MR. CHAIRMAN: I would like to call the Subcommittee on Supply to order. This is Tuesday, April 25, 2000, and the time is now 2:05 p.m. On Thursday we left off on Resolutions E9, E10, Resolution E20 in regard to Acadian Affairs, Resolutions E22, E44, E45, E48, E49. At that time, we had the honourable member for Lunenburg West questioning the minister, he has 25 minutes left in his allotment.
The honourable member for Lunenburg West.
MR. DONALD DOWNE: Mr. Chairman, just to revamp what I recall from Thursday, there will be a pursuit to full consolidation of debt of the numbers from 1993. The only thing is, there is one member of your staff, in particular, who loves to golf, and I hope you are very patient with him or give him some extra time to take his golf game seriously, to be able to fulfil that obligation and commitment you made. (Interruption) Well, I do, and he is a lot bigger than I am. Just trying to be safe here.
It was agreed that the issues of cost benefits on Health, Education and the restructuring was not done by the department and/or any government department. I just wanted to make sure of that.
Mr. Minister, I would like to go into the issue of privatization. I am sure there are a number of sectors and groups within any of the departments you are looking at from an issue of privatization; it has been mentioned, whether it is the Liquor Commission or hotels, resorts, golf courses, and the list goes on. One of the issues I find intriguing is, again back to the whole issue of the study aspect of going into the privatization issue, if the government does get into the issue of privatization of the Liquor Commission, would the government do an economic cost-benefit analysis before that was entertained?
HON. NEIL LEBLANC: Mr. Chairman, two things. This is one where I want to make sure I know whether or not it is up to me to answer this question or the Minister responsible for the Nova Scotia Liquor Commission. I am not trying to be argumentative, I know that the ball, in this instance, is being carried by the Honourable Rodney MacDonald. He said in the House this would be reviewed, if it makes sense for the province or for the consumers, we would be prepared to move forward. We are in a situation where I am sort of in another area that doesn't come under Finance. I know you could say that as Minister of Finance it is also a global issue and as such is there, but I am looking, maybe from staff, as to whether or not it is for me to answer those questions or whether or not it is for my colleague. I am just being honest with the member for Lunenburg West as to how we do this. If you would bear with me for a second I will talk to my deputy.
Mr. Chairman, in talking to my deputy, basically any specifics in this should be coming from the minister responsible for that portfolio. In general terms, I am more than prepared to speak about it. Maybe if the member could ask me some questions, and I will try as much as possible, within that framework, to offer some suggestions.
MR. DOWNE: The question was not so much as will you or will you not privatize the Liquor Commission, I think that will be a decision of Cabinet, the question was more in terms of a broader perspective. You are the most powerful minister in government, this is your budget, you are the architect of this budget by all accounts, so clearly in developing that rationale and that strategy, the question is really, will the government undertake any economic cost-benefit analysis on an economic driver to the general revenue of the province of about, I am guessing here, $140 million a year? If a decision is made to privatize it, will the government, in a broad perspective, or will you as Minister of Finance demand or expect the government to do a cost-benefit analysis on the sale, if they do so, of the Liquor Commission?
MR. LEBLANC: Mr. Chairman, as a member of Cabinet, and the member is using glowing terms, the most powerful minister, I don't think any minister is more powerful than another. I know the member has sat in Cabinet before, and I think everyone has the right to exercise their opinion, and as such there is a consensus and move forward with it. The situation in regard to the Liquor Commission, using that one for an example, is that we are going to be, I think I can quote myself almost from what is there, whether or not it makes sense both for the taxpayers and consumers, stating that there has to be benefits. You could say economically or services, those are two types of quantifiable measurements that you could use. Obviously the government will have to give supporting evidence when they make those decisions.
MR. DOWNE: I used to play a lot of hockey down on the French Shore - skate around the issues. I will go back again and I will ask, specifically, has there been any study done by government on the potential sale of the Liquor Commission?
MR. LEBLANC: Mr. Chairman, there has been a great deal of dialogue that has taken place and there has been some review within government. I can honestly say to the member opposite that it is indeed a complex issue. There are very strong opinions on both sides, and I know the member is aware of proponents of full privatization, along the Alberta model, and I think the Food and Beverage Association has been vocal. On the other side, you had the union who represents the people who work for the Nova Scotia Liquor Commission arguing the other side of it and disputing facts. There are different modules across this country, Alberta is just one, New Brunswick has another type of model, and if you go to Quebec it is different, I can go across every province. I think there are options there.
One thing that we as a government have said is that we are going to look at those options and make a determination as to whether or not we should be moving to change it. We are the most regulated province in Canada, that is a fact, I don't think that is disputable, we are regulated from start to finish. I think as to whether or not there are some changes that can be accommodated, that is what the review will say.
MR. DOWNE: If I understand the answer, there has been some study done, which should be done before anything is privatized anyway, but there has been some study done in regard to privatization of the Liquor Commission. Is that safe to say?
MR. LEBLANC: Obviously, this isn't an issue that came yesterday, for the last, especially, three to four months and awaiting the report of the Fiscal Task Force and hearing what Nova Scotians had to say also, it is an issue that has been out there for some length of time. To say that we have looked at it, the answer is yes. Whether or not it is to the degree necessary to make a decision, the answer is no.
MR. DOWNE: I wasn't asking about a decision, I am not asking that. That is not really the question. Another one is the issue of resorts and hotels. I heard the minister, the government looking at management of the resort, having an outsider agent manage the resort, vis-à-vis doing it internally. Was there any cost-benefit analysis of the private sector doing it versus the public sector doing it?
MR. LEBLANC: On that, Mr. Chairman, you would have to ask the Minister of Tourism and Culture. I want to say for ourselves, as a government and as a Cabinet, when we looked at whether or not this is a core function of government, we said that this is not something that government has to do. So I want to be fair to the member, managing hotels is not what we consider to be a priority. I am not arguing that there are benefits and pros and cons from these establishments, but is managing these facilities something that is a core function of business? The answer is no. In regard to the specifics, I will let you refer that to the Minister of Tourism and Culture.
MR. DOWNE: One observation would be, to have somebody come in to manage, sometimes when they come in to manage short term, there is a lot of pain. You don't always
do better by having an outside manager come in, versus a government manager, if there are incentives from a government point of view for the management internally. Anyway, I have my views on that. I go back in my own mind to the Upper Clements Park. We had a private sector come in because we had the same kind of mantra that the private sector, rah, rah, rah, they can do it, they will make money. It cost us just a bucket of money having them in there because they just let the place fall down, and turned it over to community and it cost us to get the equipment back in running condition. I would assume that you will do some sort of analysis on that one.
NSRL is your portfolio, so I feel I will get a good answer on this one. Where are you in the analysis of privatizing NSRL?
MR. LEBLANC: Mr. Chairman, right now we are about halfway through the evaluation process that was requested.
MR. DOWNE: Would you be able to table the criteria of the evaluation of NSRL and what are the parameters, goal posts in regard to what you are reviewing as part of the value of NSRL?
MR. LEBLANC: Mr. Chairman, I would be prepared to table the RFP that went out for competition in regard to this evaluation.
MR. DOWNE: That RFP has stayed, there have been no changes to the RFP from the public since it was sent out, the work that has been done is absolutely per the RFP?
MR. LEBLANC: I have been told yes.
MR. DOWNE: I might just say that you have a deputy minister who has a good background in NSRL and I think he is one of the best deputy minsters in government and I am sure he will give you . . .
MR. LEBLANC: I agree. He also sits on NSRL, so it also gives me valuable information during the estimates here.
MR. DOWNE: There is a lot of discussion in regard to the number of public buildings that we have and looking at DOTPW, the Public Works side, to move toward a potential privatization of the maintenance of these public buildings, can the minister tell me, are there any results back from any work that has been done, research, in regard to the cost-benefit of that? Are you aware of any?
MR. LEBLANC: This is through TPW?
MR. DOWNE: Well, privatization and maintenance of the public buildings, I assume, would be under Public Works, if I recall correctly.
MR. LEBLANC: I would assume that also, Mr. Chairman. On that one, I would refer him to the minister. It hasn't come through my department.
MR. DOWNE: There has been no RFP go out that you are aware of?
MR. LEBLANC: Not through our department, if there has been, and I am not aware if there is one. I would suggest that might be even better directed toward the Minister of Transportation and Public Works.
MR. DOWNE: I know this will get repetitious after a while but there is a rationale for asking these questions of the minister. There is some talk within the health care system that hospital lab services could very well be privatized. Is the government interested in going into areas such as Health and other departments to that extent of looking at where the privatization line will start and end? Is health care open to the full scrutiny of privatization, whether it is to do with hospital lab services or other types of activities?
MR. LEBLANC: Mr. Chairman, we are getting back into an area that is within the Minister of Health's mandate. I know his estimates have already been up and he may have asked the same question at that period of time, so I don't know. I want to say that for ourselves, obviously, we have a situation that is difficult. I indicated during my previous estimates, I think it was the member for Sackville-Cobequid, who asked me whether or not we would be looking into the future as to what kind of cost savings we could achieve or whatever, and I told him at that time to say that I never have plans for anything, I can't do that, because I am going to keep an open mind. So when he is referring to the health care aspect of it, this specific question really should have been addressed to the Minister of Health because this is within his purview.
As to what lies ahead, it is difficult for me to say, because obviously until we reach that point it is difficult to speculate as to what will come down. We are keeping an open mind as to whether there are some cost savings. That doesn't mean there are any plans, as I am sitting here, that I am not willing to announce. I am just saying I am keeping an open mind.
MR. DOWNE: The Minister of Finance sits on the Priorities and Planning Committee, sits on the inner-Cabinet committees of government, and basically all aspects of government activities are vetted through that process. I am sure you are fully aware, specifically, of each department's activities on the broad policy initiative of the government and that is toward the issue of, if it can be done cheaper through the private sector, then do it. The minister is not wanting to talk for another minister but from a broad perspective, if I recall correctly, the items are discussed at those levels to which you are at. The issue of privatization and its potential, you would be aware of that.
MR. LEBLANC: Mr. Chairman, I have indicated to the member that we have to keep our options open as to whether or not there are some cost savings. I am trying to be as upfront as I can with the member. We are making sure that our options are left open and that may encompass some service we do change, in the way it is delivered. I am not arguing that because, as I said, we have to keep those options open. We still have a $268 million deficit this year and as we move forward we have to look at some cost savings, if we can achieve that. With regard to the Minister of Health's estimates, I would again refer him, specifically there, that is where those questions should have been addressed.
MR. DOWNE: I will move away from that for just a little bit. In looking at your overall numbers in your supplement, the Department of Finance is increasing its staff component. Its fees for the deputy minister's offices, I recall, the estimates are actually going down on this one but there is additional staff in the department. In reading over Page 6 of your opening statement, you say, that we will also be impacted by the creation of a Treasury and Policy Board. By the way it is worded, I assume that Treasury and Policy Board will be a body that will take over some functions that the Department of Finance currently has? If you are going to increase your budget in Finance, and I am not disputing the fact that you should have the very best of people in that department, then are we having a duplication? Where does the money all really go if Treasury and Policy Board will be, in fact, impacting on your department; by your own statement?
MR. LEBLANC: Mr. Chairman, first of all I want to start off by saying that our FTEs did not increase, they decreased, it went from 225 to 219. The forecast was lower than that. There had been some vacancies during the year that had not been filled and that is part of the reason that - I guess the word I want to use here is that the member is saying - there has been an increase. From forecast to estimate there has been an increase but that is due to vacancies that were there during the year. I want to say that first of all to make sure that we have that on the table.
The other point you are talking about, as to how the new Treasury Board and Policy Board will work and what functions will happen there that are currently being done at Finance, I guess is a good question. I want to say first of all, one thing that I have noticed in the past, when I was in government before, was that we did have a so-called Management Board, which is somewhat similar to what a Treasury Board concept is. In that, we were in a situation that if departments made expenditures, they would do so basically in line with an overall government perspective, government plan. We find ourselves in a situation, since coming back to government, that governments are given budgets and they are basically in power to live within those budgets. We also find ourselves in situations where a lot of times it can be that departments are making decisions which may not be to the betterment of the whole of government, they want to go in-line of developing a system that may be available somewhere else within government.
I have used the examples of the SAP Program, which I know the member would be very much familiar with because the reason it was brought in was to give the government the accountability, that they would have the details they require to make decisions but also to replace the system that was there that couldn't provide all those details. A lot of times departments were making decisions to whether or not people should be trained on it. If they wanted to make cutbacks or changes in their department, the training might be one of the things that got deferred. Well, that is not in line with why we brought the SAP.
To go back to the question, we really believe that a Treasury Board will be a central agency to make sure that expenditures are made with the government as a whole rather than isolation. I don't know if I have answered the question as much as you wanted. If you want to give me more questions, I will be more than prepared to expand on it.
MR. DOWNE: The Minister of Finance, under Acts within the Legislature, has more power and has encompassing powers of control within government, whether you take advantage of them or not, but it is pretty broad. With Treasury and Policy Board, in effect, that is taking away some of those responsibilities, or are they taking away some of the workings of Finance to some degree to go to this body that is going to be looking at everything at 20,000 foot elevation and view the whole sea of 14 departments?
MR. LEBLANC: Well, if you look at the Treasury Board concept, or Management Board concept, you could say it is a high-level review but it is also at a low-level review. It is something that ensures that the departments are working together rather than working in isolation. Within the system today, after the budget is done, to a great extent the departments are basically empowered to live within their budgets. If they want positions that have to be filled and so forth, that will go to Human Resources. Other than that, there is not the central agency that ensures that cohesiveness among departments. I think that is one of the reasons that we are doing the restructuring, to first of all reduce the number of departments overall, but to put similar function departments together. I think that in itself, will bring about some efficiencies. I get on to maybe explaining too long. I apologize to the member. If you want to go back into specifics, I will.
MR. DOWNE: The reason I am trying to walk through this, and there are a couple of more questions but I only have a minute left, that is why I posed the question earlier, has the government done any cost-benefit analysis with regard to the restructuring? Let's just leave the issue of restructuring, right, wrong or indifferent, on the sideline here and just not debate that at all. Just the fact that this is affecting thousands and thousands of people. I was in church yesterday, on Sunday, and a lady in our church took sick leave because her nerves are shot. She said it was work-related and she just had to leave because she couldn't take it any longer. That is why, the fact that the government has not done any cost-benefit analysis in regard to determining what the overall saving will be, we have increased staff positions in Finance by 7.4 to 219.7.
MR. LEBLANC: Mr. Chairman, that is from forecast to estimate and not estimate to estimate.
MR. DOWNE: Well, that is the estimate of 2001 from the forecast. It is just all replacement staff. Even if you take estimate to estimate, you are down six, I realize that. So those six you are down will be - the corporate service unit itself, with the new technology and equipment, you probably won't need as many but actually it looks like you are going up. Anyway, the long and short of it is, that is why the cost-benefit analysis that I have gone back to, to me, would be so clean for government, and these types of questions would be able to be absolutely answered and we would have a clear understanding of what the benefit long term, short term, would be, what the costs would be and what number of jobs will be lost and what jobs are being lost, what benefit that would be to government and to the taxpayer of Nova Scotia.
As it is right now, nobody knows, and maybe government doesn't know exactly what is going to happen. That is what I am concerned about. I haven't seen the answers to that. That is why the questioning I have followed here, Mr. Minister, has been along those lines.
MR. CHAIRMAN: Your time has expired. We will take a short break.
[2:32 p.m. The committee recessed.]
[2:35 p.m. The committee reconvened.]
MR. CHAIRMAN: The honourable member for Sackville-Cobequid.
MR. JOHN HOLM: Mr. Chairman, the first question would be, is it your intention that the government will be being run in a business-like fashion?
MR. CHAIRMAN: The honourable Minister of Finance.
HON. NEIL LEBLANC: Mr. Chairman, I want to say that there are a lot of applications that government does that we can run it on a business-like fashion. I mentioned one is like Nova Scotia Resources Limited, and I have said on many different occasions that if we are going to make decisions on NSRL, we should do so. There are occasions that may not apply, but there are many instances throughout government that we are doing business-like, private-sector types of services that we should be providing in that type of manner.
MR. HOLM: I appreciate that, certainly I would argue that everything cannot be run exactly like a business, but when you come to making decisions, are you going to bring a
business-like approach in terms of doing a proper analysis and so on before decisions are made?
MR. LEBLANC: I would say the answer is yes. There many be some instances where we believe there are instances where we should not be into it, and I refer the member to the answer I gave before, should we be involved in tourist resorts? That is a good one. Should we be involved in golf courses? Either way, I don't think that those are functions that government should be involved in.
MR. HOLM: Before you got into politics and in your brief vacation, you were, I believe, involved in a business. I don't know if you still are or not. In the course of your personal business affairs, you would have been called upon to make some pretty hard decisions. Some of them may have dealt with maybe the investment of funds from your business and so on. When you were making decisions in your business, did you do an economic impact study or any kind of economic analysis before you were making those business decisions?
MR. LEBLANC: The answer is yes, we made projections.
MR. HOLM: Were those projections based upon the best research and study that you could do, or by the seat-of-pants decisions?
MR. LEBLANC: In business, there is probably a combination of both, because there are probably some of them that you make on gut reaction and other ones, when you have more time to review them, you might do some more, to a greater extent, with more research. If you look in business, I think if you look at them, most people do a combination of both.
MR. HOLM: But you prefer to be able to have the research done.
MR. LEBLANC: That is correct.
MR. HOLM: That brings me to the restructuring and to what we are talking about, or you were talking about with the member for Lunenburg West before. You have done no economic analysis as to the cost-benefit of this restructuring, of the reduction of the number of departments, et cetera, or the changing of the programs but you just said that it was common sense. That sounds to me to be a by-the-seat-of-the-pants approach, not the approach which you would have wished to follow in your own private business.
MR. LEBLANC: Mr. Chairman, I know that when we talk about the restructuring that we have put together programs of a similar nature which, in itself, would allow for multitasking for a lot of the things that we do, which would bring about efficiencies. I gave an example of one program, one specific that we talk about, the Nova Scotia Alcohol and Gaming Authority whereby the previous administration, at the time that they set up the
gaming industry, felt that it was very important to set up a different bureaucracy. It was maybe more to allay fears in Nova Scotia that there would be a regulatory and quasi-judicial type of separate institution. I think upon reflection, if they could have it back, they probably would have agreed with the decision that we had made to put that in under the URB. Those are the types . . .
MR. HOLM: And if it would have met the political objective of the time.
MR. LEBLANC: Well, I can't talk about the political objective of the time. I wasn't here but I do know that the lack of efficiencies that the structure has now and the changes that we are going to make will bring about considerable efficiencies that will save money. The direction that this government is going is into a smaller government with smaller amounts of departments working more closely together. I make no apologies for that and it is a direction that we took after considerable debate, especially within Cabinet and the decisions that were made are logical and will flow forward and I have no hesitation in saying that.
MR. HOLM: I would just say to the minister, not wishing to take a shot but I can't resist this one, you were a part of that government that sold off Nova Scotia Power at a tremendously under-valued price, probably somewhere to the tune of at least $150 million and making a decision that instead of insisting the politics get out of the operation of Nova Scotia Power but that it be run in an efficient, business-like manner, that has cost us many hundreds of millions of dollars in lost income that Nova Scotia Power has been able to make and those profits, of course, going largely to shareholders and that decision based upon a philosophical feeling, as Louis Comeau described it.
My concern is, and I think it is a concern of a lot of Nova Scotians, as we are looking at, or I should say that the government is looking at new privatizations, whether that be of lab services at a hospital, whether that be of the Liquor Commission or many of the other things that the government is doing, that we are being driven by a philosophical feeling rather than by the hard analysis done through proper research and study on the economic impacts and cost-benefit analysis.
I can appreciate that in business you often do have to make some snap decisions and you do in public life as well but when you are dealing with public money, you darn well better be making those decisions based upon the best hard-nosed economic impact analysis that is possible. By the minister's own admission, you put nice words out there and what you say sounds like common sense. We have seen an awful lot of businesses doing an awful lot of downsizing, multitasking and shrinking only to find out that the business started to suffer dramatically and that they had to turn around and reverse the earlier decisions that they made.
MR. LEBLANC: Two things, one of which, we could talk about Nova Scotia Power at length but I don't want to mention that. We have disagreed on this. We disagreed in the past and we still disagree today.
MR. HOLM: And in the future, no doubt.
MR. LEBLANC: And we will in the future. It may be ideology - if I could say that word, if it was French it would be easier - but on this one we keep talking about the fact that the profits are now paid to the shareholders. In the past, what people don't understand, is that we had a considerable amount of debt at Nova Scotia Power. The debt isn't there because those shareholders put their money into Nova Scotia Power and retired a lot of that debt so they are being paid a return on their investment which if they hadn't have put that money in there, Nova Scotia Power would be paying that in interest.
I do remember Nova Scotia Power when it was a public institution, it was a socio-economic type of industry. You could say that it was not, you could say that it shouldn't be but it was. Overall, Nova Scotia Power, since becoming privatized has been much more efficient and I am sure can compare against any other public utility in Canada in keeping its prices relatively stable. If we had high prices before in comparison to other parts of the country which have some advantages in hydro generation than Nova Scotia has, we probably aren't competitive. But overall, we have improved a lot since Nova Scotia Power become privatized.
The other thing as to whether or not, you are stating that we sold it for too less, I guess we could probably agree to disagree on that one and we probably have in the past, are today and will going into the future. That is my 2 cents, for what it is worth, and I think the member for Sackville-Cobequid and I will probably agree to disagree going forward.
To get back to the other question that we talked about, it slipped my mind, if the member could just remind me just one second, I will elaborate. Just give me a short summary on that one and I will pick up on it.
MR. HOLM: That was one of the things. We will get back to that and I am not going to get into it too much on that point, just to make the following observation. Had the approximately $700 million that has been made in the way of profits by Nova Scotia Power been returned to Nova Scotia Power as a publicly-owned corporation, the debt of Nova Scotia Power would have been paid down dramatically which would have meant that the power rates could have also been reduced significantly which would have been a tremendous, I would suggest, incentive for new businesses to locate in this province because of a cheaper energy source. We certainly do agree that politics played a big part in how Nova Scotia Power was run under the Tories and under the Liberals before that but that has been blown.
Anyway, we won't go back and revisit history. The fear is, of course, that some have the concern that the Donald Cameron mentality is rising again. It wouldn't be polite to say its ugly head but the ugly philosophy of that government is raising its head again under the John Hamm Government.
Budgets are, of course, about choices and one of the things that you have kept talking about is government delivering the core functions. Do you have a list of what you, and government, consider to be the core functions? (Interruption) So what are they?
MR. LEBLANC: I guess two or three things that come to light, and I think the member brings up a very good point, which is what government should provide, and one thing that we did hear from Nova Scotians, both in the hearings when we went across the province and also even in direct communication to the government, especially in regard to both Health and Education, there is also a core function in regard to Community Services. I think a lot of times it doesn't get the play, to be candid, it doesn't get the profile that the other two have and those are specifically three functions that were into it. As to whether or not we have made a list, as to what it is, I think that as we go on through our mandate, we will be sitting down once again and repriorizing what those core functions are.
I want to say, when I say that, in a sense government never stays the same. As much as we think that the environment around us will stay the same, it doesn't. I have learned that in my short term that I have spent in politics. The political arena that I entered into back in 1984 when the member for Sackville-Cobequid and I were elected on November 6th is no longer the same environment that is there today. I think that is a fair statement when I make that. I look at myself as being able to modify and government has to change too. If events change around it, then you also have to change with it.
MR. HOLM: Yes, indeed, we do have to change but that doesn't answer the question as to what government really sees as the core functions. There has to be some kind of dividing line here. I have heard it said by your good friends in the Metro Chamber of Commerce, like the incoming president, state that government shouldn't be doing anything, providing any service that can be done or offered through the private sector. In other words, anything and everything that government does, if the private sector can be contracted to deliver that service, they should be contracted. Heavens, why not? From their view, we can make a profit. If you want to carry the argument to the extreme, you can say, well every four years or five years, the people of Nova Scotia should go to the polls to elect a government that will be selecting the consultant who will be running the province. You can carry things to the extreme. There isn't much that can't be contracted out, including your job and my job and every body else's job, if you want to do it that way.
AN HON. MEMBER: No one could ever replace you, John.
MR. HOLM: Thank you, I appreciate that confidence in the former Finance Minister.
MR. LEBLANC: Put that in your record, Mr. Chairman.
MR. HOLM: That is a reality, okay? You are talking about government delivering core functions and of course your good friends in the chamber of commerce, who are the
driving forces, I would suggest, people like Murray Coolican who think that the cuts haven't gone far enough and want you to get out a bigger sledge hammer. Of course, $189,000 a year, which is what he would be making, not from the chamber of commerce position but from his employment. I think that was the figure that was in the paper not too long ago. Some of the things that face people in their real lives may not be the same in his. I want to ask the minister again, how are you deciding what are core functions? Who are you listening to other than the chamber of commerce?
MR. LEBLANC: Mr. Chairman, when the honourable member for Sackville-Cobequid says that we are only listening to the chamber of commerce or that they are driving force behind the government, I go back to the point that we said that we would bring about a balanced budget within three years and a tax reduction subsequent to that. I will say that the chamber of commerce is a very vocal group. They are organized and as such, perhaps, receive a lot of profile because of that. This is the same group that should be candid about it, that criticized me in the fall for not having gone far enough that we should do this and everything should be cut right now.
MR. HOLM: They criticized you again after this budget.
MR. LEBLANC: Mr. Chairman, I know one thing, in my short tenure as Minister of Finance, if I am looking to have everyone congratulate me on the job that I do, I think I am in the wrong job because no matter what you do, you are probably going to be criticized by those who want you to do more, make tough decisions and to only offer basic programs and other ones saying that you should expand them. I recognize the situation that I am in and it is one of the terms of the job when you accept it. I don't disagree that it is. I guess you can't be all things to all people and I never expected to be able to do that. For the Murray Coolicans and other people who are there, they are stating that we should live within our means. That is a message that they are sending.
There are also people on the other side who are saying that we should ensure that we deliver programs of quality. It is important that we keep an open mind to both sides. Now people could say, if we make a decision, that we have only listened to one side and I disagree with that. We have listened to both sides of the spectrum and are trying to come up with a balanced approach. I guess in a sense, whether I can ever convince everyone that that is the case, I guess that is probably difficult to do.
MR. HOLM: I just say to the minister, if you have been criticized by the Metro Chamber of Commerce, some might take that as a compliment. I wouldn't really worry about that too much. I think a lot of their employees might have a different view from some of the spokespersons because some of those employees are concerned about the education of their children and they are concerned about the health care that they and their family members will receive, even if others may be more interested only in their bottom line. The balanced
approach may be a different matter that some may take exception to whether or not what we actually have seen is a balanced approach.
A couple of questions just flowing from that, as you can probably tell, I am not following the list of questions that I jotted down for myself. I just want to touch into this area first. There are different tax rates for businesses. There is a small business rate and there is a larger business rate. What is the small business rate?
MR. LEBLANC: Just to make sure I am giving you the right rate, for the members of the committee, this is Liz Cody who heads our Fiscal and Economic Policy. She has all the answers, 5 per cent.
MR. HOLM: Five per cent is small and large is what?
MR. LEBLANC: Large is 16 per cent.
MR. HOLM: So there is a difference between 5 per cent and 16 per cent, an 11 per cent difference. Could you tell me where the difference starts? When do you classify somebody as small and somebody starts paying 16 per cent?
MR. LEBLANC: $200,000 of taxable income.
MR. HOLM: So once it reaches $200,000, that is after, of course, all the deductions, the free lunches and everything else that people get, if they have $200,000 worth of taxable income. So let's say that I am . . .
MR. LEBLANC: First of all, Mr. Chairman, taxable income is not determined by the province.
MR. HOLM: No, I appreciate that.
MR. LEBLANC: Taxable income is determined by the federal government.
MR. HOLM: But of course you are going to have a new Income Tax Act now.
MR. LEBLANC: Mr. Chairman, to be candid on that one, we are in a situation where the federal government is still going to control what taxable income is, just so you know that.
MR. HOLM: But of course in that legislation, you could have amended that had you wished.
MR. LEBLANC: No, the federal government is insisting that one of the things that - just one second - I want to say, first of all, we are changing personal income tax, not
corporate income tax. On the personal income tax, you may be aware of it, bear with me, one of the provisions that though they were encouraging provinces to exercise their option to go to TONI, tax on income, that one of the provisions was that taxable income would not be allowed to be modified.
MR. HOLM: That is one of their provisions. Of course, when you are rewriting the legislation, the feds may have been dictating it to you but if you had wanted to say to the federal government, no we aren't going to play that game and we are going to do it differently and we wish to be able to alter our corporate tax structure, you could have done that.
MR. LEBLANC: Yes, Mr. Chairman, but we would have had to collect the tax and . . .
MR. HOLM: Yes, okay, that is fine.
MR. LEBLANC: I don't think anybody wants to get into that kind of situation.
MR. HOLM: Or done some hard negotiating because I think, if I am not mistaken, didn't the Premier say that one of the areas that he was going to put more resources in was Intergovernmental Affairs so that they could fight harder and be more effective against the federal bad Liberals and the bad Liberals provincially where you are going to be far more effective?
MR. LEBLANC: Well, I think the big thing here, Mr. Chairman, is that we are talking about accessing programs that can give dollars to Nova Scotia. The federal government has told all the provinces that this is one issue where Nova Scotia will not be at a disadvantage to other provinces in this regard. So this is not the same thing when you are referring to Intergovernmental Affairs.
MR. HOLM: Let me just ask this question. Let's say that I am one of the Sobeys in business, just one. Who will I be? Maybe I can be Empire Theatres. I think they own that one and they also own a whole bunch of different corporations which own different shopping centres. Each one of them is probably a separate company. Let me just say that I represent one of those and I have $1 million worth of taxable income. On the first $200,000 I would pay 5 per cent, correct?
MR. LEBLANC: On this, my understanding of it, actually my director here is not altogether sure of this but I will get the answer, is if you have associated companies, the exemption is not done individually. So every company doesn't start afresh but I am going to check that out.
MR. HOLM: That is if they are separate.
MR. LEBLANC: But if they are owned by the same entity, I think the provisions are . . .
MR. HOLM: I think that if they are different companies, I would like to get that checked.
MR. LEBLANC: It is a good question, Mr. Chairman. I will check it. I believe that it would be pooled together.
MR. HOLM: Let me just separate it off then. We will leave Sobeys out of it. Let's say that I run a very profitable fish processing plant, okay?
MR. LEBLANC: Are there any?
MR. HOLM: I will be a fish wholesaler. Okay, let me be a fish buyer and seller. Let's say that the profits were $0.5 million. This is hypothetical. On the first $200,000 I would pay 5 per cent, correct?
MR. LEBLANC: That is correct.
MR. HOLM: On the second $300,000 I would pay the 16 per cent.
MR. LEBLANC: Provincial tax as opposed to federal.
MR. HOLM: Provincial tax, yes. So in other words, the large businesses are getting the same tax break as the small businesses. Correct? On the first $200,000 the are getting . . .
MR. LEBLANC: That is correct.
MR. HOLM: Do you know how many such businesses there are in Nova Scotia that are getting that, that really classify as big business because they have over $200,000 in . . .
MR. LEBLANC: I don't have that number with me. I am not sure whether that is something we could provide or not. She says she can probably get the projections. I don't have it here.
MR. HOLM: They would be very interesting projections to have because these big businesses which are getting the small business tax rate of 5 per cent, they are saving 11 per cent. So on $200,000 alone, that works out to be what, $22,000 a year in tax break by getting the lower tax rate?
MR. LEBLANC: Mr. Chairman, when people talk about whether or not companies should have tax breaks and whether they should only pay 5 per cent provincial plus the federal which I think is about 18 per cent, so if a company is making money and has taxable income, let's say they only make $100,000, it would be 23 per cent payable on that. People say, well, that is only 23 per cent and that is wrong, it should be higher. Eventually, some day, those profits will come out of the company. When they are, they will be into personal hands. You build up equity in the company to build up your company and to have resources and working capital that in time will allow your company to withstand ups and downs into it. Eventually that money has to come out and what it is, it will be taxed personally. So you have to look at both aspects of it and I think if you don't then it is somehow a little clouded.
MR. HOLM: Well, thank you and I am sure that the shareholders of Nova Scotia Power in New York, Toronto and other places are very pleased to know that because Nova Scotia Power would also be only paying 5 per cent on the first $200,000 profit as would MTT, as would The Bay, as would Wal-Mart, as would all these other businesses. Budgets are about choices.
MR. LEBLANC: Mr. Chairman, first of all, you talk about New York and Boston, we used to pay interest to those people in New York and Boston, too, because a lot of that borrowing was done out of province.
MR. HOLM: That is something I will congratulate this government and the other one and we have been saying something we have pushed for years. All we have to do is look at the newly, well lit, Macdonald Bridge with its $600,000 lights. Students who have sent me e-mails have asked, why did we spend $600,000 to light the Macdonald Bridge when we are having teachers who are being laid off? Yes, I recognize they are out of different pots but you tell that to the Nova Scotian because we only have one wallet to take the money out of and whichever department is taking it, it is all coming out of the same taxpayer and it is not necessarily going to those - as the government talks about - core programs.
I go back and I would like to ask the question, why didn't the government do an analysis to find out how much money would have been generated by eliminating the small corporate tax rate for those companies that are actually not small corporations but are, in fact, the larger corporations, so that they start paying their fair share? Now I know that some of those in the Metro Chamber of Commerce, like Nova Scotia Power, may not have liked that kind of analysis but those parents out there who see the class sizes going up and the resources that the children are going to be deprived of, might have appreciated it.
MR. LEBLANC: Mr. Chairman, I guess, in a sense, two things, one of which is that it is also a competitive issue. Within the Atlantic Provinces, New Brunswick and Nova Scotia are very comparable. Actually, right now, I think with the changes that New Brunswick
brought in, they are a little lower than ourselves, which is an issue in itself. The member mentions the Bridge Commission and the fact that they spent the $600,000. That is one of the things that I am responsible for and the member had asked this. Actually, subsequent to the event happening, and I had told the member that it actually happened on my watch . . .
MR. HOLM: And it was a decision made under the former watch.
MR. LEBLANC: But actually it had been awarded before but I didn't bother getting up and correcting that because I didn't think it would add to the thing but since we are on the subject and it has been discussed here, when I had asked the question, the first response that I had, that it happened, it had been awarded subsequent. That is irrelevant. The money was spent. Since we are doing something here and the issue is being brought up, I did want to mention that. I got off the topic there and I have lost my frame of thought.
It is important for ourselves to be competitive. People look at companies only, I guess in a sense, as tax exemptions that they get and so forth. These also are the same companies that provide employment and I think it is important that we are competitive. One thing this year that we have done, we have also reduced the overall spending of the Department of Economic Development and have put in place a review of how we do economic strategies. Now tax rates are something that companies will look at.
MR. HOLM: I appreciate that and I have heard the old competitive argument used over and over again but what the minister is, in a long, round about way saying, is that no, we didn't do that kind of analysis, we didn't look at that to see what it would generate. Probably, also, although he is not saying this, this is my spin on it, Murray Coolican and the Metro Chamber of Commerce maybe wouldn't let you. I wonder if you have done any kind of economic analysis to figure out, when you are talking about those forces that will help to attract businesses and maintain businesses, what kind of an impact, destroying the health care system, destroying the education system will have on attracting and maintaining businesses in this province, businesses that we need to depend upon to pay good wages to the employees and to provide needed tax revenues for the province?
MR. LEBLANC: Mr. Chairman, I want to say that for ourselves, I think the message that we are sending to the business community, if you want to send one, is that we are trying to control the growing debt we have in this province. I think a lot of people don't want to talk about that but it did go up $85 million this year. No matter what we say, that is a fact. If we don't start controlling our expenditures and try to bring about some reduction in our deficit, that will continue to escalate and we can't argue with that. That is a fact.
The member continuously asserts that we are under the strict guideline of the Metro Chamber of Commerce and I tell him categorically, that that isn't the case. They have the right to express their opinions and I expect them to do so in the future and I expect the other groups who are talking for the social advocacy side of this issue to do the same. That has
been the case in the past and that is going to be the case in the future. As a government, it is our responsibility to listen to both but to make a decision. I know when I do that that I will not probably please either side, that we have to bring about some rationalization of the deficit that we had and the amount of debt that we have.
MR. HOLM: I guess I just have to say that it is quite obvious as to which side the government has listened to when you take a look at where the cuts have been made and whose advice seems to have had the greatest ear of government. Let me just go on to a few other things. First of all, in terms of the projected increased income in Nova Scotia, it is projected that the average income in Nova Scotia will increase by, what is it, 2.9 per cent?
MR. LEBLANC: Correct.
MR. HOLM: Every other body, other than the Department of Finance, has projected that the economy of Nova Scotia would grow by about 3 per cent?
MR. LEBLANC: No, the Conference Board of Canada just came out with a suggestion, I think two or three weeks ago, that showed 2 per cent pretty well across the Maritimes.
MR. HOLM: Across the Maritimes.
MR. LEBLANC: Pretty well, I think every province, they were saying the Atlantic Provinces, 2 per cent, approximately three weeks ago.
MR. HOLM: And what were they saying for Nova Scotia?
MR. LEBLANC: She will get it up for you.
MR. HOLM: The conference board is saying 2 per cent growth but personal revenues or incomes are still going up by 2.9 per cent. Do you hold to that?
MR. LEBLANC: I will get that from her.
MR. HOLM: Or have you adjusted the income levels in your budgets downward?
MR. LEBLANC: She is getting that information. Just ask the question again because she was getting . . .
MR. HOLM: You budget said 2.9 per cent personal income projected growth.
MR. LEBLANC: So you wanted to know, first of all, what the projection of the Conference Board of Canada was for Nova Scotia.
MR. HOLM: And do you still hold to that 2.9 per cent?
MR. LEBLANC: The conference board quoted 2 per cent for the Atlantic Provinces, quoted 2.5 per cent for Nova Scotia and I look here at some of the projections that we have, the TD Bank projected 2.2 per cent as did the Bank of Montreal. So there is quite a variety of different . . .
MR. HOLM: That is in the last . . .
MR. LEBLANC: This is for 2000.
MR. HOLM: That was just the most recent? They came out before or after your budget?
MR. LEBLANC: The TD Bank is March and the conference board is February.
MR. HOLM: Okay. They are still considerably higher than the provincial estimate of 1.8 per cent.
MR. LEBLANC: That is correct.
MR. HOLM: So obviously the Government of Nova Scotia is more pessimistic about the economy than any of the other major bodies that look at our economy. So one might ask whether or not, especially given the fact you are projecting that the income levels are going to increase by 2.9 per cent, the conference board, you said, said 2.5 per cent and yet you are showing in your revenue growth that personal income tax is going to increase by - what is it - $50,000-some odd?
MR. LEBLANC: A couple of things here that are all-important. There was information that came out by Statistics Canada that showed new investment intentions data and also the federal budget came out subsequent to some of these things coming out. Of course those are two things which bear into it. The other thing, I am sorry, John . . .
MR. HOLM: About the income tax. You say 2.9 per cent increase and 2.5 per cent by the conference board yet you project, on over $1.1 billion estimates you throw in a grand total of 2.9 per cent equates to, $54,000?
MR. LEBLANC: Well, there are a few issues that go into here and a lot of them are timing. The definition that the federal government has brought in, in regard to how capital gains is calculated, it went from 75 per cent taxable to two-thirds. It had an impact of about $7.7 million that we lost this year. The other issue that happened last year was that there were changes in the federal tax rate that took effect on July 1st which didn't have an impact for the full year which will have an impact this year in its entirety. That was a total of $11.9 million.
So those are things that impacted this budget that wouldn't have impacted last year. So those are just two issues in itself that are almost $20 million in that regard.
MR. HOLM: I will get to those two then. One was a change in the capital gains tax. You are saying the federal changes in capital gains cost us approximately $7 million, give or take?
MR. LEBLANC: Yes.
MR. HOLM: We are going to have a new Income Tax Act and you are passing through the changes that the feds have made on capital gains. Are you passing that through in the new legislation that is being brought forward?
MR. LEBLANC: Mr. Chairman, I have no option because the determination of taxable income is a federal one. There is an another issue, maybe we will come back to that.
MR. HOLM: I can't help but point out that capital gains taxes and benefits, who do they normally benefit? Most of the people who benefit from those, the big winners, are they the lower-middle income people or do they tend to be the people who are more well-heeled?
MR. LEBLANC: Mr. Chairman, I would imagine that it is people who have the means to invest.
MR. HOLM: That is right. That one is being passed through the feds, we aren't challenging that. The income creep, the tax creep that the feds are bringing in that would have seen the amount of a person's income tax payable decline with inflation, unless their salary increased by more than that amount. In other words, you are maintaining the bad Liberal practice of the income tax creep that would be quite favourable towards a Creep Party.
MR. LEBLANC: First of all, let me just give you a little more information. Out of the $7.7 million, in regard to the capital gains, $3.2 million of that is the capital gains side of it; the other aspect of it is the changes in the non-refundable tax credits that are given, which we have accepted the changes, which is basically for $4.5 million. That does help the low income earners, because everyone will benefit from that. The $3.2 million is due to the fact they have changed how they tax capital gains. I have already indicated to the member that I don't have the ability to change that, the member can say that I do, but I don't. One of the things the federal government has clearly said is that we will allow people to piggyback on our system and we will collect the taxes for you, but you are not going to determine what taxable income is, we will determine what taxable income is, and that is why that one is flowed through.
There is another issue that should be brought forward and discussed. The past year, 1999-2000, included about $18 million of revenue that could have been or should have been allocated in the 1999-2000 year, but by the time that information came forward the 1998-99
year had been closed out, so it was added into last year's income, which makes the comparative, again, even a little more cloudy, and I don't argue the point.
We have basically three different issues that are making the situation more difficult to read. The member brings up that if you compare estimate to forecast, it is only out about $54,000, which is amazing when you figure out that we collect huge amounts of revenue in personal income taxes. There are three different components, one of them I have just broken down for you which is the $7.7 million, which is between both capital gains, $3.2 million, and the increase in the non-refundable tax credits, $4.5 million, that we have given back to Nova Scotians. Even in these changes, there has been some tax benefit to Nova Scotians because of these changes, but they are minor in comparison overall to the system.
MR. HOLM: I guess the only real way to have a full understanding of all of the tax changes and everything there is if the minister wants to table his briefing book with all the details.
MR. LEBLANC: Mr. Chairman, that is a good try. On the ones we are referring to, it wouldn't be that difficult to list those four different items. I am sure I can get staff to analyze and give you that I am more than prepared to do so.
MR. HOLM: Maybe I will put in a FOIPOP for your book, it has been done before.
MR. LEBLANC: It probably wouldn't be the first time.
MR. HOLM: I know it wouldn't be, and it was successful before. Anyway, I won't get into that. Let me just close off that little chapter for the moment by saying this, is it fair to say that in terms of the revenue projections that you have brought forward, you have attempted to be conservative?
MR. LEBLANC: I can say two things - I always say that - let's say one thing at a time. One thing that is important for me as Minister of Finance is to let the staff that we have here, headed by Liz Cody, do those projections on the modules. I don't get involved in them, I don't pretend to, and I make a very specific point not to give guidance as to what numbers I want or what would be good or what would be bad. They take the information that is presented to them and is available to them by a multitude of projections, obviously, coming out, I have mentioned two or three of them, but also the modules coming out of the federal government, and they put together the budget on the revenue side of it. That is subsequently examined, obviously, by the Auditor General.
When those numbers are punched out, we put them into the budget, but it isn't something Cabinet decides whether or not these numbers look good, this is the way they are projected. I know the member brings up a good question, how could they be so close? And, of course, it brings up the question, it is hard to believe that the forecast and the estimate
could be that close in actuality. I have given some of the rationale here, and we will give it in a written form that also explains it.
MR. HOLM: I appreciate that, but that didn't really totally answer my question, and that is, would you wish to err on the side of being conservative or liberal in your revenue projections?
MR. LEBLANC: This is a loaded question. I want to say first of all that in the past, perhaps people have been more optimistic in revenue projections. My personal approach is always to be cautious. I am telling you what my approach is, and I am telling you Neil LeBlanc's position. That is not necessarily the case of the department. I want to speak very candidly, I don't even try to give guidance in these numbers because that would be . . .
MR. HOLM: I am sure you would.
MR. LEBLANC: I know the member believes that in all sincerity. I think it is important they have the latitude to do their job, as they were hired to do.
MR. HOLM: I do remember the days, sometimes philosophies even for right-wing Parties do seem to change, back in the Buchanan era you would come in, when a budget was brought in, with a very conservative debt projection or deficit projection for the end of the fiscal year, and then when the new budget came in, lo and behold revenues weren't what we thought, the debt was much higher, but it is going to be better. You always started off with good projections as to what it was going to be like the next fiscal year, and at the end of the year, of course, it never came in.
Now it seems to be the flip side. Now it seems to be that you come in with these bad projections as to what the debt is going to be and then you come forward at the end of the year and say, gosh, aren't we such great managers, look at this, we brought in way under, and look at this, we are almost a full year ahead of our election commitment, we are going to be able to give tax reductions in two years' or three years' time instead of in the fourth, and what the heck if we destroy the health and education systems in the meantime and they are driving all kinds of businesses away and we have to import skilled workers from abroad, what the heck, we are exporting all kinds of people. That seems to be a change of philosophy, but that is just my opinion.
MR. LEBLANC: Is that a question?
MR. HOLM: Not really, that is just a modest little rant in here. (Laughter) I will just touch on the debt for a second, if I can. We actually now have a total debt, showing on the books, of just shy of $11 billion.
MR. LEBLANC: I think that is correct.
MR. HOLM: Of that $11 billion that is shown as debt, how much of that is actual paper debt? I am not talking about the amounts of money, theoretically, that we have put on the books because of Sysco and that kind of thing. How much is hard debt for which we are paying interest payments?
MR. LEBLANC: I am looking at Schedule 20 of my speech. We have a gross debt this year, the end of 2000, of $12.389 billion with the net debt being $9.5 billion.
MR. HOLM: It is the net debt that we normally refer to as the $11 billion, because the gross debt is all those other things, like the school boards. When we throw around this figure of $11 billion, which everybody talks about, the reality is that the amount that we are paying interest on is $9.5 billion. I am forgetting about the gross part, that would be added on in either case.
MR. LEBLANC: It would be that $9.5 billion plus the P3 commitments that we have made, plus the NSRL commitments that we have, which will drive that up considerably.
MR. HOLM: I appreciate that. When people were throwing around the $11 billion figure before, that was plus the NSRL, plus the P3.
MR. LEBLANC: I don't think you recall me saying that but maybe some other people. I can't comment on other people.
MR. HOLM: I believe so. If I could go back to those P3s for a second, and then there are a number of things that I want to go to from this in the short time I have left today. The P3 leases - and if you don't have this information maybe you could just get this for me afterwards - and I know the figure is in here somewhere, $30 million or whatever it was, and that is for schools with a total value of, again I can't remember the P3 value that those schools covered, let's say it was $300 million and let's say it with $30 million, I know both those figures are wrong. I would like to know, if the government had built those and owned those schools, what the borrowing costs over a 20 year mortgage payment would have been for those facilities?
MR. LEBLANC: Mr. Chairman, the only problem you get into is when you would have actually made the borrowing, which is a little . . .
MR. HOLM: Yes, I appreciate that.
MR. LEBLANC: So you are going to have to make some assumptions on that.
MR. HOLM: I appreciate that too, and I know the rates now are a little higher than when those buildings were being built, and some of those buildings that we haven't taken over, the mortgage payments probably haven't been finalized on them, so we probably don't
have a firm lease payment amount negotiated for those either, because they are going to be dependent upon the going rates of the time.
I would like to get a commitment from the minister so we can actually see, on paper, what the costs of the structures were, the total cost of the P3 leases, skipping the maintenance because that would have fit in with both sides, and the costs of doing that as a government lease. That is something that should have been done, certainly it should be available through any analysis that was done on those leasing arrangements.
MR. LEBLANC: Mr. Chairman, I am not sure what has been done, going backwards. It is hard to say. I think the member is asking something that is reasonable. The only thing is that I am not sure whether or not it will be like comparing apples to apples or apples to oranges.
MR. HOLM: It could be pulled out very easily, I am sure the Department of Finance has information in its database as to what the borrowing rates at the very specific times that each one of those leases was finalized. Let's just throw in the lease arrangements at that time. I have a little rinky-dink computer program on my computer at home, it was even a share-ware, I could lend it to the Department of Finance if they want it.
MR. LEBLANC: Mr. Chairman, we will take as many donations as possible, if they want to give us the computer, but I think I would rather let him have his computer and work it out on ours.
MR. HOLM: I was just going to copy the program onto a floppy disk.
MR. LEBLANC: The deputy says we could try to make some projections, some of them actually aren't finished yet. When you actually access the funding, it will have an impact on it. When you were building the old way, of course, you had percentage of completion advances being given to the contractors. Under a P3, you don't pay anything until everything is done, so that has another aspect to it. Without trying to get into all the schools, I will try to see whether we can compile even some of them and see if we can make some projections. I think if the member can be agreeable to that, then we will try to work out some projections.
MR. HOLM: What kind of time-frame would that be? I don't expect it tomorrow morning.
MR. LEBLANC: I don't think so. The advice we are getting is two to three weeks. The only thing is, I want to make sure the commitment is abided by. I want to make sure the member appreciates that it would not be written in stone, it would be approximations. I think the member is aware of that.
MR. HOLM: I appreciate that.
MR. LEBLANC: Flipping ahead to Panuke, the NSRL pact. There is some dispute, and I am not going to get into who did what when, whether the decision to give away or sell, whichever phrase you want to use, our 50 per cent ownership in Panuke. Of course, we could have exercised another option way back when, the former government, we could have picked up 100 per cent ownership in those fields for nothing, instead we gave it away and left it back with LASMO and LASMO turned around and sold it to PanCanadian for $60 million. LASMO $60 million, we got nothing out of that one, and now PanCanadian owns 100 per cent of it, and we get 2 per cent of the revenues, eventually.
I just want to ask a question. Before the decisions were made to forgo our opportunities to own 50 per cent of a gas field that is probably larger than Sable, I want to know when Nova Scotia Resources Limited decided to try to farm out our 50 per cent to other companies, when was the decision made to make those offerings to other exploration companies to take our 50 per cent position in that and, what offer was made to them, exactly?
MR. LEBLANC: I will get Jim MacDonald to come to the table because he has the specifics on this. For the members of the committee, this is Jim MacDonald, General Manager of Nova Scotia Resources Limited. The information I am receiving here is that Nova Scotia Resources Limited had, at some time prior to the election, for some length of time felt this was a high-risk venture, and it had some difficulty going ahead with this. I think the member is aware that we had a deep-water well at Panuke that had been estimated to be a few million dollars to drill, and it turned out to be a considerable problem, and I think it cost us well over $20 million before it was finished. Anyway, by July 22nd, three companies had already been asked to look in regard to trying to . . .
MR. HOLM: When were they asked or approached to do it?
MR. LEBLANC: He says by July 22nd.
MR. HOLM: By, that could mean July 21st or it could mean January or February.
MR. LEBLANC: I am informed that it was just prior to that, a couple of weeks before, they had to have a data room together, the information is there. If people are interested in farming-out, obviously, the information they receive is confidential. They have to sign the confidential information - all the information is held on hand so that it doesn't get out. So basically, just prior to that.
MR. HOLM: Okay, so they were given the information early in July and asked if they wanted to take Nova Scotia's position. When were they told they had to respond by? How much time were they given to make a decision?
MR. LEBLANC: My understanding is that there was no deadline as such. It was kept open.
MR. HOLM: When did the government make the final decision that PanCanadian gets it?
MR. LEBLANC: I think the day was in October. I can find that out.
MR. HOLM: So early in July they were notified, or three companies were approached, so that means they had part of July, August, and September, a little over two months. Were those companies told that if they didn't come back with a response by October, it was being given to PanCanadian?
MR. LEBLANC: I guess I am missing the point.
MR. HOLM: My point is I am trying to nail down some time-frames.
MR. LEBLANC: Why, if we are approaching the groups to see whether or not they would want to get into it, whether or not we were the shareholder or PanCanadian, what difference would that make to the companies?
MR. HOLM: Well, the difference is, these companies, and the minister surely knows, even though they are big boys with big deep pockets, deeper than the Province of Nova Scotia, they do long-term projections and plannings, and they make their commitments as to capital expenditures often for several years in advance. If we are going out to these companies and saying to them, look we have this parcel. Are you interested in taking our spot, in taking or assuming some of the risk with us? Those companies have to jump through a bureaucracy that is many times greater than the Province of Nova Scotia's. If they are going to be expected to make a decision within a couple of months, it isn't going to happen.
MR. LEBLANC: Mr. Chairman, my understanding from the oil industry, that farming-out is not unknown, it is a relatively common practice. A lot of times, especially when have a percentage of a well, the situation arises where you may not feel the same optimism as your partner as to whether you perceive it. Farming-out is a way whereby you can keep rights regarding that well and the other person puts their money up.
MR. HOLM: I understand that.
MR. LEBLANC: As much as I appreciate the member's comments that they need lead time. I think the fact of the matter was they felt based apparently on the evidence that was there, the information that was provided to them, it was not in their best interest to go forward with regard to this one well.
MR. HOLM: Did you get any correspondence back from those companies stating that they felt it was a poor risk, and turning it down on that basis? I would suggest that yes, indeed farming-out is quite a common practice. But if you are going to farming-out, those companies have to have the data, they have to have the information, they have to have time to analyze it, they have to have a chance for the executive management, or whatever you want to call them, to make recommendations. Those recommendations are going to have to go to the board. They are going to have to figure out whether or not the funding is available to switch around what their plans were for the capital investments for the coming year. Even the big boys don't just throw millions of dollars at the switch. They want and need to take some time to do due diligence.
MR. LEBLANC: Mr. Chairman, I go back to the fact that we made as much information available that they required, and we didn't hold anything back from these companies that were there. If they would have shown interest, the situation would have been one that we probably would have also delayed making our decision, because that would have been an option we would have had to consider when we made the decision to take a percentage of the Panuke well, rather than maintain a 50 per cent proprietary right in that. I guess you can always look back in situations and ask, did we do as much as possible? I think the answer is yes, to make sure we could farm it out. We approached companies, and I do know that PanCanadian, themselves, approached other companies.
MR. CHAIRMAN: The time for the NDP caucus has expired. Now back to the Liberal caucus.
The honourable member for Lunenburg West. You may start your hour of questioning. The time is 3:35 p.m.
MR. DONALD DOWNE: Thank you, Mr. Chairman and Mr. Minister. In the beginning of the questioning with regard to the restructuring of government, the 21 to 14 departments, you use an example of the Nova Scotia Alcohol and Gaming Authority where it was, in your view, a lack of efficiency because the Nova Scotia Alcohol and Gaming Authority was separate, a quasi-judicial body that was arm's length to regulate the whole issue of gaming in the province, and that, in your view, it would be a lot more cost effective if it is under URB. You use that as an example of poor management. Can you give me the economic analysis of that; do you have anything to prove where the cost savings will be within that amalgamation?
MR. LEBLANC: Mr. Chairman, I know the member has asked me this question in regard to the other ones, and I go back. A separate entity was created, whether it was the right move or not, it is not for me to go back to the time when the decision was made. The Nova Scotia Alcohol and Gaming Authority is one that, in this government's opinion, is not required. We can do the functions from within the URB, which will do the adjudicative functions of that commission or authority. The other functions of it can work themselves into
both - I would assert, Mr. Chairman, first of all, they will probably be into more than one government department because we are putting forward Environment, Labour, and Regulatory Affairs, which is to do the regulatory aspects of government. The other one is Business and Consumer Services, which will change to Service Nova Scotia, which does the service delivery.
There are the efficiencies that these commonalities of function that the reorganization will bring about. I stand convinced today, as I did when we made the decision, that will bring efficiencies and will bring cost savings to the government. So he is asking for cost-benefit analysis for that decision, it is the direction of the government that we will bring about efficiencies in this.
MR. DOWNE: Mr. Minister, you are saying it will give savings. Do you have anything to show me? Have you any piece of paper, any documentation, anything internal, anything at all to be able to say there are going to be savings? You are a nice person, and maybe everybody believes everything you say, but I am asking you, where is the proof? Internally, you wouldn't make that statement unless you had something to substantiate it. So I am asking, what do you have to substantiate it that I could see?
MR. LEBLANC: Mr. Chairman, I know the honourable member feels that the status quo is perhaps the way we should go. But I am telling you, the status quo still left us with a $497.6 million deficit in the fall, and we still have $268 million. I tell you, we have to move on this issue, and the longer we wait, the more difficult the decisions will be down the road. I am more than convinced, as is our government, that the streamlining of government will bring about the efficiencies that we require. The member can call that a gut feeling, and I disagree altogether. It is a streamlining of government, and that is what we have to do.
MR. DOWNE: Listen, Mr. Minister, I was the one who helped write the book regarding the status quo no longer being an option when we were in government. So don't tell me about the status quo. I simply asked a question, and you walk around it. I don't know if you are scared to answer questions, or if you are afraid of what you have to say, or you are intimidated by the questions, or what the situation is, but clearly, the simple question was, can you show me something to substantiate it? I am not arguing about it. I am not arguing that you are doing it. I am simply asking for some proof, and you refuse to give it to me. I assume that it might save money. Well, okay, but somebody in some department must have taken a look at this thing and said, look, minister, we have 50 people doing this job, we can do it under this auspices and it will save five jobs. We can give the same credible level of service, and we can provide the same regulatory body at arm's length of government.
Somebody must have come up with some analysis of that, as basic as that. Four or five less people, whatever it is. There must be somebody that did that. You couldn't have just simply thought it in your own mind and are sitting here saying that because you are not the type of guy who would get up and make a bold statement like that without something to
substantiate it. I simply asked if I could see or have or show me something that would substantiate the statement.
MR. LEBLANC: Mr. Chairman, if you look at the Nova Scotia Alcohol and Gaming Authority, just the administration, the board itself, is about $.5 million. Is that required? The answer is no, and that is one of the reasons we are moving the Nova Scotia Alcohol and Gaming Authority into the URB and into the other departments of our governments. We can't afford that level of bureaucracy, and that is one of the changes we are brining about. The URB is well positioned to make those decisions, and we don't need a duplication of that board. The facts speak for themselves.
MR. DOWNE: Mr. Minister, I wasn't going to go into this side of it, but I think I will just out of pure joy here. We are now going forward here. We are moving on Bill No. 34 to about nine boards in Health. An increase of four or five boards. Four or five CFOs, the number of boards increased, whatever the number, I forget the exact number we had before we got up to nine. Now we are going, in Health, from five to nine. Now the rationale for the Nova Scotia Alcohol and Gaming Authority is, we can do it all under one, save administration. Now we are going from five health boards up to nine. I would assume they will have some CFOs and CEOs and so on and so forth, so where is the saving of that? Where is the analysis of the saving if the agenda is clearly fiscal restraint? The agenda is clearly meeting target numbers. The agenda is clearly, putting our House in order. Then how do you justify, economically, Bill No. 34, where you have gone from five to nine boards? How do you justify that? Is it another warm fuzzy feeling?
MR. LEBLANC: Not at all, Mr. Chairman. I think if the honourable member believes that regional health boards were working well the way they were, perhaps he was the only one in Lunenburg County. I tell you, I have been in Lunenburg County, and I have been in Yarmouth County, and I have been in Shelburne County, and I have been in Queens. There aren't a whole lot of people who believe that the regional health boards were efficient the way they were structured. The level of bureaucracy that it created, and the requirements for prior approvals where decisions were left hanging for long periods of time, caused a lot of problems within that board. One of the reasons we moved to district health authorities is to bring about a more hands-on approach within those district health boards to make decisions in a more efficient way. The member is assuming we will do the level of remuneration that was put in place by the previous administration and the level of bureaucracy that was permitted to build up. The answer is no on both fronts.
Now this is one that I know the honourable member is of the opinion that regional health boards were working, and probably no matter what I could say here today will probably change his mind because it was part of your administration's vision to move along in those directions. But it is not one of ours. We clearly stated that in our mandate, in our platform, that we would be moving to reorganize regional health boards into the present format.
MR. DOWNE: Mr. Minister, I think, really, you have just answered your own question. It is a political agenda. It was a blue book promise, and there is no more rhyme nor reason for it than that. I am glad you have been to Lunenburg County. My wife even went to hear your speech.
MR. LEBLANC: And I spoke well of you.
MR. DOWNE: You spoke well of me? I appreciate that. You kind of take me off my stride when you do that. (Laughter) You have been to Lunenburg County. You are not a professional medical person. You are not an accountant.
MR. LEBLANC: Yes, I am.
MR. DOWNE: You are a B.Com., aren't you? You have a Bachelor of Commerce.
MR. LEBLANC: I articled three years with a chartered accountant firm.
MR. DOWNE: You articled? You are a chartered accountant?
MR. LEBLANC: No, I said I articled three years with them.
MR. DOWNE: You articled three years. You flunked?
MR. LEBLANC: No, I went on to my family business.
MR. DOWNE: You articled for three years for a CA, and you didn't finish? You didn't write the exam?
MR. LEBLANC: No, I didn't get to that point.
MR. DOWNE: How many years do you article before writing the exam?
MR. LEBLANC: Anywhere two to three, depending on the circumstances. Usually three and a half, something like that. It depends on what the circumstances are. That is irrelevant here.
MR. DOWNE: Now wait minute. If you article with a company for three years, and you were ready to write your CA exam, did you write any exams?
MR. LEBLANC: It was a one course - look, I am saying . . .
MR. DOWNE: Wait now. I . . .
MR. LEBLANC: Mr. Chairman, he asked me whether or not I was an accountant. I say my background is accounting. I worked with Peat, Marwick and Mitchell and received a good education and experience when I was there. So I am saying that my background is there. I do not have my CA. I don't profess to have one, but I do have the experience that working there gave me, and it has been something that I have used throughout my life.
MR. DOWNE: Did you flunk the test?
MR. LEBLANC: Did I fail an exam? I did fail an exam.
MR. DOWNE: Anyway, the health boards, back to the health boards; the nine boards. You have been to Lunenburg County, you have been Shelburne County, that is great. I have been down in your community, a beautiful community. I have no way of determining, without doing some sort of analytical work or analysis, whether or not the boards are cost effective. We have undertaken, with your Party recommendation, in fact, all three Parties, two Parties, had agreed for us to go ahead. We had an all-Party committee basically go out and analyze whether or not the five boards were functioning. The report came back that they were doing okay.
So we are now up to nine, if this Bill No. 34 goes through, with a feeling that it is going to be even better. So one minute we are doing cost issues, in another minute we are doing a better service delivery; in another we are doing a better feeling. All of this is affecting all Nova Scotians, it affects every Nova Scotian, what you have done in this last budget and restructuring and so on and so forth in the bills that are here, without one, even half of one, cost-benefit analysis. We are going from five to nine, and that is going to be more cost effective, and that is going to save money. On top of a time when you are taking $70-plus million out of the acute care system and $9 million out of Southwest regional acute care delivery, and we are going to nine boards versus five, and that is going to save us money. If you say so, Mr. Minister, but I find it awful hard to sit here and accept that without some proof.
I want to ask you a question on the Nova Scotia Alcohol and Gaming Authority. You and I have talked about it, in a roundabout way the other day. The staff that go to the bars, the liquor inspectors, then they got rolled into this group here, and I don't know where they are going to end up now, back at the URB, are they going to be with the URB, or in another restructured department?
MR. LEBLANC: Mr. Chairman, first of all, the functions that will be over at the URB will be the adjudicative functions. That is what those hearings are going to be; basically hearings, appeals and so forth will go there. There are functions within this that can be delivered, especially to our agencies, and I will use Business and Consumer Services, which will become Service Nova Scotia, which makes a lot of sense. The member may agree or disagree with that. I do believe, especially for a lot of people who are applying for lotteries
or even bingo licenses and so forth, that some of those things, especially, can be initiated at the local level, rather than everything having to come here, especially by electronic means. The regulatory part of it, where you are talking about the inspectors and so forth, are looked to be moving over to Environment, Labour, and Regulatory Affairs as an inspection function, because that is where the commonality of functions will be moving, into that department.
MR. DOWNE: I can see some logic in that. I really can. The employees who are there, these employees were brought under, when they made the transition, I forget, they weren't NSGEU before . . .
MR. LEBLANC: They used to be the Liquor Licensing Board.
MR. DOWNE: Yes, the Liquor Licensing Board, I don't know, were they in the CUPE? I can't remember what union they brought in. There is a big argument whether or not all their years of experience and seniority was brought with them. I really don't know if it was or not. Now they are going to be brought into another body. With all their seniority from when they were hired and all that, will that come forward with them and give them some sort of protection in the system, or are they very vulnerable to the bumping potential that is going to be out there after the restructuring starts.
MR. LEBLANC: Mr. Chairman, the member brings up a question that we discussed just outside the House the other day, and I was going to write it down and mention it to the minister responsible, but I forgot. I will make a note of it to do it. The member brings up a good point. Rather than speculate, I will do that now to make sure it is addressed.
MR. DOWNE: Thank you, Mr. Minister. The budget itself, the budget deficit of $268.093 million for 2000-01. Is that the number?
MR. LEBLANC: Those are the projections.
MR. DOWNE: Yes. And that is compared to 1999-2000, $765.229 million?
MR. LEBLANC: That's correct.
MR. DOWNE: In those numbers, and I use the term trumped up to some degree, you have everything, I think, in there including the kitchen sink and every dirty dish in the House. There are some extraordinary items, one time charges, non-recurrable items. Do we agree?
MR. LEBLANC: That is correct, especially the Sysco one being the major one.
MR. DOWNE: And when I went through these numbers and tried to look at them, I came up with a different number. Can you tell me if the $767 million, just rounding that off, is the gross number that was the projected deficit of 1999-2000, is that right?
MR. LEBLANC: No I think it is $765.229 million. That is what we are showing here.
MR. DOWNE: Okay.
MR. LEBLANC: I am just quoting out of the estimates here.
MR. DOWNE: Yes. Forecasted deficit, it bounced around the numbers. But okay, $765 million. Sysco costs of $378.5 million?
MR. LEBLANC: That is correct.
MR. DOWNE: Pension adjustment of $26 million?
MR. LEBLANC: That is correct.
MR. DOWNE: Long-term service adjustment of $5.5 million?
MR. LEBLANC: That is right. That was for the school board's pension service awards. Yes.
MR. DOWNE: That is all part of this big number?
MR. LEBLANC: That is correct.
MR. DOWNE: Okay. Long-term service adjustment of $5.5 million. Y2K is $45 million?
MR. LEBLANC: I am not sure if it is $45 million. He is saying that is approximately correct. Not exact.
MR. DOWNE: Well they are rounded off.
MR. LEBLANC: Okay I know. Yes.
MR. DOWNE: General election $6.4 million?
MR. LEBLANC: That is correct.
MR. DOWNE: Restructuring costs of $16.1 million?
MR. LEBLANC: That was last year's restructuring costs, is that correct?
MR. DOWNE: That is what we are talking about here. Last year's numbers.
MR. LEBLANC: But you would usually have restructuring costs in a normal year anyway. So those I would say are things that probably will go ahead, and that number, all the other ones you stated are a little different than the restructuring part of it.
MR. DOWNE: But as I understand it, $16.1 million was added in there to add up to $767 over the base?
MR. LEBLANC: Well that is correct, because those were the expenditures there.
MR. DOWNE: Yes. Sysco's operating loss of $31.8 million?
MR. LEBLANC: That is correct.
MR. DOWNE: Older fishers, fisheries workers, or what is it?
MR. LEBLANC: ERP, Fishermen's ERP.
MR. DOWNE: Yes, of $3.5 million?
MR. LEBLANC: I think it might be a little higher, is that right?
MR. DOWNE: What was booked into the . . .
MR. LEBLANC: Okay, that is probably the actual forecast. It was actually less than what was projected. That is right, because fewer people qualified for it than had been projected.
MR. DOWNE: Yes. That adds up to about $512.8 million dollars within a few bucks.
MR. LEBLANC: That could be.
MR. DOWNE: So the real deficit as estimated is about $254 million?
MR. LEBLANC: Based on what was there. Are you taking out the funds that you used for $160 million, you are adding those back in are you? With the prior period adjustments and so forth on the other side.
MR. DOWNE: I am just taking the raw numbers and doing this pretty simply. I am not an accountant.
MR. LEBLANC: The only thing is if you are going to use those, you should also take in the things that aren't added. I know that.
MR. DOWNE: It leaves a balance of about $254 million (Laughter) It's been a long weekend. Actually, it has been a really great weekend.
MR. LEBLANC: We are just starting off.
MR. DOWNE: Starting off pretty good. Anyway, the number we came up with is about $254 million. And that includes $78.5 million in Sysco costs which are Nova Scotia's share of the Muggah Creek site clean-up. Is that accurate?
MR. LEBLANC: The $378 million includes all those aspects.
MR. DOWNE: So $78.5 million and Muggah Creek's figures are part of this $254 million?
MR. LEBLANC: That is correct. No, well, I want to make sure. When you talk about the Muggah Creek, that is included in the $378.5 million. That is for the pension provisions and for the environment reclamation site.
MR. DOWNE: The obligation of the Muggah Creek clean-up . . .
MR. LEBLANC: Is in that $378 million?
MR. DOWNE: One-third, two-thirds, $78.5 million roughly?
MR. LEBLANC: The deputy tells me it is about $68 million. That is including . . .
MR. DOWNE: We might be mistaken. I thought it was $78 million.
MR. LEBLANC: I can get that information. I am just going by the deputy's memory. It is either $68 million or $78 million of that $378.5 million.
MR. DOWNE: So we are pretty close. I think it is $78 million, but you know.
MR. LEBLANC: You could be right, but I have to get some more information on that.
MR. DOWNE: We are getting there. Change in accounting for tangible capital assets. We have the issues of equipment bridges and schools and so on and so forth. I am just trying to work back these numbers. There is about $24 million for schools, $29 million for hospitals, $14 million for Housing and Municipal Affairs, $71 million for Transportation, depending on the definition that we use. The amount, the depreciation that will go on the record is where I am heading with this question. We roll back some of these numbers.
MR. LEBLANC: Okay, continue.
MR. DOWNE: So the $254 million that we came up to, excluding the $78 or $68.5 million Muggah Creek issue, I am just trying to expose what all these numbers are that the gentleman, who was at that the prayer breakfast, rolled over and they stuck in my mind. Some of the members weren't there. He said, is it the prerequisite of every Minister of Finance to tell the other guy was a crook. He said I have been going to these and listening to this from government for years and years and years. I said, well, I am not a crook, and I am sure the minister might agree that I am not. Anyway . . .
MR. LEBLANC: Mr. Chairman, to say that I was insinuating he was a crook, I don't think that is a fair statement. But I do want to say one thing. We prepared these statements in accordance with GAAP, and so . . .
MR. DOWNE: Absolutely.
MR. LEBLANC: And so, when we are talking about this . . .
MR. DOWNE: Absolutely, absolutely, . . .
MR. LEBLANC: In the past, that wasn't the case, to be candid about it. It wasn't the case in the previous administration I was in or the previous administration that the honourable member was in.
MR. DOWNE: Absolutely, Mr. Minister, you are the one that wrote the exam and you know that the accounting fraternity is without question a tremendous fraternity and I support it. In fact, I supported the fact that we go to consolidate. This is not new. I maybe don't understand 1000 per cent of it, but I understand enough that this is the right way to go. I just thought it was important to let people know what was the make-up of this number because it is so big, people are saying, well how could this ever be.
Now, the $254 million, which is a little different than your number, somehow or another I have to get the clarification of that. I am sure your staff will do that. Since the 2000-01 budget is on an expense basis of accounting, the adjustment back to the expenditure basis, requires that we add back the net adjustments, the net adjustments of the tangible capital assets which is part of your presentation A18 when we have the net adjustments for tangible capital assets at $19.85 million.
MR. CHAIRMAN: Which book is that one in?
MR. LEBLANC: That is the Estimates Book.
MR. DOWNE: This is the minister's book.
MR. CHAIRMAN: The Budget Address book?
MR. LEBLANC: No, it is not. It is in the estimates.
MR. DOWNE: This is not your book?
MR. LEBLANC: No, no. It is in both places.
MR. DOWNE: It is in both places, I am sorry. I just took this one here because it has your name written up here really nice.
MR. CHAIRMAN: I think there is a reference on a certain page.
MR. LEBLANC: There is no problem. We found it, Mr. Chairman.
MR. DOWNE: Same number?
MR. LEBLANC: Yes.
MR. DOWNE: The $19.851 million, now we have gone from expense basis of accounting to expenditure basis of accounting, yet the net adjustment of the $19.851 million is not on the balance sheet.
MR. LEBLANC: On the balance sheet?
MR. DOWNE: It doesn't show up in your figure of $268 million. What you are projecting for 2000-01, doesn't have the $19.851 million in it.
MR. LEBLANC: I disagree. It is in there. The difference between the amortization costs and the capital purchases is $19.851 million. That number is in there.
MR. DOWNE: It is part . . .
MR. LEBLANC: It is part of the $268 million.
MR. DOWNE: When you show your deficit, you show your deficit of $268 million even though I can figure out $254 million, but you are showing a deficit of $268 million?
MR. LEBLANC: That is correct.
MR. DOWNE: That $19.851 million is part of that $268 million?
MR. LEBLANC: It is, and I am just trying to figure out how I can explain it to you. It is difficult to explain across the table. That is the dilemma that I have. We could try to do it across the table if you want, I have no problem with that. Or if you want to, in between this session, I am not sure if we are coming back or not, to walk you through it. Even the staff, it may be easier to do it. I will leave it to the member's discretion as to which of the two ways you want to do it.
MR. DOWNE: So you are saying it is part of that number?
MR. LEBLANC: It is.
MR. DOWNE: All right. I am sure we will work out some time that is suitable to both to be able to get that. The way I looked at it, it appeared to me that the so-called real deficit is like two separate numbers, and I know the tangible capital assets, we are spending $70 million or $80 million out here.
MR. LEBLANC: $88.9 million. $89 million.
MR. DOWNE: We are spending $89 million, and we are going to book $19.8 million on the balance sheet?
MR. LEBLANC: Well, the difference is the amortization costs are $69 million. The difference between the two is basically $20 million, $19.851 million.
MR. DOWNE: So the way it was before, when we did a highway, when we did a paving down on French Shore when we paved the road . . .
MR. LEBLANC: The French Shore is not in my riding by the way. Make it in Argyle, if you are suggesting they do some paving, I would rather have it in my riding than the French Shore, but that is beside the point.
MR. DOWNE: Probably try to work on fixing the bridge in your area.
MR. LEBLANC: I know that one. I know what he is referring to. (Laughter)
MR. DOWNE: We tried to fix the bridge down in your area. But anyway, bridge or road. Let's do the road for easy figuring. The road work, we expensed out the whole thing. So under Transportation and Public Works, there is $51.607 million that would be capital purchases, some of which will be . . .
MR. LEBLANC: Bridges, roads.
MR. DOWNE: Most of it is roads . . .
MR. LEBLANC: Yes.
MR. DOWNE: . . . and you only have to show $6.4 million of that.
MR. LEBLANC: No. The amortization costs of it is $45 million, from $179 million, so the net result is the difference between the two, but we are showing the amortization into this.
MR. DOWNE: Separate on the line below.
MR. LEBLANC: It is built into the totals.
MR. DOWNE: It is a little confusing. It is almost like two sets of books.
MR. LEBLANC: Well, it is difficult. The first year, especially, Mr. Chairman. The member brings up a good point. When you change the system, and I will just give you a story.
MR. DOWNE: Be careful where you walk. (Laughter)
MR. LEBLANC: Be careful, I know that. It isn't something I can't remember what it was. I know what it was. Anyway, Kevin Malloy who is a comptroller, who happens not to be here today, was explaining this to the press and it was extremely dry. A lot of people aren't really that interested, so he didn't get a whole lot of results. They tried it a second time. One person clapped and he was enthused that at least someone had appreciated it. It is technical, but the member brings up a good point. But, it is included in there.
MR. DOWNE: So one can almost assess by the tangible capital asset approach, which is one of the benefits of consolidation of debt, that we are going to be spending more money in real terms, not in accounting terms, but in real terms, on highways overall than we did last year?
MR. LEBLANC: The number is up. I don't have the exact number, but I think it is somewhere around $4 million or $5 million, something like that.
MR. DOWNE: It is interesting, we have a $20 million cut in education and we are going to spend more on roads. Health care, gosh only knows we need road work, I am not arguing that.
MR. LEBLANC: I don't have the number between the two. I will get the number from last year to this year, what the increment is, but I believe it is probably about a $4 million or $5 million increment altogether. It may be $3 million to $5 million. I will get the exact number for the member.
MR. DOWNE: Mr. Minister, we will try to come together on the number of dollars that are out there and what the real numbers are and hopefully try to work out between us in the next day or two and get clarification.
MR. LEBLANC: You mean regarding the TCA and amortization?
MR. DOWNE: Yes.
MR. LEBLANC: No problem. I am sure the staff will . . .
MR. DOWNE: Whether or not that is in there or not.
MR. LEBLANC: Yes.
MR. DOWNE: Our numbers aren't adding up to your numbers.
MR. LEBLANC: I am sure the staff will do that.
MR. DOWNE: You have tremendous staff. By the way, you have about 400 of them behind you here. I know there are quite a few of them here, and I hope at the end of the day . . .
MR. LEBLANC: I am sure they are all here to see you too at the same time. That is probably why they are here.
MR. DOWNE: It is great to see them all again. They are all looking quite well.
MR. LEBLANC: They are good people.
MR. DOWNE: Minister, in the budget documents, personal income tax, PIT revenues, and you basically knew this question was coming, so I just want to ask again. Ms. Cody is here, and she got somewhat of a clarification of it, but in 1999-2000, personal income tax was increased by $95.7 million. So the number was lower, and you had a windfall benefit of $95 million. This year, according to David Rodenhiser, is it 0.005 of 1 per cent increase in PIT this year even though the economy is hopefully going to continue to move along at the heated pace it was? I guess the question goes back, and I am sure Ms. Cody can answer this, but the confidence in the forecast, and it is a question because I get asked that quite a bit, and I am having a problem trying to analyze it myself. We got a $95 million benefit last year, and I know Liz would be able to do that right away. Can you clarify that again for the record?
MR. LEBLANC: There are three things, and I did mention it to the member for Sackville-Cobequid, and I don't think you were in the room at the time, so we will just do it again. There are three major parts, one of which is that in last year's fiscal year, 1999-2000,
there were $18 million which pertained to the previous fiscal year that was not ascertained until such time that they had to be included in last year's. So instead of being in 1998-99, that $18 million got included in last year's. That is number one. Do you understand what I am doing?
MR. DOWNE: Yes.
MR. LEBLANC: Okay, if I am not explaining very well, bear with me a second. The next thing is that the federal changes in taxes last year took effect July 1st, so there was a reduction actually in provincial individual income taxes collected that came about because of that, that resulted in only partial savings last year which will result in a full year's application this year, which is another $11.9 million. So those are two aspects of it.
The other thing that is there is a $4.5 million decrease in revenues this year because we used the non-refundable tax credit numbers that came out of the federal government which will reduce our taxes this year by $4.5 million. Lastly, there is also a $3.5 million reduction because of the way the capital gains are being calculated. It is going from 75 per cent of the capital gain being taxable to 66.67 per cent. So that means that under the changes that we are using, we have to use either the old system or the new system we are going to go to. We use the federal definition of taxable income. We basically have no choice in the matter. So that change in capital gains will also mean that we will lose another $3.2 million. I say three but there are actually four things which really, when you look at it, happen to lower our revenues this year or make them not comparable with the year before, but it is a coincidence that they came so close. I think the difference is only like $54,000 between the forecast for last year and the estimates for this year.
MR. DOWNE: It is 0.005 of 1 per cent.
MR. LEBLANC: I am not arguing your point.
MR. DOWNE: According to Mr. Rodenhiser, $54,000, but it still does not add up, I get $95 million. The question I am asking the minister here, I would assume that it is better for you if you are going to have a surprise to have a good surprise. I have heard that before. The department brings these numbers to the Auditor General and they give their rationale to the AG exactly how they do their planning.
MR. LEBLANC: That is right.
MR. DOWNE: We have always tried, or the department, I should not say we, excuse me, the department has probably always tried to be conservative on the numbers and the expectations of the realization of what those numbers could be because there are fluctuations and some variations. What do you consider as being a reasonable level of security to suppress the numbers in regard to the revenue stream under PIT this upcoming year? The federal
Finance Minister, Mr. Martin, is talking about setting up numbers and other Ministers of Finance have indicated they always try to make sure that they are protected and kind of hedge their positions a little bit. What do you consider as a reasonable level that you would want the staff to take a look at in regard to expectations of real income?
MR. LEBLANC: Two things, first of all. I want to say that I have not established a reasonable level of where I think is the safe level. I have let the staff make the decision themselves. They are the people to provide those numbers. They do them based on the information that they get from Ottawa. They have modulars that they produce these numbers with and I want to be very candid, I am repeating what I said before which, is that I don't try in any way, shape or form to try to influence the production of income tax numbers. It would be extremely inappropriate for me, as minister, to try to do that and those numbers are produced through the Fiscal and Economic Policy through Liz Cody and they are the ones preparing those numbers.
The previous speaker asked me what my gut reaction is, as to whether I am more liberal, and he used a small l, or conservative in my views, and I said my approach personally has been one of being conservative, but I am also saying upfront that I do not in any way put influence on the division. It is theirs to produce the numbers that we use in the budget process and that is what I have done. I have ensured that they have a free hand to produce those numbers and so for myself to say that I was surprised that the numbers came out so close, of course, I was surprised when I saw the numbers, but it is not for me to question as to whether the numbers are wrong so we should change them so that people don't talk about them.
When the numbers are produced, they are produced and when I asked why they were so close, these are some of the reasons that they also gave me. So I don't argue the fact what you are saying before. There was an increase. At the same time I don't predetermine what numbers will be coming out and I think the former minister knows and I am sure he followed the same protocol in his capacity as minister.
MR. DOWNE: The staff did their thing and I totally let them do it. The question really is, have you suggested any larger conservative number, small c, as a percentage to kind of hedge your own position a little bit and I guess the question I have asked is whether you were involved with that and your answer to me was that you had nothing to do with it, that staff did . . .
MR. LEBLANC: Very clearly upfront, and I will just refer, even in my Budget Address there is a report of the Auditor General in regard to that and I think you are already aware of that. Maybe I have gone on too long in my answer and I apologize. I just want to make sure for the record that people know that.
MR. DOWNE: Federal transfers are budgeted to decrease by $54 million. The fiscal year and the year end fiscal update, federal transfers were increased by $18 million for
equalization and $6 million and change for CHST. This budget that you brought in, is it decreased just as another way of protecting your position from what the federal transfers are projected to be?
MR. LEBLANC: Mr. Chairman, to the member again, these are numbers that are calculated out by the Fiscal and Economic Policy division, but if you want to know the reasons for the changes there, I can get Liz Cody to try to get me some explanations as to why, if the member just wants to hold on for a second I will get that for him. If there is another question in the meantime - she is trying to get it - or if you want to wait, whatever, it is the member's discretion.
MR. DOWNE: Can I swing you over, Mr. Minister, to the fiscal measures and the Grant Thorton report. I have asked you this question before and the issue of . . .
MR. LEBLANC: I do have the answer. Do you want me to finish this one first?
MR. DOWNE: I thought you wanted me to go on to something else.
MR. LEBLANC: No, I thought it would take longer, but if you want to point overall, the equalization, the CHST money overall is increasing.
MR. DOWNE: That is right, $6.4 million.
MR. LEBLANC: But the supplement has gone down because we were receiving $107 million last year and this year we are only receiving $75 million. Of course, the compensation money on the BST has also run out. So you were asking me a specific question as to, you were saying equalization, you said that equalization had gone down. Which one were you referring to specifically because I have them all in front of me here. Could you do it again just for a second?
MR. DOWNE: The budget shows a decrease by $54 million.
MR. LEBLANC: Over federal sources.
MR. DOWNE: Yes.
MR. LEBLANC: But don't forget that in that you have used basically $53 million of the BST harmonization fund. That is gone. We have $107 million of the former CHST fund, I think it was a total of $250 million or $350 million that you had received before, that you exhausted in the last year also. So that is $160 million that we are not getting. The only thing that replaced it this year was $75 million that we are getting from the federal government for CHST and that is for four years. So that means that $75 million that we have gotten has been exhausted all in the first year which is after discussion with the Auditor General. He was
saying since we have the opportunity to draw it all down now, that it should be booked in this year. So after discussions with the Auditor General we complied with . . .
MR. DOWNE: So you took the whole amount in?
MR. LEBLANC: That was the accounting under GAAP that the Auditor General . . .
MR. DOWNE: We took $107 million, if I recall correctly, in the year previous, 1999-2000.
MR. LEBLANC: $107 million and $132 million.
MR. DOWNE: And you are taking $74 million this year?
MR. LEBLANC: $75 million, $475 million, yes.
MR. DOWNE: And equalization numbers are going to be flat or up? I think they are up, are they not?
MR. LEBLANC: Apparently here they are flat, almost exact . . .
MR. DOWNE: I thought they were up $18 million, but I could be . . .
MR. LEBLANC: No, if you look at the equalization estimate to estimate - I am sorry - if the honourable member will look at the forecast estimate, it is pretty well exactly the same. If you are doing estimate to estimate, there could be an increase.
MR. DOWNE: Mr. Minister, I want to move on to the Financial Measures (2000) Act. It is quite a document and I appreciate the chance to talk to you about some of the changes, but the purpose of the decoupling, switching from tax on tax to tax on income, and I understand, whatever, 72 hours before the federal budget comes out, we do it and decoupling is interesting. I read the Tory handbook, the gospel according to Harris in Ontario, and it said in the book the reason we are going to decouple is that just in the event that those Liberals increase taxes, I don't want Ontario citizens to be forced to pay higher taxes and that is how they justified why they wanted to decouple. I assume that maybe that was some of the rationale down here. You are scared that Martin and company might want to increase taxes. So you decouple 70-some hours before the budget. Well, we all know the taxes went down.
So when we decoupled, we were at 57.5 per cent of the federal tax and that was left alone on this line. It represents x dollars and as a percentage, the federal tax went down. Can you tell me, the number x over here as a percentage of what the new federal tax is, can you tell me what percentage of that it is now?
MR. LEBLANC: I am sorry, I missed it, you are talking about the new . . .
MR. DOWNE: Before the budget, hours before the budget, the 57.5 per cent of the federal tax represented how many dollars, the provincial portion, 57.5 per cent is . . .
MR. LEBLANC: Are you talking about the provincial income tax portion of it?
MR. DOWNE: Yes.
MR. LEBLANC: We received the forecast and personal income tax is at $1.144 billion.
MR. DOWNE: Yes. Anyway, I guess the point I am trying to make, the 57.5 per cent of the old tax is what we are at. That was the lowest in Atlantic Canada. We lowered it. It used to be up to around 60 per cent or 59.5 per cent.
MR. LEBLANC: I think it was 59 per cent.
MR. DOWNE: 59.1 per cent and, yes, then I think the Liberal Government lowered it to 57.5 per cent. Anyway, that 57.5 per cent of the federal tax, the federal tax has gone down, we froze the 57.5 number. What does that number represent or what percentage or if you were to recalibrate that, what would that number be?
MR. LEBLANC: Under the new system you are talking about?
MR. DOWNE: Yes.
MR. LEBLANC: Basically there will be different rates for every different category. There were three categories that you tax on there. There is a lower, middle and upper. So under the . . .
MR. DOWNE: We did the numbers and maybe . . .
MR. LEBLANC: Because the report came out by Grant Thorton.
MR. DOWNE: I think it worked out to about 60 per cent.
MR. LEBLANC: On the low one it is 9.77 per cent. The middle one would be 14.95 per cent and the upper one would be 16.67 per cent and that would be based on taxable income rather than on the basic federal tax.
MR. DOWNE: We calibrated and I understand why you decoupled. We have had that debate before, but by decoupling, in effect, Nova Scotia taxpayers provincially are about 60 per cent of the federal tax instead of 57.5 per cent because of the fact that the federal tax went down. Those are our calculations. I think we are reasonably close.
MR. LEBLANC: Well, if we would have had to maintain it, the raise on the provincial would have changed. I am not arguing that. That is a fact. Whether your percentage is right, I cannot tell you.
MR. DOWNE: Would you be able to confirm if it is 60 per cent or could you provide me with the number of what it is?
MR. LEBLANC: The projection forward, okay. That should not be difficult to calculate.
MR. DOWNE: It is pretty close, yes. Mr. Minister, if I may have your support here, while the staff are going to be doing that for this fiscal year, would they mind taking a look at the rate, the yield on the tax on tax, the same revenue base as the taxable income for the years 2002-03. I think Mr. Martin talked about potential reductions out two or three years and could they provide that number for us? Would you commit to that?
MR. LEBLANC: I am trying to figure out here, projections are there, I don't see a problem with that.
MR. DOWNE: Based on Mr. Martin's projections and he put a caveat in there that they could change, but assuming those numbers stay constant, the provincial portion, if we had not decoupled, would be the equivalent of . . .
MR. LEBLANC: It would be lower and I think that your point is stating that if would not have decoupled and would have kept the rate where it was, that overall Nova Scotians would be paying less provincial income tax and I don't disagree with that, but what we have said upfront is that we will maintain our revenues at the levels that they are until such time as we bring about a balanced budget. So what you are saying here, today, is basically along the lines of where your position is or where ours is, I don't argue that.
MR. DOWNE: If the rate for the year 2000-01 is about 60 per cent, the fiscal years 2001-02, 2002-03 based on Mr. Martin's numbers, it would be interesting for me to have that number if we could.
There is another part of this and this is fairly complicated and I don't profess to have this figured out very well, but the alternative tax, minimum tax, the tax structure we have got, we try to be fair across the board and most Nova Scotians want it to be as fair as it can be, but it appears that to some degree we might have a two-tiered system for the real rich. We
are treating the real rich a little bit different than the average person and it never happened before. As Jerry was saying, it never happened before. The alternative minimum tax, high income earners are using it as a shelter and not necessarily all the high income people, but anybody who was in receipt of a lump sum pension. Can you explain to us why you have the policy you have in regard to treating those individuals, the alternative tax measures and the high income pension earner for lump sum payments at a different tax bracket or a different tax structure than you can for the rest of Nova Scotians?
MR. LEBLANC: When you were in the middle of that question, I was asking the Page to check some information for me so . . .
MR. CHAIRMAN: There are nine minutes left in the honourable member's questioning time.
MR. LEBLANC: Mr. Chairman, maybe after that we could just take a two or three minute recess if that is agreeable and, the honourable member for Lunenburg West, I want to make sure that I answer his question correctly. I think I missed part of the preamble if he could be so kind as to do that again, please.
MR. CHAIRMAN: About the rich person and the poor person, the different tax structure, income tax.
MR. DOWNE: This is very complicated. I took a look at it and I had to get somebody to give me a better explanation myself, so I mean I don't expect the minister . . .
MR. LEBLANC: You are talking about the Ontario one?
MR. DOWNE: You are probably closer to an accountant than I am, but you probably will have a problem with . . .
MR. LEBLANC: I am thinking of taking up farming by the way. (Laughter)
MR. DOWNE: . . . tax on tax and tax on tax.
MR. LEBLANC: How is chicken farming? Is that a pretty good business to get into?
MR. CHAIRMAN: Well, don't count your eggs, okay. (Laughter)
MR. LEBLANC: Or after Easter. Are you referring to changes that are going on in other parts of Canada or are being proposed in other parts?
MR. DOWNE: The alternative minimum tax, high income earners using it as a tax shelter, can you explain how the alternative minimum tax system works and how it works under this budget?
MR. LEBLANC: Mr. Chairman, it is a very technical one and it is one where I never found I had to worry about paying the minimum tax. So it is one that, although I have read it, done a few income taxes and so forth of my own and helped some of my friends, you read on it, but since none of them ever fell into the same category that it would help them, I really don't know the level of detail. My understanding is that it was put in place by the federal government to try to ensure that people who are trying to plan to get around tax at least have a minimum paid into it, but I think that the staff could probably, I will try to do a little more review on this and I am sure that the staff will try to get the information, but I cannot give you the level of depth that you want on that issue.
MR. DOWNE: We will be back again maybe another day. I want to go back to this document which we will be talking about, the whole complex issue. This really points out the complexity of the tax structure. We are in tax season right now and anybody - my brother-in-law by the way is a tax expert and he passed all those exams so he knows how complicated they are. The tax system here now, I might say, seriously, the tax system we have now in this book that we have, this Financial Measures (2000) is a very complicated process. The individual Nova Scotians who actually try to figure out their own income tax, I think are going to have a really complicated time.
Before, we had a basic formula that was pretty simple, relatively speaking. One calculation for the tax. Under this decoupled system, we have a dual tax structure and we are going to be doing two calibrations as I understand it. So, the average person is going to have more expense when they go to an accountant to do this. According to accountants that I have talked to, the procedures are going to be more expensive because they are going to be more time consuming. This is only going by accountants. That is what they tell me, maybe they are only joking with me or jiving me, I don't know.
MR. LEBLANC: They may be trying to get your bill up a little higher and they are setting you up for blood.
MR. DOWNE: Absolutely. You are referring that all accountants are - I won't go there. The issue here seriously is that this is going to be a more complicated process for the average person who tries to do their own income tax at home. I really question whether or not they are going to be able or not to get through this maze. It is going to be more expensive for individuals who use an accountant to do their taxes and it will be more complicated for companies that are doing taxes.
One of the formulas here is (A x B x C/D) + (E x (C - (B x C/D))) . . .
MR. LEBLANC: It is very simple.
MR. DOWNE: I am sure it is, but the question I am asking here, not only did you decouple for the purpose of saving dollars, dollars that would have flowed through to the taxpayers for the Province of Nova Scotia, you also brought in a complicated tax system to be able to legitimize the decoupling that it is going to cost consumers more to file income taxes at the end of the year. Would you agree with that, Mr. Minister?
MR. LEBLANC: No, I wouldn't agree. I think we are in a situation where if anyone who can calculate their federal tax, which is what they have to do now, they have one additional separate sheet that will have to use for the same amount of taxable income that they had determined before and calculate their provincial income tax.
We have looked at this. It is an additional calculation to be done, I don't argue the point. You bring up a point that is before you that you would just take a straight percentage of the federal tax and put it in on one line, but this is not as complicated, you look at the income tax because the Income Tax Act sets up the process whereby it legitimizes what we are doing. The actual calculation will be a relatively simple one.
If there are changes that go into the future where we bring in different provisions or credits or so forth, the more we change provincially, then you get a little more complications. To be candid to the member, this is not going to be that much more difficult and I say that in all sincerity. I am not arguing that your accountant is saying that this a lot more work, I don't agree with that. I think that they may be looking down the road if there are a lot of different credits coming both provincially and federally that have to be calculated, that could be a little more complicated.
This change also gives the province more control of its own revenues. It gives us more controls as to even how we time things. There are some advantages to this that in the past we were to a great extent controlled by what was done federally and provincially, we had to go along for the ride. In other words, we didn't determine when things happened. A lot of them were dictated by the federal government and they were beyond our control to have any input in that.
I really believe that the changes that are here in regard to cost and complexity, are not great and I am being candid when I say that and I may be disagreeing with your accountant, but I am being sincere when I say that.
MR. DOWNE: I have 15 seconds. All I will say is that 76 pages of formulas and legalese would challenge any expert and the experts I have talked to said this is challenging. Maybe these experts, there is some question there, but I don't question their expertise in this
area and they find this very complicated at this point in time. I think the average Nova Scotian is going to be paying more to have their income tax done because of it. I thank you for your time and I guess we move on now to the New Democratic Party.
MR. CHAIRMAN: There has been a request for a rest break. Just before we take that break, keeping in the spirit of accuracy of Hansard, the honourable member made a jest, the remark about having 400 of his staff members behind him, for accuracy it was 14 staff members. I just wanted to make sure that was for the record for anybody reading the transcript at a future time.
We will take a rest break now for a few minutes. We will come back and the NDP caucus will have an hour to question.
[4:36 p.m. The subcommittee recessed.]
[4:45 p.m. The subcommittee reconvened.]
MR. CHAIRMAN: I would like to reconvene the Subcommittee on Supply. The time is now 4:45 p.m. We have a time of one hour for the NDP caucus.
The honourable member for Dartmouth North.
MR. JERRY PYE: Mr. Chairman, I will be sharing my time with my colleague, the honourable member for Halifax Chebucto. My questions will centre around the Nova Scotia Gaming Corporation. I believe the Atlantic Lottery Corporation had a commitment of some $11 million over a three year period to harness racing. As you know harness racing has hit the news here in the last three weeks. In particular, your government has given a $1 million grant to harness racing in order to keep the harness racing business alive. I do know that it supports a tremendous number of people in the industry and also employs a number of people in the industry, particularly in rural communities, it has a significant impact. My understanding is that the Atlantic Lottery Corporation had a three year commitment, and it is now attempting to withdraw, if it hasn't already withdrawn after year two of that commitment. Mr. Minister, my question to you is, has the Atlantic Lottery Corporation withdrawn from the harness racing industry?
MR. LEBLANC: Yes.
MR. PYE: Can you elaborate a bit more as to the reason why the Atlantic Lottery Corporation has withdrawn from the industry?
MR. LEBLANC: First of all, it isn't so much the Atlantic Lottery Corporation, it was the province, in a sense, that asked the Atlantic Lottery Corporation to get involved in the harness racing. It was not a money maker for the Atlantic Lottery Corporation. The three
provinces being New Brunswick, P.E.I., and Nova Scotia, looked to see if there could be a cooperative approach to harness racing, whereby they could work together and hopefully resurrect or bring about some sustainability in this industry. So there was a three year plan. The first two years were followed through. It became apparent, every year, the expectations of costs were exceeded to a great extent, so obviously the concerns of the provincial government, not only ourselves, but the other ones, were also brought to light. So we asked for a review as to the long-term outlook. Should we be in this? Last year I think the actual cost was a little over $3 million. I think it might even be closer to $3.5 million altogether that was put into this industry, and it just cannot be sustained at those levels.
MR. PYE: Yes, but the industry will say, in fairness to the industry, that when the Atlantic Lottery Corporation came into effect, it became a competing industry, and as a competing industry, it had taken away dollars that normally would have been bet at the race tracks. As a result of that, they can identify that loss of revenue is consistent with when the Atlantic Lottery Corporation came into being. I am wondering, is there not a commitment? I know there was $3 million spent the previous year, but why would the Atlantic Lottery Corporation not commit itself into the final year of this phase, where it may very well have been able to stabilize an industry? Your government has, in fact, propped it up with $1 million.
MR. LEBLANC: Two things, one of which is that when we got into this so-called, whether you want to call it a bail out or income support for this industry, it was to start them on the road to financial stability. That didn't occur. There are a lot of critics out there who say that part of the reason is that the Atlantic Lottery Corporation, through I think it was HRCI, Harness Racing Corporation Inc., didn't work very well. It was too heavy in administration; it didn't do the right promotions, a lot of different reasons why. The problem comes in, for us, facing the challenges that we have, can we continue to continue putting $3 million to $4 million a year into the harness racing industry basically to allow it to continue? The answer, in our government's opinion, is no.
I want to say one thing that the member brings up, which is a valid point, and that is gambling, or the operations that are done, and the VLTs and other things, are competing with the horse racing industry. I don't challenge that, people like to gamble, and they either gamble in one location or another. So, part of the horse racing industries' comments is that part of the reason we are having difficulties is because of the competition we are getting from all these other forms of gambling. Of course, Sackville Downs went down even before this happened, so I think the industry was never that healthy anyway. Perhaps going back it was, but the presence of other forms of gambling have compounded the problem.
MR. PYE: Since the Atlantic Lottery Corporation has stepped away from supporting harness racing, has the Gaming Corporation given any consideration to additional facilities for off-track betting in Nova Scotia?
MR. LEBLANC: We have looked at that. As it is now, the answer is no, to the best of my knowledge, coming out of the corporation. This is per the board that is making the suggestions.
MR. PYE: The reason for my question is because we know there are a few off-track betting establishments in Nova Scotia. I am wondering if you can tell me if the revenue return is sufficient from those off-track betting establishments to justify maybe increasing off-track betting establishments so more revenue can go back into harness racing in that way?
MR. LEBLANC: The report that was done also stated that perhaps we should expand a lot of those roles, but also continue to subsidize harness racing to a relatively high level, is one we did not accept. The off-site betting venues you refer to, we have five that are operating, they have not been as successful as we would have liked them to be because, of course, the revenues go toward the industry and as such, whether or not the way they were designed or formatted, it is difficult to say. They are something we are still operating, but we are not anticipating expanding them as we currently stand.
MR. PYE: Again, I believe it was under the previous Liberal Administration that the government implied that the Nova Scotia Government wasn't getting its share of the revenue return from the Atlantic Lottery Corporation, and that when your government came to power, you continued to review, to see if Nova Scotia was receiving its fair share of the revenue. You had indicated that there has been some agreement made with respect to the Atlantic Lottery Corporation, that is the four Atlantic provinces that are in on this. In fact, Nova Scotia has benefitted from that. I am wondering, Mr. Minister, when will Nova Scotians see that contractual agreement that was made between the Atlantic Lottery Corporation, and when will we know for sure if Nova Scotians have been the benefactor of this agreement?
MR. LEBLANC: I notice one thing when I am in government, and that is things move very slowly. We had an agreement in principle to bring about the changes that you refer to. What staff has to do is work out the details and to make sure that the agreement is finalized and puts that in writing. As lawyers sometimes know - I am sorry, Howard, but - some of these people, the discussions that are taking place between the four provinces are going slower than I would like, because I would like to have this put to rest and moved on. We anticipate that everything should be signed off, we are saying probably mid-May to the latter part of May and subsequent to that, I have no problem with making that public, I think it is important.
The other thing I want to say is this, the consultants' reports that were done both in 1996 and the one that was done by the previous Liberal Administration that showed that we should move out of ALC and set up our own, will both be made public subsequent to this agreement being signed. I have said before, that once everything is signed off that I will make those documents public along with the operating agreement. I have no problem with all three aspects of that.
MR. PYE: This is more or less on a personal note. I just want to know the cost of the administration of the Atlantic Lottery Corporation. When someone purchases a scratch ticket or a lottery ticket, 65 per cent or 55 per cent of the revenue goes to the ticket holder. The other 35 per cent to 45 per cent goes into the administration of the Atlantic Lottery Corporation. Can you tell me if that is a significantly high number for an administrative operation? How much of that 35 per cent to 45 per cent comes back into revenues to provincial governments, particularly the Nova Scotia Government?
MR. LEBLANC: Two things, one of which I don't have the specifics of, but it shouldn't be difficult to find out because you can break down the ALC's audited financial statements and get that. What I do want to say is that the ALC, we feel, is a relatively expensive operation to run, and one of the points we made in staying in it is that it should be reviewed. So, we should look to see whether or not there are efficiencies that can be made within that. That was a concern that was also shared by the other provinces; Nova Scotia wasn't alone in that comment. There is an efficiency study that is going to be done outside of the ALC looking at the ALC. I would rather do it from outside than from within. Sometimes doing it from within, you don't necessarily get the objectivity you would like to have. That is something within itself that will hopefully bring about a lowering of that cost. Of course, if you speak to the ALC, they may have the opinion that they are pared to the bone and that is why having an objective report would be more appropriate.
MR. PYE: So that is going to be done by an outside consulting firm?
MR. LEBLANC: That is correct.
MR. PYE: I remember last year here when I was sitting and talking to you about revenues from the Gaming Foundation, and I do know that there was a cooperation with TIANS and your government. You entered into an agreement to train employees with respect to sensitivity and individuals who may become addicted to gambling. I am wondering, can you give me a report of how successful - I think it is completed - that has become?
MR. LEBLANC: Staff tell me that it is about 70 per cent complete. There has been about 2,000 people who have completed it as of December 31st. The feedback that we are getting from the participants is that it has been a very good exercise. I think you were also asking how effective it has been.
I think the effectiveness will probably take some time to judge because I guess you have to have measureables that you can compare. I think there are some people who question as to whether or not this will be a very valuable exercise, if we have people who are operators of these machines acting in a more responsible way, I am not saying they are not, there are some people who are very good, but the more responsible they are, hopefully, the less this will give those who have addictions perhaps a little more support when they need them.
Once this project is complete, we are going to be sitting down and assessing it to see whether or not it is conducive, whether we should continue it, then we will make an assessment as of that time. If there are some other aspects of it that you are looking for maybe you could clarify that.
MR. PYE: During Health Estimates, because I believe the Gaming Foundation is now under the Department of Health, I asked the Minister of Health how much money was coming through the Gaming Foundation to the Department of Health to address gamblers with addiction problems and he was quite vague. Can you give me clarity with respect to how much money is going into gambling addiction?
MR. LEBLANC: It is difficult for me to say how much is being spent because the Gaming Foundation doesn't report to me anymore. So, as to what is being spent out of that, to be candid, I can't answer the honourable member's question. I am not trying to be evasive, but it is not longer within my purview.
MR. PYE: In 1998, it cost Nova Scotian taxpayers about $44,000 for a socio-economic impact study on gambling in the Province of Nova Scotia. I am wondering what has become of this plan, did you shelve it and leave it to collect dust or have you looked at this plan? Is there any intention to implement recommendations?
MR. LEBLANC: Just to make sure that we are on the same wavelength, are you talking about the one that was done for the committee of the House?
MR. PYE: Yes, Community Services.
MR. LEBLANC: This is the Porter Dillon report?
MR. PYE: Yes, the Porter Dillon report. The socio-economic impact on gambling in the Province of Nova Scotia.
MR. LEBLANC: Of course, the Gaming Corporation received a copy of it and staff are telling me as part of that even the responsible gambling program was put in place. I guess in a sense, I am not saying that the Gaming Corporation is looking at more ways of being responsible gambling. In response specifically to that report, my understanding is that basically the Gaming Corporation has received it. It is still on file; besides that one specific initiative, it has not been acted on.
MR. PYE: I know there was great concern with respect to the Sheraton paying $10,000 a day for not having its new facilities completed and there was a penalty clause placed in the agreement. I know we have taken that penalty clause to arbitration and a
decision came back and there was no basis for it to continue to charge the Sheraton Corporation. I am wondering, where is your position today with respect to that? Have you agreed there needs to be an appeal on this decision or has your government just said, that we have lost that one and we are going to mark it in the books?
MR. LEBLANC: Subsequent to the announcement, this was sent back by the Gaming Corporation to the lawyers, which is Merrick Holm, and as such, the CEO tells me there is a suggestion coming back to the board. The board will be appraising that and making a determination. I am not aware of what that decision is or what information is coming back from the lawyers.
I want to say one thing though, I would also like to have the Department of Justice take a look at it. I have indicated before that I would normally act unilaterally or whatever, or that the board should probably take a look or the Department of Justice could also shed some light. That is no reference to the capabilities of the legal firm, but sometimes I wouldn't mind also having another opinion, especially if it doesn't cost anything to do so.
MR. PYE: So I guess the decision isn't finished yet. You will be awaiting for a decision to direct government on where to go. Okay.
Last year, I believe the Nova Scotia Government received about $153 million from gambling sources. I am just wondering, when you receive $153 million in gambling revenue, where does that money go? It goes into general revenues, but when it goes into general revenues, what departments and where is it dispensed to?
MR. LEBLANC: There are funds that goes into the foundation that the member referred to. The net proceeds of the Nova Scotia Gaming Corporation go into the general revenues of the province and, as such, aren't dedicated to any one department.
MR. PYE: We now have a new casino in the Province of Nova Scotia. It cost about approximately $700 million to build.
MR. LEBLANC: I didn't hear what you were referring to.
MR. PYE: The new gambling casino in the Province of Nova Scotia. It cost about $100 million to build, and there is about $73 million, I believe, in revenue generated annually from the casino operation. My understanding is that there is approximately $1 million in revenue that is going to be coming to the province within the next year.
MR. LEBLANC: No, that is incorrect. There was an article on that, but all the information wasn't there.
MR. PYE: Let's have some clarity.
MR. LEBLANC: What happens is that there is 20 per cent that is a win tax that is paid on top, on your revenues, and that is paid directly to the province. Subsequent to that, once that is paid, the net proceeds after that, you have deductions of expenditures and so forth. The point of concern here is that the new casino, the expense over seven years, as the contract allows them to do a major - that is very quick to be able to amortize a major - expenditure such as that over seven years, but the contract is what determines the level of amortization that you can claim against your net income. So, if they don't have income, then the level of monies that comes at the bottom, the net profits, we usually receive a percentage of that also. So for the next seven years, the net profit will be negligible or very small.
MR. PYE: My final question is with respect to the Alcohol and Gaming Authority. I understand it is disbanded, from the previous speaker, the member from Lunenburg West, Don Downe. You had indicated that the adjudication and the hearing and appeals process was going to be carried on now by the Utilities and Review Board. I guess the other components are going to be covered by the Business and Consumer Affairs Department?
MR. LEBLANC: When we move forward with the organization, some of it will be done through Service Nova Scotia because they have the ability to be in a lot of different communities. Right now, everyone has to access Halifax. There was a lot of commonsensical marriages between what we are doing, especially for lotteries or even bingo licences, that can be applied for much easier in a local area and if they are require hearings, they can be done elsewhere. The liquor inspector portion of it and so forth will be - this is not my department, but I will try to answer the questions for the member - done through the newly formed Environment, Labour and Regulatory Affairs, whereby you are having inspection-types of functions going on, and sort of regulatory, and would be worked in there. We believe this will also allow, to a great extent, some multi-tasking. It creates possibilities whereby people can sometimes, in certain instances, do more than one task if they are in the same location.
MR. PYE: Thank you. I will now pass my time over.
MR. CHAIRMAN: The honourable member for Halifax Chebucto.
MR. HOWARD EPSTEIN: This is no longer my critic area so I am probably not as up on some of the aspects of your department as I might be, so perhaps you can help me tidy up a few odds and ends that I am curious about.
I see in the description of what is on the agenda for your department to the Estimates, that one of the things coming up this year will be a new Pension Benefits Act. That is, there is a project to draft a new Act and some regulations under it. Can you let me know what stage this is at? Has the Act been released for public comment, or will it be?
MR. LEBLANC: In regard to the Pension Benefits Act, our intention is to table the bill this spring, as it stands now. I am telling you what my intentions are, what your intentions are and sometimes how it turns out, if something arises that changes it, but my intention is to table the bill this spring. It has been a bill that has had a lot of debate and I know that the member, when he was Finance Critic, has probably had the chance to review it. So did I when I was there, and there has been a lot of different people who have made submissions to it and we are looking for a revision in this Act.
I think by tabling this bill and looking forward to having it pass in the fall, which is my intention, it will also encourage quite a bit of review, and those, of course, who are looking to have their concerns addressed.
MR. EPSTEIN: So the bill that has been seen before is the same bill that you are about to introduce, or perhaps with some variations?
MR. LEBLANC: Well, the bill has been prepared through our Department of Finance through Nancy MacNeill-Smith. The deputy is telling me that there has been a lot of prior consultation to this bill and that is what I was referring to. As to, if exactly every comma is the same, I can't tell you, but I do know that the bill is pretty well consistent in its form.
MR. EPSTEIN: Is it your hope then that again it will be put out for formal public consultation rather than a bill to be introduced and dealt with immediately through the legislative process?
MR. LEBLANC: My intention is not to deal with the bill immediately through the process. If we table the bill, it will also give a chance for people to offer their opinion. There has been considerable consultation on this in the past, so I think that would be a reasonable way to approach it.
MR. EPSTEIN: Do you know if the regulations will be ready at the same time as the bill?
MR. LEBLANC: As it stands now, I would have to get back to you on that one. I don't believe that may be the case, it matters on how much regulation is involved in it as well.
MR. EPSTEIN: Thank you, that is a help. Since we last spoke about matters in the Department of Finance, the Securities Commission, I gather, has been transferred out and is now responsible to Business and Consumer Services. Can you explain to me, is my understanding on that correct?
MR. LEBLANC: My understanding is that it is under the Minister of Justice.
MR. EPSTEIN: It goes to Justice?
MR. LEBLANC: Yes. It has been there for quite a while.
MR. EPSTEIN: The Securities Commission.
MR. LEBLANC: I don't think I have ever had the Securities Commission.
MR. EPSTEIN: Well, this is news to me, I have to say.
MR. CHAIRMAN: Resolution E29, that comes under the Minister of Justice. (Interruption) Yes, Resolution E29, Securities Commission is Justice Department.
MR. LEBLANC: I am informed Mr. Chairman, it has been there for years, so maybe it is just an oversight by the member.
MR. EPSTEIN: It probably is, because when I was Finance Critic I used to deal with it and it wasn't because of Justice. Okay.
Can I go back to another point about pensions? This is a related pensions matter, but not along the same line as the new legislation. Can you bring me up to date as to the financial health of the Teachers' Pension Plan?
MR. LEBLANC: I have been informed by staff that the actual report has been done for that for their financial statements. I do think there has been improvement, but rather than speculate on a percentage, I think it would be perhaps a little bit irresponsible for me to give the member a number. I do want to say that the return this year has been excellent and that is good news obviously for the plan, for the members and also for the province. The returns were somewhere in the 15 per cent to 18 per cent range, so it was very good.
MR. EPSTEIN: Yes, that was my understanding as well and it was also my understanding that the projection now is that the plan is moving towards a target of being fully funded much more quickly than had previously been anticipated. What I wondered was whether there were any consequences for the province because of that, beyond the fact that it may move to be fully funded at an earlier date? By that I mean, is there any intention to change the special contributions being made by the province between now and the date it might otherwise be fully funded?
MR. LEBLANC: Two things, one of which is, as trustee of the fund as Minister of Finance, it is my responsibility to make sure things move along well. As to how the results are and if it works to the point that the fund would be fully funded, then obviously that will have an impact and those would perhaps be discussions between the Nova Scotia Teachers' Union and the department. I can't prejudge or speculate as to what will occur, because the returns that you get don't necessarily mean that will be the same into the future. I think that is a
dangerous thing to perhaps to get into, and you are asking me to speculate and I know that you are just trying to be informed, but I think that is part of the problem on this thing here.
MR. EPSTEIN: What I think is quite appropriate is that the minister indicates that this will be a negotiation process. I think that is right. I was wondering how the committees that were set up last year were working, that is the advisory committees. Are they continuing to meet?
MR. LEBLANC: They meet in our floor's boardroom, I know they are there. Every so often I go in there and I talk to a lot of them and it appears from what I have seen, they are very pleased with the job that our department is doing. It is headed up through Doug Stratton, who heads that section. The rates of return we have received are very good, and of course when things are going well everybody is a hero and hopefully they will continue to be heroes into the future. My understanding is that the feedback is good and people are pleased.
MR. EPSTEIN: There is another point that I wanted to ask you about. It actually has to do with the Utility and Review Board. What I am looking at is the Supplement to the Public Accounts, Page 144. When one reads the rest of the Supplement to the Public Accounts, it is very detailed. It is broken down, indeed, as to each individual person who is paid, including, of course, their salaries. That is generally the essence of what it is that is included in the Supplement to the Public Accounts, but at the URB entry that seems not to be the case and I think I have seen this for a couple of years, that it is not broken down. I wondered if there was some special reason for that?
MR. LEBLANC: I am being told by staff that they get funding from the province, since they are public servants and they are not employees of the province, and as such, like school boards or whatever - I am repeating the question, I will look further into this. I don't know why they wouldn't be, but it could be a technicality that is there and I think the member brings up a point that I had an answer and at the same time, that is what I have been told.
MR. EPSTEIN: One of the things about the members of the URB is that they are in a quasi-judicial capacity, but when I look at the supplements with respect to the Department of Justice where you actually have full judges, the judges that we pay, not the federal judges, but the judges that we pay provincially, they are all listed by name, their salaries are listed. It is not treated as if it were confidential, and I am constantly surprised by the fact that for the URB all we get is a global number. It really stands out in the Supplements to the Public Accounts. I am not aware of any other entity that is treated that way.
MR. LEBLANC: Another tidbit is we only pay approximately one-half of the expenses of the URB, with the balance coming from people making submissions and so forth, like oil companies, power corporations, et cetera. That may be part of the rationale. To the member, I will tell him that we will take a look at it again to see whether or not there is justification for giving the information, and from there I will have a discussion with staff. This
is the reasoning that we are having up to now, at least you understand why. Whether you agree with it or not, I don't know.
MR. EPSTEIN: I would much appreciate it if the minister could have a look at it because it seems to me to be an anomalous situation and there are all kinds of other departments, of course, where there are cost recoveries or there are revenues that flow into the department because of fees, filing fees, for example, that are paid. It just has never been apparent to me why it is that the URB should be treated that way. I hope the minister will consider this and perhaps consider a change in the presentation in a future year.
MR. LEBLANC: I am still getting the same answer, basically the judges and so forth are employees of the province and, as such, are being shown. These are not seen to be employees of the province and that is why they are not listed. I am giving the information that is there, but it is one I will endeavour to take a look at.
MR. EPSTEIN: To be perfectly clear, I find it contrary to the spirit of what the supplements are supposed to be about and I hope the minister, who has overall responsibility for the presentation of the Public Accounts including the Supplements, will have a look at changing this in a future year.
I would like to move on to something else. I am very struck by the reduction in foreign debt exposure this year and I wonder if you can help me understand what has occurred. There is a very marked decrease in the percentage of the debt that is held in foreign funds, down from 51 per cent to about 35 per cent or 36 per cent. This is at Page A40, A41 of the Budget Address itself.
MR. LEBLANC: There is a multitude of two to three things that contributed to the escalation or acceleration of the repatriation of the debt - I am not sure if that is the right terminology, every time I use that people say it is a double negative or whatever. I do want to say that here the U.S. dollar has fallen against the Canadian dollar or the Canadian dollar has risen against the U.S. dollar which has changed. There has been a rotation of debt which has come due, which has been refinanced again into Canadian. Even if we have gone to other markets, we have hedged that. So, the other aspect is also some currency swaps that we have taken to bring that percentage down. It has been the efforts of our department that have accelerated that from what was projected to the levels that we are today; those three things together. To say that is what we projected, that was not the case, but we have done better than expected and we have reached that level in a relatively short period of time.
MR. EPSTEIN: When the department reaches the 20 per cent level, do you expect to stop at that point or do you intend to patriate 100 per cent?
MR. LEBLANC: Per legislation it says 20 per cent, as it is now. We thought we had some more time to make the decision. Things are moving along a little quicker than even we anticipated. We have taken advantage of some opportunities so the percentage has come down. That is something that we are going to have to consider and I will be taking advice from staff. I think that we have some very good people in Finance. We have Roy Spence who works in that division and we have some people giving some good advice. I am going to try to sit down with them and ask their advice and take it to Cabinet as to where we are going to go subsequent to reaching 20 per cent which is still some length of time. I think it is another five years or so that we are projecting it before we reach that.
The big thing that we have done to the Financial Measures (2000) Act is that any debt that is coming due that we are rolling over, in the past we have been doing it and the previous administration has been, too, hedging that debt and bringing it into Canadian equivalence. However, the Act was not entirely clear that you had to do that and in the Financial Measures (2000) Act that we introduced the other day we made that clarification to ensure that that has to happen in Canadian so we have less and less foreign debt and, of course, that makes us less susceptible to currency swings which really had a big effect on us, especially back in 1998 when the U.S. rate changed almost 15 per cent in a month and one-half, of something like that. That was a very devastating thing for the government at that time and for people.
MR. EPSTEIN: There is an associated question which is the projection of the value of the Canadian dollar against the American dollar and I see, in fact, that you have included a four year projection in one of your tables. So what I wonder is whether the figures that were used and are presented are still the figures at this point that you feel comfortable with, that is projecting a rising Canadian dollar up to 72 cents over the next approximately four years?
MR. LEBLANC: The answer is yes. The projections that are coming out of the Bank of Canada, and I have met with Gordon Thiessen and, of course, getting details of projection out of Mr. Thiessen sometimes can be very difficult. He wants to ensure as much as possible that he does not give high expectations, but he is giving advice overall. Our projections are showing that the Canadian dollar will increase in value against the U.S., but we have to be aware that these are the estimates that we are using. These are the trends that we see. We are comfortable where we are, today, for this year, but the further out you get, of course, the less reliable your estimates are because they are susceptible to factors which are out of our control. These are the best guesstimates that we have as of now and we are comfortable with those projections.
MR. EPSTEIN: What we were just discussing, of course, was percentage of foreign debt and the basic problem with debt. We have heard you say any number of times, of course, that it is substantial and what I wonder is, what plans you have with respect to any revenue that might flow to the province from the sale of any assets of the government; that is, do you intend to use any revenue that flows to the province from the sale of any assets this year to pay down the debt?
MR. LEBLANC: To be candid for ourselves, we have indicated in my Budget Address that we would bring forward a subsequent budget in regard to how we would deal with any surpluses and so forth so that would be outlined in my subsequent budget. People could say that whether you put it against the debt or if you put it against the deficit, it ends up in the same location because of the fact of the matter that you would have a smaller deficit or a smaller debt increment if you were to put it to the deficit.
I think my main concern is that if we do sell assets, and the one that comes to mind, obviously, is the Nova Scotia Resources Limited that we are doing an evaluation on, and I am saying clearly that once we have that evaluation, we will have a better estimate as to what that asset is worth, whether it is in our interest to keep it, or whether or not there is any interest to sell it. I am not going to speculate as to what will come out of that. I think what we want to do as a province is to be informed and if a window of opportunity presents itself that we feel that we should go ahead with, then at least we will be prepared, but for ourselves if we were to sell assets, whether it goes to the debt or lowers the deficit, the effect is the same right now because we are not in a surplus situation.
MR. EPSTEIN: But there is a difference and the difference, of course, is that if it is used to reduce the deficit in any given year, it tends not to give a completely accurate picture of the usual operations of the province in any one year. I would have thought that any extraordinary revenues, as for example from the sale of a revenue, should probably go directly to pay down the debt. On the other hand, if they are small sums, it is not going to matter.
MR. LEBLANC: Could I just clarify it. Really my gut reaction is to put it towards the debt and you are asking me a hypothetical question and I am giving you my preference, is that if we do sell an asset like that, it should go against the debt and not affect the bottom line for that year.
MR. EPSTEIN: I did not intend it to be hypothetical. What I asked was whether you had an intention as to what you were going to do but, in any event (Interruption)
MR. CHAIRMAN: I just wish to advise the NDP caucus you have about four minutes left in your questioning. I am just curious, will this be concluding the NDP's time for questions for this minister or will we be carrying on to another day?
MR. EPSTEIN: No, we will certainly be carrying on. In that case, let me move to a couple of other and I have one lengthy question, but if I have only four minutes, I want to ask this. Mr. Minister, I am struck in your budget presentation that some figures are presented on a multi-year basis and some are not. One of the things that isn't presented on a multi-year basis is your expectation of petroleum royalties. I see that you are expecting that the fiscal year we have just finished will bring about $2 million to the province and you are anticipating
about $6 million for the fiscal year 2000-2001, but there is no projection beyond that. I am wondering whether you can give us any idea of what kinds of figures you are anticipating beyond that?
MR. LEBLANC: My understanding, there was a schedule that was tabled last year in the House by the previous administration and I think that one is not that far off, to be candid about it. The projections of the increments and so forth in the royalties are included in our revenue as going forward. This is what was tabled last year and I think as a matter of fact you were the one who had asked for it. That was in regard to what the royalties would be going forward. This year there is scheduled to be $6.3 million, $6.4 million next year, $7.2 million, as you get into 2003-04, they start to go up, but I believe you already have this information.
MR. EPSTEIN: I remember the table. Yes, I can ask the question a different way. Is the table that we saw last year still the basis for the figures that you are projecting or have you had any change in your understanding of what the likely revenue flow is?
MR. LEBLANC: Those are the same numbers that they are planning to punch into them.
MR. EPSTEIN: You made mention at one point that the bond rating agencies have had a look at the province, as they always do, and three of the agencies have given a stable rating, but one has given a negative rating.
MR. LEBLANC: I believe it was cautionary. (Interruption) Yes, it was cautionary. That was the Canadian Bond Rating Agency.
MR. EPSTEIN: Okay, that is what I wondered. It was called cautionary?
MR. LEBLANC: I will just check that to make sure, but I believe it was cautionary. I am going by recollection myself. You may be right. I will get the staff to tell me.
MR. EPSTEIN: I thought I wrote it down. It is actually in the budget bulletins. One of them is called Debt and Debt Servicing. What it says is, currently Nova Scotia's outlook is rated as stable by three of the four major bond rating agencies. The fourth has a negative outlook. That is what it says.
MR. LEBLANC: I am trying to get this from the staff, I am going by recollection, but you could be correct. Anyway, continue, please.
MR. EPSTEIN: I am quoting your document. So my question was, I think, who had the negative rating?
MR. LEBLANC: That was the Canadian Bond Rating . . .
MR. EPSTEIN: And are you telling me now this might be wrong, that it is not negative, but it might be cautionary?
MR. LEBLANC: If that is what is quoted in my speech, I am sure that is right.
MR. CHAIRMAN: The time has expired for the NDP caucus. Now we will turn the floor over to the Liberal caucus. The time is 5:35 p.m. I would let the minister know, if there are no further interruptions, we will conclude at 6:20 p.m.
The honourable member for Cape Breton North.
MR. RUSSELL MACLELLAN: Mr. Chairman, just, I guess to start off, I would like to get an overview on how the information for this budget was compiled. I know there was a Voluntary Planning study. I know there was an in-house study on the needs and the spending of the various departments. I wonder how those were analyzed, those two studies. What was the common denominator or the Rosetta Stone that was used to put these studies into what the minister put into the budget?
MR. LEBLANC: Well, Mr. Chairman, I think there was a multitude of different venues for information, one of which is the one that he refers to, the fiscal task force, which was made up by Voluntary Planning that went out and garnered public comments throughout the province which made a recommendation and were, to be candid, on a very broad type of format with some specific suggestions in regard to foreign debt and so forth. To be candid, they had some specific ones, but a lot of times the specifics from within the departments weren't there, but it was more broad directions of the government.
There was also a review of the many different programs delivered by each department and also, of course, the department's perspective of trying to look at it line-by-line, trying to understand and also take in the information from the staff members and the outside process and incorporating them both together with some suggestions. Then, of course, there were the subcommittees of Cabinet which made some suggestions. You come up to a point whereby it all comes together. I know the honourable member has been the Premier of the province, and as such is aware of the process that usually Cabinet isn't any one individual that does it. It is coming together and trying to work as a team as much as getting a consensus to where you want to go.
MR. MACLELLAN: On the in-house task force, was there anyone from outside of government involved in that?
MR. LEBLANC: No.
MR. MACLELLAN: They are all members of the Civil Service. Is that correct?
MR. LEBLANC: The answer is that it is all internal, but through P & P.
MR. MACLELLAN: So, what you did, you took the Voluntary Planning overview general and the information from the in-house study and weaved them together. Is that correct? Was there any other analyses done other than those two?
MR. LEBLANC: Mr. Chairman, I know there were a lot of other meetings. I had some of my own. In my capacity as Minister of Finance I met with people. I went around the province and met with groups and listened to what they had to say. There were also groups that came to speak to me. I use the Federation of Agriculture for one, people, the wood products association, and I think a lot of groups wanted to speak to, not only myself, but other ministers. That would be another source of information that was there. And also the internal workings of the department, suggestions they would be putting forth.
MR. MACLELLAN: How would these other groups submit their information or their suggestions?
MR. LEBLANC: Mr. Chairman, I think a lot of them do it in written form. Some also come in and have meetings. I think it is imperative upon myself as minister, if someone wants to meet me, if I can accommodate them through my schedule, that I do so. If I don't, to at least have an open mind and listen to what they have to say. I think in previous questions I have said the chamber of commerce has our ear and we are listening to everything they are saying. I am saying that for ourselves and government, to make sure we keep an open mind, but we can't listen to one side altogether. We have to basically come up with a balanced approach. There are those who will say we listen more to one side than another. I do want to say we have an open mind, but we also looked at where we were in trying to bring a balanced budget. That was one of the priorities that we felt had to be addressed.
MR. MACLELLAN: The question was, regardless, to bring forward a balanced budget and to make those cuts. That was the overview, that is what guided you?
MR. LEBLANC: Mr. Chairman, I think the status quo was unacceptable, so to say that to make changes, the member can refer to them as cuts, but they are changes, and to make changes, to add to it, is probably the wrong way to go. We had a $497 million deficit last fall and through some good fortune of increased revenues and even some of the changes in NSRL that the rate against the U.S. dollar fell and basically gave us another $20 million or $30 million recovery right there. We had some good fortune. But we are still faced with some very serious problems.
MR. MACLELLAN: With the suggestions, if there was this kind of an in-house study, Mr. Chairman, I would suggest that words didn't go very far down in the Civil Service, why would there not have been a cost-benefit analysis of what the effects of these cuts would be?
MR. LEBLANC: Mr. Chairman, I know the member asks the question sincerely. The problem is that when we look at what we were doing in the past is basically saying we can't act because of the result it will have based on employment levels within government or even outside of government in a sense that some of the agencies we have, be they health boards or even school boards. The problem is the compound effects of the debt and the interest charges are very severe. For ourselves, it is paramount that we do what we consider to be a balanced budget approach in the sense that we try to weigh the needs of people, and also try to bring down our deficit.
This year, and I know the member opposite is aware of it, we are spending, from estimate to estimate, another $85 million this year. Those are serious concerns. If we didn't have that $85 million pressure, we probably wouldn't have to be speaking loud at this table. It would probably be a lot quieter around Province House today. Those are situations that by not acting would make it worse on the other side.
MR. MACLELLAN: I am not questioning the need to make cuts. What I am questioning is that there was no study, no report done as to what the effects of the cuts would be. I just wondered why not. Why wasn't there some indication, some study, some informed prediction as to what the results would be, then maybe as you say, we would have a quieter room here? Why was there no information with the minister or the department as to what the results of these cuts would be?
MR. LEBLANC: Mr. Chairman, I go back to the point that I have been saying which is for us to continue on the route that has been laid out. Look, I will be candid with the member, I was part of a previous administration where we overspent. Looking back, the fact of the matter that I look back at my experience, and the fact I was out of government for five years, sometimes you can appreciate things. I was only 28 years old when I was elected, and I thought I knew everything back then. I think I've learned that perhaps I didn't, maybe I thought I did. For ourselves, we have to learn to live within our means. A lot of people don't like to hear that. It is a difficult one.
I look at myself, being a father of three children. My wife was in town last night with our daughter. I really believe passionately that we have to learn to live within our means. If we want to sit here and figure out reasons why we can't do that, then we will continue spending money that we don't have, that will compound the effects down the road. A lot of people don't like to hear that, but I really believe, passionately, that is the way we are going to go.
I look at the projections that we have, we feel that we have put ourselves on the road to recovery, but that doesn't mean that no matter what we do this year, it is done, because we have to be vigilant in order to continue to bring about a balanced budget and also to maintain it. In the past, everyone always hoped that the revenues would grow in the future. Last year, the economic growth in this province was 3.6 per cent, and I think the SOEP project was a major contributor. That is slowing down now. The fact that the pipeline is built is probably contributing to the fact that things will be slower this year, and that is going to have an impact. No matter what happens, if we are going to make these changes, when the economy is good is the time to do them.
MR. MACLELLAN: I can appreciate that, and I am not going to go on. I am not going to use up all my time, because I think the minister is going to give me the same answer. What I am saying is that no matter how much you feel you need to cut, I would think it would be incumbent upon the minister and the department and the government to have some idea as to what the effects of those cuts would be, regardless of how necessary or how important the government feels those cuts are. There has to be some idea of what the effects would be, and to not have a cost-benefit analysis is, to me, very surprising.
The minister talks about spending, but the Canadian Centre for Policy Alternatives says only three provinces, P.E.I., Alberta, and Saskatchewan, have lower increases per capita expenditures than Nova Scotia in the last few years. I think the minister would agree that it hasn't been a wanton disregard for where the money has been spent. Also, they go on to say that the deficit for this last fiscal year was $278.5 million, that is after you take out the one-time expenditures on Sysco and Y2K. Just in that prediction, what was the increased revenue last year, was it $212 million over what was projected for 1999-2000?
MR. LEBLANC: I will get that number for you. I just want to mention - you talk about that report that came out - they discounted the one-time expenses. Even when we presented the budget, I tried to, as much as possible, point out that there are things which are not being repeated in the budget that we have here. They also didn't include the revenues that wouldn't be repeated in that exercise. If you want to show the pressures and the one-time issues, you also have to show the revenues that will not be repeated.
MR. MACLELLAN: What revenues will not be repeated?
MR. LEBLANC: We have $160 million that we had last year, the ends of two funds, which were harmonization funds. One was the CHST, which is $103 million; and the other one was the BST, the harmonization fund which was when the federal government encouraged the provincial government to go into harmonized sales tax.
MR. MACLELLAN: That was very low.
MR. LEBLANC: It was $57 million.
MR. MACLELLAN: We were at the tail-end of that last year.
MR. LEBLANC: It was $160 million last year that was included in the revenues that was not repeated this year. In this year, we have included $75 million which is the entire balance that the federal government, as of now, has given us in regard to CHST for the next four years. The reason it has been included in this year is that we have had some discussions with the Auditor General as to how to properly account for it, and he was saying that under GAAP the revenue should be included in this year, because we could draw all of it down. As such, we complied with his ruling on that. We are looking for some advice.
I am just pointing out the fact that, the social policy group - I read the documentation, and I don't think they had all the information for some of their projections - when they mentioned the one-time issues, they also didn't take into effect that a lot of the revenues that they assume are going to stay in the balance sheet or the income sheet are revenues that will not go forward. I think it is important that . . .
MR. MACLELLAN: I have a problem with that as well. What is the minister predicting as an increase in revenues for the next fiscal year? Was it $54,000? Something like that?
MR. LEBLANC: That is right.
MR. MACLELLAN: Why $54,000? The minister didn't know, and I wonder now if he has had an opportunity to find out why $54,000 would be mentioned as increased revenues?
MR. LEBLANC: There are actually four different factors that go into it. One is that there is a reduction in this year of about $3.2 million, the fact that they have changed the capital gains, the definition of Capital Gains Income under Taxable Income by the federal government, we have to accept their interpretation of that. We will lose tax revenues of $3.2 million. There is $4.5 million that we will lose this year because of the fact that the non-refundable tax credits are going up, and we have accepted those. We are losing that $4.5 million.
There are two other issues, one of which was $18 million, which was included in last year's revenues, which really pertain to the previous year. Since they were not discovered until after the year-end was cut off, they were included last year. Last year's numbers were actually over-inflated by $18 million. I believe there was a $12 million fee, a loss that we have this year. That is because last year the federal income tax was lowered, so you lost some provincial revenues because of that. That was only for part of the year. This year, that effect is taking place throughout the entire year, so we are losing another $12 million.
There are a multitude of different reasons why that happened. So the $54,000 is extremely close. I don't argue that, and I asked the same question myself, how could it be so close? There were some other factors that played into that, so the number is actually quite different than the small amount, but there were other factors which really don't reflect unless you ask the question.
The other thing you asked about was how much the revenues had increased. Let me see if I can get that answer. Actual to forecast - last year, revenues went up $233 million; this year, they are looking to be increased somewhere in the vicinity of $12 million.
MR. MACLELLAN: Mr. Chairman, what the minister is doing is painting a rather gloomy picture of the economy for this coming year. I just want to know, does he really believe that it is going to be that bad, even with increased revenues in tourism and other areas, that we are going to have an increase of $54,000? Just one more quote from the Canadian Centre for Policy Alternatives, where they say, Nova Scotia generates less of its own revenues as a percentage of provincial GDP than any other province. Would the minister agree with that?
MR. LEBLANC: Would the honourable Leader of the Liberal Party please repeat the question?
MR. MACLELLAN: According to this report, the Canadian Centre for Policy Alternatives says that Nova Scotia generates less of its own source of revenue as a percentage of provincial GDP than any other province. I just wondered if the minister agreed with that.
MR. CHAIRMAN: I wish to advise members that I have made a small error in the timing. It is still 6:20 p.m. for conclusion, but I have cut the NDP caucus off by 10 minutes. So you can add that on in your next time-frame, you will have 70 minutes instead of one hour. I apologize for that.
MR. LEBLANC: This is a complicated question and has a complicated answer. I read the report, but I didn't go into all of it, obviously I was trying to prepare for the budget. Ms. Cody is trying as much as possible to give me an answer. I will try to get back to the member with some of the specifics. It may be better use of the committee's time, and I will defer to the member as to whether he is agreeable to that.
MR. MACLELLAN: Yes. I don't want to take up all the time.
MR. LEBLANC: It is a complicated question. There is a lot of different . . .
MR. MACLELLAN: If that is true, it is an alarming statistic, and I think one that has to be considered.
MR. LEBLANC: Part of the thing that Ms. Cody is talking to me about is that different provinces do different taxations, different ways, some of them actually do some of their own municipal taxes, payroll taxes, that we don't do. You have to compare apples to apples, and some of them, on average, have higher-income earners, especially in Toronto, that will also have an impact on this. Those are some of the things that are there. I should mention, though, when we talked about the revenues overall, our provincial revenues in this year are estimated to go up about $76 million. Our federal revenues are estimated to go down $54 million. So that is part of the problem we have here. A lot of that has to do, first of all, with the fact that we are not getting $160 million; that was the end of those two harmonization funds we had here, we are only getting $75 million in return. That is a big contributor to that.
There was also a prior year's adjustment last year that was about $11 million. We can't estimate prior period adjustments, and they could very well be negative rather than positive. I know the member opposite knows we have to wait for the modules to come out to estimate that.
On this other question, I will try to get it into layman terms so, not only can the member have it but also members of the committee.
MR. MACLELLAN: Mr. Chairman, I do find the minister's figures on the federal funding are a little pessimistic, quite frankly, as I do the projection in the increase in revenues. I don't want to get into a discussion with him on that today because I do not have a common denominator that would allow me to challenge it so that it would be something we could compare on the same grounds. I did want to ask him, just on the basis of federal funding, whether he has ever brought up with the federal government the discrepancy in funding of university students by the federal government? As the minister knows, funding for the federal government to university students is in accordance with where the student lives, not where they go to university. In the provinces in Canada, the average number of students in universities . . .
MR. LEBLANC: The member brings up an excellent point. (Interruption) No, you brought it up in the past too, so I am aware that you made representations.
MR. MACLELLAN: It is unacceptable.
MR. LEBLANC: I do know the Premier brought it up at the First Ministers' Meeting. He has also brought it up with Senator Boudreau, and I want to say that I also brought it up at one of the Finance Minister's meetings that I went to, especially with Paul Martin, to try to ensure there was some fairness in this. I will be candid, at that meeting, we were really focusing on the CHST. We were trying to increase our contribution at that time. Although there is a bit of a dilemma in the sense we are trying to - a lot of the provinces are going forward with a multitude of different agendas, the western provinces are going with drug relief, emergency aid, and the member opposite is aware of what I am referring to. Our focus
at that time was with CHST. I did make the point at that time that there is some inequities in the system, and it really hurts Nova Scotia, especially with the high level of universities we have.
We have a very high level of foreign students or even out-of-province students here that, if it was corrected - I am not sure what the number is, $25 million, it is a big number - it would go a long way to dealing with education as a whole, let alone university students. So the member brings up a good point.
To be candid, that is an issue we are going to be pushing forward. I do know the Nova Scotia member of Cabinet, which of course is Senator Boudreau, has been made aware of it, and to a great extent we are also relying on his help to make sure that point is made at the federal Cabinet table.
MR. MACLELLAN: Mr. Chairman, have they given the minister an indication of what the problem is, why they can't do it based on where the student goes to university as opposed to where they live?
MR. LEBLANC: My understanding is that those discussions are perhaps being more led by the Premier. I will get them.
MR. MACLELLAN: I can tell the minister that its . . .
MR. LEBLANC: I know what you are saying, but I don't recall the discussion. Rather than mislead the member, I don't want to.
MR. MACLELLAN: The answer they will give you is that it is based on how Statistics Canada does its information, and Statistics Canada is a separate and autonomous organization, and because they do their figuring in a certain way, it is costing Nova Scotia $25 million.
MR. LEBLANC: There is another thing with the federal funding that is really causing us a lot of problem. We are moving toward a per capita funding, and that is having a major effect on the Atlantic provinces. Not only Nova Scotia, but Newfoundland, P.E.I. and New Brunswick are not the exploding provinces in regard to population. The big winners in this equation, of course, are Ontario, Alberta and British Columbia when you go to per capita. We have been going on historical percentages and now that has changed. It is something we are very much opposed to. There were some requests to go to a per capita in the past. Those other provisions that were going to be put into place that would protect the Atlantic Provinces, they took part of the equation. They took the per capita side of it, but the other provisions, which would have safeguarded our interests were somehow left off the table.
This actually was happening during your administration, so I know how frustrated you must have been, because it was frustrating for us to try and change it. Once something has been done, to go back and change it seems to be extremely difficult. It is those issues which are, in turn, hurting some of our federal sources of revenue.
MR. MACLELLAN: If I might, I would like to talk about Nova Scotia Resources. The minister talks about the study that is being undertaken on the assets. Does the minister, before this study comes forward, have any idea of what the value of Nova Scotia Resources is?
MR. LEBLANC: My problem is, you are asking me to speculate on what it is. I find that difficult to do.
MR. MACLELLAN: You can't give a ballpark figure at all?
MR. LEBLANC: Mr. Chairman, I don't think it would be proper for me to do. I know there has been an evaluation done before, I think it was Rod Shaw. He did one about four years ago. We are about half way through that evaluation, and I would rather wait until such time as it is there.
First of all I should say, someone asked me for the terms of reference today as to how they would conduct this, and we indicated that we have no problem showing what the criteria was for doing the evaluation. The problem comes in with the information coming forward, and once we receive it, that information is an evaluation of the asset. It also allows us to be informed as to what possibilities may be in our interest if there is a divestiture that could be considered. I am not saying there will be or there won't be. However, that information is one, at that time that will probably be kept within the department, because of the fact that if we do go forward, that information should be kept private because, of course, it would hurt our position in trying to achieve maximum results.
I am just trying to be upfront with the member. If I am saying the report hasn't been done and once it gets done he says, well, what is the number, I want him to know that would be something that would perhaps not be in the best interests of the province to divulge if there was a divestiture plan, or offered because at least people would know what that number is.
MR. MACLELLAN: I find it hard to understand, Mr. Chairman, how the minister can actually agree to a balance sheet or an annual report if he doesn't have any idea what the assets are worth.
MR. LEBLANC: Can you explain that please? I am trying to understand.
MR. MACLELLAN: Mr. Chairman, if the minister doesn't know or have any idea of what the assets and the value of the company is, how can he or anybody else ever agree to an annual report? There is no measure, no way of telling what the assets are.
MR. LEBLANC: When you do a consolidated report, with NSRL it would be reported at cost and that is the way, under Generally Accepted Accounting Principles, you record the asset of Nova Scotia Resources Limited. It isn't valued like an underfunded pension plan, whereby you do an assessment and, as such, you would show the contributions that are required to it. With Nova Scotia Resources Limited, the money that we put into it is the cost that we would carry, and that is the way that it is recorded under Generally Accepted Accounting Principles. As of now, obviously, the cost that we carried on the books is probably inflated from what it is actually worth. The bottom line is that it is reported on a cost basis, which is the way you do it.
MR. MACLELLAN: I know the way it is reported, but I can't honestly believe, with all due respect to the minister, that he doesn't have any idea of what those assets are worth.
No sense beating him over the head with it because he is not going to change his answer. I do want him to tell us what are the various assets of Nova Scotia Resources Limited. What are the working assets, what are the operating licences, how many of them are there and what position are they in right now?
MR. LEBLANC: The major thing, obviously, is that NSRL is the proprietor of the six SOEP fields that we have. The 11 other significant licences that are still under NSRL would have the 8.4 per cent in the facilities, both onshore and offshore. Those are the major assets that Nova Scotia Resources Limited is the proprietor of.
MR. MACLELLAN: They are all within the SOPI are they? They are all 8.4? They are all linked to Sable Offshore Petroleum Incorporated?
MR. LEBLANC: The 11 other significant licences go from anywhere between 1.25 per cent to 10 per cent. The six SOEP fields are the 8.4 per cent.
MR. MACLELLAN: What are the other 11? Are they licences that have yet to be worked or are they ones in which you have arrangements with other companies? Are there farm-outs, for instance in any of those?
MR. LEBLANC: Mr. Chairman, I am trying to get as much information in my head to relate it back to the member because I think he wants a lot of details on this and I am just trying to make sure. I know that your experience in the petroleum industry is more considerable than mine. Of course, you were a critic for a long time, I think you were also attached to the department once you were in government. If you could give me some specifics
on this I could try as much as possible to follow up and give you the information rather than trying to trace it.
MR. MACLELLAN: I am quite prepared, Mr. Chairman, if the minister could give us a list of just what the assets are; what the operating licences are; I think there is one where there is a farm-out, is that right, with another company? What are the operating licences; what properties out there does Nova Scotia Resources Limited have an interest in, and what is that interest; where do they stand for purposes of development or exploration? This information would have been made available to the person doing the study for the evaluation of Nova Scotia Resources Limited, so it would be there. If it is confidential, I can appreciate the problem, but I don't think that would be.
MR. LEBLANC: The general manager says he has no problems with that. So, it is basically the list of assets, the operating leases, what properties NSRL have an interest in, at what levels of development they are.
MR. MACLELLAN: Just one more, just on that where the minister agreed to turn over 50 per cent of that lower Panuke field for 2 per cent of the gross revenue royalty. I just wondered on what basis or what information that he had agreed to the 2 per cent? Was there an opinion given to him to allow for this, or was this the minister's own decision?
MR. LEBLANC: The recommendation that came forward to the 2 per cent gross overriding revenue was the recommendation that came forward from NSRL to myself and was accepted.
MR. MACLELLAN: Was that based on some information that Nova Scotia Resources Limited had? Did they have a consultant who told them that 2 per cent was satisfactory and would be suitable?
MR. LEBLANC: The situation in regard to the Panuke well is one that was difficult. This has been a point of concern with the member because he has been asking for some clarification as to when things took place. I do know that within NSRL, their concern as to whether or not we should proceed with this, happened before the government changed. By that time, even before July 22nd, they had approached three companies and made the data available to them to take a look at. It was their opinion from NSRLs position, the Board of Directors, that this was a relatively high-risk field and they were comfortable going forward with it. I want to say subsequent to that, this went on for some length of time and PanCanadian wanted to proceed with this, the province, through NSRL, was still hesitant to move forward.
It is a high-risk game, as much as we can sit here and say that this may be a very good well and it may have all kinds of promise, the situation is to whether or not the province can continue. I will use an example. In the same field there was another well we did agree to go
into, and I know the member opposite knows very well what I am referring to. The early estimates were about $3 million and it turned out to be over $20 million because there were complications that came out of it. When you are in for 50 per cent, you are in for 50 per cent. It isn't like you get in for $3 million and you have problems and all of a sudden you are still at $3 million, the other guy is picking up $37 million, it doesn't work that way.
So, we are into a situation where we have made the decision that for ourselves, regarding this one, the recommendation from the board was that it was a high risk. We didn't feel comfortable doing it, we agreed with what they were saying, we had no reason to do otherwise and, as such, basically indicated that we were not prepared to do 50 per cent partnership or involvement with this well. I want to state there that were attempts, by us, to farm that out; that was unsuccessful, the people did not wish to go foward with it. It is also my understanding that even the other partner was looking to find someone to take a piece of it and was also unable. That is irrelevant, we did our own work in trying to get people to take interest in it. We basically were not willing to let things go on with this. We still had a 50 per cent proprietary right to this and, as such, we were compensated for the levels that were there.
I know the honourable member has stated he felt it should have been 30 per cent gross - I think that was the word I heard, sometimes I read the paper and I think I read one of your comments on that. At the time they were there, we felt that was a reasonable compensation for what was there. The board recommended it to the government, and we accepted it as such.
MR. MACLELLAN: There are other questions on this and with the time remaining I can't get into them, as the minister would understand. This is a lot of money, we are talking hundreds of millions of dollars here, and to take a 2 per cent gross revenue royalty as opposed to another per cent, let's not talk about another possibility, staying in or reducing the percentage and letting PanCanadian do something else, let's just stick with the gross revenue royalty. The minister talks about, well, it is costly. Well, gross revenue royalty, you don't invest anything. If it comes in, you get a royalty on top of the royalty you would normally receive.
MR. LEBLANC: That is right, at no risk to the province.
MR. MACLELLAN: Yes. All we are talking about now is what would be considered a fair gross revenue royalty. I want to know, what made the minister think that 2 per cent was fair for Nova Scotia? That is all. I want to know on what it was based, and whether it was the board that made that decision, whether it was Mr. MacDonald who made that decision, whether it was the Premier who made that decision. I just want to know how that decision was arrived at and on basis it was arrived at?
MR. LEBLANC: That recommendation came forward from NSRL, and it was their recommendation that it be accepted by government, and it was.
MR. MACLELLAN: Did NSRL have any kind of in-depth analysis, any kind of comparisons done on other situations on deep-water drilling that would indicate that 2 per cent of a gross revenue royalty would be sufficient?
MR. LEBLANC: Well, Mr. Chairman, there are two things here. First of all, on this specific well, the evidence that was there was - I am not sure whether you should quote me on this or quote the board - this well did not justify people trying to farm it out, they were not willing to take the farm-out interests onto this deep-water well. Right now, the preliminary results are showing some promise. Look, we wish PanCanadian all the best, because what is good for PanCanadian will be good for the province, and if this turns out to be a large well, that also bodes well for the province. However, I go back to the point, at the time and place the decision was made, the recommendation came forward from NSRL and was accepted by the province. As for the research that was done behind that, I can basically refer that.
MR. CHAIRMAN: I wish to advise that we have about two minutes left in our time allotment for today.
MR. LEBLANC: Mr. Chairman, the member is saying he is going to come back. What I will try to do is get a little more detail, it would possibly be better for the committee.
MR. MACLELLAN: I really want the minister, Mr. Chairman, to have all the information he can get. I am not trying to trick him. I just want to know, and I feel it is important to know this. I have no problem with that at all. The more opportunity he has to inform himself, the better.
MR. CHAIRMAN: If there is another question the member would like to ask that comes out of NSRL? You have two minutes, maybe there is some data you would like to get ready for next time.
MR. MACLELLAN: No, the minister has undertaken . . .
MR. CHAIRMAN: I mean over and above that.
MR. MACLELLAN: Mr. Chairman, he is getting the information on the assets, and he is getting the information on this. Other than wanting to know who works there and how many work there, I did have an idea at one time, but I don't any more, that would be helpful. I know there are not a lot of employees and I realize there is a cost factor. I am quite prepared to leave it at that for today without losing my spot for when we reconvene.
MR. CHAIRMAN: Thank you very much. Time allotted for debate of the Subcommittee on Supply has now expired. The Subcommittee will now rise and report progress to meet again on a future day. I would just like to advise each of the caucuses my error in the time recording. There is still 10 minutes remaining in the NDP time and 15 minutes remaining in the Liberal time, for allocations of time today, so those will just be tacked on the next day.
MR. LEBLANC: How can you have time for both Parties?
MR. CHAIRMAN: I cut Howard off 10 minutes too early. I looked at the break time instead of the time Mr. Pye started.
The subcommittee now stands adjourned. Thank you.
[6:21 p.m. The subcommittee rose.]