when I was there. So I am saying that my background is there. I do not have my CA. I don't profess to have one, but I do have the experience that working there gave me, and it has been something that I have used throughout my life.
MR. DOWNE: Did you flunk the test?
MR. LEBLANC: Did I fail an exam? I did fail an exam.
MR. DOWNE: Anyway, the health boards, back to the health boards; the nine boards. You have been to Lunenburg County, you have been Shelburne County, that is great. I have been down in your community, a beautiful community. I have no way of determining, without doing some sort of analytical work or analysis, whether or not the boards are cost effective. We have undertaken, with your Party recommendation, in fact, all three Parties, two Parties, had agreed for us to go ahead. We had an all-Party committee basically go out and analyze whether or not the five boards were functioning. The report came back that they were doing okay.
So we are now up to nine, if this Bill No. 34 goes through, with a feeling that it is going to be even better. So one minute we are doing cost issues, in another minute we are doing a better service delivery; in another we are doing a better feeling. All of this is affecting all Nova Scotians, it affects every Nova Scotian, what you have done in this last budget and restructuring and so on and so forth in the bills that are here, without one, even half of one, cost-benefit analysis. We are going from five to nine, and that is going to be more cost effective, and that is going to save money. On top of a time when you are taking $70-plus million out of the acute care system and $9 million out of Southwest regional acute care delivery, and we are going to nine boards versus five, and that is going to save us money. If you say so, Mr. Minister, but I find it awful hard to sit here and accept that without some proof.
I want to ask you a question on the Nova Scotia Alcohol and Gaming Authority. You and I have talked about it, in a roundabout way the other day. The staff that go to the bars, the liquor inspectors, then they got rolled into this group here, and I don't know where they are going to end up now, back at the URB, are they going to be with the URB, or in another restructured department?
MR. LEBLANC: Mr. Chairman, first of all, the functions that will be over at the URB will be the adjudicative functions. That is what those hearings are going to be; basically hearings, appeals and so forth will go there. There are functions within this that can be delivered, especially to our agencies, and I will use Business and Consumer Services, which will become Service Nova Scotia, which makes a lot of sense. The member may agree or disagree with that. I do believe, especially for a lot of people who are applying for lotteries
or even bingo licenses and so forth, that some of those things, especially, can be initiated at the local level, rather than everything having to come here, especially by electronic means. The regulatory part of it, where you are talking about the inspectors and so forth, are looked to be moving over to Environment, Labour, and Regulatory Affairs as an inspection function, because that is where the commonality of functions will be moving, into that department.
MR. DOWNE: I can see some logic in that. I really can. The employees who are there, these employees were brought under, when they made the transition, I forget, they weren't NSGEU before . . .
MR. LEBLANC: They used to be the Liquor Licensing Board.
MR. DOWNE: Yes, the Liquor Licensing Board, I don't know, were they in the CUPE? I can't remember what union they brought in. There is a big argument whether or not all their years of experience and seniority was brought with them. I really don't know if it was or not. Now they are going to be brought into another body. With all their seniority from when they were hired and all that, will that come forward with them and give them some sort of protection in the system, or are they very vulnerable to the bumping potential that is going to be out there after the restructuring starts.
MR. LEBLANC: Mr. Chairman, the member brings up a question that we discussed just outside the House the other day, and I was going to write it down and mention it to the minister responsible, but I forgot. I will make a note of it to do it. The member brings up a good point. Rather than speculate, I will do that now to make sure it is addressed.
MR. DOWNE: Thank you, Mr. Minister. The budget itself, the budget deficit of $268.093 million for 2000-01. Is that the number?
MR. LEBLANC: Those are the projections.
MR. DOWNE: Yes. And that is compared to 1999-2000, $765.229 million?
MR. LEBLANC: That's correct.
MR. DOWNE: In those numbers, and I use the term trumped up to some degree, you have everything, I think, in there including the kitchen sink and every dirty dish in the House. There are some extraordinary items, one time charges, non-recurrable items. Do we agree?
MR. LEBLANC: That is correct, especially the Sysco one being the major one.
MR. DOWNE: And when I went through these numbers and tried to look at them, I came up with a different number. Can you tell me if the $767 million, just rounding that off, is the gross number that was the projected deficit of 1999-2000, is that right?
MR. LEBLANC: No I think it is $765.229 million. That is what we are showing here.
MR. DOWNE: Okay.
MR. LEBLANC: I am just quoting out of the estimates here.
MR. DOWNE: Yes. Forecasted deficit, it bounced around the numbers. But okay, $765 million. Sysco costs of $378.5 million?
MR. LEBLANC: That is correct.
MR. DOWNE: Pension adjustment of $26 million?
MR. LEBLANC: That is correct.
MR. DOWNE: Long-term service adjustment of $5.5 million?
MR. LEBLANC: That is right. That was for the school board's pension service awards. Yes.
MR. DOWNE: That is all part of this big number?
MR. LEBLANC: That is correct.
MR. DOWNE: Okay. Long-term service adjustment of $5.5 million. Y2K is $45 million?
MR. LEBLANC: I am not sure if it is $45 million. He is saying that is approximately correct. Not exact.
MR. DOWNE: Well they are rounded off.
MR. LEBLANC: Okay I know. Yes.
MR. DOWNE: General election $6.4 million?
MR. LEBLANC: That is correct.
MR. DOWNE: Restructuring costs of $16.1 million?
MR. LEBLANC: That was last year's restructuring costs, is that correct?
MR. DOWNE: That is what we are talking about here. Last year's numbers.
MR. LEBLANC: But you would usually have restructuring costs in a normal year anyway. So those I would say are things that probably will go ahead, and that number, all the other ones you stated are a little different than the restructuring part of it.
MR. DOWNE: But as I understand it, $16.1 million was added in there to add up to $767 over the base?
MR. LEBLANC: Well that is correct, because those were the expenditures there.
MR. DOWNE: Yes. Sysco's operating loss of $31.8 million?
MR. LEBLANC: That is correct.
MR. DOWNE: Older fishers, fisheries workers, or what is it?
MR. LEBLANC: ERP, Fishermen's ERP.
MR. DOWNE: Yes, of $3.5 million?
MR. LEBLANC: I think it might be a little higher, is that right?
MR. DOWNE: What was booked into the . . .
MR. LEBLANC: Okay, that is probably the actual forecast. It was actually less than what was projected. That is right, because fewer people qualified for it than had been projected.
MR. DOWNE: Yes. That adds up to about $512.8 million dollars within a few bucks.
MR. LEBLANC: That could be.
MR. DOWNE: So the real deficit as estimated is about $254 million?
MR. LEBLANC: Based on what was there. Are you taking out the funds that you used for $160 million, you are adding those back in are you? With the prior period adjustments and so forth on the other side.
MR. DOWNE: I am just taking the raw numbers and doing this pretty simply. I am not an accountant.
MR. LEBLANC: The only thing is if you are going to use those, you should also take in the things that aren't added. I know that.
MR. DOWNE: It leaves a balance of about $254 million (Laughter) It's been a long weekend. Actually, it has been a really great weekend.
MR. LEBLANC: We are just starting off.
MR. DOWNE: Starting off pretty good. Anyway, the number we came up with is about $254 million. And that includes $78.5 million in Sysco costs which are Nova Scotia's share of the Muggah Creek site clean-up. Is that accurate?
MR. LEBLANC: The $378 million includes all those aspects.
MR. DOWNE: So $78.5 million and Muggah Creek's figures are part of this $254 million?
MR. LEBLANC: That is correct. No, well, I want to make sure. When you talk about the Muggah Creek, that is included in the $378.5 million. That is for the pension provisions and for the environment reclamation site.
MR. DOWNE: The obligation of the Muggah Creek clean-up . . .
MR. LEBLANC: Is in that $378 million?
MR. DOWNE: One-third, two-thirds, $78.5 million roughly?
MR. LEBLANC: The deputy tells me it is about $68 million. That is including . . .
MR. DOWNE: We might be mistaken. I thought it was $78 million.
MR. LEBLANC: I can get that information. I am just going by the deputy's memory. It is either $68 million or $78 million of that $378.5 million.
MR. DOWNE: So we are pretty close. I think it is $78 million, but you know.
MR. LEBLANC: You could be right, but I have to get some more information on that.
MR. DOWNE: We are getting there. Change in accounting for tangible capital assets. We have the issues of equipment bridges and schools and so on and so forth. I am just trying to work back these numbers. There is about $24 million for schools, $29 million for hospitals, $14 million for Housing and Municipal Affairs, $71 million for Transportation, depending on the definition that we use. The amount, the depreciation that will go on the record is where I am heading with this question. We roll back some of these numbers.
MR. LEBLANC: Okay, continue.
MR. DOWNE: So the $254 million that we came up to, excluding the $78 or $68.5 million Muggah Creek issue, I am just trying to expose what all these numbers are that the gentleman, who was at that the prayer breakfast, rolled over and they stuck in my mind. Some of the members weren't there. He said, is it the prerequisite of every Minister of Finance to tell the other guy was a crook. He said I have been going to these and listening to this from government for years and years and years. I said, well, I am not a crook, and I am sure the minister might agree that I am not. Anyway . . .
MR. LEBLANC: Mr. Chairman, to say that I was insinuating he was a crook, I don't think that is a fair statement. But I do want to say one thing. We prepared these statements in accordance with GAAP, and so . . .
MR. DOWNE: Absolutely.
MR. LEBLANC: And so, when we are talking about this . . .
MR. DOWNE: Absolutely, absolutely, . . .
MR. LEBLANC: In the past, that wasn't the case, to be candid about it. It wasn't the case in the previous administration I was in or the previous administration that the honourable member was in.
MR. DOWNE: Absolutely, Mr. Minister, you are the one that wrote the exam and you know that the accounting fraternity is without question a tremendous fraternity and I support it. In fact, I supported the fact that we go to consolidate. This is not new. I maybe don't understand 1000 per cent of it, but I understand enough that this is the right way to go. I just thought it was important to let people know what was the make-up of this number because it is so big, people are saying, well how could this ever be.
Now, the $254 million, which is a little different than your number, somehow or another I have to get the clarification of that. I am sure your staff will do that. Since the 2000-01 budget is on an expense basis of accounting, the adjustment back to the expenditure basis, requires that we add back the net adjustments, the net adjustments of the tangible capital assets which is part of your presentation A18 when we have the net adjustments for tangible capital assets at $19.85 million.
MR. CHAIRMAN: Which book is that one in?
MR. LEBLANC: That is the Estimates Book.
MR. DOWNE: This is the minister's book.
MR. CHAIRMAN: The Budget Address book?
MR. LEBLANC: No, it is not. It is in the estimates.
MR. DOWNE: This is not your book?
MR. LEBLANC: No, no. It is in both places.
[4:00 p.m.]
MR. DOWNE: It is in both places, I am sorry. I just took this one here because it has your name written up here really nice.
MR. CHAIRMAN: I think there is a reference on a certain page.
MR. LEBLANC: There is no problem. We found it, Mr. Chairman.
MR. DOWNE: Same number?
MR. LEBLANC: Yes.
MR. DOWNE: The $19.851 million, now we have gone from expense basis of accounting to expenditure basis of accounting, yet the net adjustment of the $19.851 million is not on the balance sheet.
MR. LEBLANC: On the balance sheet?
MR. DOWNE: It doesn't show up in your figure of $268 million. What you are projecting for 2000-01, doesn't have the $19.851 million in it.
MR. LEBLANC: I disagree. It is in there. The difference between the amortization costs and the capital purchases is $19.851 million. That number is in there.
MR. DOWNE: It is part . . .
MR. LEBLANC: It is part of the $268 million.
MR. DOWNE: When you show your deficit, you show your deficit of $268 million even though I can figure out $254 million, but you are showing a deficit of $268 million?
MR. LEBLANC: That is correct.
MR. DOWNE: That $19.851 million is part of that $268 million?
MR. LEBLANC: It is, and I am just trying to figure out how I can explain it to you. It is difficult to explain across the table. That is the dilemma that I have. We could try to do it across the table if you want, I have no problem with that. Or if you want to, in between this session, I am not sure if we are coming back or not, to walk you through it. Even the staff, it may be easier to do it. I will leave it to the member's discretion as to which of the two ways you want to do it.
MR. DOWNE: So you are saying it is part of that number?
MR. LEBLANC: It is.
MR. DOWNE: All right. I am sure we will work out some time that is suitable to both to be able to get that. The way I looked at it, it appeared to me that the so-called real deficit is like two separate numbers, and I know the tangible capital assets, we are spending $70 million or $80 million out here.
MR. LEBLANC: $88.9 million. $89 million.
MR. DOWNE: We are spending $89 million, and we are going to book $19.8 million on the balance sheet?
MR. LEBLANC: Well, the difference is the amortization costs are $69 million. The difference between the two is basically $20 million, $19.851 million.
MR. DOWNE: So the way it was before, when we did a highway, when we did a paving down on French Shore when we paved the road . . .
MR. LEBLANC: The French Shore is not in my riding by the way. Make it in Argyle, if you are suggesting they do some paving, I would rather have it in my riding than the French Shore, but that is beside the point.
MR. DOWNE: Probably try to work on fixing the bridge in your area.
MR. LEBLANC: I know that one. I know what he is referring to. (Laughter)
MR. DOWNE: We tried to fix the bridge down in your area. But anyway, bridge or road. Let's do the road for easy figuring. The road work, we expensed out the whole thing. So under Transportation and Public Works, there is $51.607 million that would be capital purchases, some of which will be . . .
MR. LEBLANC: Bridges, roads.
MR. DOWNE: Most of it is roads . . .
MR. LEBLANC: Yes.
MR. DOWNE: . . . and you only have to show $6.4 million of that.
MR. LEBLANC: No. The amortization costs of it is $45 million, from $179 million, so the net result is the difference between the two, but we are showing the amortization into this.
MR. DOWNE: Separate on the line below.
MR. LEBLANC: It is built into the totals.
MR. DOWNE: It is a little confusing. It is almost like two sets of books.
MR. LEBLANC: Well, it is difficult. The first year, especially, Mr. Chairman. The member brings up a good point. When you change the system, and I will just give you a story.
MR. DOWNE: Be careful where you walk. (Laughter)
MR. LEBLANC: Be careful, I know that. It isn't something I can't remember what it was. I know what it was. Anyway, Kevin Malloy who is a comptroller, who happens not to be here today, was explaining this to the press and it was extremely dry. A lot of people aren't really that interested, so he didn't get a whole lot of results. They tried it a second time. One person clapped and he was enthused that at least someone had appreciated it. It is technical, but the member brings up a good point. But, it is included in there.
MR. DOWNE: So one can almost assess by the tangible capital asset approach, which is one of the benefits of consolidation of debt, that we are going to be spending more money in real terms, not in accounting terms, but in real terms, on highways overall than we did last year?
MR. LEBLANC: The number is up. I don't have the exact number, but I think it is somewhere around $4 million or $5 million, something like that.
MR. DOWNE: It is interesting, we have a $20 million cut in education and we are going to spend more on roads. Health care, gosh only knows we need road work, I am not arguing that.
MR. LEBLANC: I don't have the number between the two. I will get the number from last year to this year, what the increment is, but I believe it is probably about a $4 million or $5 million increment altogether. It may be $3 million to $5 million. I will get the exact number for the member.
MR. DOWNE: Mr. Minister, we will try to come together on the number of dollars that are out there and what the real numbers are and hopefully try to work out between us in the next day or two and get clarification.
MR. LEBLANC: You mean regarding the TCA and amortization?
MR. DOWNE: Yes.
MR. LEBLANC: No problem. I am sure the staff will . . .
MR. DOWNE: Whether or not that is in there or not.
MR. LEBLANC: Yes.
MR. DOWNE: Our numbers aren't adding up to your numbers.
MR. LEBLANC: I am sure the staff will do that.
MR. DOWNE: You have tremendous staff. By the way, you have about 400 of them behind you here. I know there are quite a few of them here, and I hope at the end of the day . . .
MR. LEBLANC: I am sure they are all here to see you too at the same time. That is probably why they are here.
MR. DOWNE: It is great to see them all again. They are all looking quite well.
MR. LEBLANC: They are good people.
MR. DOWNE: Minister, in the budget documents, personal income tax, PIT revenues, and you basically knew this question was coming, so I just want to ask again. Ms. Cody is here, and she got somewhat of a clarification of it, but in 1999-2000, personal income tax was increased by $95.7 million. So the number was lower, and you had a windfall benefit of $95 million. This year, according to David Rodenhiser, is it 0.005 of 1 per cent increase in PIT this year even though the economy is hopefully going to continue to move along at the heated pace it was? I guess the question goes back, and I am sure Ms. Cody can answer this, but the confidence in the forecast, and it is a question because I get asked that quite a bit, and I am having a problem trying to analyze it myself. We got a $95 million benefit last year, and I know Liz would be able to do that right away. Can you clarify that again for the record?
MR. LEBLANC: There are three things, and I did mention it to the member for Sackville-Cobequid, and I don't think you were in the room at the time, so we will just do it again. There are three major parts, one of which is that in last year's fiscal year, 1999-2000,
there were $18 million which pertained to the previous fiscal year that was not ascertained until such time that they had to be included in last year's. So instead of being in 1998-99, that $18 million got included in last year's. That is number one. Do you understand what I am doing?
MR. DOWNE: Yes.
MR. LEBLANC: Okay, if I am not explaining very well, bear with me a second. The next thing is that the federal changes in taxes last year took effect July 1st, so there was a reduction actually in provincial individual income taxes collected that came about because of that, that resulted in only partial savings last year which will result in a full year's application this year, which is another $11.9 million. So those are two aspects of it.
The other thing that is there is a $4.5 million decrease in revenues this year because we used the non-refundable tax credit numbers that came out of the federal government which will reduce our taxes this year by $4.5 million. Lastly, there is also a $3.5 million reduction because of the way the capital gains are being calculated. It is going from 75 per cent of the capital gain being taxable to 66.67 per cent. So that means that under the changes that we are using, we have to use either the old system or the new system we are going to go to. We use the federal definition of taxable income. We basically have no choice in the matter. So that change in capital gains will also mean that we will lose another $3.2 million. I say three but there are actually four things which really, when you look at it, happen to lower our revenues this year or make them not comparable with the year before, but it is a coincidence that they came so close. I think the difference is only like $54,000 between the forecast for last year and the estimates for this year.
MR. DOWNE: It is 0.005 of 1 per cent.
MR. LEBLANC: I am not arguing your point.
MR. DOWNE: According to Mr. Rodenhiser, $54,000, but it still does not add up, I get $95 million. The question I am asking the minister here, I would assume that it is better for you if you are going to have a surprise to have a good surprise. I have heard that before. The department brings these numbers to the Auditor General and they give their rationale to the AG exactly how they do their planning.
MR. LEBLANC: That is right.
MR. DOWNE: We have always tried, or the department, I should not say we, excuse me, the department has probably always tried to be conservative on the numbers and the expectations of the realization of what those numbers could be because there are fluctuations and some variations. What do you consider as being a reasonable level of security to suppress the numbers in regard to the revenue stream under PIT this upcoming year? The federal
Finance Minister, Mr. Martin, is talking about setting up numbers and other Ministers of Finance have indicated they always try to make sure that they are protected and kind of hedge their positions a little bit. What do you consider as a reasonable level that you would want the staff to take a look at in regard to expectations of real income?
MR. LEBLANC: Two things, first of all. I want to say that I have not established a reasonable level of where I think is the safe level. I have let the staff make the decision themselves. They are the people to provide those numbers. They do them based on the information that they get from Ottawa. They have modulars that they produce these numbers with and I want to be very candid, I am repeating what I said before which, is that I don't try in any way, shape or form to try to influence the production of income tax numbers. It would be extremely inappropriate for me, as minister, to try to do that and those numbers are produced through the Fiscal and Economic Policy through Liz Cody and they are the ones preparing those numbers.
The previous speaker asked me what my gut reaction is, as to whether I am more liberal, and he used a small l, or conservative in my views, and I said my approach personally has been one of being conservative, but I am also saying upfront that I do not in any way put influence on the division. It is theirs to produce the numbers that we use in the budget process and that is what I have done. I have ensured that they have a free hand to produce those numbers and so for myself to say that I was surprised that the numbers came out so close, of course, I was surprised when I saw the numbers, but it is not for me to question as to whether the numbers are wrong so we should change them so that people don't talk about them.
When the numbers are produced, they are produced and when I asked why they were so close, these are some of the reasons that they also gave me. So I don't argue the fact what you are saying before. There was an increase. At the same time I don't predetermine what numbers will be coming out and I think the former minister knows and I am sure he followed the same protocol in his capacity as minister.
MR. DOWNE: The staff did their thing and I totally let them do it. The question really is, have you suggested any larger conservative number, small c, as a percentage to kind of hedge your own position a little bit and I guess the question I have asked is whether you were involved with that and your answer to me was that you had nothing to do with it, that staff did . . .
MR. LEBLANC: Very clearly upfront, and I will just refer, even in my Budget Address there is a report of the Auditor General in regard to that and I think you are already aware of that. Maybe I have gone on too long in my answer and I apologize. I just want to make sure for the record that people know that.
MR. DOWNE: Federal transfers are budgeted to decrease by $54 million. The fiscal year and the year end fiscal update, federal transfers were increased by $18 million for
equalization and $6 million and change for CHST. This budget that you brought in, is it decreased just as another way of protecting your position from what the federal transfers are projected to be?
MR. LEBLANC: Mr. Chairman, to the member again, these are numbers that are calculated out by the Fiscal and Economic Policy division, but if you want to know the reasons for the changes there, I can get Liz Cody to try to get me some explanations as to why, if the member just wants to hold on for a second I will get that for him. If there is another question in the meantime - she is trying to get it - or if you want to wait, whatever, it is the member's discretion.
MR. DOWNE: Can I swing you over, Mr. Minister, to the fiscal measures and the Grant Thorton report. I have asked you this question before and the issue of . . .
MR. LEBLANC: I do have the answer. Do you want me to finish this one first?
MR. DOWNE: I thought you wanted me to go on to something else.
MR. LEBLANC: No, I thought it would take longer, but if you want to point overall, the equalization, the CHST money overall is increasing.
MR. DOWNE: That is right, $6.4 million.
MR. LEBLANC: But the supplement has gone down because we were receiving $107 million last year and this year we are only receiving $75 million. Of course, the compensation money on the BST has also run out. So you were asking me a specific question as to, you were saying equalization, you said that equalization had gone down. Which one were you referring to specifically because I have them all in front of me here. Could you do it again just for a second?
MR. DOWNE: The budget shows a decrease by $54 million.
MR. LEBLANC: Over federal sources.
MR. DOWNE: Yes.
MR. LEBLANC: But don't forget that in that you have used basically $53 million of the BST harmonization fund. That is gone. We have $107 million of the former CHST fund, I think it was a total of $250 million or $350 million that you had received before, that you exhausted in the last year also. So that is $160 million that we are not getting. The only thing that replaced it this year was $75 million that we are getting from the federal government for CHST and that is for four years. So that means that $75 million that we have gotten has been exhausted all in the first year which is after discussion with the Auditor General. He was
saying since we have the opportunity to draw it all down now, that it should be booked in this year. So after discussions with the Auditor General we complied with . . .
MR. DOWNE: So you took the whole amount in?
MR. LEBLANC: That was the accounting under GAAP that the Auditor General . . .
MR. DOWNE: We took $107 million, if I recall correctly, in the year previous, 1999-2000.
MR. LEBLANC: $107 million and $132 million.
MR. DOWNE: And you are taking $74 million this year?
MR. LEBLANC: $75 million, $475 million, yes.
MR. DOWNE: And equalization numbers are going to be flat or up? I think they are up, are they not?
MR. LEBLANC: Apparently here they are flat, almost exact . . .
MR. DOWNE: I thought they were up $18 million, but I could be . . .
MR. LEBLANC: No, if you look at the equalization estimate to estimate - I am sorry - if the honourable member will look at the forecast estimate, it is pretty well exactly the same. If you are doing estimate to estimate, there could be an increase.
MR. DOWNE: Mr. Minister, I want to move on to the Financial Measures (2000) Act. It is quite a document and I appreciate the chance to talk to you about some of the changes, but the purpose of the decoupling, switching from tax on tax to tax on income, and I understand, whatever, 72 hours before the federal budget comes out, we do it and decoupling is interesting. I read the Tory handbook, the gospel according to Harris in Ontario, and it said in the book the reason we are going to decouple is that just in the event that those Liberals increase taxes, I don't want Ontario citizens to be forced to pay higher taxes and that is how they justified why they wanted to decouple. I assume that maybe that was some of the rationale down here. You are scared that Martin and company might want to increase taxes. So you decouple 70-some hours before the budget. Well, we all know the taxes went down.
So when we decoupled, we were at 57.5 per cent of the federal tax and that was left alone on this line. It represents x dollars and as a percentage, the federal tax went down. Can you tell me, the number x over here as a percentage of what the new federal tax is, can you tell me what percentage of that it is now?
MR. LEBLANC: I am sorry, I missed it, you are talking about the new . . .
MR. DOWNE: Before the budget, hours before the budget, the 57.5 per cent of the federal tax represented how many dollars, the provincial portion, 57.5 per cent is . . .
MR. LEBLANC: Are you talking about the provincial income tax portion of it?
MR. DOWNE: Yes.
MR. LEBLANC: We received the forecast and personal income tax is at $1.144 billion.
MR. DOWNE: Yes. Anyway, I guess the point I am trying to make, the 57.5 per cent of the old tax is what we are at. That was the lowest in Atlantic Canada. We lowered it. It used to be up to around 60 per cent or 59.5 per cent.
MR. LEBLANC: I think it was 59 per cent.
MR. DOWNE: 59.1 per cent and, yes, then I think the Liberal Government lowered it to 57.5 per cent. Anyway, that 57.5 per cent of the federal tax, the federal tax has gone down, we froze the 57.5 number. What does that number represent or what percentage or if you were to recalibrate that, what would that number be?
MR. LEBLANC: Under the new system you are talking about?
MR. DOWNE: Yes.
MR. LEBLANC: Basically there will be different rates for every different category. There were three categories that you tax on there. There is a lower, middle and upper. So under the . . .
MR. DOWNE: We did the numbers and maybe . . .
MR. LEBLANC: Because the report came out by Grant Thorton.
MR. DOWNE: I think it worked out to about 60 per cent.
MR. LEBLANC: On the low one it is 9.77 per cent. The middle one would be 14.95 per cent and the upper one would be 16.67 per cent and that would be based on taxable income rather than on the basic federal tax.
MR. DOWNE: We calibrated and I understand why you decoupled. We have had that debate before, but by decoupling, in effect, Nova Scotia taxpayers provincially are about 60 per cent of the federal tax instead of 57.5 per cent because of the fact that the federal tax went down. Those are our calculations. I think we are reasonably close.
MR. LEBLANC: Well, if we would have had to maintain it, the raise on the provincial would have changed. I am not arguing that. That is a fact. Whether your percentage is right, I cannot tell you.
MR. DOWNE: Would you be able to confirm if it is 60 per cent or could you provide me with the number of what it is?
MR. LEBLANC: The projection forward, okay. That should not be difficult to calculate.
MR. DOWNE: It is pretty close, yes. Mr. Minister, if I may have your support here, while the staff are going to be doing that for this fiscal year, would they mind taking a look at the rate, the yield on the tax on tax, the same revenue base as the taxable income for the years 2002-03. I think Mr. Martin talked about potential reductions out two or three years and could they provide that number for us? Would you commit to th