HALIFAX, FRIDAY, APRIL 23, 2010

SUBCOMMITTEE OF THE WHOLE HOUSE ON SUPPLY

9:00 A.M.

CHAIRMAN

Mr. Clarrie MacKinnon

MR. CHAIRMAN: Good morning. We will resume the estimates of the Department of Justice. There are 44 minutes remaining in the PC caucus time allocation.

The honourable member for Cumberland South.

HON. MURRAY SCOTT: Thank you, Mr. Chairman. I assure you that we're not going to take 44 minutes. I just want to - really, I have no more questions to the minister, I just want to say in closing that first of all, I want to thank the minister and the staff, the deputy and the rest of her staff, for being here today and over the last few days, answering very important questions. I believe they are important to Nova Scotians and important to constituents of mine and I know to many others who have a vested interest in the justice system in Nova Scotia.

I think we've discussed some very important issues and I hope I've made some points with the minister that he will consider in the future, especially around corrections and police, courts and the Prosecution Service. I just want to restate again that in my time in the department I'm very proud of some things we were able to move forward on. Of course I give full credit to staff because they are actually the ones who do all the work. I said the other day that the minister is usually the one out front, taking the good or the bad, when staff work behind the scenes to make our justice system what it is today so I think, minister, that you'd agree you're very fortunate to have the staff that you do.

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The other thing I want to say is that I think the Department of Justice right across Canada is recognized as being a leader in reform and justice around issues, whether it is legislation, whether it is moving forward on changing vision on the way things are done in this country and having some true input in regard to federal legislation. I remember we attended one conference in Newfoundland - I think it was my first one - and this province is really recognized across the country and in Ottawa as being a leader in regard to justice issues.

I just want to close by saying that I think the minister and the department have done a good job over the last few days here, bearing with all of us as we talk about issues that affect us all. I just want to say thank you again and look forward to the minister's closing comments, especially working with the minister over the next number of years. Thank you.

MR. CHAIRMAN: Shall Resolution E13 stand?

Resolution E13 stands.

Resolution E21 - Resolved, that a sum not exceeding $398,000 be granted to the Lieutenant Governor to defray expenses in respect of the FOIPOP Review Office, pursuant to the Estimate.

Resolution E24 - Resolved, that a sum not exceeding $2,200,000 be granted to the Lieutenant Governor to defray expenses in respect of the Human Rights Commission, pursuant to the Estimate.

Resolution E33 - Resolved, a sum not exceeding $19,332,000 be granted to the Lieutenant Governor to defray expenses in respect of the Public Prosecution Service, pursuant to the Estimate.

MR. CHAIRMAN: Shall Resolution Nos. E21, E24 and E33 carry?

The resolutions are carried.

MR. LANDRY: Thank you very much. I am very happy and honoured to have had the opportunity to be here the last couple of days. I want to thank my deputy and my staff, to work with them is an honour and a privilege. It is a highly motivated environment which I am in, as the honourable member across knows, and he spoke kind words of the staff, they, too, express kind words to him and to Mr. Clarke of their tenure at the office.

I want to talk on just a few things, to recap where we have been and where we came through on some of the questions that came forth. I thank all the members who came here to ask questions and I thank my colleagues for bearing through the last couple of days to sit. I know those who sat in the 26 hours for Minister MacDonald, it was quite a journey. This one was a little shorter but yet it is still a considerable time when you have to sit and not necessarily hear topics or discussions that necessarily motivate your interest, so I value that and appreciate that time.

I think it is very, very important where we go in Justice and there is some confusion when I heard some of the questions - or maybe it is just the process to ask questions, I don't know - to trip up the minister or to find weakness. I think that is a good thing to try and find if there is weakness and how we can improve the justice system.

One thing that I take pride in and that I want to expand upon is how we develop partnerships and get collaboration and then to have the opportunity to express to the Liberal member, Ms. Whalen, about offering an invitation to her as something that is dear to her heart, on domestic violence, and come in and see how we're progressing with that file and that issue. We're not here to hide or exclude, I think we're in partnership to further the legislative interest of all Nova Scotians and I think take the partisanship out of it whenever we can, while still respecting the politics of politics, I guess.

It is the collaboration and having a positive relationship I think is very important in the discussion. There were a few questions that kind of alluded to a strain or an issue between the Chiefs of Police or me, personally, or the RCMP or something along that line. I made the comment that I didn't really want to go down that road because I really don't see it that way. I support all police officers 100 per cent, unequivocally, in this province, no matter what stripe they wear. I've been on both sides of that street within police departments and, at the end of the day, they deal with the criminal element and the criminal element doesn't discriminate against the officer. They take them as they find them and deal with them the way they believe is in their interest. That's why we have to stay unified, stay positive and work together to deal with crime.

In these economic times it is critical and vital that our police agencies become more integrated, more co-operative and focused on dealing with prolific offenders, dealing with organized crime and identifying priorities. We are also in a situation where we have to start working together to rechange management. The world that we find them in, like I know the journey that I went through as a police officer to the journey today, it has changed rapidly in the last decade, so we need younger people because a lot of our leaders in the policing universe and even within Justice are aging, not to imply that anyone here in this room falls in that category.

We are aging so it is critical that we find learning opportunities to develop and give people an opportunity to show leadership, to experience success and failure. We know that young officers who are getting into management, making mistakes is a learning journey and we have to bear with that but the system has to allow that. I would like to see more interest in developing leadership training and support for our young officers to take over and to go with the current trends of where we're at.

That is not to imply anything negative on anyone who is there now. I am very satisfied and have a good working relationship with those who are there now. It's a matter that we have to make sure that we're prepared for our replacements. We know in politics, as was pointed out to me last night by your colleague, in four years this may change. I pointed out that that's certainly up to the voters and they're never wrong and we'll respect that, how that takes us down that course.

Our sheriff's department contracts were settled, and they were settled under the previous administration, that set a tone and a precedent for salaries. There is some disconnect with some other parts, either in corrections, for example, that we need to balance out. So one of the journeys there is dealing with - and I'm not going to really comment too extensively on the contract because there are negotiations going on - there is an interest in going into the public sector and I'm supportive of that but at the end of the day, I'll respect the decision of the negotiating parties and go in that direction.

I see benefits to reduce our costs in the long term, but provide great opportunity for employees within corrections. I think within our corrections, within our sheriffs, within our courts, there, too, we need to develop leadership and younger people to get opportunities to show those skills and to see opportunity within the organizations. In some people's minds turning a key is what the corrections officer does. That is the least of what they do. They are a highly skilled entity in today's world and there are many issues that are in today's corrections facilities that weren't there even a decade ago, so we need to provide that support, that training and the opportunity to develop.

We have a number of employees in that system in process who are at home because of workplace injuries or situations in the workplace that have removed them from there and they are not able to return to the workplace so we're finding ways to bring them back into the workforce, to allow them a dignified way to be productive in a working environment, to work with colleagues and to get productivity out of them.

All of us are commodities, we provide a service and we have skills and abilities and if they are not utilized, if you don't use them you can lose them. Well, that's the same with resources, we don't want people staying at home unless there is medically no other choice. If there's an option, an opportunity for us to bring them back in and get more production out of them, that will reduce our overall cost, increase our efficiencies, plus make the mental health of all our employees and staff a little better.

One of the things I want to work at is increasing mediation within disputes or where there are conflicts within the overall justice system. When we have employees who are several months down the road and haven't been heard in conflict, that creates long-lasting problems, so we want to try and make sure that we're more human in how we approach our issues and more committed to the employee. If we make the statement that our most valued resource is our human resource, then we have to go out of our way to make sure that we express that. One way to do that is to understand the emotional conflict that an individual is in with the issues, so I put the challenge to managers, to myself and to others, to identify that and to find positive solutions to issues that are outstanding. I share that amongst our colleagues within the House as we work towards that, too.

I also want to acknowledge, and I did make comment about it through the questions being asked, but I do want to give a considerable amount of credit to the previous government and to you as well - are we allowed to say names in here?

MR. CHAIRMAN: In this Chamber, I believe, in this Red Room I think you are in the estimates but the Chair will recognize the name anyway.

MR. LANDRY: To yourself, Mr. Scott, to Mr. Clarke and to Mr. Baker, some of the ideas and programs that you put forth and that we've carried on. We carried them on because they're the right thing to do. I'm hoping, too, that some of the things that we start to implement over the next year or two, that you see that as positive steps as well and we move them forward.

I respect the judgment of the staff and encourage them, in fact challenge them, to bring forward ideas that they think would make the justice system better. As a politician we come in and we have a role to play but the real leadership and the real imagination about where the system needs to go and why it needs to go is from those who have the expertise within the departments and they need an opportunity to grow and to blossom and for their ideas to be valued and put out there so that when they look back at their retirement they can say that they made a difference, because they spend a lifetime within the department. Those of who are in the political realm spend a short time in comparison, so that really needs to be, I think, accentuated, encouraged and that leadership needs to come from within if we're going to succeed.

You made mention that we're ahead of other areas. I think Nova Scotia can lead. I was really taken aback when I read just a few weeks ago about New Brunswick trying to champion themselves - and maybe they are and I encourage them to do so if they are - as the safest province in Canada to live, in fact, Codiac being the most efficient police office in the country. If that's true, we really need to look at what they're doing and not be afraid of copying the best practices and good things. So we have to look at our partners in Atlantic Canada, across Canada, and be consulted continually.

I know there were a couple of questions yesterday asking about supporting the federal government. I support the federal government in most initiatives. The politics of being placed in, do I categorically accept this point or premise? Well, there are some twists to some of them and how we get there but in principle, I believe that their intention is to better the safety and security of Canada. Whenever I, as Minister of Justice or as Attorney General, can support that and move those initiatives forward, to reduce crime, to make it safer for today's families or youth, I have some different views on youth. I don't believe in locking people up, I believe there are some people who need to be locked up and they need to stay there, there's no question. It's how do we separate within the system, to put those that need to be in there long term and how do we get those that don't need to be in there long term back into society and being productive and being held accountable while, at the same time, being respected and valued.

[9:15 a.m.]

A lot of people that we know, and Mr. Zinck raised a number of questions from people from his area and his community, that just seemed so disenfranchised from society and hopeless and I'm hoping that we can do things to help provide opportunities because the cost for the loss of productivity of an individual or input to society is so great, so maybe the front-end investment.

I have made a number of comments dealing with investment at early childhood and I had the pleasure to have a session by Dr. Hamm. He came to our caucus and the points that he was talking about, early education and early investment in health and children and in particularly the young mother to help with the child is also of great value and I support that principle and initiative. I think that's important if we're going to reduce justice costs.

If we look at ways just to lock people up or build jails, we will never get ahead of the game. We have to be more creative, consultative, compassionate, at the same time holding accountable those who need to be accountable. I made a comment at a recent interview on a matter where I said if you're going to do the crime, you got to do the time but the time has got to be appropriate for the crime, so there needs to be some modifications in some of the approaches that we take in deciding incarcerations. The courts need to have some leeway and be aware of those pressures.

The two for one that was mentioned before in the questioning I think will put additional strains on our system. I do like the idea that reducing times for people who can use the system to manipulate, to be in our facilities here in the province, to get an extra advantage from their incarceration. Remember, I work on the premise; you do the crime, you do the time, as long as the time reflects the crime.

I'm going to pretty well leave it at that. I'm very honoured to come here again and I look forward to the next year with my staff and get their feedback. We are a Justice Department that is looking as well to expand our partnerships with our universities. I think there's a big void or a gap within Justice and within some of our other departments where that knowledge is being kept at the universities and not being exchanged at the level that it could be. If we're going to articulate and market ourselves as a knowledge-based environment and a university centre where we can advance and we have a unique opportunity here, we have to change our language and our total approach as an organization, as a government and as a community, to reflect that.

That doesn't stop there, in the sense of dealing with making ourselves reduce our carbon footprint. I see a connection between that and how we become a healthier community, a healthier society. So in order to increase our knowledge, let's capitalize on it, let's reduce our carbon footprint, increase our energy and I think our success as we develop new energy sources that are renewable, we'll be more independent and viable as a province which, in turn, will have great economic and social benefits to us which I think will have a very profound effect in reducing crime. I think that all plays a part.

Also in reducing the deficit that we have, and not to be argumentative with anyone else who has a different view than that, the situation we're in. As I had an opportunity, and I will mention Dr. Hamm again, because I had an opportunity to speak with him recently. He, too, used an example of where they were back in, I think it was 1999 or somewhere around there, with the deficit, some of the things that government of that day had to do which you were a part of and some of the steps. There were some parallels that we find ourselves in.

History repeats itself and if we don't reflect on history and look forward to how we can do things differently, we may end up in the same trap. So let's get rid of that burden on our money flow. Nova Scotians, as a whole, have sufficient money to manage the problems if we get ourselves back in order.

I do again just want to reiterate my thanks and appreciation for taking the time to listen to me. I hope I put a number of ideas out there and that you get a flavour of where I see our department going. I have the utmost confidence that we have the talent in Justice and whether it is in corrections, policing, the courts, the sheriffs, Public Prosecution and our other administrative supportive staff and teams, we have talent and when you have talent one of the problems you have is, which priority do you go with.

I encourage those in the different areas to push for their ideas to come forward and we'll try and get as many of them done. I thank you very much for this time and I also want to thank you very much for giving me the opportunity to be here this morning because it is important this afternoon that I go where I have to go and I am really and truly appreciative of the adjustment that was made here. I thank the chairman and my colleagues for coming in this morning to support me on that. Thank you.

MR. CHAIRMAN: Thank you, minister, and thank you, staff, and the member for Cumberland South and government caucus members. We've already had the resolutions so that concludes the estimates for the Department of Justice. Thank you all for being here this morning.

[The subcommittee adjourned at 9:21 a.m.]

[2:55 p.m. The subcommittee reconvened.]

MR. CHAIRMAN: We'll call the Subcommittee on Supply to order. We will now be dealing with the Department of Finance.

Resolution E8 - Resolved that a sum not exceeding $33,870,000 be granted to the Lieutenant Governor to defray expenses in respect of the Department of Finance, pursuant to the Estimate and the business plan of the Nova Scotia Power Finance Corporation be approved.

MR. CHAIRMAN: The honourable Minister of Finance.

HON. GRAHAM STEELE: Thank you, Mr. Chairman. It's a pleasure to be back here with the estimates for my various responsibilities. As I mentioned before, we started formally. I do have 15 separate resolutions. I'm not going to read them, of course, but I do want to mention what they are, to give an idea of the scope of the areas for which I'm responsible and which I hope will provide a framework for the estimates debate that is about to follow.

The first one is for the Department of Finance itself, which is for $33,870,000. I have to say that the Department of Finance is a pretty lean ship under the guidance of the Deputy Minister, Vicki Harnish, and the Director of the Finance CSU, who are here with me today. Things are run pretty tightly. It's a good model for the rest of the government. If there's a penny wasted in the department, I haven't seen it yet. I think it sets a good standard for the rest of government. A little later I'll get into what exactly is done within the Department of Finance because like most departments, it sounds simple on the outside, until you get into it and you realize the variety of things that are done within the department.

The second resolution is Debt Servicing Costs, which fall under my responsibility as Minister of Finance, and that is regrettably a large number - $959,197,000 that is being requested in the budget for 2010-11. I say "regrettably" largely of course because imagine how much we could do if that number was lower by $100 million, $200 million, $300 million. We can't do that until the debt is paid down and we can't start paying down the debt until we start running surpluses. In order to start running surpluses, we first have to get back to balance. That, of course, is a lot of what my primary responsibility is, as the province's Minister of Finance.

It pains me greatly that of a $9 million budget, almost $1 billion is paid out in interest. That is not making life better for Nova Scotia families, that is not improving health care, education, community services, roads, it is simply going out in interest. If the members are interested later, I can talk a little bit about where that money goes and whether there are any alternatives about that.

During the Back to Balance consultations, which I am going to talk about fairly extensively in my opening remarks, it was surprising how often that idea or question came up, is there not a way that we could take this money and, as it were, patriate it or repatriate it and keep it within the province? So that is something I went back to the Department of Finance and asked about. The answer is actually every interesting and, as I say, if the members are interested, I'm quite happy to get into that a little bit later.

The third resolution for which I'm responsible is government Contributions to Benefit Plans, which this year is remarkably small in contrast to the previous resolution. This year, as part of the budget, that number is $8,868,000. It is remarkably small because of changes that we are proposing to the Public Service pension plan.

[3:00 p.m.]

Again, I am quite happy to get into that, if members wish, because as Minister of Finance I am the sole trustee for the Public Service pension plan. As my deputy has heard me say before and other members may have heard me say, there is probably no responsibility that I feel the weight of more than being the sole trustee for a pension plan which is so important to so many people and yet when I walked into the office of the Minister of Finance, the plan was in such bad shape. It is a very sick plan and we cannot have so many Nova Scotians relying on a plan that is sick. We need to bring it back to health and that is an important part of the budget this year. Part of that, the solution that we're proposing to the House, results in this third resolution being much smaller than it has been in the past.

The fourth resolution is for the one government office for which I am available, the Office of Acadian Affairs - L'Office des affaires acadiennes - and I will skip over that for now. If the critics for Acadian Affairs for the Opposition Parties are interested - I have spoken to them about this, by the way - if they are interested at some later time, I would be happy to discuss that particular resolution and the plans and priorities of the Office of Acadian Affairs.

One thing I would like to say is how very proud I am to be the Minister of Acadian Affairs. It is a critic area that I had for I think a couple of years before the last election. It is something, when the Premier invited me to be part of his Cabinet, that I specifically requested if he would do me the honour of making me the Minister of Acadian Affairs. Our Acadian community has this fantastic, deep, rich, sad, moving history and it is my great honour to be the minister for the office of government that deals with the promotion and protection of the Acadian language and the Acadian culture.

I know there are many members who represent Acadian communities, I'll mention in particular, for present purposes, the member for Antigonish who represents the good people of Pomquet, one of our smaller, I would say, but very proud Acadian communities. The member will recall when I visited the school and community centre in Pomquet with him, and as I like to say, had the best coconut cream pie I have ever had in my life. It was a great visit and that was like unexpected icing on the cake, to pardon the pun.

I know the member for Kings West also has an Acadian community. I have to tell you that I was surprised at how many Acadians and francophones there are in the Annapolis Valley. One of the very significant reasons for that is because of CFB Greenwood, which brings in many servicepeople who come from parts of Canada where French is spoken, so there is a surprisingly rich community, although the difficulty in the Annapolis Valley is the same difficulty they have along the South Shore, which is there are relatively few over a broad area. So all of the children who go to the Conseil scolaire acadien provincial school, some of them have to travel a very long distance on the bus every morning just to get to the local French school. Other communities with more of a concentration, like Clare or Argyle or Richmond, they still have to travel by bus but not some of the distances that the children in the Annapolis Valley have to travel or down the South Shore.

In any event, as I said, I'll move over that fairly quickly and if the critics wish to revisit that, of course I'm happy to do that. In fact, I'm happy to do it in French as well.

It was very interesting the exchange we had in the House where the question was raised again about simultaneous translation and there are many facets to that. I remember a few years ago during the estimates debate that myself and the then Minister of Acadian Affairs talked about the Acadian Affairs estimates for about 15 minutes in French. I was very pleased to do that because I don't think that is something that has happened in this House very often.

The next resolution I have is the Nova Scotia Police Complaints Commissioner, which is the modest sum of $429,000. Members who may wonder why that is under the Minister of Finance, members may recall that shortly after being sworn into office, because of a matter in which the Minister of Justice was involved personally, that responsibility was transferred to me in order to avoid any possible conflict of interest.

The next resolution I have is the Nova Scotia Securities Commission, which deals with the supervision and regulation of the securities industry here in Nova Scotia. Now obviously we're not as large as Ontario, Alberta, British Columbia, Quebec, but nevertheless we do have, when last I counted, 51 issuers of securities in this province. Because securities are a provincial mandate, each province and territory has its own securities commission. We have a commission that falls under the very able and experienced chairmanship of Les O'Brien, who will be known to certainly anybody in the legal profession, will be known to the member for Halifax Chebucto. He was at Dalhousie Law School when I was there, although I can't remember if he ever taught me or not, I'm not sure I took it in even if he did, it was not my specialty at the time.

We are very, very fortunate to have somebody who is, without question, of national standing and national calibre, somebody like Les O'Brien leading the Securities Commission which does its work quietly and very capably and every so often the public will hear about it. Earlier this week, for example, they issued a news release announcing some discipline that had been imposed on a securities dealer so they are doing their work, they do it well and I am responsible for them. They do the work so well under the leadership of Les O'Brien that there is very little, frankly, that I need to do in order to keep that ship running efficiently.

The next resolution that I have is for the Nova Scotia Utility and Review Board. Now that doesn't mean that I am responsible for all of the things that are regulated by the Utility and Review Board but I am responsible for the administration of the board. Again, we are very fortunate, in my opinion, to have someone of the calibre of Peter Gurnham as the Chair. I have the highest opinion, the highest regard for Peter Gurnham, I just think he does a first-class job.

When I was a young lawyer, which is getting to be further and further ago, I had a great interest in administrative law, the law of government, the law of agencies, boards and commissions. I actually ended up spending a lot of time studying it. It was a bit of a mess, frankly, in Nova Scotia. What we had was a lot of little tribunals, a lot of little part-time tribunals, sometimes dealing with very important matters. There would be part-time members who would come in and they just didn't have the ability, they didn't have the resources to develop any kind of an expertise. One by one these little tribunals were abolished and the responsibilities were added to what was first the Public Utilities Board, and then became the Utility and Review Board, so it is now by far the premier regulatory administrative tribunal in the Province of Nova Scotia. They have developed a very wide expertise, they have very capable members, and an excellent and committed staff. They do a lot of good work in a surprising variety of areas.

I had the pleasure a few months after my appointment to actually, in turn, be responsible for the appointment of a new member to that board, Roberta Clarke. It had always been important to me, when I was in Opposition, and even before I was in Opposition, as a young lawyer, I cared very much about the quality of appointments because as a lawyer, you only have to appear once before somebody who is not up to the job to realize that justice is not served when you have somebody in a responsible position who simply is not up to the job. So it was my pleasure to appoint Ms. Roberta Clarke, who everyone agrees is of the highest calibre. She came to the top of a fairly rigorous selection process. The neat thing about the selection process was that it came down to a short list of three and any one of the three people could have done a marvellous job in that position. The hardest thing was not finding somebody to serve, it was choosing between those three people.

In the end, after consulting with a number of people and talking to each member of the interview panel and so on and so on, we picked Roberta Clarke. I'm very, very pleased that she has turned out to be every bit as good as we hoped she would be, so the Utility and Review Board continues to function very nicely, again under the leadership of Peter Gurnham. I can't compliment him enough for the work he does there.

The next resolution that I have is Restructuring Costs, which is $111,423,000. This is one that is difficult to describe. There are certain things, particularly relating to collective bargaining, that simply can't be put in the budget because essentially what you're doing then is telling the people on the other side of the bargaining table what you have budgeted for the negotiations and you simply can't do that. Much of that amount, and it's a very large amount, but much of it has to do with things like collective bargaining.

I just want to read something, this is an opinion of the Deputy Attorney General from April 1997 when the question came up about whether members of the House were entitled to more information about what was in restructuring. The opinion of the Deputy Attorney General, who I would characterize as the chief advisor to government on legal matters - people may argue with me about that but that is how I would characterize it - said the following: ". . . release of this information could reasonably be expected to harm the financial interests of the Government of Nova Scotia during the collective bargaining process and therefore the information will not be disclosed." So it has always been the policy and the practice of the government, and our government is no different, that we will not break down in detail what is in restructuring.

I would mention, though, to give an example of how this is used outside the collective bargaining process, that in the last budget, the budget that was introduced and passed last Fall, the Fall of 2009, that the money that had to be set aside for H1N1, or the province's response to H1N1, was in the restructuring line item. That was there for two reasons; one is that the previous government had not made any allocation for H1N1 in the budget they tabled on May 1^st. Although we were reintroducing what was essentially the same budget, there were some changes and one of the changes had to be an allocation for H1N1. We knew it was coming, we knew it had to be provided for, so we put it in restructuring.

It was also partly because - it is almost easy to forget right now how much stress and strain was caused by H1N1; because it is now behind us, we forget that everybody was looking for vaccine, around the world, all at the same time. There were a number of other critical supplies that had to be acquired and stockpiled and we did not feel that we could reveal the budget figure which would essentially reveal how much we were willing to pay for that vaccine and those materials because there was world-wide competition for limited resources.

The final reason that we put it in restructuring was because, and I'm going to put this in a way that doesn't sound in a way that I don't mean it, but we also didn't necessarily, as a government, want the responsible department to know exactly how much had been allocated because we felt that there was at least a possibility that if they knew what the budget limit was, they would find ways to spend up to their budget limit. What we wanted them to do was spend exactly what they needed in order to protect the people of the province from the threat of H1N1, not more and not less, so that was another reason why the allocation for H1N1 was put in restructuring.

That's an example of why restructuring exists and why it is that we can't really break it down in detail. Fortunately the amount that we allocated for H1N1 was sufficient to meet the threat and now it is behind us. In hindsight, I would say it was managed very, very well, led by, among other people, Dr. Robert Strang, the Chief Medical Officer of Health and, of course, my own colleague, Honourable Maureen MacDonald, the Minister of Health.

[3:15 p.m.]

The next resolution for which I am responsible is one called Tax Credits and Rebates, $54,800,000. Again, I can get into detail of that later. Those kinds of things have to end up in somebody's budget and they end up in mine, as Minister of Finance. I can provide the details of that later in the estimates debate, if any member is interested.

That reminds me of another thing we can get into, that is one of the things that surprised me when I became Minister of Finance is there is no actual complete listing of the value of a lot of the - for want of a better term - I'll call the tax breaks that are available to Nova Scotians. The Department of Finance has this wonderful phrase, which I've sworn never to use in public, called contra-revenue, where something is essentially - it is a tax break but it is deducted from revenue but it doesn't show up as an expenditure item, what is shown is essentially the net revenue.

One of the reasons why it is very difficult to say to people, how many different tax breaks are there and what is the value of each and have we made the right choices and set the right priorities, in terms of how much potential tax revenue is spent in this place or that place? The reason it is not possible to do that is that such a list does not exist. I am determined that between now and the next budget, God willing that I am here to deliver it and am still the Minister of Finance - I don't want to suggest to anybody that I take for granted that I'll be the one who delivers the next budget because I just don't believe in that kind of thing but if I am the one who delivers the next budget, I am determined that such a list will have been created over the next year and will exist and we will be able to have a sensible debate in the House about whether the program of tax credits and rebates represents the best priorities and the best mix.

The next resolution for which I am responsible is the Pension Valuation Adjustment, which is, in fact, another aspect of the pension issue that I already talked about so I won't dwell on that.

The next one is Capital Purchase Requirements. Now oddly enough, all capital purchases fall under my responsibility although the actual expenditure is done by other departments, particularly by my colleague, the Minister of Transportation and Infrastructure Renewal, who spends a great deal of money on infrastructure and somehow it ends up in my resolution, not his.

What I would suggest to members is if they have questions about capital, they really, truly are better directed to the minister who is responsible for the department making the capital expenditure, but for accounting purposes and for purposes of the estimates, that falls under my responsibility, $579,894,000.

The next one that I'm responsible for is Sinking Fund Instalments and Serial Retirements, $112,293,000. I'll summarize that by saying that is simply one aspect of our liability management treasury services, which is a fascinating but very complex area for which I am responsible. We talk very freely about the fact that the debt of the province is just a little north of $13 billion and we have all these bond issues and the question is, well who is it who actually manages all that. The answer is the very capable people in the Department of Finance, in Liability Management and Treasury Services. They are a relatively few number of people dealing with a great deal of money, so it is very, very important that they be really good at what they do and they are. This particular resolution is simply one aspect of the work that is carried out by that unit.

It is kind of odd when you think of the amounts of money that we deal with in our personal lives and these people, as part of their daily work, are dealing with hundreds of millions and billions of dollars. One day, it was very interesting, I actually sat in and watched a bond issue, watched the province borrow - I can't remember how much that particular one was but it was in the hundreds of millions of dollars. Frankly, I've never borrowed hundreds of millions of dollars before, it was in the neighbourhood of $400 million. As the Minister of Health jokes, she has never built a hospital before, well I've never borrowed $400 million before and I didn't know exactly how it works. So while our folks, Peter Urbanc and Roy Spence, actually made it happen, I sat in the office with them when they were on the speaker phone and listened to the phone call and watched the screen and I could see exactly how it is that you go about borrowing $400 million. It is a fascinating process.

The next resolution for which I am responsible is the Halifax-Dartmouth Bridge Commission, I am the minister for the bridges. In a way - maybe I shouldn't say this but - it's a bit of an anomaly, actually, that the province still owns those bridges. It makes perfect sense when they are connecting different municipalities, it makes less sense when you have an amalgamated municipality and the bridges simply connect one side of the municipality to the other.

I suppose in some larger sense it is good for the province to be involved in those kinds of key infrastructure and transportation assets but it is, I would say, a bit of an anomaly. In any event, the bridges are critical assets. One of them was, I think, opened - I'm going to say roughly here - in 1955 and the other one was opened in roughly 1970, or it was the early 1970s at any rate.

They are aging and over the next 15 years there is going to have to be major work done on both of those bridges. The Macdonald Bridge will be done first, within the next five years, and the MacKay Bridge will have to be done next and that is going to be within the next 15 years. We know it is going to happen, we know when it is going to happen, we know roughly how much it is going to cost. These are expenditures that total in the hundreds of millions of dollars, simply in order to keep the bridges functional.

Like all assets, bridges have a lifespan and unless there is significant renewal of those bridges, they will come to the end of their lifespan. You can only imagine what a disaster it would be for HRM, indeed for Nova Scotia, if one of those bridges failed and had to be closed. What we're trying to do, of course, is make sure that that never happens but that is going to require some significant investment - not this year, not next year but soon.

The next resolution for which I am responsible is the Nova Scotia Gaming Corporation. As the member for Kings West knows very well, we could talk for hours about gaming all by itself. It is a big topic, it is an important topic, it is a difficult topic, a sometimes troubling topic but, nevertheless, the law of Canada as it exists today is that gambling is illegal unless managed by a provincial government. So the provincial governments do manage it but it is difficult. It is challenging and well, as I say, we could talk for a long time. We could spend hours, days, in estimates talking just about gaming. In fact, in previous years that is exactly what has happened.

There was a time, which the member for Kings West will remember well, when the Liberal Leader - maybe at that time was the former Leader - in any event, we know who I am talking about, when Danny Graham was here, took a very strong, deep-seated, personal interest in the issue and kept the Minister of Finance on the estimates hot seat for a very long time because he wanted to probe every aspect of gaming.

That has kind of waned a bit and yet the difficulties and the challenges haven't waned, they are just the same as they always were. In fact, the thing about gaming or gambling is that it is constantly evolving. One of the challenges that our government, our Legislature, our province is going to be facing sooner rather than later is what are we going to do about Internet gambling? Where are we going to go? It is here, it is already here. It's not as if we're deciding whether we're going to bring it to Nova Scotia or not, it is already in Nova Scotia. The question is going to be what is the role of the provincial government?

That is going to be one of the key questions as this government develops its gaming strategy to replace the previous government's five-year gaming strategy which expires just about now. It came into effect, I think, in the Spring of 2005 and was always intended to be a five-year strategy and those five years are up, so it's time for renewal. The question of Internet gambling is going to be front and centre in that gaming strategy. Again, if members are interested, we can explore the gambling questions later in these estimates.

The final resolution for which I am responsible is the Nova Scotia Liquor Corporation. I just want to note the presence here today of Greg Beaulieu, the corporate secretary who, whenever I have a question or something I need to know, Greg is the contact person because he always gets back to me with great information, fast and accurate. Even though we're not anticipating any liquor questions today, Greg loves the estimates process so much he said he just had to be here, so members should feel free to pose them because Greg is here. Greg has recently had some health challenges and we're very, very glad to see him on his feet and back in the estimates process.

The Liquor Corporation is another thing on which we could spend hours and days. It is, all by itself, a fascinating area and shares much in common, frankly, with the Gaming Corporation but the histories of the two are different. The link between liquor and politics in Nova Scotia goes back, well, as long as liquor and politics have existed, which is just about forever. When I read books from the 19^th Century, you realize that alcohol and the question of liquor control and prohibition and temperance was one of the key issues in Nova Scotia politics in the latter part of the 19^th Century. There were temperance Parties that ran candidates, and key issues in elections were your stance on temperance, your stance on alcohol consumption. That's why we have essentially a monopoly seller. Part of the social compromise we've reached is that alcohol should be a monopoly of the government and the government is both the regulator and the retailer.

Now there are some people who say that those two roles should be divided. I'm not one of them, I don't believe that. Principally the people who say that the Liquor Corporation should be privatized - and that is a whole other question for another day, I'm not going to get into that right now - those people say well, why don't we privatize it, just let the private sector run it and the government can still regulate it? I actually think it's a really good idea that the same people who are responsible for retailing also have statutory responsibility for responsible alcohol consumption, so that every day in every decision that they make, they have the twin mandates of retail and responsibility.

If you let the private sector in, their main thing is selling things and making money. There's nothing wrong with that, that is the object of a corporation. In fact, if you have a corporation and you are not doing everything you can to increase shareholder value, you are going against your fiduciary responsibility - not fiduciary - you are going against the very objectives of a corporation as built into our law and the objective is to increase shareholder value. There's nothing wrong with that but you have to recognize it for what it is and you cannot expect a private corporation to also have a mandate of social responsibility. It is simply not in keeping with our legal system, our economic system conception of what a corporation is. That is why we have the Liquor Corporation as a monopoly retailer that is also responsible for responsible drinking.

As the minister for both gaming and liquor, I do think from time to time about the analogies between the two and why it is that there are some things that are acceptable on the liquor side that we find unacceptable on the gambling side and vice versa because to me, in principle, it is really much the same thing. It is just that gambling has come along as a government responsibility quite a bit later than liquor but the principles of why the government is involved and why the government has a monopoly are much the same. Now we can explore that if anybody wants.

[3:30 p.m.]

Those are the 15 resolutions for which I am responsible in these estimates.

What I'd like to do now in the time that is available to me is talk a bit more in detail about the Department of Finance and what it is and what it is that I do, as minister. I think this is important as a way of framing the estimates. I want to start by talking in some detail about the Back to Balance process.

Now traditionally, at least during my time around the Legislature which now runs back 12 years, two and a half years as a researcher for the NDP caucus and the rest of the time as an MLA, the pre-budget consultation typically would consist of the Minister of Finance visiting four or five chambers of commerce in the month leading up to the Budget Address and giving a speech. I had never really understood how that amounted to consultation. It did mean the minister was out and about but four or five speeches around the province to chambers of commerce meant that most people never saw the minister, nor was there anything that I would call like a dialogue with the people.

When I started, particularly in light of the financial difficulties that we were facing and the choices the government had to make about the way forward, I wanted to do something different. What evolved out of the discussions I had with the staff at the Department of Finance was what became the Back to Balance process. I'm very proud of that process, I think it has been an outstanding success. A lot of people put a lot of work into it.

When we started nobody knew how it was going to turn out because it had never been done before. Nobody had done this kind of consultation on financial issues before, so when we went into it, we built in a lot of flexibility because we knew we were going to have to adjust and adapt as we learned as we went along, to try and make sure that it was going to work. Working meant establishing a real dialogue, not the kind of session where I would stand at the front and speechify at people and then a series of people would come to the microphone and speechify back at me. That is not dialogue, you don't learn anything from that, not much anyway.

To get people out thinking and working, we decided what we were going to do is we were going to have two-hour sessions, we would have a book - that we quickly started calling the discussion guide - because if that kind of consultation is going to be useful at all, people have to be working more or less with the same set of facts and addressing more or less the same kinds of questions.

Now there was more than one iteration of that booklet because we learned in the first few that there were some things that were not clear or that could be - well some of the graphs weren't as clear as they could be, for example, so we ended up changing them. Also, the format, within a certain framework, was flexible so we always wanted to be listening and learning as we went along. I have to tell you that I learned a tremendous amount. As usual, it's kind of like knocking on doors in the election, I get way more out of that than people get back from me because there is no better way to learn what is on people's minds and what is important to them than to ask them and to really listen.

I didn't used to like knocking on doors, that was before I was a candidate. It's a lot more fun when you're the candidate because instead of saying I'm here on behalf of somebody, you say I'm the candidate and it just engenders a better dialogue. Back in the old days when I was knocking on doors on behalf of somebody else, back in the days when I was a Liberal - there were even some of those days - I didn't used to like it because I felt if somebody was angry or indifferent that that somehow - I just didn't know how to deal with that. Eventually it sort of hit me that everything somebody says to you on the doorstep, no matter what it is and no matter what tone it is, whether it is happy or sad or angry or indifferent, it is all useful information. If you listen to people, really listen to people, especially if you're talking to a lot of them, you get a real sense of the mood and the priorities and what matters to people and, just as important, what doesn't matter to them, what people are paying attention to, what they are not paying attention to.

I got to really love knocking on doors and I do as much of it as I can, especially between elections. There is nothing better than knocking on doors between elections because suddenly you're not out there selling something, you're there and people understand. Because there is no election on, people say yes, now I know you are here to listen to me. There is nothing better for a politician than to get out and knock on doors between elections.

This Back to Balance consultation kind of took that idea, which I hold very firmly, and sort of took it around the province and said, how else are we going to identify people's values and priorities than to go out and ask them. So that's what we did. We did it in 19 different places around the province and then, in addition to those 19 meetings, which were fully advertised, fully open to the public, we also had about a dozen other sessions with other groups, principally chambers of commerce but not entirely. I will run through the list in a second.

Out of that process grew exactly what I was hoping to find, that was what I call the collective wisdom, the collective wisdom of the people which, if you listen to it and respect it, should be the only guide that any politician needs.

The reason why this was different than an opinion poll, and there's a time and a place for an opinion poll but the reason why this was different is because the financial challenges facing this province do not lend themselves to opinion polls. That is why when you've got interested, committed people who were willing to sit down for two hours and talk to each other and had some basic facts laid out for them and some basic options described and then a dialogue, people will form collectively some pretty sophisticated ideas. That is exactly what we got out of Back to Balance.

Now the first day we did it, remember I said that we had this format that had never been tried before, which was a presentation followed by breaking into small groups for up to an hour and then usually about 45 minutes of reporting back and then having everything that was written down transcribed and posted on the Internet, so that everybody could see what everybody had said everywhere. Once we had settled on that format, we set out to see what would happen. We truly had no idea if it would work.

The first meeting was at the Sydney Chamber of Commerce. We knew we were on to something because we followed this format, having no idea if it would be a success or a flop. They said that they loved it so much that they were going to adopt that format for the rest of their meetings because not only did they have a spectacular turnout, they had - I can't remember what they told me - I think they said they had about 100 people, which is way more than they usually have for their meetings. Everybody left happy because they felt that they had had a chance to have their say.

One of the great things about the format we adopted is it really forced everybody to participate. So people are so used to just sitting there and listening to a series of speeches and this time every single person participated because we broke into small groups, every single person had input, every single table had a chance to talk to the larger group and to have whatever they wrote down to be recorded and transcribed and then posted.

The Sydney Chamber of Commerce loved it. We thought okay, great, apart from the fact that the microphone broke down that day, everything was good. I had to shout a bit at that meeting. I was really pleased to see a number of my legislative colleagues come out to that meeting. I'll mention in particular the ones I remember that were there - am I allowed to use names in here? I guess I have to use ridings in here as well - the member for Cape Breton West, the member for Cape Breton North and the member for Victoria The-Lakes were there and my good friends the member for Cape Breton Nova and Cape Breton Centre were there. That was really great, I really appreciated the interest.

Let me also pay particular compliment to the Progressive Conservative caucus; apart from myself and my executive assistant, Stephan Richard, the single person who went to the most meetings was a poor Progressive Conservative caucus staffer named Sarah Reeves who somehow got the short straw and had to follow me around the province. I think she made it to, if I remember correctly, 16 out of the 19 meetings.

Now unlike the results that I got, her results were never transcribed and posted on the Internet, so I really don't know what she saw or what she reported back, whereas the public response is fully available to anybody. Anyway, Sarah was very kind and personable and, of course, as you can imagine, it became a bit of a joke that she was following me around. But anyway, the Progressive Conservatives, I think, had a pretty close tab on what was going on.

There was another group, which I won't mention, who started to follow me around because they weren't sure what this process was going to look like, either - this wasn't anybody political - and kind of gave up halfway through when they realized that really there was nothing nefarious going on, despite what my good friends in the Opposition say, there was no agenda being pushed, so halfway through the process they just gave up and said okay, we don't need to follow him around anymore because we know what the process looks like and feels like.

Anyway, that night we were in the Legion in Whitney Pier and again, this was our first public meeting, first fully public meeting because remember, every meeting was advertised in the local media and we had no idea how many people, if any, would turn out. The people just kept coming in and coming in. At the end of the day about 130 people showed up in Whitney Pier on a Friday night, to talk about the province's finances. You know what? It was great, the feedback was good and I learned stuff instantly. For example, the one thing I distinctly remember learning at Whitney Pier about the HST - what I started asking was just the yes or no question, can you live with it or can you not, or whatever words I used, do you like it or don't you. The answer I got back pretty quickly was, it depends.

We got into a conversation in Whitney Pier about well, it depends on what? So that started the refinement of the questions so that by the end of the Back to Balance process, I think it was fairly refined. Of course you learn as you go along and you say okay, let's make sure that we reflect what we've heard, so we asked the question in the best possible way. Of course the answer in Whitney Pier, as it was in many other places, was well it depends on whether you provide support for people at the lower end of the income scale.

Other suggestions that came up in other places, I don't think necessarily Whitney Pier, was well it depends on whether it is permanent or temporary, it depends on whether it is phased in gradually, it depends on whether it is phased out gradually, all those kinds of things which add refinement to the basic idea, which is do you like it, yes or no?

Now Don Mills of Corporate Research, who is a great guy and a very experienced business person and I have all kinds of time for Don and what he does, Don just asked the basic question, just a polled yes/no question, do you like it or you don't. If you ask me whether I like it, I would say no. That's the thing about that poll-type question. So then you say well why are you doing it then? Well you do it because it is necessary, not because we like it. So that's the difficulty with Don's poll, Don asked the same question that I asked in Whitney Pier the first night and learned it was not the right question.

It doesn't surprise me a bit that when Don asked his question, 74 per cent of people said no and I am absolutely sure that's an accurate result because when you ask that kind of a yes or no question, without any context, of course that's going to be the answer. As I said, if he called me up and asked me that question, I would have said no.

The point of Back to Balance is it went beyond that kind of simplistic yes/no thing and gave people the facts, gave them the background, talked about the options, said well we can do this or we can do that, what are your values and priorities, and we got a much more sophisticated and nuanced answer, which I refer to as the collective wisdom.

[3:45 p.m.]

We knew we had a good thing going because people left Whitney Pier and they were really excited. I can't tell you the number of people who said to me, that was the best consultation that we've ever seen, we really wish the government did this kind of thing more often, because they are not used to it. The people of the province want to participate and they are not used to being included and we are determined to do that.

I could have disappeared into an office tower in downtown Halifax. My office is right across the street from the Legislature, I could have just disappeared in there for six months and talked to the staff and come up with a plan. But I just believe so much in this idea of the collective wisdom and making sure that you ask people what it is they want and why, that I'm just very proud that we went out and did this Back to Balance process - didn't disappear into a back room - and went around the province, 19 separate public meetings and about a dozen other meetings that were not public meetings, most of them were chamber meetings.

Then we went down to Port Hawkesbury and I know the member for Inverness had another engagement that day, which was great because the member for Inverness, I hasten to say, showed up in a quite unexpected place and that was in Wolfville. He came to the meeting that was held on the campus of Acadia University and he was, of course, very welcome there, I was very glad to see him. The member for Kings West, not to leave him out, I don't believe got to any of the public sessions but did go to one that was hosted by Nova Knowledge. I don't mean this to sound harsh at all but most of my legislative colleagues who appeared at these meetings kind of hung around the edges and didn't participate. My distinct recollection is that the member for Kings West did very much participate in the Nova Knowledge and participated in one of the small groups.

My colleague, the member for Antigonish, who I remember went to at least two - the one in Port Hawkesbury and the one in Antigonish - also did the same thing, sort of got right into the middle of it and participated actively, so it was good that the member for Kings West did that as well.

Then, not in any particular order we went to - oh yes, by the way, since people have been criticizing me - I think pretty unfairly - about small business, I do feel obliged to point out that prior to the Whitney Pier meeting, we met with the Sydney Chamber of Commerce, after the Port Hawkesbury meeting I met with the executive of the Port Hawkesbury Chamber of Commerce. When I went to Stellarton, I had a full meeting with the Pictou Chamber of Commerce. I can't remember if it is the Pictou County or just Pictou and area, at any rate, it covers the whole county with the chamber of commerce.

At many of the stops I would meet with either the chamber of commerce or the chamber of commerce executive. Many people who attended these meetings were small business owners and I was very grateful for their attendance. I had another session, since I'm on the topic let me mention that I had another session for business groups to which I invited, among other people, the CFIB. Since I am on the topic, let me talk about that. One of the things that the member for Kings West keeps saying and I think, with the greatest of respect, unfairly, is that I didn't attend the CFIB breakfast meeting and, it is true, I didn't.

Let me tell you the back story, which is a little different than it gets portrayed by the member for Kings West. The back story is this; this is after I had done my tour around the province and many small business owners attended Back to Balance. We got about 1,000 written submissions - this is in addition to everything else we saw and heard at Back to Balance - 1,000 written submissions many of which came from business organizations and small business owners. I met with five different chambers of commerce, three chamber of commerce executives and I think the chambers of commerce, frankly, do a really good job representing their members and they are almost all small businesses because the larger businesses tend, on the whole, to do their work through organizations like the CME - the Canadian Manufacturers and Exporters.

In addition to all of those contacts with small business, which I valued very highly, I had another meeting specifically for business organizations, including the CFIB and the Atlantic Convenience Stores Association, for whom I have a very high regard. Talk about the quintessential small business owners, the people who are running the convenience stores not just around Nova Scotia but around Atlantic Canada, and the Canadian Restaurant and Food Services Association and other organizations. So I had a meeting for them specifically and invited the CFIB and they came in and said their piece and that was great.

On the way out from that meeting, I kid you not, on the way out of the meeting - and I just want to repeat this in case the member for Kings West ever feels inclined to talk about that CFIB breakfast meeting again - remember this is a meeting that I arranged with the CFIB, I had just finished meeting with them and talking to them. At the end of that meeting they gave me an invitation to that breakfast meeting and it was a week later. I looked at the date and I said immediately, I'm not available, it doesn't fit my schedule. You know what, they were really pleasant, they said oh yes, that's okay, we understand. I said, you know I'd love to go but really for the Minister of Finance, in the process leading up to the budget, you have to understand that a week's notice is just not enough because my calendar is pretty full, you have to give me more notice. They said sure, sure, we understand. Everything was good. I said okay, I'd love to go but I can't.

Then they had their meeting a week later and they turned around and criticized me for not attending. I thought to myself, but why don't they say that the invitation was given to me on very short notice, at a meeting that I had arranged with them. Remember, I had just finished meeting with them and then they turned around a week later and criticized me for not attending a meeting. Anyway, that's the back story to that. If the member for Kings West wants to go on and criticize me again, because I've heard him say it at least three times in the House, if he wants to go on and continue, he can but that's the back story to it.

All right, so Stellarton and the chamber of commerce, Amherst was very interesting, of course. Let me say this about Amherst, it was the one meeting in the whole province - the one meeting, remember, one out of 19, not counting the chamber meetings which are full of business audiences and which also, where most people said the HST was something that was acceptable to them, for example, in the Sydney Chamber of Commerce. Anybody who was there can confirm that is exactly what they said. Amherst was the only meeting where a strong majority of people said no to the HST, the only one out of 19. The other rooms, after considering the issues and considering the options, said yes, okay, we understand why an increase in the HST may be necessary, on conditions, which I've talked about a little bit.

I'm just looking at my watch here, Mr. Chairman. I could go on for hours and have been known to do that but how much time have I got left? About three minutes?

MR. CHAIRMAN: You almost have an hour used up. I would say about three more minutes would be an hour.

MR. STEELE: Three more minutes and then whatever the first question is, I can just take another hour. No, I'm joking.

I took what I heard in Amherst very seriously, which is why - there is a particular issue in Cumberland County about cross-border shopping. You know it sounds simple but it's not because when you look at the products that people talk about, each one has a different reason for the price being where it is. There is a very particular reason why cigarettes are much cheaper in New Brunswick than they are in Nova Scotia. There is a different reason why milk is cheaper. There is a different reason again why gas is cheaper.

Some people say that liquor is cheaper but I've been checking this with the Liquor Corporation and it's actually probably not true, unless you are a lover of single malt scotch. There is a particular historical reason why New Brunswick sells their single malt scotch cheaper than Nova Scotia. Now there are others and each one of those has to be dealt with individually. That's why in the Budget Address I specifically wanted to talk about Cumberland County and why the following week I went up and spent a full day meeting with business and community leaders in Cumberland County, because I take that concern very seriously.

In my tour of the province in Back to Balance I've only gotten to Amherst and there's so much more I could say but I think I'll give my colleagues an opportunity to ask some questions.

MR. CHAIRMAN: That is exactly 59 minutes, one minute short of the hour. We will now recognize the Liberal caucus for one hour.

The honourable member for Kings West.

MR. LEO GLAVINE: Thank you very much, Mr. Chairman. I want to thank the minister and deputy minister and staff for providing the opportunity to drill down on some of the areas that are in the budget for 2010-11.

I don't think anybody comes to Province House and goes through the exercise of receiving perhaps their first full document of the budget and is certainly struck by the amount of preparation, the amount of work that goes into a budget. I think I need to start off by mentioning the fact that the staff has put in a lot of work and I think some of the new formatting of presenting the budget is truly valued and gives, I think, pretty well anybody an opportunity to visually capture and I think make some determinations in a much easier manner than I know historically.

That being said, I would still say that perhaps for some of the new members, and we have three new members in our collection here at estimates today, I know when I first came to the House and was given the document - and I actually didn't check this year, minister, I don't mind admitting to it because I guess I knew the figures pretty closely after being here for a number of years - in receiving that very first document and going down through the overview of what each department was going to be spending in the next fiscal year, it was an overwhelming moment for me, even knowing this, to sit there and to contemplate that third line of the budget.

In that first year it was health, education and interest on the debt, when I received that first document in the Spring of 2004. It is something that we have continued to struggle very seriously with bringing it under control. We had some years when I felt that we were finally getting a significant part of the royalties from the offshore. The one-time $830 million for the offshore agreement and I thought we would really see a significant dent in that amount. It now turns out that I know, minister, you are struggling with, if at all possible, to keep it under $1 billion in interest in the foreseeable future. It is a monumental task.

However, when I do consider as many things as one can bring into perspective here, I think there were also, and I know there were within the sessions that you held across the province and I know that at the one I attended there were strong, I guess, ideas and discussion around how do we change our spending patterns? How we change our spending patterns was one of the areas that I heard a number of comments on because once that pattern of spending is in practice, it truly is like the tanker coming across the ocean and about to enter port, it takes about 10 or 11 miles for it to actually slow down to a speed that is required. We are on a pattern, we've been on a pattern of significant spending in our province. Yes we did have the revenues but we knew that royalties were likely to peak, based on supply in 2010-11. We've been told that for a long time, that that was roughly the time period.

[4:00 p.m.]

I was hoping that the minister would not, through the Back to Balance sessions, put an orientation towards getting the revenues to, in fact, compensate for the decline in revenues, especially related to the offshore and the royalties. Also we know perhaps less from the federal government as well, where we have an enormous dependence also. We would take a look at what are the ways that we can truly curb some of our expenditures and that we would be able to make perhaps more headway on the debt.

I just want to start with the minister's own department, perhaps, because I did think highly of your letter around the March madness, I did, because we had talked about that in our caucus on other occasions. We talked about it during the process of your deliberations and meetings across the province and felt that was one area.

Just to start off with, in terms again of the ordering process and how money is spent within budgets, did you think it was probably a bit late for this year and that its real value may be in the educative process and then the practical implementation in a real manner, as we go forward. I am sure, in hearing from a few people in departments, that ordering was already kind of planned for this particular March, which brings the question, and I want the minister to comment on this as well, is it possible to have base budgeting, the basic requirement to run the department and then those items that are in a more flexible area of spending - we think of health and very costly machinery and so forth - are those able to be approved outside of a base budget that each department would receive?

Again, when budgets, when full amounts are there, they definitely tend to get spent, outside of a very small amount, perhaps, as we close in on the end of the budget year each year.

I know I've asked you several questions within that framework because I'm also leading up to the question, and I'll leave it here, which was, were you able to capture any late dollars from being spent in your own department, the Department of Finance?

MR. STEELE: Thank you very much for those comments, You are right, you have asked me multiple questions, all of them good. I'm going to try and deal with them.

Can I just start - you mentioned at the beginning, and I don't want to pass over it, you said how much work goes into the budget. I was the Finance Critic for the NDP for seven years and I can tell you that I had no idea how many people work so hard to put a budget together, until I became the minister. In Opposition you see some glimpses of it but until you are actually there, you have no idea. I had no idea and I can't tell you how much I thank and admire the people in the Department of Finance and Treasury Board, Communications Nova Scotia in particular, but also the Finance staff throughout government. When you get right down to the end of the budget process, like the last month, the last few weeks, the last few days, there is a core of people who just work their hearts out to get it done and they are pretty good at it.

Now there is a lot of crazy stuff that I asked them to do, as minister, but the one thing they know they have to do every year is create a budget. They know it has to be done, when it has to be done and they're really good at it and I can't thank them enough for doing that. Oddly enough, the Premier was scheduled to actually go over to the Department of Finance now, in the last hour, to thank them in person for all the work they put in but because of an unexpected change in the House hours and the fact that his estimates are on in the other room, he had to skip that. I say that jokingly but it is a bit of a shame because it is very nice of you to acknowledge the hard work, it was nice of the Premier to put it in his schedule.

You truly have no idea how much work, this year in particular, because the budget was delivered the day after a long weekend. I can tell you, there are a lot of people who worked through the long weekend. Now I don't think anybody worked on Easter Sunday because the deputy and I pretty much made it clear that they shouldn't. I don't think even the deputy worked on Easter Sunday, although she has a hard time putting her BlackBerry down, I have to tell you. Anyway, thank you for that comment, I know that staff appreciate that acknowledgment.

Okay, let's talk about March madness. There are so many things that I learned during the Back to Balance process. One of the things that surprised me is how often it came up. To be perfectly honest with you, that is why the letter went. That's why it came up, that's why we did what we did, because I have my own view of how often it happens and how much money is involved but it is absolutely clear to me now, after touring the province, that a lot of people believed that a lot of money is wasted in the last few weeks or even the last few days of the year.

The difficulty is, can you quantify it, because the reporters asked me that as well. The answer, of course, is you can't because the whole purpose of the letter is to stop something from happening and you can't quantify something that never happened. In fact, because of the nature of March madness which after all, at the end of the day, was designed to spend budgetary allowances, it would be very difficult to put your finger on how it compared to previous years. You use the word educative and I think that's a good one because that's exactly what it was for. It was to say to the civil servants, who I highly respect, this is important, this is an issue with the people of the province and we need you to demonstrate restraint.

Now did it happen anyway? I don't know, although I imagine that because the message was so clearly sent, that we would have heard one way or another, if it had happened. I can tell you that in my own little world I can think of examples of things that would have been done that were not done, because of that directive. I don't think I can mention them because they are more in the nature of Cabinet confidentiality but the previous government which, as the member for Inverness knows, I dearly love, they are all great people but they got into the habit of, right at the end of the year, saying okay, what is the difference between where we are and where we said we would be and let's spend the difference. They did. He'll deny it, I know he will, but they did it. Of course they did it because every year in the last few days of March, the government would announce a number of major initiatives, sometimes amounting to millions or tens of millions of dollars. The member for Kings West, you know what I'm talking about. We said this year that we are not going to do that.

Now that may, in the end, hurt us politically because the reason the previous government did it was, to use a phrase or for want of a better term, they wanted to create room for themselves for the following year because if they spent the money at the end of the year, that was money they didn't have to spend in the following year. Because we didn't do that, that means we're going to have that many more pressures coming at us. The result was that our forecast deficit at budget time was $592 million; when we did our December update it was $525 million and the final number is $488 million. We had room, we could have gone on a spending spree at the end and we didn't. Hopefully that example has been noticed in the civil service, specifically in the Department of Finance.

All I can say is that the deputy minister runs a tremendously tight ship. If there has been March madness in government, I would be very surprised if any of it ever happened in the Department of Finance because this deputy wouldn't allow it. So can you say did it stop in the Department of Finance? I would say no, because it wasn't something that was going to happen anyway.

The base budgeting question, the question about base budgeting is a little more difficult because you put your finger on what I think is the biggest issue facing the government and the people of the province as we decide on our fiscal path, that is you phrased it as how do we change our spending patterns? I would phrase it slightly differently, the way I would phrase it is, how do we get our expenditures back into alignment with our revenue? There is more than one way to do that. As you'll know, this government's plan, as outlined in the budget, is that we are going to do that roughly 80 per cent through expenditure management and restraint and roughly 20 per cent with new revenue measures. That is, I think, roughly the balance that I heard from people as I went across the province.

I'll tell you something else about Back to Balance; the answers on the revenue side were clearer and that's partly a function of the fact that the questions on the revenue side are more precise, but I could detect no particular consensus around the province on where we should find the savings or the efficiencies. What people said to me over and over again, very strongly in every room, was there is too much waste and inefficiency and duplication in government. If I tried to press and say where exactly, that is when people's opinions diverge greatly. One of the phrases I used was that when you walk into a hospital, the inefficiencies aren't painted red and you just walk in and say, take out all the red stuff. You really have to look at some of these systems - the education system, the health system, the community services system, the capital spending - and say where exactly are the inefficiencies. It's not as easy as people think because if you get it wrong, if you just go in and slash indiscriminately, you're going to hurt people and you're going to cut the wrong things.

Our difficulty now is that the savings on the spending side are further down the road. I could give you multiple examples but let me just give you one; the university MOU, which you and I have talked about before in another context, it doesn't expire for another year, another full year, so the opportunities to sit down with the universities and say what does the future hold if we are going to enter into another multi-year memorandum of understanding on your financing? We come to you expecting more efficiencies, more back office consolidation, we can't go on like this.

We have superb post-secondary institutions that don't work together. For example, they have their own international recruiting teams. Can't we have just one international recruiting team that goes around the world and they work together? That is just one example of many but the opportunity to have that conversation doesn't happen for another year so there are no savings to be had in the university system this year because that agreement doesn't expire. Whether you're talking about payments to doctors, some collective agreements, the many things that government spends a lot of money on, you can't just snap your fingers and instantly find the savings.

I think that you and I agree, member, that we have to change our spending patterns in a smart, sensible way and the big question in front of us is how. In our plan we have laid out how we expected things to unfold over the next four years. In this plan, unfortunately, the number is $54 million. I say unfortunately because that's what we can snap our fingers and find right away. That is not nothing but the health system goes through $54 million before breakfast. You know what it is like, they just spend so much money. So this year is $54 million, next year is $252 million, then $499 million, then $772 million. That's a lot of savings but they are things that build over time.

The last thing I'll say before I turn it back over to you is that one of the very first things we did was send up an expenditure management initiative. The government is very acronym happy and we refer to this one as EMI - expenditure management initiative. We took some of the best, smartest people in government and we said, here's your task. Their job, in a nutshell, is to find those savings, find those efficiencies but do it in a smart way that not only saves money but also relieves the pressure. It's not enough just to find savings if the pressures continue.

[4:15 p.m.]

The analogy I use, you know those hand grips that you use and you squeeze it together in order to strengthen your wrist, well if you let it go it springs back to where it was because the tension is in the coil. I think of that because it is the same two graph lines that describe our finances, where our revenues are here and our expenditures are there and it is not enough just to slash your expenditures so that temporarily they meet your revenues because the pressure is still there. You not only have to do that but you have to relieve the pressure. That is the difficult but very important job that is being done right now and has been going on practically for the whole 10 months we've been here with the EMI group.

MR. GLAVINE: Thank you very much, minister, for that overview but also some very specific areas that I was relating to in my questioning and opening remarks. In terms of senior management, on the basis of estimate over estimate, almost all elements under senior management seem to have decreased in this budget, with the exception of communications and advisory services for Crown agencies. However, there's the same amount of funded staff budgeted for this year as it was in last year, so what accounts for these lower estimates?

MR. STEELE: Two things. First of all I have to tell you that Joyce is very, very excited by that question. Last year I think we had two full days of estimates and it was only at the very, very end that anybody asked me any questions that actually related directly to the estimates. The fact that you are doing this pretty much off the top is very exciting to her.

What page are you reading from, if I may? Our books are organized with the pages of the book on one side and the commentary on the other. It's going to help me a lot if I know exactly what page you are referring to. I don't want to speak to a question that you're not asking so I want to make sure that I understand exactly which question you're asking.

Can I ask whether it is possible that you are referring to Page 10.3 in the Estimates Book? Do you have the Estimates Book in front of you?

MR. GLAVINE: No, we pulled some out in relation to our questions.

MR. STEELE: I'm going to take a stab at it because I think I know which page you're referring to. You're referring to the senior management, you were asking why certain numbers had increased. I think you're looking at estimate to estimate.

MR. GLAVINE: Yes.

MR. STEELE: Okay. You are correct. Here's the thing, these are decisions that were made before I arrived. The deputy in the department in the previous government had identified some holes, some areas that needed to be addressed that weren't, so with respect to the estimate to estimate on - okay, let me review the five things that go up to make - the changes that have happened were, there was an additional senior policy analyst for Advisory Services on Crown Agencies. This is partly related to the fact that a significant amount of my non-Finance responsibilities are for Crown agencies. I mention in particular the Securities Commission, the Utility and Review Board, the Bridge Commission, the Liquor Corporation, the Gaming Corporation are the ones that jump to mind and they do help me with other things as well. Those are very important parts of the responsibilities of the Finance Minister and we simply needed more help on the policy analysis.

I want to emphasize, when I walked in the door as Finance Minister, that person was already there, although the particular individual was there on secondment and has since been made full time, which I think is why it is reflected in the budget. There was also a decision made, prior to my arrival, to have a third communications officer because there was a great deal of correspondence that was going unanswered or unaddressed - not unanswered but the delays were not acceptable, so there are three full-time communications officers in the Department of Finance.

In counterbalance to that, a Secretary III position was eliminated. The Secretary III was $51,000, administrative savings $46,000, reduction of other expenses of $13,000, with the net result that you've just referred to.

Oh, this is important as well. One of the things that I don't think I fully grasped when I was Opposition Critic is how much shifting around there is within government, where you can look at a particular line item that looks like it went up or down a particular amount but what has really happened is that it has been shifted somewhere else. These particular positions always existed but they had been in other units of government. Now they are classified as senior management so it looks somehow like there is an overall increase in the complement, when, in fact, there isn't, it is just that they appear in a different line now in the budget. There is no way for anyone in the Opposition to know that because none of the Budget Books give you the information about what is a shift and what is genuinely new, although I have it in my book here.

MR. GLAVINE: Thank you. We know some of the new direction around cost-saving measures. We know, for example, it was a right measure to ask MLAs to take a leadership role in this particular area. I'm wondering, in terms of benefits and bonuses for senior management, has everything stayed in place, is the same, or has there been some scale-back in those areas?

MR. STEELE: There have been no changes during my time as minister. There are no bonuses anymore. That was something that had been introduced by the previous government and then eliminated, so there are no bonuses and the benefits are just the standard benefits. I mention in particular the non-union staff at the Department of Finance and, indeed, throughout government, have had their wages increased by 1 per cent and 1 per cent, basically right off the bat.

MR. GLAVINE: Because I didn't have my reference point here, I can't seem to find that topic at the moment that I started out with, so when we look at communications it looks like it will be overspent with regard to the estimates of 2009-10 and 2010-11. The budget shows an increase of $44,000. Specifically what accounts for the overspending in 2009-10? What specifically accounts for the 11.5 per cent increase in the communications budget?

MR. STEELE: Again, I have so many numbers in my book in front of me I want to make sure we're addressing the same one. Can you tell me specifically what page and which line you are referring to?

MR. GLAVINE: Yes, that's one of the things I didn't put in here in my notes was the exact page.

MR. STEELE: For example, are you talking estimate to estimate or forecast to estimate?

MR. GLAVINE: Estimate to estimate.

MR. STEELE: Okay. So that would be a net increase, if you're going estimate to estimate, it is a net increase of $44,000 and that is composed of the following three components; there was $60,000 allocated for that third communications position, offset by $13,000 of reductions of miscellaneous other expenses and $7,000 in administrative savings, although I note, for Joyce's benefit, that doesn't add up to $44,000 but it's in the ballpark.

MR. GLAVINE: The Advisory Services for Crown Agencies is estimated to be overspent by 2009-10 by $55,000 and the budget has increased by $89,000 or 37 per cent. What specific functions does this item provide to Crown agencies?

MR. STEELE: That is almost entirely that senior policy analyst position that I talked about. It is not a new position, it's a move of a position from the Controller section, which would have a corresponding decrease, into the senior management section. That was to assist our senior advisor, David Perry, a very experienced and capable guy, with the work that is being done on the various Crown Corporations for which the minister is responsible. I mentioned them to you before, principally at the moment they are the Liquor Corporation, the Gaming Corporation, the Bridge Commission, the Securities Commission, the Utility and Review Board and also another one that just occurred to me, of course, is the Police Complaints Commissioner. So that is what they are focused on, to make sure that I am fully apprised of all the issues surrounding that part of my responsibilities.

MR. GLAVINE: Are you able to inform me as to how many staffers are actually assigned to this service?

MR. STEELE: Which service?

MR. GLAVINE: The number of staffers, those working with the Crown agencies.

MR. STEELE: There would be three in total; David Perry, Susan Winfield O'Hara and Mary Ellen Rainey.

MR. GLAVINE: The estimates cite 29 full-time equivalent staff and senior management. What is the dispersement of these staff members? Or, I guess put a little differently, how many are in the office of the minister and deputy or how many in communications? I'm trying to get a breakdown of the office.

MR. STEELE: It's a very good question. So for the 2010-11 FTEs - full-time equivalents - which means they are not necessarily single individuals but people whose jobs together add up to full time, are as follows; office of the minister and office of the deputy, four full-time equivalents. Okay, communications is technically one, the rest of our communications staff, I'm informed, are actually CNS staff - Communications Nova Scotia staff. The Internal Audit Centre is 13 FTEs. Of course the Department of Finance is responsible for the Internal Audit Unit that covers the whole government. I think it is under the leadership of Director Ted Doane, also a very capable guy. Financial Institutions is eight FTEs and Advisory Services for Crown Agencies are three, the three individuals that I mentioned.

MR. GLAVINE: Have some of these staff members been moved from other positions or are there a number of new hires from outside the government since the previous budget or is it a fairly steady state that we are talking about here?

MR. STEELE: I've been the minister now for 10 months and it has been very, very stable. The main change, I have to say during my time, is that the Assistant Deputy Minister position has been eliminated because the incumbent, the very capable Liz Cody, is, in fact, leading the EMI, the expenditure management initiative, which shows we took our very best people and put them over there. The only other change that I can think of during my time is that a person who was on maternity leave came back from maternity leave. Other than that, it has been very steady.

[4:30 p.m.]

MR. GLAVINE: In terms of the Office of the Assistant Deputy Minister, the line item shows an overall decline in spending by $498,000, or 8.9 per cent. This seems pretty reasonable and each item within this subject is either substantially flat or has decreased on an estimate over estimate basis. Spending for Policy and Planning is stable and in each of the two years, 2009-10, 2010-11, the forecast for 2009-10 has it over budget by only $12,000, so how does this item differ from the Fiscal and Economic Policy and the Taxation and Fiscal Policy items?

MR. STEELE: I just want to make sure again, you've asked me to compare one thing with two others. Can you just repeat again which things you're asking me to compare.

MR. GLAVINE: How does the spending for Policy and Planning, how does this item differ from Fiscal and Economic Policy and the Taxation and Fiscal Policy items? Is there a difference, in terms of their alignment of staff and budgeting?

MR. STEELE: I'm having a little trouble - for example, you look at Taxation and Fiscal Policy which estimate to estimate is just about the same. Really it is what it always was, so when you get the forecast, that's when you get into actuals, like are people on leave, are they not on leave. There's a lot of reasons why but estimate to estimate is pretty much the same. I want to understand what it is that you're asking me but I don't.

MR. GLAVINE: When we take a look at those areas of Policy and Planning, Fiscal and Economic Policy. Then we have Taxation and Fiscal Policy. So in terms of these three divisions, have these three divisions always been - do they work in conjunction, do they work separately, in terms of what is budgeted for them?

MR. STEELE: It's a good question because I never noticed until you raised this now that it says Fiscal and Economic Policy and then on the next line, Taxation and Fiscal Policy. It's like, well, why? Apparently the answer is fairly straightforward, which is that the third-last line, Fiscal and Economic Policy, is the executive director and his support. That's a gentleman by the name of Mike DeCoste. He is the director of the next two units. So I suppose technically if we had the sophisticated formatting, the last two items would be a subset of the first one because the person whose area is captured by the third-last item really is directing the next two. That's why there is the overlap in terminology.

MR. GLAVINE: Okay, thank you very much for that explanation.

MR. STEELE: I learned something myself.

MR. GLAVINE: Knowing we're not going to have, I guess, a lot of time, minister and staff, I wanted to start with the minister's office and deputy, which I think is a good place to have a look at. One of the areas that we keep bringing to the table, in terms of where we thought perhaps a new government would go, was the comprehensive tax review. It was a process that was there and I know the deputy is very familiar with this, before you arrived, minister, before your government wanted to bring a new direction. It was started while former Finance Minister Baker was in office, the Spring of 2009. It was put on hold due to the election but was not restarted when you came into office.

In terms of the Office of the Assistant Deputy Minister, who would have all been involved in the comprehensive tax review that was started by Minister Baker?

MR. STEELE: It's a good question but there's a premise of your question that I don't quite agree with and I want to make sure that we're clear on our terminology here. The tax review was not put on hold because of the election, let's be very clear on that. The tax review was not put on hold because of the election, the previous government, prior to the election, had brought the tax review to a grinding halt so that when I walked into the office it wasn't a matter of just picking up work that was already underway, it had come to an absolute, dead stop.

My job, as minister, was then to say okay, what are we going to do with this? As far as I understand - now you have to understand that when I walk into the office or if one day you walk into the minister's office, you are not just walking into an operation in progress. I have no idea why the previous government did what they did because any of the documentation, particularly the political documentation, had been destroyed so I can only surmise why the previous government did what it did.

I know they started something that they called the tax review and I know they got to a certain point. I can't even remember if they formally talked about it, in terms of phases, I don't know if that's my language or theirs. What happened was that internally to the Department of Finance, without any consultation outside, they did what I refer to or think of as Phase I of the tax review.

I've seen that report and I don't know if you've seen it, member, because around March it was shared with some interest groups. Some interest groups were called in and it was kind of an odd thing because some of the interest groups will say they were called in to a meeting - this was like days or weeks, it wasn't very long before the budget. Maybe it wasn't March because the budget was introduced on May 4th. At any rate, they were called in for kind of a weird combination of what the government referred to as pre-budget consultation and to look at Phase I of the tax review. Everything was kind of wrapped up together.

I've seen this Phase I document and it's very well done but let me tell you what it is. I suppose I should think about whether to release it. If you don't mind me asking, Mr. Chairman, I just want to check with the member, have you seen that document?

MR. GLAVINE: No, I have not.

MR. STEELE: Okay, because some people saw it before the election. I wasn't one of them and I guess you haven't seen it either. The document was prepared by the staff of the Department of Finance, under the leadership of a gentleman by the name of Paul Davies. I know a lot of work was done by another analyst, named Thomas Storring - and I was trying to think, he has been promoted since then and I can't think of his new title but at any rate, some very capable, some pretty smart and experienced people were working on it. What it was essentially was a very detailed description of how tax works. That is all it was.

In and of itself, if the question was, how does tax work, it's really good. It seems to me that the previous government had very carefully not given it any direction. There is no hint in it about where the previous government wanted to go, thought it should go. It is not in any sense a discussion paper, there are no questions raised. It is simply - really, anybody anywhere could sit down and write a similar paper.

Now the examples used are examples from Nova Scotia but it is a theoretical document on how tax functions. I don't know where the previous government was intending to go with that. Now I surmise - but this is purely coming from me - that they were afraid to give it any direction because once you start giving it a direction, that's when people can start criticizing.

All I can tell you is that when I walked into the office on June 19^th or June 20^th, that's what I found. So there is no broad tax review that I stopped - I know somebody suggested that early on - or something that was in progress. Phase I was done and that's all it was. So we were left with a decision, I was left with the decision about where we go now. You've heard me say this before, member, and I'll say it again, one thing that I am determined to do is not have some kind of esoteric discussion about tax that is entirely divorced from any discussion of what the revenue from tax is used for. Part of the problem in this province and part of the - sorry, I shouldn't put it that way, that sounds much more dramatic than I mean - part of the difficulty that we face as a government, we face as a Legislature, is there has been very little really serious, grown-up conversation about taxes and services.

Remember earlier, I said the way I would phrase the question is, how do we get taxes and services back in alignment? Any discussion about taxes has got to take place in the context of what it is that tax money is used for. There are too many people who think that you can have some discussion about tax which talks only about tax, whereas to me, you cannot - it's like having a coin and saying, I choose only the head side of the coin or only the tail side. If you have a coin, you have both.

The conversation on fiscal issues in this province has gone along two equally erroneous tracks. One is a discussion about tax, where you say well what should the level of tax be? How much do you want to pay? Do you like tax or do you want more tax? How much tax do we need to be competitive with New Brunswick, for example? That's one track but it's not terribly useful because it completely ignores what the tax revenue is used for.

The other equally erroneous track is to talk about programs and services as if money doesn't matter, which is not to say that my own Party has not been guilty of that in the past but now that I am the minister, part of my job is to force people to talk about the two things at the same time. You cannot have a discussion about this program or that program or this service or that service, no matter how worthy it is, without some discussion of where the money is going to come from. So if we're going to have any kind of a discussion of tax in this province, and we desperately need to, it has to take place in the context of what level of programs and services people want from their government.

Now there is not one of those questions that is more important than the other. It is going to have to be kind of an iterative process, which is how much are people willing to pay, what tax base is it going to be applied to, because of course different tax bases apply to different people, versus what programs and services do people want and to have those two questions considered together until they are back in alignment.

As Finance Minister, I can tell you that it doesn't much matter to me where they get back in alignment. Now as a New Democrat, it matters to me and I have certain particular views on that. As Finance Minister my objective is to impose fiscal discipline on the government and yes, on the Legislature, and say the two things have to get back into alignment, let's talk about how we're going to do that. So to the extent that the tax review is going to continue, and it will, it's going to take that form.

I had another thought which was just as good as my first one and it is now gone. Anyway, that's my thought on - oh, I know what it was. We also have, in addition to EMI, we have an initiative, the core priorities initiative that is being led by Deputy Minister Rick Williams, and you may have heard of this. It makes no sense to me that we should be discussing the core priorities of government, what it is that government has to do and has to do excellently, without talking about how tax policy will serve that. So that's the other track that the tax review will take, not to discuss taxes in isolation, as if you ever could talk about taxes completely divorced from anything else, but rather, what is it that people can expect their government to deliver and to deliver excellently and how does tax policy best serve that? That's how you're going to see the tax review unfold.

[4:45 p.m.]

What I see so very often, and it happened again in my constituency office this morning, I had a call and talked to a lovely lady and she embodied this thing, is that in too many people's minds there is a complete divorce between the question of taxes and how much you pay and then services you receive from the government. The taxes pay for the services. If people want their taxes to be lower, they have to accept lesser services. If they want more services, they are going to have to pay more taxes. You cannot hold in your mind at the same time the thoughts that I want lower taxes and better services, it is simply not possible. Part of my job as Finance Minister is to continually make sure that people understand that, so that the debate can continue in the way that it has to, which is to talk about the two at the same time.

MR. CHAIRMAN: Member, there are approximately 10 minutes remaining in the Liberal caucus time frame.

MR. GLAVINE: Thank you very much, Mr. Chairman. I do appreciate that balance that does need to be struck between revenue generation and the kind of programs that I guess we have come to expect or that we will have to have much greater accounting for, if we don't have the revenue there to provide those.

That being said, and I know you continue to talk about the merits of the Back to Balance sessions, but that in no way could be a substitute for a real strong going forward, in terms of bringing a lot of different, I guess, expertise to the table to talk about a tax review. So will you be putting forth the criteria, the outline, the structure of a review as we move this forward? There are still many who provide that question that still is perhaps unanswered, that we haven't done this for quite some time in our province and we've seen some literature recently that is suggesting that we do this, or continue the process that you did state very clearly was put in a holding pattern but I think you are enunciating that you do think there is a need for this to go forward.

MR. STEELE: Again, I want to make sure we're clear on terminology; the tax review was not in a holding pattern, it was in an absolute dead stop with absolutely no conception on the table of where it was going next. So what I have to do is figure out where it goes next. Clearly, we have to have a quality discussion in this province about taxation.

I guess what I'm saying is that it's going to take a form of serving the core priorities of government first and foremost so it is difficult for me to put my finger on exactly how that is going to look, but if you ask me, are we going to be reviewing tax policy? The answer is absolutely yes, but if you ask me, is it going to be in a form like Back to Balance, I would say well no, probably not. I haven't really thought through what the best way is to do it. All I know is that whatever form it takes, we are going to have a discussion about taxes and services at the same time and not pretend you can talk about one to the exclusion of the other.

I don't know, I think what you're looking for is some kind of a formal announcement. For example, in the gaming strategy which you asked me about the other day, there is going to be a formal announcement. There is going to be a leader, there is going to be a terms of reference, there's going to be a deadline and so that process is going to unfold in that way. This particular tax review I can't say is going to unfold exactly like that but clearly we need to have a grown-up conversation here about our revenue sources and what we use those revenue sources for.

MR. GLAVINE: Since I'm getting to probably my last questions here for today, was the introduction of the HST hike discussed in the context of this overall structure of taxation in Nova Scotia? We know that was given very strong emphasis in the Back to Balance sessions and that's

why again I prefaced around a comprehensive tax review and where it was but, more importantly, where it may go. I just want your thoughts, Mr. Minister, on its place in the overall structure of taxation for the province.

MR. STEELE: I guess the short answer is well, of course it was. I don't want to get into what discussions may or may not have been held in Cabinet but let me talk about Back to Balance. That was one of the things that we were trying to achieve in the Back to Balance, to say to people, here are the facts about where your government gets its money and spends its money and here are the revenue options.

You will remember, anybody who attended will remember, that we laid out our revenue sources and what the options are and really when you consider that equalization is mostly not within our control, things like offshore royalties are mostly not in our control, unless there is a brand new field to which the existing royalty regime doesn't apply, and that the big revenue sources that are within our control are income tax and HST. That is why the discussion in the Back to Balance focused largely on those two sources.

We do have a number of other revenue sources available to us. Heck, we could double, triple liquor prices and bring in a fairly handsome amount of money but it wouldn't come anywhere . . .

MR. GLAVINE: I just saw some squirming.

MR. STEELE: I'm saying we could, we're not going to, my point being that you can double, triple, quadruple small revenue sources and it hardly makes a dent in your problem. So one of the things the expert panel pointed out and we took seriously is if you're going to have a serious discussion about new revenue, you have to have a serious discussion about the large sources of revenue and those are two - HST and income tax.

As I went around the province and we talked to people about what the options were, certainly there were people who indicated that they would prefer - all other things being equal - if revenue increases are necessary, they would prefer that there be a general increase in income tax rather than HST. Even in Cumberland County, which is strongly opposed to an increase in the sales tax, for reasons having largely to do with the fact that they are our only border county, they would acknowledge that okay, if that's off the table then you have to increase income tax. Those are the options.

For the people who said that income tax was their preferred route, I would say, and anybody who attended will confirm this, that was very much a minority and that other people, the people across the province who looked at it and considered and talked to their neighbours about it, said that all other things being equal, the HST is the right way to go. So I would like to think that that is - there's a lot of collective wisdom in that if you have to do it, that would be the way to do it. So I would say yes, clearly at those Back to Balance sessions people were looking at a form of tax review.

There were lots of other suggestions to tax on all kinds of other things but they would have raised relatively small amounts of money.

MR. CHAIRMAN: Member, time for another quick question and a quicker answer, perhaps.

MR. GLAVINE: In terms of yes, that's fine, not speaking of discussions, how they developed in Cabinet and so forth but within your department, was the HST brought to the table of a large segment of the Department of Finance or did you think that perhaps that's not where it needed to be?

MR. STEELE: I'm not going to talk about discussions within the Department of Finance. They are called internal discussions for a reason. I'm the minister and I'm responsible for the decisions that are made. I certainly am not going to go down the road of identifying particular people who said this or proposed that or advocated this or opposed that, that is just not helpful. I'm responsible for the decisions and those discussions are internal discussions.

MR. CHAIRMAN: And you have about one minute remaining, if you have a thank you or anything else.

MR. GLAVINE: Well, I did want to thank the minister for his candid answers this afternoon. I hope to be able - I'm sure the estimates will go beyond today into Monday. I had a major commitment in the riding that my wife didn't want to give up, a fundraiser, so some of my colleagues will be here for the remaining Liberal time today, so I want to thank you, minister.

MR. STEELE: Thank you. If I may, a short conclusion. I would like to thank you for your excellent questions, I very much appreciate that. I've told you already you've made Joyce's day by asking detailed questions that are actually about the estimates and thank you very much.

MR. CHAIRMAN: The honourable member for Inverness.

MR. ALLAN MACMASTER: Thank you, Mr. Chairman, and thank you minister and department, for offering this opportunity to ask a few questions about the budget. I'll start off just by giving some remarks and then I'll go into a few questions. I do appreciate, minister, as the member had just indicated, your candidness with the answers and that's great. Certainly my goal in asking some of my questions today is perhaps to provide a different philosophy but the questions are truly meant with the desire to maybe offer some different opinions and thoughts for the betterment of the province, so that's why I'll be asking them. Of course I respect that you've put together this budget because you believe that is what is best for the province and that needs to be recognized as well.

How long will I be here? Well I don't know, that's up to the people of Inverness but while I am here I am always going to try to do things that I believe in. When I look at the world of finance and when we look at this budget, the numbers don't seem very human in the sense that when we talk about numbers they're not really human. Part of what makes it human for me is I see it as we're passing the torch on to the next generation. I think of the expression that you leave people that you meet better than you found them. The same can be true for when I come to government, I want to do something, I want to do things that I believe put it in better stead. I think we all do, anybody who is elected. I see some of the other members who are with us here today and I am sure they feel the same way.

It does not always mean easy decisions and I think we know, too, there are easier ways to earn a living than to get into politics, it's not always an easy job. I've looked at the operating statement for government and really the only area that we can control is expenditure. I know with this budget and with the coming budgets it seems that instead of dealing with expenditure, we're looking at raising taxes, running deficits and creating debt. That is something that I am philosophically opposed to.

Yes, there are certain cases, I know the federal government has entered into deficit budgets but I would say that the federal government is dealing with more of a cyclical economy across the country. They have the auto sector in Ontario that has a tremendous decline, they have oil and gas in Alberta with prices declining a number of months back now, they've been recovering quite nicely, and even with the potash sector with price declines there, so there are economies that are much more cyclical than ours.

I also know that businesses can't survive running deficits or, in their case, they would be running years where they are not making profits. Unless you have a monopoly, you might be able to get away with that.

I guess what I would say is it's okay to disagree sometimes. Some would say that to balance the budget right now would be too harsh. What I would say to that is, well what about the young people who we have with us now and the ones who are coming before us? I would say, why put it on them? I think it is better to take steps today with respect to spending, so that we don't need to make more drastic changes tomorrow. We all know that with the effect of compounding, when you have a rate of growth and expenditure today and if you're adding to it tomorrow and the year after and the year after, that's what causes these pressures that, minister, you spoke about earlier, when we have pressures to spend money in government.

One of my concerns with this budget and with the next three budgets is that we don't seem to be making much change today with respect to expenditure. I think that's going to hurt us in the long run.

I just want to mention, too, I guess our thoughts on money and how it works and budgets and how they work are perhaps shaped by how we're brought up. I want to tell you that my own father grew up in the Depression. Times were tough and back then people learned to save. There weren't a lot of social safety nets around for people and people made do. Today we live in a world where it is much different, people are used to mortgaging the future, people are used to just presuming that later on they will pay for it. It's a different mentality. While things have changed, access to credit is easier and that's a good thing, perhaps we've gone a bit too far the other way in the past 40 years.

[5:00 p.m.]

The house that my father grew up in, he was born in Ontario because the family had to move there to find work because there wasn't work here in Nova Scotia. His father was a miner and his mother was a very cheerful woman. She spent her days making sure that all the boarders - and I think there were in excess of 10 boarders in the house at any one time - they would be working shifts, but they worked hard and they made it through those times. I think they were strong people but we're strong people today. I think that sometimes we maybe don't have faith that we can handle some of the things that I think we can handle.

I look at the other side of my family, on my mother's side. They were entrepreneurs, they worked hard, they paid their taxes, they made sacrifices to run businesses, much the same as businesses here in our province make sacrifices to run their businesses. I think the same can be said in government, that sometimes we have to think that same way, that we are not separate of those people. I think I've mentioned it in my opening remarks when I came to this Legislature, that my grandparents, the businesses that they ran, they ran a general store and they offered some of the first social security in the province, in the form of credit to people who couldn't afford it at the time, if they had seasonal income.

I want to make those points and I want to put that on the record because I am sure that probably shapes the way I think and the way I was brought up and perhaps it is a different opinion but I think that's okay. What I see in the future is a government that is smaller, so that we can create a larger private sector. The biggest thing that I heard when I was going around talking to people, when I offered for election, was people want employment opportunities. It's not just about people finding work, it's about families who want to stay close to each other.

I spoke to many older people who had children who were working off in places away from Nova Scotia and they don't get to see their grandchildren, or they might get to see them once or twice a year because of it. I think the solution for that is to try to grow a private sector that can provide us opportunities in the economy. I think for the private sector to grow, the government has to place less pressure on it, through the form of taxes. That's the philosophy I see.

I think a smaller government also means that it becomes easier to balance budgets and we lay a foundation to begin paying off debt and perhaps a future, maybe many years in the future but a time when maybe we get to pay less tax and still look after people, still have our social programs.

Since the 1960s, save for some balanced budgets in the last number of years, we have been on the other path, where we're running deficits and we are - well, the result today is we have the second highest debt per person in the country and we pay some of the highest taxes in North America. I think it's time that we start moving in another direction.

I know the minister will, I know some of his responses to this and I look forward to hearing them, I know he's dying to give them. You know I'm not that much younger than the rest of the members in the House but I am a little bit younger, I suppose, than most. I see some of those decisions that were made in the past, I mean we're all living with it, in truth, but perhaps I have to live with it a little bit longer in the sense that I may have a few more years on the planet. Maybe that helps shape the way I think as well.

The first question, I think it has to do with a starting point, is where did we start with a starting point? I'm going to give the minister an opportunity and I'm going to extend him some courtesy because one thing that wasn't in the budget in 2009 was the spending on universities. If we want to be fair and we want to look at where was the starting point, I think that needs to be added to the budget that was presented in 2009 by the Progressive Conservatives and it was defeated.

It was prepaid and that has been said and people can look at the documents and they can see that, but if we add that, say, $350 million or so, and I know that figure could be debated, but if we add that to the $8.6 billion figure, we come up with a figure of about $9 billion. I believe that is what we started out with this year but I don't think this year includes universities either, so that would suggest that we've moved up to $9.35 billion or $9.4 billion, if we wanted to look at an accurate starting point. Minister, I hope I have explained that the way I intended to. I'll let you answer that and anything else you'd like to say.

MR. STEELE: I was listening but I didn't hear a question. I'm not sure what you wanted me . . .

MR. MACMASTER: The question would be, where would our starting point be, if we were going to start on the expenditure side of the budget, leaving off from 2009, after the Progressive Conservative budget was defeated, up until the budget start this year?

MR. STEELE: I want to write that down to make sure I got it. When you were talking about your father, your parents and the circumstances you grew up in and, of course, I suppose myself and probably everybody in the room was thinking about the circumstances their own parents grew up in. My own parents are immigrants from Scotland. They were born in the 1930s. What is amazing to me - because I was thinking of this as you were talking about your father's circumstances - is that not only did they grow up in Depression years, which extended to the U.K. as much as it did to North America, of course, but they also grew up during a war. My parents both grew up near Glasgow - not in Glasgow, Scotland, but near it. When my father was my son's age, he could hear the German bombers flying over at night and you think of how difficult it was to live in those circumstances.

We're extraordinarily lucky that we live in a prosperous and peaceful time but we have this enormous debt and it wasn't me who ran it up. I walked into the office as Minister of Finance with a $13 billion debt that had been run up by somebody else. That wasn't me who did that but I have to deal with it and this is what we're trying to do, of course.

This is an analogy, because there are some things that we agree on and one of the things is that that is not a good thing to pass on to our children. It's like if somebody walks into a Tim Hortons with their son and their grandson and orders a full meal deal for themselves and then says to their son and their grandson, okay you pay for it and if there's anything left over, get something for yourself. It's not fair and it is not fair that we should expect our children to make decisions that we are not prepared to make ourselves. We have to pay our way and we're not and we haven't for a generation. It's not fair.

It is not fair that today's generation has to receive less programs and services because those programs and services were funded over the last generation with deficit financing because now not only are we paying for our own programs and services, we're paying for the programs and services delivered in the past. It's not fair.

So what are we going to do about it? Well, we have to get back to balance. We can only start paying down that debt when we start running surpluses. We can only get to balance and start running surpluses if we get our expenditures back in line with our revenue. That is the debate we need to have in this province and we started that debate with back to balance.

I actually thought that Back to Balance was a beautiful process. It was wonderful, it was uplifting, it was inspiring because people came out because they care about the province's future and they have ideas and there's a lot of collective wisdom if you choose to listen to it. It really bothers me when I hear Opposition members just sort of airily dismissing what went on in Back to Balance. They say oh it was this, it was that. I just think it's really unfortunate to take such a beautiful, open, democratic process and just dismiss it and say oh, don't listen to that. Dismiss it because it doesn't fit in with a preconceived political message track about what it is the people ought to have decided, rather than what they actually said when they were there.

So we agree that it is necessary to not continue adding to the debt but it's not possible not to add to the debt without wrenching change. Nobody wants that, I don't really think that's what people want, I know it's not what they want. So what we're aiming at is, at the very least, reducing the debt-to-GDP ratio, that is the size of the debt relative to the size of the economy. You can only do that if the economy is growing faster than the debt. That we can do.

Now if we meet our targets which we've laid out in our budget over the next four years, the debt-to-GDP ratio will start declining the year after next and that's a good thing. Nobody should think that our debt-to-GDP ratio is the highest it has ever been in our history, it's not, it was higher in the 1990s. It was up, it came down, largely because of stimulus spending that everybody in the House agrees on, is going back up again and the year after next it is going to come down again.

One of the key questions at every meeting of Back to Balance is how fast do people want us to move? This is a question that was asked at every single session. The overwhelming majority of people in this province - no, I shouldn't say that - the overwhelming majority of people who attended the Back to Balance sessions said the right time frame was three to five years. Of course, as with any question, there are people who thought that it should be balanced immediately and some that it should be 10 years or longer. I have to say, member, if you think that we should balance the budget this year, you are in a very small minority of Nova Scotians.

Now I didn't go out to Back to Balance with a preconceived idea about what the answer was going to be. I asked the question and over the first two or three sessions I learned how to ask it better because in the first session or two people were having trouble understanding what I was getting at, so it evolved. Once I got it right, the answer that came back was overwhelmingly three to five years and that's exactly what we're doing. That is why the forecast is that if we meet our targets, as I am determined that we will, we will be back to balance in four years but the debt will continue to grow. That has to do largely with the fact that it is not enough to have an operating balance, but if you are truly going to start paying down your debt you also have to have a surplus that is more than enough to cover your tangible capital assets spending. One of the things that the Hamm Government - which I love dearly, believe me - used to skate over was the fact that even though they claimed a balance, it was an operating balance and they were still adding to the debt.

I don't recall exactly but I think there may have been one year, precisely one, one year in the last 10 where the debt actually went down. I can verify that but in order to go down you have to have not just an operating balance but a surplus big enough to cover your tangible capital asset spending.

I do hope, and it's going to take a lot of work, that we will get to that point but at the very least we can start decreasing our debt-to-GDP ratio. That is what the people told me in the Back to Balance sessions because if you go any slower, you're weakening the government and the government is important to people. I believe very profoundly that in our system of government that government is the collective expression of the will of the people. It is their government, we are only their elected representatives. It is their government, it is their province.

You cannot have a well-functioning society with a weak government. I'm not talking about politically weak, that's a different thing entirely, I'm talking about a government that does not have the resources to deliver the programs and services that people expect from their government. They need a strong government and they cannot have a strong government if it is continually running deficits and running up debt because then more and more of your budget is taken up with interest payments.

[5:15 p.m.]

Conversely, you cannot have a government that privileges a balance above everything else, above reason, above responsibility, above compassion. When a new government is elected it is like a ship at sea has a new crew and a new captain and you can't just say to the passengers, we have some renovations to do, you all have to go overboard until we're ready for you, or you can't just make them huddle on the deck while you refashion the cabins. The ship has to continue, you have to continue to deliver quality health care to people. You have to continue to deliver an excellent education system. You need to continue to support those who are not able to support themselves. You have to be able to continue to build and maintain a transportation system. Those four things I've mentioned are where the vast majority of this budget goes.

What does a provincial government do? I'll tell you; a $9 billion budget; $4 billion goes on health, $2 billion goes on education, $1 billion goes on community services, $1 billion goes on interest $0.5 billion goes on transportation and every single other thing the government does is the other $500 million.

The position that you've laid out is philosophically and eminently a respectable one but the problem is that we're not creating the Government of Nova Scotia from scratch. The ship of state is at sea and has almost 1 million passengers. If you and your caucus are serious about balancing the budget this year, with no tax increases, then you have got to face the real question, which you don't, which you won't, because you know that you have no answer to it. That is that if you're going to balance the budget this year, with no increases in revenue, you have one single choice, that is to cut $437 million out of the provincial budget immediately.

Now my question to you, and of course over on the other side I'm teasing just a little bit, sometimes good naturedly, sometimes not so much, but I am going to keep asking you and your caucus that question until I get an answer because you know you have no answer. It is all very well to say no deficit, no tax increases but that's not the real political question. The real political question is, what would you cut? Specifically what would you cut - not some airy-fairy theoretical thing? If you are going to take $437 million out of health and education and community services and the roads, I want to know how you're going to do it. I'll be honest with you, we could not. We did not believe that it would be reasonable or fair or compassionate, or responsible, to cut $437 million immediately out of health and education and community services and roads. That is not the right thing to do, it's not what the people of this province want. They want us to get back to balance in a reasonable time frame and the reasonable time frame they told us was three to five years and that's what we're doing.

Now one of the things which you said right off the top, which I completely agree with, is that the numbers we deal with in this budget, they are not human numbers, which is why there is very little, in my view, public debate about these numbers because once you start talking in millions and billions of dollars, they are not numbers that people are used to dealing with, you and I agree on that, so people switch off because it doesn't mean anything to talk to them about $4 billion for health care. What is meaningful to them is when they go to the emergency room, what are they going to find? What is meaningful to them is when they send their child to school in the morning, what is going to happen when they walk through the doors? What is meaningful to them, especially in rural areas like your own, is when you have to go and shop or visit a doctor or visit a government office, what is the quality of the road going to be like in the middle of winter?

Sometimes I wonder what it is that people think that I do with their money. What I do with it is I spend it on nurses and paramedics and doctors and drugs and medical technology, and yes, hospitals, even ones that go $80 million over budget and that's not my fault. I wish I had that $80 million back, there's a heck of a lot of good things I could do with it, including reducing people's taxes but I can't because when I walked into the office, they said you have no choice, the previous government ran $80 million over budget, there's no choice but to pay it.

This is what I use the money for; I use it to pay teachers. In the P - 12 education system the vast majority of our expenditures is to pay teachers. Of course it is also to keep the lights on in the schools, to keep the schools clean and healthy, so that we have textbooks, so that we have something to teach our children with. It is also to support the poorest and the most vulnerable among us and I'm sure it's the same in your constituency, I know it is in mine. I have pockets of real poverty in my community and some of it has to do with disability; physical disability, mental disability, people who are defeated by the world and the way it works and they need a hand and that's what Community Services does.

Then there is transportation which, of course, is the road network which is a staple of Nova Scotia politics. So let me bring it right down to your constituency; your constituency's proportionate share of that $437 million is about $8 million. So if you or any member of your caucus is going to stand up in the Legislature or in a public meeting or anywhere else and tell me that I'm supposed to balance the budget with no revenue increase, I want you to tell me where you are going to take $8 million out of health and education, community services, transportation, in Inverness County.

MR. MACMASTER: Well, minister, you know that's an interesting question. What I think we need to do is back up and my first question was, where is our starting point? I would say that you've given a figure of $437 million but I would say it's a lot easier to balance the budget if our dollar figure of expenses to start with is lower to begin with. You know when we look at the budget that was tabled, and I said it in my introduction to the first question, total expenses would be about $9 billion with universities included. So right away we're much closer to balancing the budget.

I know to answer your question about the people of Inverness, where would the cuts be in Inverness, there likely wouldn't be any. Most rural areas wouldn't experience cuts. You can make it seem like the world is going to end but the truth be known, there's a tremendous amount of resources within the hands of government to look after people and to look after people's needs.

You did make a good point about the necessity to keep expenditures in line with revenue. I would say that's very important and I would say it's important to do without increasing taxes.

Stimulus spending, yes, the province is spending money on stimulus but that doesn't appear on the operating statement, except perhaps for debt servicing charges because that money is borrowed and it is amortized off, over years, over time as roads are paid off. We both know that that's their tangible capital assets in that method of accounting.

Your point that people don't want us to balance the budget today. Well, most people - also to your point - most people don't understand numbers. I had a friend years back, and this was back when Dr. Hamm was first balancing a budget in 40 years in the province, I spoke with a friend in a boat one day and he said well, Allan, what does it matter, they're just numbers? Most people don't see the relevance of it and for many years that was the way we were going. I think we started to change people's thinking on that.

The important thing I would say, and I don't think there is anything wrong with going out and consulting people with the Back to Balance tour, I think it's great to give people a chance to express themselves and it's great for us to listen. That's the best thing we can do in government, is listen to people because no doubt, there are many good ideas out there.

I do want to make the point that most people listening don't have access to the information that you would have in the Department of Finance or perhaps I might have if I scoured some documents and reports associated with the budget. I guess that's where we'll just have to disagree on that point, philosophically, about balancing the budget right now because I know you did say that you thought it was an honourable thing to do but you don't feel the time is right to do it now.

One question I do want to ask, now I can agree with you in part, and I said it in my opening statement, about the amount that was extended to universities. This was not really included in the budget that was defeated in the Spring of 2009. What has really changed since then? If you look at our economy, interest rates are the same. I remember I asked you this question in Question Period, the Canadian dollar has gone up but it was quite high at the time, inflation is stable. If we look at our economy in Nova Scotia, it's quite stable. I look at an economy like Alberta and I noticed their revenues in a year, the portion of revenues associated with royalties went from 8 per cent to 26 per cent. Now that is a cyclical economy. There is an economy where government has to deal with a major issue, certainly when it went down to 8 per cent of their budget.

In Nova Scotia we don't have that as an issue, and maybe I'm missing something, but is there something that you see that has changed significantly since the Spring of 2009 that would require us to run deficits? I'll let you answer the question, minister.

MR. STEELE: I'm not sure where to begin answering that question because it appears to me that you're - no, that's not going to sound right if I put it that way. Your take on the province's books is simply misconceived. There is something that you are misunderstanding about the way the province's books are put together.

I notice, of course - I can't resist saying, half teasingly - that you didn't answer the question that I asked you because you can't because you have no idea where you would find $437 million to balance the budget this year without a tax increase. You have absolutely no idea but that's not going to stop you from saying that we could have done it. I'm going to keep pressing you, every time you ask me why I can't balance the budget without a tax increase, I'm going to say to you, where do you propose that we get that $437 million in immediate cuts? This is not something that is coming down the road, that's like right now, today, what do you propose that we do? I'm going to keep doing that but let me continue on.

Something that you don't understand about capital budgeting. He says it doesn't appear in the operating statement. Of course it does. It doesn't appear as a cash outlay because we don't do cash accounting but it appears as a capital outlay, which, as you know from my introductory remarks, is many hundreds of millions of dollars and it appears over time because it is amortized. Of course it appears on the operating statements. There is no free money here, there is no point where you get to spend money and it doesn't count. Previous governments have tried that but we're past that.

Then you said, where would our starting point be? The starting point is exactly where the budget shows it is. You have a construction in your mind, apparently, that I can't follow, that somehow the university MOU makes some hundreds of millions of dollars of the deficit disappear. Look, you missed the debate last Fall about the MOU so let me talk a bit about the MOU because like I said, I have a little trouble following your logic on it. All I know is that the conclusion that you draw from it is misconceived so there must be some misconception in the way you understand the university MOU.

What is the university MOU? The previous government entered into a multi-year funding arrangement with our universities. Now that's a good thing and there's many other sectors that would love to have multi-year funding arrangements because one of the complaints, of course, is they say we can't predict from one year to the next what our funding level is going to be. It is very difficult for government to make those kinds of commitments because by the same token, we don't know what our revenue is going to be from year to year.

[5:30 p.m.]

You know you could have, like one of the differences between last year and this year is that offshore royalties dropped by $300 million. That was $300 million that just evaporated from the budget. The previous government had that money and, in fact, they spent it all and they implemented new programs on the assumption that that money would be there forever and, of course, it wasn't. That's what a structural deficit is all about, our revenue sources are a mismatch for the expenditures.

Okay, so back to the university MOU. It's a multi-year funding arrangement which in principle is a good thing but then the previous government started playing around with it. This harkens back to the question about March madness. What they did was they started moving the money for the MOU around between fiscal years because they could because it matched their preconceived ideas of what the deficit in a particular year should be, so that when I came into office as Minister of Finance I had in front of me a very simple issue. I had one year of university funding and two years to do it. The previous government started it by pre-funding a whole year of university funding, so I had one year of funding and two years to do it.

Now I am still at a loss to understand what particular virtue there is in assigning that amount to the second year, as opposed to the first year, or splitting it evenly between the years. What I chose to do, because it was a complex and confusing arrangement, was to pay it out in the first year, bring this confusing arrangement, which had been started by the previous government, to an end and start fresh.

I guess the fundamental point, and I think the point that you don't take into account, is that no matter how it is accounted for, the amount of money paid to the universities is the same. There was no change in the total amount paid to the universities, compared to what was promised by the previous government. So all we're talking about now is this accounting issue of what year the money is assigned to. Since the previous government had started shifting things around, I had to figure out how to make one payment in two years and have it make some kind of sense.

I made my choice and other people have said well, they would have made other choices and that's fine. I don't think there's any particular virtue in the alternatives offered by other people. The point is that the payment is the same, so now that we're in the second year of those two years, it doesn't matter how you look at it, the total payment is exactly the same. The amount that is added to the debt is exactly the same. The amount of interest that we have to pay on that debt is exactly the same as it would have been if I paid it the first year or the second year or split it between the years, it makes no difference.

If you try and escape from my question by talking about the university MOU, you are just misunderstanding. You still have to explain where you are going to find $437 million. If you think that you can cut $437 million out of a $9 billion budget without anybody noticing, you are wrong. If you think you can take $8 million out of Inverness County without anybody noticing any difference in their health care, or education, or community services and the roads, you are wrong. I'd like to see you explain but I notice that every time I ask the question you evade it because there is no answer, it makes no sense. I don't think that's what the people of Inverness County want, I don't think it's what the people of the province want. That's why it's a very careful, very balanced, very considered return to balance in three to five years, which is what the people asked us to do.

Then you moved on to your question, what has changed since the May budget? Let me talk about the May budget. The first thing I would point out is that the budget was introduced on the same day that the election was called. So it didn't receive the kind of - okay, it was never voted on. I think you suggested in the House - I'm not sure if you have or not because I don't always understand some of your premises but I think you've suggested that we actually voted on a budget which, of course, we didn't.

The government introduced the budget on May 4^th and the election was triggered the same night. It started in earnest the following day, so that budget received no examination, no debate in the House, no estimates, no anything. The government put it on the table and we're off to the polls.

That budget is like the guy who, 20 years after his wedding, tries to fit into his wedding suit and all he cares about is the photograph. He doesn't care if the buttons pop and the seams split the minute the photo is over because there are so many so things, there were so many things wrong with that budget and we're still uncovering them. Every week it seems like there's a little budget bomb that goes off, things that were hidden by the previous government that we just discover. I wish I could rhyme them all off to you but some, of course, come to me through the Cabinet process so I can't talk about them all.

I started lifting some of them in the House. That was not a balanced budget. If it had been examined for five minutes in the House, it would have been clear to everyone that it was not a balanced budget. It was a budget presented on the eve - literally on the eve - of an election, designed to leave a certain impression for purposes of the election.

When you say what has changed since the budget, I could talk about things that have changed but what I think is more interesting is what government was hiding in that budget that we've just discovered, sort of week by week. Let me mention a few. I've mentioned some of these before but since you asked the question again, I'll give the same answer again.

Let's talk about the Colchester Regional Hospital. Does Colchester need a hospital? Absolutely. That hospital was budgeted at $100 million by the previous government - I think $103 million, $104 million, something like that. The minute we walked into office we were told there was no choice, the minimum price to complete that hospital - because remember, it is half done. I don't know if you've driven by it but when the election was held the hospital was half done because the previous government wanted to show that the hospital was underway. So you have this shell which for a time was covered by blue tarps because they ran out of money. So we walk into office and we're told the minimum is $180 million and the thing is not even finished yet. We don't know if we can bring it in for $180 million, it may be more. That wasn't included in the previous government's budget, even though they knew perfectly well that it was over budget.

Then there was another project. I'm trying to remember the right name for it and I just can't remember but it is here in Halifax over at the QEII. It was a $30 million project, adding a new facility over at the QEII. Do you know how much that $30 million project went over budget? Ten million dollars over budget. Now we heard stories about how that could happen because of course naturally we say, how could this happen? How could you have a facility budgeted at $30 million that ends up costing $40 million? How could you be so wrong?

We heard certain stories, which I won't repeat, I don't think they put certain ministers of the previous government in a very favourable light but let's just say that that was something the previous government either knew about or should have known about and wasn't included in their budget. By the time we came into office, we were told there was no choice, that's how much the thing costs, it's already underway, you have no choice. Bang goes another $10 million.

Then there's one of my favourites, H1N1. Last Spring everybody knew that H1N1 was coming. Everybody knew, it was in the news every day. How much did the previous government put in their budget for H1N1? Nothing, because it didn't fit the message track. The message track was that the budget put on the table on May 4^th had to show an operating balance. They simply ignored or left out everything that didn't fit the message track and that included H1N1 because it hadn't happened yet, so they didn't have to include it but they knew it was coming, they just didn't allocate any money for it because if they had, it wouldn't have been a balanced budget.

Then there was the amount set aside for collective bargaining. Now, I have to say that one of the crazier aspects of the operations of the Government of Nova Scotia is collective bargaining because in this small province of under one million people, the public sector has about 450 separate collective agreements and some of the bargaining units are very small. The thing is that they all come due at different times. I've seen the charts - the people at the Public Service Commission are actually pretty good at this because in order to keep track of what's coming due, they have to have some pretty sophisticated colour charts to track the expiry dates of 450 collective agreements. What's happening (Interruptions) Just a minute, since the member asked the question, it just occurred to me that he should probably listen to the answer. If he's ready, I'm ready to continue.

So as I was saying - I could start from the beginning again if you want me to, but I won't. So there are 450 collective agreements that all come due at different times. What the previous government had done was basically refuse to deal with any collective agreements coming due for about two years before the election. It just didn't fit their message track so they just didn't deal with them, so when we walked into office there were like 100 collective agreements that had already expired and there were another 100 that were about to expire.

Even though the previous government knew to a certainty that they were going to have to settle these collective agreements or that the next government was going to have to, how much do you imagine they put in their budget to deal with it? Nothing. Nothing. The implication was that they were going to implement a Public Service wage freeze which, of course, they had no intention of doing - or if they did, they certainly had no intention of announcing it.

All I know is that when we walked into office and we got that budget and said okay, how much have they set aside for collective bargaining? The answer was nothing, or as good as nothing. It was actually 0.5 per cent which, as anybody knows dealing with collecting bargaining, the 0.5 per cent is good enough to deal with some of the side issues, like benefit issues and the little things that come up, but for actual wages they had set aside nothing.

Now, I suppose we could have a debate about whether a Public Service wage freeze is a good policy or not, that would actually be a really good debate to have, but our government rightly or wrongly, for better or for worse, decided that was not the right policy. We decided that all things considered, a policy of two-year settlements of 1 per cent per year was the right policy, but there was no money in the budget to pay for it so we had to add that to the budget.

Why did the previous government, knowing that whoever won the election was going to have to settle literally a couple hundred contracts, allocate no money for that? I don't know, and I'm sure the member for Inverness doesn't know because he wasn't here either. You can't look at us and say, well, what has changed? I'll tell you what has changed is that we actually have to deal with the real world and the real world in Nova Scotia does not include zero per cent settlements.

Let me tell you what would happen if we had zero per cent settlements - I'll tell you what I believe would have happened. Now, this is not the policy that we would have adopted, this was apparently the policy of the previous government, hidden in a budget delivered on the day the election was called. Obviously this is not something that we knew because there is no line item in the budget that will show you how much money has been put aside for collective bargaining, as I was discussing earlier.

[5:45 p.m.]

I'll tell you what would happen. We have a relatively mature Public Service workforce - I'm not looking at any particular individual here. We have an older-than-normal demographic in our Public Service and that's reflected in the pension plan, where we have an unusually large number of people who are either currently eligible for retirement, like right now, today, or will be eligible for retirement within the next five years. We have an usually older Public Service. That's part of the reason for the problems with the Public Service pension plan, which we could discuss later if the member wants.

What would happen if we froze or cut wages is - particularly in certain areas like nursing - we would have, in my view, a large number who would just retire immediately. Do you know, we have something like 2,000 nurses who could retire today if they chose to? You have to be very careful how you do your collective bargaining with them because if you're not fair to them and not respectful, they'll just say fine, see you later, we're retiring.

I believe that if we had actually frozen wages, we would have had a wave of retirements because that's the demographic in our Public Service. I believe that in certain areas people would have left for other provinces where there is no wage freeze. There are certain areas, certain specialties where the provinces really do compete with each other, particularly, for example, in the medical field, the nursing field. In any highly-skilled career or profession there is competition between provinces and, of course, that's a whole other topic by itself, about how we compete with other provinces for things like nursing positions. Anyway, you would have a wave of retirements, you would have a bunch of people who will move, if they can, and then a number of the rest are going to go on strike.

Then you say, how many are going to go on strike? I don't know. How do you know they will go on strike? Well, I don't, I just think that the lower the wage settlement, the more likely it is that you're to have labour disruptions.

Is that really what the people of Nova Scotia want, to have a wave of retirements, to have skilled professionals leave the province and labour disruptions throughout the public sector? I'm pretty sure that's not what they want and that's why we didn't go with a wage freeze, or as some organizations advocate, an actual wage cut.

The previous government allocated no money in their budget for wage settlements so the implication, which we only found after we became the government, was that they had intended to freeze wages. I think what is probably a more accurate, a more logical explanation of what they did is it simply didn't fit the message track of an operating balance and, therefore, they just left it out, knowing that if they won the election, they'd have to do something, but after they won the election they wouldn't mind so much admitting to what it was that they had done. So that's something else that has changed and, of course, that's tens of millions of dollars right there.

Then, of course, there's the stimulus spending. You know our capital spending program is going to be the same as what the Progressive Conservatives had promised, it's going to add up to the same amount of money. In round figures, all things in, it's about $1.9 billion, so it's not on the stimulus - but the other thing that the member is leaving out, of course, is that the operations of government are not a snapshot in time.

I mentioned earlier that the fundamental problem is not exactly the cost, it's the cost pressures. For example, drug costs continue to go up 5 per cent, 7 per cent, 10 per cent per year. You can make choices that lower that one year, but the next year the pressures are still there so immediately you have these big expenditures, like on drugs, and it's the same with other aspects of the medical system. So if you're going to deal with the problem, you've got to deal with the pressures. That's why, for example, Ontario is tackling generic drug prices head-on because another possible policy choice is to simply say to the pharmacies, we're going to cut the amount we pay you, or something like that. What Ontario is trying to do is get to the root of the problem and change the economics of how pharmaceuticals are paid for in Ontario.

We could have a very interesting debate about whether they're taking the right approach or not. I would say it's more, for want of a better word, confrontational than we're comfortable with here. Nevertheless, we share, like every province does, concern with the problem. We cannot afford the status quo as far as drugs are concerned, we cannot, so we have to change the status quo.

You don't do that overnight, you don't snap your fingers and declare to drug companies that we're paying you 20 per cent of what we used to pay you. They'll say fine, we just won't sell you any then. That's not what the people of Nova Scotia want. We have to make sure that Nova Scotians continue to get their prescription drugs that they need but at a price they can afford. I don't think people have any idea how much their drugs actually cost, the people who are on a plan of one kind or another. I just don't believe people have the slightest idea.

We're trying to deal with the pressure but you don't do it overnight. You've got to have a plan, you've got to lay the groundwork, you've got to say okay, if the drug companies respond this way, we're going to do this, and if the pharmacies respond like this, then we're going to do that; meanwhile, the system has to function.

Let me give you an example of what happens if you don't lay that groundwork. Medavie Blue Cross said to Shoppers Drug Mart, we're not going to pay you as much as we used to pay you and Shoppers said fine, we won't process Medavie claims. So tens of thousands of Nova Scotians got letters, including civil servants, saying you will no longer be reimbursed for your drug costs. You have to pay for it out-of-pocket and then apply for reimbursement. Now that's very difficult because if you have any conception of how much drugs actually cost, you know that some of them are in the hundreds and even thousands of dollars per month. The Nova Scotians on Medavie were told that they were going to have to do this and then apply for reimbursement because Shoppers - their tactic was to refuse to pay the claims or refuse to accept Medavie cards unless Medavie caved in.

Is that what the Progressive Conservative caucus wants? Is that what the people of the province want? I don't think so. Can you imagine if the same thing happened with the Seniors' Pharmacare Program - the turmoil, the anxiety, the fear among our seniors? So if you're going to do something about drug costs, you've got to do it in a way where the system of Pharmacare still functions and people get the drugs they need. You can't just go in like a bull in a china shop and say, we're slashing expenditures here. You've got to do it very, very carefully. It doesn't matter what part of government operations we talk about, I could go through the same thing.

Are we going to take money out of the P to 12 education system? Well, I hardly think so. They get a 2 per cent increase this year, is that what they wanted? No, they wanted more. Is it enough for the P to 12 education system to continue to function well? Yes, it is, but if you're going to talk seriously about taking money out of the P to 12 education system, which is over $1 billion a year, then you've got to be prepared to say where you would take it from. Most of the money in P to 12 goes to teachers, 85 per cent of the budget, so if you're going to have any kind of a serious attempt at dealing with the P to 12 budget, you've got to be ready to talk cutting teachers, you've got to be ready to talk closing schools. Is that what the people of the province want? Is that what the people of Inverness want? I don't think so.

What the member is proposing to us is something where he knows in his heart that he couldn't find $437 million, not without causing a great deal of consternation, a great deal of disruption to the people of the province. That's why what this government is doing is taking a very step-wise, balanced approach. We're going to get back to balance, we're going to do it in the right time and we're going to do it in a way that allows us to continue to deliver quality services to the people of the province because, after all, they need a well-functioning health care system, they need a well-functioning education system, community services, and roads.

MADAM CHAIRMAN: At this point the time has elapsed for the Progressive Conservative caucus and the floor will now be open to the Liberal caucus.

The honourable member for Digby-Annapolis.

MR. HAROLD THERIAULT: Thank you, Madam Chairman, and thank you for your wonderful speech, Mr. Minister, it was a good one. Before I start I also want to thank the minister for when he was down to the Digby area on his budget road show and we had a good member, a former member of this House who died in that same period of time, Mr. Joe Casey. I just wanted to say publicly - I haven't yet so it's a good day to say this - I want to thank you very much for postponing the meeting that day in Digby and I want to thank you very much for attending the funeral of Mr. Joe Casey, we truly appreciated that.

With that, I just want to say I'm going to share my time, too, with a colleague of mine - if she shows up - the member for Halifax Clayton Park. I want to start off by speaking about the budget. It's going to be some very simple questions that I've got because I'm going to ask questions that people ask me all the time. You can go through your Estimates Book all you want but I'm going to ask some direct questions that I'm asked by people, the constituents, and I hear them all the time.

You were going on, Mr. Minister, and being negative in the last part of your speech there. You were being negative about cutting schools and cutting this and cutting that and raising taxes. That all seems to be negative. I've been in business all my life. I started in business when I was 15 years old, I started my business in the fishery business. I've been in other businesses since that time and I never, ever really looked at cutting things. I never, ever looked at trying to go and borrow too much money. I was always born and brought up that if you make a dollar, try not to spend over 99 cents of it; at least put 1 cent away if you can. Maybe some days you can't but never, ever go over that dollar.

What I did in business, I was always focused on growth, the growth of whatever I was doing - never focused on cutting anything or taking anything away but how can I grow, how can I grow? That's the way I was born and brought up.

With that, I just want to get into a few questions. The first question is going to be directly about the money that this province uses and the money that it borrows and the cost of the money and where it comes from. Then I'm going to ask about maybe how we can find some growth, other than raising taxes. I think about that a lot, I lie in bed at night and think about how you can make extra money when you're in business.

First of all I want to ask, what is the budget this year for this province? It's a pretty simple question.

MR. STEELE: Thank you. Let me just start by saying in referring to Joe Casey's funeral, obviously he was a very well-loved person and lived to a good age; he was into his 90s, I believe. It was just one of those things that the back-to-balance session was planned at precisely the same time as the funeral. Once I heard about it - in fact, it was you, member, who alerted us to Mr. Casey's passing - it was obviously an easy decision. We weren't going ahead when we knew that so many people, like yourself, who would otherwise have attended that session, wanted to go to Mr. Casey's funeral.

I went to the funeral in Annapolis Royal, as you say, because with my meeting off, obviously I was there and available. I walked into the church, as you know, a very small church, and it was full. So I did what I would always do in those circumstances and just saw where the rest of the crowd was because they had a closed-circuit television. I walked around to the back - I had to walk down the aisle, through the pulpit, down a back staircase and around to a big room where a lot of people were sitting. I was standing along the back wall because that room, which was a bigger room than the church itself, was also full - standing-room only.

[6:00 p.m.]

Then somebody came and got me and I said, why? There are all these people sitting and waiting and I'm still not used to the fact that as the Minister of Finance, somehow I should be treated special. I got pulled out and taken back into the main church and they found a seat for me. I was very, very pleased to be there that day to honour a former MLA. Although this sounds strange, it was absolutely the most hilarious eulogy I've ever heard. It was his speaking partner who spoke and he was very, very funny, as I understand Joe Casey was himself. I had never heard Joe speak but I did read one of his two books.

In terms of the negativity, I agree with you. I like to be positive and constructive all the time because that's the only way forward. I think you missed the introduction to that, which is where the member for Inverness said that he could balance the budget this year with no tax increase, to which I say basically, how? If I were going to do that, here are the only ways that it would be possible. Of course he knows in his heart that it's not possible, which doesn't stop him from saying it but every time I ask him the question, he evades answering it because he knows there is no answer.

The people of Digby-Annapolis, the people of Inverness, the people of Halifax Fairview, do not want a government that is so obsessed with balance that you get back to balance no matter what the consequences. That's really the reason for the negativity which is really introduced by the Progressive Conservative Party who say that something magical can happen here. The time for magical thinking about budgets is over. I'm the minister of cold, hard reality and the cold, hard reality is that you cannot continue to deliver quality public services to people - which is what we all want - and to do it right now with no increase in revenue.

Our plan is to get back to balance in four years. If things go better than expected, it will be three; if things go worse than expected, it will be five. We have to get back to balance for the future of the province, for the people that you represent, for the people that I represent, we cannot continue to add to the debt. That's the reason, perhaps, why some of the comments I was making were fairly negative, because I would never go down that road. The people who tell me that they could balance the budget with no tax increase, sooner or later they have to face the question, how would you do it? They won't because they know they can't.

Your question is what's the budget for the province this year? Now, I have to say the budget is all the documents that I tabled so I'm not quite sure what it is you were asking, but let me put it to you this way . . .

MR. THERIAULT: What is the figure for the budget for the province?

MR. STEELE: I don't know what you mean. The budget is made up of thousands of different figures, I'm not sure which particular one you are looking for.

MR. THERIAULT: The total budget, for the whole province.

MR. STEELE: If you're looking for the revenue, the total revenue this year is $8,722,600,000. The total - oops, I'm sorry, I'm reading from the wrong figure there. Just give me a second here. As I said, there are thousands of figures and you're asking me to pick one. Sorry, I was reading the four-year plan.

The total revenue this year is $8,391,031,000. The total expenses are $9,044,361,000. The consolidation and accounting adjustments, because that's part of the budget as well, add up to a total of $82.674 million. The net income from government business enterprises, which is the other revenue item - and that's largely the Gaming Corporation and the Liquor Corporation - is $348.573 million. When you take those four numbers that I've just laid out, the total deficit for this year is $222.083 million.

MR. THERIAULT: Where does the greatest amount of financing come from?

MR. STEELE: I don't know what you mean by financing.

MR. THERIAULT: Where does the greatest amount of dollars come from for this province? Is it income tax? Is it HST? Would it be income tax - personal income tax or corporate income tax?

MR. STEELE: Just a second, we're just finding that. The greatest single source of revenue, if that is your question - can I give you the top three?

MR. THERIAULT: Yes.

MR. STEELE: Okay, the top three sources of revenue are: individual income tax, which is $1,896,905,000; the second largest is harmonized sales tax, $1,413,115,000; and the third is equalization payments from the federal government, which is $1,360,722,000. There is a large number of smaller revenue items but those are the top three.

MR. THERIAULT: What would be the least amount? Where does that come from?

MR. STEELE: Oh, it's impossible to say. There are far too many small, miscellaneous charges. If I can put it this way, among the big-ticket items the smallest is - this is Page 2.5, by the way, of the Budget Assumptions and Schedules - a federal source called C52 Trust Funds, which this year is $3.415 million. The next smallest is tangible capital assets, cost-shared revenue, which is $9.650 million, and then it's up from there.

Again, this list is only the big-ticket items. There are very, very many more small revenue items. For example, the province charges literally hundreds of different user fees. Some of those generate very small amounts of money.

MR. THERIAULT: When the province puts its budget together, is the money distributed to each department, like each department is issued so much money, so many dollars? Is each department issued that money when the budget is passed and where does that money come from? You surely don't have it in the bank account so where does that money come from when it's issued to each department?

MR. STEELE: You know it's really complicated. It's not as simple as, say, my household where I have one bank account and one source of revenue and I know exactly what's coming in and what's going out. There is no simple answer to that question.

You have to understand the Government of Nova Scotia is a $9 billion-a-year enterprise, which covers everything from welfare payments to road construction to running hospitals and nursing homes to running an entire P to 12 education system. We have very many entities, running from the Halifax-Dartmouth Bridge Commission, for which I'm responsible, to a bunch of regional school boards and district health authorities. There is no simple answer but if you ask when the budget is passed, does the money get transferred to each department which then puts the money in the bank and spends it, the answer is no. The government accounting is not anywhere close to being that simple.

MR. THERIAULT: You said it was complicated but isn't the Department of Finance supposed to know where all this money is going and where this money is coming from and where this money is borrowed? It needs to be borrowed, doesn't it? Does the province have a line of credit?

MR. STEELE: Don't misunderstand what I'm saying, your question was, when the budget is passed does that get handed to the departments, and the answer is no. When I said it was complicated, the answer of how the money flows within the government is a tremendously complicated question, but no, it's not a matter of saying the budget is passed and, therefore, we're going to write a cheque to the Department of Health and Wellness for $4 billion. Not in any way, shape or form does government money-flow work that way.

The question of where we get the money from is an entirely different question. Part of the answer, of course, is - it seems simple on the surface, but again it's not - about half of the government's total revenue comes from taxes. It's not like you go and, for example, buy a pair of shoes in the store and you pay the HST on your shoes and then the store sends the money to the government, it absolutely is not that simple. That business will collect the money, they will do their HST accounts, they will submit the money to the federal government. Businesses do that all across the country and that money is put into what's called a revenue-sharing pool.

The way that each province's allocation of that pool is calculated is tremendously complex. It's not just like a penny-to-penny analysis of, well, this penny was paid in a store in Nova Scotia; therefore, Nova Scotia gets that same penny. We get our share of the national revenue pool and we get that cheque twice a month from the federal government. That's just one example of how the money actually flows.

Now, when it comes in it does come into the Department of Finance and one of the very important functions of the Department of Finance is managing that money. There's a unit in the Department of Finance called Liability Management and Treasury Services. Treasury Services are managing the money; Liability Management are the people who manage our debt.

Another source of funds is financial markets. The province borrows roughly $2 billion a year, there's no direct connection between the amount of our deficit and the amount of money we have to borrow. Obviously we have to borrow enough to cover our deficit, but our cash flow has to be covered with money from the money - when the payroll is due, the payroll is due, you have to pay it. It's sort of like a business that has a line of credit: if they need to borrow from that line of credit in order to meet payroll, they do.

The province is dealing with literally billions of dollars a year and part of what the people at LMTS, Liability Management and Treasury Services do is make sure that the inflows match the outflows. But when you're talking about $9 billion, that's not a simple exercise. Occasionally we do go to the financial markets and borrow. Typically we issue bonds, although that's only for terms of more than a year; if it's less than a year it's called the money market, which is then a different thing again.

When we issue bonds we typically issue them in terms of five years, 10 years or 30 years, and there's a very sophisticated analysis about what it is the market will be interested in, what interest rate we have to offer and so on. When we issue the bonds the money comes in all at once, so we might issue a $400 million bond and that money comes into the province just like that. So then that money is managed in order to maximize the return and make sure that the money goes to the part of government that needs it in order to pay their invoices and so on.

I'm only just skimming the surface of the surface of how money flows within government, but that gives you a very rough idea of some of the examples.

MR. THERIAULT: That was a fair answer. Does the Department of Finance have any say in how you create growth in this province or is that up to different departments? Is that up to Economic Development or Nova Scotia Business Inc.? Does the Department of Finance have ideas of how financing can be gained, how you can create more financing for the province, or is that left up to different departments?

[6:15 p.m.]

MR. STEELE: What I would say is that everybody in government, every minister, every department has to be thinking about economic growth and development; if they're not, there's something wrong. Clearly the Department of Economic and Rural Development takes the lead along with their partner, Nova Scotia Business Inc. They direct the traffic, as it were, but absolutely, the Department of Finance has to be thinking about that all the time so that when an analysis is done of taxes, for example, clearly a fundamental part of the analysis has to be the economic impact.

I can't remember if you were here when we had the discussion earlier. It was your colleague, the member for Kings West who I had this conversation with about what generally goes under the name of the tax review. The Department of Finance is primarily responsible for tax and fiscal policy, and every time there is any change in tax or fiscal policy, a fundamental element of the analysis is the economic impact. The department has some pretty sophisticated economic models where they can simulate the impact on the economy of this change or that change.

You don't have to ask me what the results are because the results are in the budget. For example, when we have a budget that includes an HST increase, the effect on the economy is then incorporated into our analysis of what economic growth is likely to be this year and next year. The models are very sophisticated. There are a number of variables and, as you know, in the economy everything impacts on everything else, but there's some pretty sophisticated forecasting that goes on in the Department of Finance.

MR. THERIAULT: Thank you, Mr. Minister. I'd like to share the rest of my time with my colleague, the member for Halifax Clayton Park.

MADAM CHAIRMAN: The honourable member for Halifax Clayton Park.

MS. DIANA WHALEN: Thank you very much and I'm pleased to have a little bit of time today with the Minister of Finance and his very competent staff. I'm happy to see you all here. I've missed being the Finance Critic, to some degree, because I don't get to see the quarterly reports and see how we're doing as the year unfolds. It's interesting to come back today with certain questions that are of particular interest to me as well. You've already had more than an hour of questioning going on, so I guess I'm bringing up the last of this hour to 6:35 p.m.

I wanted to ask a couple of questions. One in particular is just something that I'd like to raise with you today, which isn't financial directly but, through you, Madam Chairman, the minister had been on the Public Accounts Committee for many years when he was in Opposition. I had suggested at Public Accounts, which I'm now chairing, that the committee should actually look at the Public Accounts when they are tabled. When they're wrapped up for the year, and we have a full year's view of the year past, that should come to the Public Accounts Committee simply for both an opportunity for the staff to present it and for members of that committee to understand it better. I think it would help focus our direction and future as we talk to different programs and departments more around the financial aspects that committee is really supposed to be looking at.

I must say, for the time I've been on there, often we don't go to the financial aspects of the programs that we're calling in and investigating in Public Accounts. It seems like even less than before, I think, and, in fact, a year or so ago - it might have been a little more than a year ago - I had asked then Chairman Maureen MacDonald to please make sure that people bring their financial staff with them because they weren't prepared to answer financial questions. I think it was a reflection of the fact that the members weren't asking any and if they never asked any, then there was no need to bring your director of finance with you when you came to Public Accounts.

I know that you have served on some national committees and understand what that committee should do and how it can be most effective. I have raised that with the committee members and there seemed to be some uncertainty about whether or not that was a direction they wanted to go. I believe it's in the studies that the CCAF - I think that's the Canadian organization that looks at effective Public Accounts Committees and does training even overseas on that. They do recommend, among other things, that many jurisdictions have the Public Accounts actually presented to the Public Accounts Committee, which seems to make sense. I wonder if you are with me on that.

MR. STEELE: Let me say, first of all, I'll just share with my colleagues the joke that I've shared with you, which is because we're in neighbouring ridings we used to see each other a lot at public events, and since the election we hardly see each other anymore. This will probably be the longest conversation that we've had since the election. It's too bad we have to come to Estimates to do it.

MS. WHALEN: Yes, I think so.

MR. STEELE: As you say, I have a strong personal interest in the Public Accounts Committee, the work of the Public Accounts Committee, and have had the good fortune of serving on that committee, I think, for pretty much seven full years, including two years as chairman, and have spent a considerable amount of time reading and studying what they do and what they're supposed to do.

I have to tell you that CCAF, which is the leading think-tank - if I can call it that - about public accountability and public accounting in Canada, is concerned about Nova Scotia because what we do here is markedly different from what is done by most other Public Accounts Committees anywhere across Canada, never mind around the Commonwealth. I don't necessarily share the concern because I understand how things have evolved the way they've evolved and I think our Public Accounts Committee does some pretty valuable work. But in some jurisdictions, examining the Public Accounts is all the Public Accounts Committee does, and I'm not sure if that's the right model either.

What I would say is an examination of the Public Accounts is clearly within the existing mandate of the Public Accounts Committee. I personally believe that it would be very useful for members of the committee to study the accounts in order to understand more than I think they do about the finances and the operation of government, and there is absolutely nothing stopping the Public Accounts Committee from doing that except that they would probably have to stop some of the things that they're already doing, because there's only so much time. Really, the judgment about the best use of the members' time ultimately has to rest with the members of that committee. If I were still on the committee, I'm sure that I would have a view on that, but really, I'm not on the committee, so I'll leave it to the judgment of the members who are currently on the committee.

MS. WHALEN: I appreciate that, but I do think it will directly impact you, if we're able to, because it would be your staff that we'd be asking to come in to help us. Part of it I do think is to raise that level of familiarity with the accounts, to understand how they're structured, what some of the variances are, what it means, because most members don't have much of a financial or accounting background, although some have run businesses, as many of our colleagues have, but it's just to get a sense, because it's different; public accounting is different from even business accounting.

So I would like to see us do it - not divert attention to any great extent, but just to even give the time, when the Public Accounts are made public, that little extra attention, to look at and see what happened last year and to keep our focus on - and this actually would dovetail with what I think members of the committee, and particularly government members of the committee want to see, and that's to keep the focus more on the past and on the financial aspects and less on policy. As the minister knows, Madam Chairman, our committee does swing quite widely from policy and financial and every other issue, whether it's looking back or looking forward.

I think it has been effective, as well, because it does allow a lot of leeway, but we don't seem comfortable on the financial side and I think the committee needs to have more information. Plus, I think that often the Public Accounts are introduced and just kind of ignored in a sense. It just gets wrapped up. The critics come, the critics have a quick look. There's a little bit of a press release that goes out from the department, and that's sort of the end of it, and nobody focuses on it anymore.

I think if one group in the House should be more informed, and perhaps more attuned to it, it should be the members who sit on the Public Accounts Committee. So I have proposed that and I am hoping that might come back for discussion, either through the government caucus or perhaps directly from you as the Minister of Finance.

I think it actually gives you a chance to tell your story through the deputy minister, of course, and through your staff, but an opportunity for a greater understanding and maybe that dovetails with our understanding of the pressures that we're under and the cost pressures and so on because when we look at those, even the quarterly or if we look at a year end, we're looking at where were the variances, what happened with royalties, what happened with taxes, tobacco tax, and different things that come in. You get to sort of analyze and look at those different components of your revenue and expenses.

MR. STEELE: May I? I don't want to interrupt your flow, but I do want to thank you very much for saying this. There is a whole unit of the Department of Finance that devotes much of its time to the Public Accounts. They are serious, professional accounting staff; they take their job very seriously. And there's a unit of the Department of Finance where the highlight of the year is the budget. Then as soon as the budget is delivered, they go out and celebrate and they don't care whether it passes or not because their job is to make sure the minister can table it, deliver it; whether it passes or not, that's the minister's problem not theirs.

But there's a whole other unit of government where the highlight of the year is the delivery of the Public Accounts, which is the final audited accounts of a $9 billion, very large, very sophisticated, very complex operation, and they put a great deal of effort into it. You would make their day, their week, their month, their year if you showed that you understood or that you appreciated how important that document is. I absolutely agree with you. That document doesn't get the attention that it deserves.

MS. WHALEN: That's one thing that I like about estimates: as an individual member you get to bring your own interests and ideas to the floor. So I'm glad we've had a chance to broach that, and now you and the deputy and other staff have a chance to consider it because I will raise it again; I think it has a lot of merit.

I'm going to go on to the NSLC, which falls under your control as well. I'm sorry, that means you've got to move people around. I know there's only about 10 minutes, I think, left in this round.

MADAM CHAIRMAN: Seven.

MS. WHALEN: Because of your opening comments perhaps, that cut into it.

MADAM CHAIRMAN: Seven minutes and we have to add the 22 minutes from this morning, which puts it at 6:35 p.m. for wrap-up.

MS. WHALEN: Okay, and I understand that you may be back again. I think you are coming back on Monday because you haven't wrapped up either, so there will be a chance to go further.

I had raised a couple of questions with the Health Promotion and Protection Minister around the NSLC, around drinking and the drinking culture, and the fact that I was hoping they would take steps to introduce more social responsibility, more control; just as we have with the tobacco strategy, we had to try to get people to control their tobacco use. I gave her lots of figures about the number of people, the number of hospital admissions, the number of days in hospital, the number of emergency-room visits, the number of justice interventions, all related to alcohol.

I haven't brought all that with me today but it actually comes off of the HPP Web site, that's where you can see that. So it's something that I think is a natural for improving the health of Nova Scotians, that we start to look at that. I prefaced it by saying that I'm not a prohibitionist, I don't want to say that we close all of the liquor stores, but I think the evidence in Nova Scotia is we drink roughly the same amount per person as other jurisdictions but we tend to drink in a different pattern: there's more binge drinking. That's what HPP is saying. So you have more of the weekend blowouts rather than just more regular social drinking.

So what I wanted to ask you about were a couple of things and one is the idea - and I think we have some beautiful looking liquor stores now, we're doing great retail marketing. I kind of take exception to the big sales that we're having, the full-page ads and the sales. I wondered if we could talk about how we dovetail a monopoly, essentially a monopoly that we have, the control of the sale of these products with our social responsibility.

Sales, which are intended to get people into the store and move more product, just leaves me with the question about how we're doing on that balance between revenue generation and social responsibility. I know it's a similar argument when we come to gaming - that, I believe, also falls under your control. But we've had more discussion in the Legislature around gaming revenues and the social impacts. I'm going to that today and wonder if we can at least begin that debate today.

MR. STEELE: Thank you. What a big, big topic to even begin to talk about it. I know I have five minutes today. I'm the minister for two of the principal vices that the government is responsible for; namely, alcohol and gaming. I'm not sure why both of those vices were assigned to me, because I don't do a great deal of either one of them. But like you, I'm no prohibitionist either.

[6:30 p.m.]

It's interesting that you should talk about the two together because I've done that myself, and I'll tell you the context in which I've talked about alcohol and gaming together. As you say, a great deal of attention has been focused on Nova Scotia over the past, say, 10 or a dozen years or so on gaming and of addictions and the misery and heartache caused by gambling addictions. An enormous amount of work has been done on it and, frankly, a lot of good things are happening and a lot of money is devoted to dealing with addiction issues and gambling. Yet my view is, and has always been, that alcohol abuse is far more prevalent, far more devastating, and far more widespread because it has been part of the culture, well, forever and yet, for reasons I don't quite understand, nobody talks about alcohol in the same way that they talk about gambling.

People, seriously, for example, will talk about prohibition of gambling or various forms of it and nobody talks seriously about prohibition of alcohol. If alcohol is more devastating, why? My theory on this - and this is my personal theory - is that alcohol has been such an important public policy issue for over a century at least, if not longer, in Nova Scotia, that thinking on it has evolved and is now fairly sophisticated and nuanced. Whereas gambling, as a monopoly of the government, is a relatively new thing and the thinking on it hasn't quite evolved to the same extent.

So what we have - and you missed my opening comments where I actually referred to this in a way - is that both the Gaming Corporation and the Liquor Corporation have essentially a dual mandate. I think the Liquor Corporation would say they have more than two mandates but let me call it a dual mandate. The first one is to be an excellent retailer and the second one is to promote socially-responsible drinking. To me, it makes sense that both of those mandates should be held by the same organization, the same people, so that every decision they make takes both into account.

There are some who advocate a division of those two roles, particularly those who would advocate the privatization of the Nova Scotia Liquor Corporation. That's not something that I favour on purely financial grounds, but also on the grounds of social responsibility, I do not believe it is healthy to divorce those two mandates so that some people are thinking only about selling and other people are thinking about how to impose a reasonable regime of socially-responsible drinking on the people who are selling. I think it's a good thing, it's a healthy thing, that the Liquor Corporation has the dual mandate. I'm not aware of the particular figures you talk about, about binge drinking. I haven't seen figures to suggest to me that it's particularly better or worse in Nova Scotia than anywhere else, but if you have those figures, I would be interested in seeing them.

Then you referred to the question of sales. Now, I want to make sure that I understand exactly what you're talking about so I don't answer a question that you're not asking. I wonder . . .

MADAM CHAIRMAN: There's less than one minute left.

MR. STEELE: Okay, I'm back on Monday and I'm happy to pursue this but I wonder if you could elaborate or begin to elaborate on what exactly the issue is that you want to identify for me.

MS. WHALEN: Well, I'm talking about opening the newspaper and seeing a full-page ad for the Liquor Corporation with markdowns or contests, or things like that going on with beer sales. I think it was beer that I saw recently, a full-page ad in The ChronicleHerald. So that's what I'm thinking, is here you're marking down products so people will come in and buy lots.

MR. STEELE: Okay, when we resume on Monday, the Liberal caucus will be how far in?

MADAM CHAIRMAN: They will have 21 minutes remaining.

MR. STEELE: Perhaps if you're willing, we can just pick up where we're leaving off.

MS. WHALEN: Sure.

MR. STEELE: That would be great, thanks.

MADAM CHAIRMAN: Thank you very much, members. At this point I will adjourn the Subcommittee on Supply, to resume again on Monday. Thank you.

[The subcommittee adjourned at 6:34 p.m.]