The House resumed at 8 p.m.

ONTARIO LOAN ACT

Hon. Mr. McKeough moved second reading of Bill 8, An Act to authorize the Raising of Money on the Credit of the Consolidated Revenue Fund.

Mr. Deputy Speaker: Is there any opening statement by the minister?

Hon. Mr. McKeough: I suppose I might, Mr. Speaker, because when the former member for Sudbury --

Mr. Cassidy: On a point of order, Mr. Speaker. Is there a quorum please?

Mr. Speaker called for the quorum bells.

On resumption:

Mr. Deputy Speaker: I am advised there is a quorum and we will continue with the second reading of Bill 8.

Hon. Mr. McKeough: Mr. Speaker, when the former member for Sudbury used to be here, he used to ask what this was all about. Although there is no need for an opening statement, I might indicate to the House that this borrowing authority, which is less than it has been for the last two years, gives us authority to borrow from the Canada Pension Plan, and from Central Mortgage and the maturities of Ontario debentures securities. There are other things we borrow from, which are not required under this Act.

I will not attempt to defend why some borrowings are covered by this Act and some are covered by The Financial Administration Act, and I suppose really they should be all in one place or another. The Deputy Speaker, coming from Perth, would appreciate that fact, that one consolidates one’s borrowings.

Nevertheless, these are the borrowings which we would expect to make from April 1 last under this Act: from the Canada Pension Plan, about $850 million; from Central Mortgage waste control loans, $43 million; and from scheduled maturities about $73 million. That totals $966 million; and only the people in my ministry, sir, could round that to an even $1 billion, which was the subject of the bid in.

Mr. Reid: What’s a billion?

Hon. Mr. McKeough: That’s right.

Mr. S. Smith: We of course will have no objection to the bill. I do want to take the opportunity, however, to make a brief remark or two about the borrowing habits of the Treasurer, if I might, Mr. Speaker.

We have had the feeling for some time that the so-called in-house borrowings -- which this bill is designed to permit, something that the Treasurer is proud of in the sense that whenever he can borrow to cover his deficit in-house he feels it is somehow a great achievement he has been able to keep Ontario off the money market -- we have had the feeling for some time that this is a rather pyrrhic victory, a rather hollow achievement. In fact what it really means to the people who contribute to the Canada Pension Plan -- and of course this particular bill does not apply to OMERS and other superannuation funds -- is that the Treasurer is able to borrow from these funds at something less than what these funds could attract in the commercial market, and he feels that this is somehow a great achievement.

What I would like to say is that we believe that that money made available for commercial enterprises would be a real stimulus to our economy and would actually in many ways earn more money for Ontarians and create more employment. We have a great belief in the private sector. We believe that this money ought to be made available for private borrowing to stimulate Canadian industry and Ontario industry. The more the Treasurer borrows, whether it be in-house or out of house, the more that money is not available for other purposes.

Furthermore, the more it means that people who depend on these funds -- and ultimately, actuarially of course, all our pensions will depend on some of these funds in one way or another -- the more that the Treasurer borrows at less than competitive commercial rates, the more all of us are being short-changed by the heavy demands that the Treasurer has made.

I don’t have to tell you that the average per capita debt in this province has gone up astronomically in the years of the administration under the present Premier (Mr. Davis). I don’t have to tell you that we are now paying interest at the rate of some $2.85 million a day on the provincial debt. I simply want to say that although we of course will give the government authority to raise money on the credit of the consolidated revenue fund, we personally believe that our province would be better served if the deficits were lower, if the borrowings were not so high, and if the Treasurer were not allowed to hide behind the so-called in-house borrowing as he’s so fond of doing, taking credit for the fact that he doesn’t have to go to the free and open money market.

[8:15]

We believe if he did have to go to that market, he might watch his deficits a little more carefully. It always seems to us rather a remarkable coincidence that the deficits end up exactly at the sum total of what he’s able to borrow and what’s open to him to borrow in-house. We believe if he had to go and take his chances with everyone else on the open market and if he allowed the in-house money to be used for commercial purposes, Ontario would be better off and he would suddenly discover there is a lot more fat in the budget than he imagines at present.

So by all means the Treasurer can have his authorization to raise money but we believe he ought to change his practice of this in-house borrowing. He ought to change his practice whereby pension funds are kept captive by the government of Ontario and are rendered actuarially vulnerable. We believe that money should be made available for the private sector, should be able to attract competitive interest rates and that the government should have to go out and fight with everybody else for every dollar it borrows. In so doing, they’d learn the discipline of having to watch the dollars that they spend and the size of deficit; and that would be a great benefit, a boon to all of us.

However, we will certainly support the bill itself.

Mr. Cassidy: The bill is obviously a housekeeping bill. It does provide an opportunity to comment on the Treasurer’s goal of balancing the budget by 1981, and I want to do so. I don’t want to do so at great length, but I think there are some points that need to be raised, serious points which I put before the Treasurer in that particular spirit.

Hon. Mr. McKeough: Mr. Speaker, on a point of order, I don’t find any connection between this bill and balancing the budget by 1981, I really don’t. I think that might be part of the budget debate or it might be part of my estimates, but I find no reference in the principle of this bill to balancing the budget by 1981.

Mr. Deputy Speaker: I recognize the point of order. I would remind the member for Ottawa Centre to keep his remarks in accordance with the principle of this bill.

Mr. Foulds: On the point of order, Mr. Speaker; you let the previous speaker wander far from the principle that you’ve just enunciated. Secondly, surely borrowing today has to do with future deficits and whether or not the budget will be balanced five years hence.

Mr. Cassidy: With respect, Mr. Speaker, I’m not sure why the Treasurer chose to intervene. If he knew me better or listened a bit more carefully, he would understand that by tone and by words specifically I said I wanted to comment briefly on the question of the borrowing of the province. Since the Treasurer says that he intends in the very near future not to do any more borrowing but in fact to achieve a situation where he won’t have any, I think there’s some concern to be raised about that and this is a legitimate and appropriate place to do so.

Hon. Mr. McKeough: With respect, on the point of order, I don’t think so, Mr. Speaker. This bill authorizes the raising of $1 billion on the credit for this year, which we are now in; and there is no reference to 1981 whatsoever, so far as I know, in that bill.

Mr. Foulds: The year 1981 follows 1977.

Mr. Cassidy: Mr. Speaker, if the Treasurer wants to play it that way, we can spend all night here talking about whether or not Ontario should borrow $1 billion on the consolidated revenue fund, and I'm sure there are things it is quite properly in order to talk about. Frankly, I don’t want to do that. I don’t want to do that at all.

I think the Treasurer’s being quite aggravating. I’m not sure what he had between 6 o’clock and now, but all the same it seems to me it’s legitimate to raise a few points, and I intend to do so with your permission, Mr. Speaker.

Hon. Mr. McKeough: Mr. Speaker, speaking to the point, all I had since 6 o’clock, which is none of the member’s business, was some of the milk of human kindness. I don’t propose that we should waste our time tonight debating the non-principle of a bill as we did all this afternoon. If that’s what the member wants to do, let him say so, let the Speaker rule and let’s get on with it; but if we’re going to talk about the principle of the bill, then let’s do so and let’s not pussyfoot around.

Mr. Foulds: Further on the point of order, while the pussy over there is footing, I’d like to just remind him that borrowing is the principle inherent in this bill.

Mr. Deputy Speaker: Order, please. The member for Ottawa Centre.

Mr. Cassidy: Thank you, Mr. Speaker. I want to say that the bill proposes to borrow $1 billion. I gather from what the Treasurer said that the borrowing is not equal to the total amount of cash requirements anticipated for this year because a certain amount of those cash requirements will be met by borrowing which is not required to be authorized by this form of legislation. Is that right?

Hon. Mr. McKeough: Yes.

Mr. Cassidy: That is correct. I want to introduce a couple of figures from the budget, which were relative to this particular bill. With your permission, Mr. Speaker, there are just three or four things that I want to raise.

First, the Treasurer said, and I quote: “Our objective is to have the capacity to balance the Ontario budget by 1980-81.” He said that in the budget. In the statement of Monday he said: “I continue to look forward to a balanced budget by 1981.”

I would gather that between the budget, the charter and now, the government’s intention has hardened as far as that particular commitment is concerned. If we can look at this year’s figures as outlined in the budget paper which I have to say states, “towards a balanced budget” -- and I can’t help but use the words “if the figures that are relevant are in there” -- the statement of cash requirements is interesting when you compare it with the statements of investments and physical assets which is found in table C8 in the back of the budget. Those investments in physical assets, and I’ll read them into the record, are as follows:

Under budgetary investment: Direct expenditures and transfer payments: Roads and transit, $579 million; public buildings, $241 million; health, $94 million; other, $47 million; for a total budgetary investment in physical assets of $961 million.

On the non-budgetary side, the investment is as follows: Industrial resources development, $232 million; home and community environment, $215 million; education, $117 million; and health, $38 million. Total investment, $1,563 million, up about $150 million from the interim estimate for 1976-77.

If you take that $1.5 billion of investment in physical assets and put it against the total financing requirements of the province for the current fiscal year, 1977-78, or $1,077 million, you get a surplus of about $500 million. That surplus, as far as I can gather, Mr. Speaker, is the surplus that the Ontario government will be running this year on its budgetary current account. On capital account it’s intended to put out about $1.5 billion in investment of physical assets. On current account, its expenditures will fall short of its revenues by $500 million.

I put these figures into the record because I think they are important with regard to the possibility of future debates or discussions about whether or not to balance the budget, or what balancing the budget actually means.

In 1976-77, using the same sources for the figures, the total financing requirement to the province was $1,388 million and the total of investment in physical assets was $1,438 million. There was, therefore, a surplus on the budgetary current account of $50 million. The previous year, in 1975-76, when we had a $1.8 billion financing requirement. The bulk of that was also taken up with investment in physical assets -- $1.6 billion that year -- and there was a small deficit on budgetary current operations of $138 million. In the previous year, 1974-75, the investment of physical assets was $1.2 million, financing requirements were $1.2 billion the total financing requirements just under $1 billion. The surplus on budgetary current account was $200 million.

Perhaps after an election is when one can read this kind of figure into the record, because it makes the situation of the last four years look rather less perilous than it may have appeared if one simply looked at the amounts of money that the province of Ontario had been borrowing over that period of time.

If you just look at current income and expenditure, we had a $200 million surplus in 1974-75, $130 million deficit in 1975-76 and a $50 million surplus in 1976-77. The Treasurer’s figures, if they’re to be trusted -- and I have raised questions about some of the estimates -- would see us having a $500 million surplus on current account this year.

The question of a budgetary deficit --

Mr. S. Smith: Ever heard of depreciation on capital?

Mr. Cassidy: The question of a budgetary surplus or deficit, the question of whether we are balancing the budget and the question of what we are borrowing for in this bill or some other bills before or after it, is therefore largely a matter of definition. Now is the time to raise this kind of question in the brief lull between the last election and the possibility of a future one. In other jurisdictions, in Britain for example, there are two budgets. There is an above-the-line budget which is the current budget and there is a below-the-line budget which is a capital budget, representing investments in capital assets of one sort or another.

Mr. S. Smith: What do they do about depreciation of capital assets?

An hon. member: Are you an economist now, Stuart?

Mr. Cassidy: The Leader of the Opposition can comment on this later, or one of his critics can comment on the point. I think the point has got to be raised and I am glad he is listening with interest.

If you bring this back in personal terms -- and that has limited validity for government -- but if you bring this back in personal terms, a family person with an income of $12,000 a year who receives $240 a week and spends about $240 a week on rent, food, clothing, recreation, gas for the car and that kind of thing, is keeping his current operations in balance.

Mr. S. Smith: Not if his car is depreciating.

Mr. Cassidy: If he borrows money to buy a car, he should be prepared to take enough money out of his current operating budget in order to pay for that car. That is what’s represented in this budget by the payments that are set aside for interest.

The Leader the Opposition asks, what about depreciation? In personal terms, it’s prudent if somebody has a bit set aside in addition to the interest. In fact, finance payments usually provide for a certain amount of repayment in line with depreciation.

The point is that for the year in which a person on a $12,000 income spends 5,000 bucks to buy a car, we don’t say their situation has gone from $12,000 in and $12,000 out to $12,000 in and $17,000 out, we don’t say that for that year they ran up a $5,000 deficit; we say that for that year they invested in an item that will be used over a number of years, and incurred a debt which will be paid off at a rate of so many dollars a year.

Taking this year’s figures again, the presentation of the budget, in which every penny of capital asset acquisition is put down as a current expenditure and therefore contributes to an overall deficit, is misleading. At least it’s misleading if that then is a springboard for the Treasurer to say that in future we are going to balance our budget and we are going to pay as we go for absolutely every nickel of capital investment.

If you look at the table of the investments that Ontario makes, it includes such things as investments in universities, in nuclear power -- an investment which will last for an awfully long time -- tile drainage, junior farmer assistance, the housing corporations, and in other assets including loans which are for the long term. But the Treasurer’s point of view appears to be that the borrowing now is unhealthy under any circumstances and that we should pay for all of those long-term loans, investments and assets out of current revenue. Now if one can jump ahead two or three years and take him at face value, then we will be running a surplus on operating or current budgetary account of about $1.6 billion.

I have a question. I am not sure whether this year a half a billion dollar surplus on current operating account is the right setting for Ontario’s economy. It seems to me that it is equally important to balance Ontario’s economy and not just to have a fixation about balancing a set of numbers when there is a definitional problem which could allow you to come up with any number of different balances for that particular set of numbers.

The Treasurer of New South Wales was in town the other day and I had the opportunity of meeting with him and he said: “We always balance our budget.” It’s a labour government and it has been for many years. I said: “Gosh, you mean you outdo Darcy McKeough” -- I am sorry, Mr. Speaker -- “You outdo the Treasurer of Ontario.” And he said: “Yes.” He then revealed that they had an above-the-line budget which they always balance and a below-the-line capital budget which of course is financed partly out of current revenues and partly out of borrowing.

[8:30]

If it is perfectly legitimate for an individual to borrow to buy a house or a car and if it’s even considered legitimate for individuals to borrow for certain large items of expenditure that might almost be considered current, such as round-the-world vacations, then it seems to me that to have a fixation about getting to a budgetary balance is inappropriate and could lead us to grief in the future.

In the budget statement, the Treasurer did say he wasn’t sure about balancing the budget, that there could be certain reasons for which Ontario would have to take other steps. I am concerned with the fact that after this year he says --

Hon. Mr. McKeough: I didn’t want to be dogmatic.

Mr. Cassidy: Well, I’m glad you didn’t, but you became much more dogmatic in the reappraisal of your statement, as the government also was in the Charter for Ontario, and that is why I am expressing these concerns.

Hon. Mr. McKeough: But I didn’t want to be like you are.

Mr. Cassidy: The increase in budgetary spending, which is foreseen for the next few years as only six per cent a year, I suggest that this may be a straitjacket which we will all live to regret, because there are certain valid and valuable things which ought to be performed by government --

Hon. Mr. McKeough: Not according to your House leader; he says we are giving too much to the municipalities.

Mr. Cassidy: He did not say that, on a point of order. There are certain valid and valuable things which will be required from the province of Ontario. We will have to reach a judgement decision as to how much of our capital expenditures, loans and investments should be financed out of current revenues and how much it would be legitimate to continue to finance from borrowing.

Just a final point, in response to the Leader of the Opposition: I wish the opposition party, the Liberal Party and its leaders, would stop prating about fat and that kind of thing in the Ontario budget and would start to come up with specifics. If I can say a word of commendation to the Treasurer -- I know he doesn’t get them often from me -- Ontario has a record which is decidedly better than, say, the federal government in the city I represent, the city of Ottawa. There has been control over the civil service complement here in Ontario.

Mr. S. Smith: It is better than BC was.

Mr. Cassidy: There has been a rather tighter control over expenditures. At times it’s been imprudent and wrong, and at other times it has provided a discipline which doesn’t exist to people who think that government dollars come for free and forget the fact that each one of these government dollars comes out of somebody’s pocket or could have remained in somebody’s pocket. However, that being said, it seems to me that it is rigid, dogmatic and ideological for the Treasurer to say that we have to constrain spending growth to the six per cent mark over the next three years at the very least in order to achieve this particular goal.

That said, we will support this billion-dollar bill. It seems to me that for that sum of money the time of 23 or 24 minutes of this Legislature is well worth it. I am sure we will return in the future to the question, not of the balanced budget the way the Treasurer puts it, but of the appropriate way in which we set the budget of Ontario and how much of our capital expenditures we should finance out of current revenue and how much out of borrowing.

Mr. Reid: I just have a question or two I would like to ask the Treasurer. The name of the report slips my mind, but I recall reading it in the House last year. It indicated that if we kept borrowing from the Canada Pension Plan, within about -- I think it said six to eight years if I recall the figures correctly -- the revenues accruing to the province of Ontario would be all used up. In fact it indicated that the Canada Pension Plan would be bankrupt as far as the province of Ontario went and there would be no funds available after that period of time for the province to borrow on.

I presume the Treasurer is going to stand in his place and say we’re going to balance the budget and we don’t have to borrow from the CPP within that period of time, but could he perhaps clarify that situation? If we continue our current rate of borrowing, will we have exhausted the Canada Pension Plan within a six to eight-year period?

Ms. Bryden: I just have one or two questions to ask the provincial Treasurer with regard to this authorization to borrow. I’d like to know if he has put his whiz kids or calculus operators to work at figuring out the cost of the Charter for Ontario which was unveiled during the election. He was very prompt at putting the opposition estimates to the test and working out what they were going to cost.

Mr. S. Smith: That has nothing to do with the bill.

Mr. Deputy Speaker: Order, please. I don’t believe this has anything to do with the bill before the House at this time.

Ms. Bryden: Mr. Speaker, with respect, the amount he has to borrow is based on the amount he expects to spend. I want to know if the billion is going to be enough to cover all the costs of the Charter for Ontario. For example, the two trees for every one tree will require a great increase in expenditures on forest regeneration --

Hon. Mr. McKeough: You’re opposed to that?

Ms. Bryden: -- and reducing the municipal tax burden, and so on; senior citizens will cost money. So my first question is, is the billion dollars adequate?

Mr. Reid: Obviously not to pay for the --

Ms. Bryden: The second question I have, if he is planning any borrowing in the United States market, has he taken into account the rather dramatic change in the value of the dollar in his estimates of his needs? Also, will he be repaying some of our foreign US loans? The amount will be affected, unless they’re repayable in Canadian dollars, by the change in the value of the dollar.

The only other comment I’d like to make is that we wouldn’t need such large borrowing power if the Treasurer didn’t continue to give away such large amounts of revenue to the corporations in fast writeoffs and in exemptions from sales tax on machinery and in all sorts of other concessions, so that our corporations are now contributing just slightly over 10 per cent of total provincial revenues.

Hon. Mr. McKeough: Mr. Speaker, in reply to the hon. member for Beaches-Woodbine, the answer to her three questions would be yes, yes, and no. And as a comment, I think on only the remarks of the hon. Leader of the Opposition, I would just point out one of the serious inaccuracies, among others, which he made during the course of recent events in which he persisted in talking about interest costs. Tonight he brought it down to $2.85 million a day. I imagine that’s what the increased research staff has done to his office. During the campaign it was always $3 million, and tonight he’s been getting --

Mr. S. Smith: It’s a rounded figure, it’s like your billion.

Mr. Reid: It’s like your billion.

Hon. Mr. McKeough: It’s so precise, that’s the research. If you want to be precise, really, then you should cut that figure in half once again. Because if the member would look, as I pointed out several times during the course of the campaign, and just to set the record straight here in the House, if you look at the Ontario budget on pages 18 and 19 you would also find out that we earn some $468 million in interest on our investments. That, of course, should be deducted from our public debt interest.

Mr. S. Smith: Why should it?

Hon. Mr. McKeough: Certainly it should.

Mr. S. Smith: Why?

Hon. Mr. McKeough: Because we borrow money from the Canada Pension Plan and we loan it out to universities and hospitals and school boards. We pay interest in one place and we get it back from someplace else. The true amount, if you want to be truthful, is not a billion dollars a year, it’s about half a billion dollars a year. I simply put that to you. You’re just out $500 million.

Mr. S. Smith: Where do the school boards get this interest to pay you?

Hon. Mr. McKeough: We lend it out on mortgages; we lend it out on senior citizens’ apartments; we lend it out through the Ontario Mortgage Corporation. We’d even lend it out on those energy conservation loans you want to make on insulation, that would be an interest on investment.

Mr. S. Smith: But not by the universities, the school boards, and the other public institutions.

Hon. Mr. McKeough: Look, I am not quarrelling. The amount of interest we pay is staggering. But if you’re going to use a figure, use $500 million a year and not a billion and you’d be more correct, you’d satisfy me. But what we have here tonight, Mr. Speaker, and you will enjoy this --

Mr. S. Smith: Yes, the one which comes from the taxpayer --

Hon. Mr. McKeough: -- coming as you do from rural Ontario, is one of the great classic confrontations of all time. We have the far right party saying we’re borrowing too much and we have the far left party saying we’re not borrowing enough. This would prove to you, Mr. Speaker, the efficacy of what we’re doing tonight, the efficacy of my budget, and the truth of the reason why this party was re-elected on June 9, and I’m happy to endorse this bill.

Mr. Makarchuk: Without a majority.

Mr. S. Smith: On a point of privilege, I would like to know whether this is in any way reminiscent of the comments that were made by the former federal leader of the Treasurer’s party, of whom it is alleged that on one occasion he said: “There are those who say on the one hand that two and two make four, those who say on the other hand two and two make six; we go to neither extreme, we simply say that two and two make five.”

Hon. Mr. McKeough: Speaking to the point of order, I recall the remarks not too long ago of the former national leader of my party, and I assume we are referring to the same person, who referred to the policies of the federal Liberal Party as being arsonists in our Confederation today; and that is so true.

Mr. Reid: Mr. Speaker, a point of order. I wonder if the Treasurer, since he is in such a convivial mood, would mind replying to the questions I put in regard to the Canada Pension Plan.

Hon. Mr. McKeough: The answer to your question is that within the $1.42 billion is, I think now, some $550 million interest on the Canada Pension Plan outstanding debentures --

Mr. Reid: I was going to say, don’t look at us.

Hon. Mr. McKeough: -- which I think are now something like $10 million. Within the $460 million something is the interest on the money which we have been earning on part of that.

We will cross the line. We are borrowing from the Canada Pension Plan this year about $850 million. We are paying back something around I think $450 million or $500 million in interest. Those two points will meet in about 1980 or 1981. I will debate this with the member -- I won’t debate it with the member, I will discuss it at some point.

I think one of the very large questions which we have facing us economically is the future of the Canada Pension Plan. When those two lines cross it is not going to distort anything. We will still be getting an amount of money to do something with and will be paying out an amount of money over here to pay interest on it. There is no question that that money will have to roll over.

My own view is, tentatively, that we should be moving towards, albeit slowly, a fully funded plan. But as things now stand, to put it in the simplest possible terms, there is going to have to be an increase in the contribution rate to the Canada Pension Plan if we are going to pay out the rates of benefits which are being paid out.

Members opposite will know that on this side, my successor who is now the Minister of Energy (Mr. J. A. Taylor) started the argument, fully supported by me, the Minister of Community and Social Services (Mr. Norton) carrying that argument forward with Mr. Lalonde. The report which was referred to was the report of the Canada Pension Plan Advisory Committee, which, with great respect, would spend more money than is coming into the plan presently. If those lines cross in December, 1981, they have proposed amendments which would -- make that October, 1981, or whatever.

We are going to have to face up to that problem very soon, in the next couple of years. I would be glad to send the member for Rainy River copies of about six speeches I have made on this subject.

I went to Chicago about three months ago. To put something on the record, many of Hydro’s bonds sold in the United States are, surprisingly enough -- and I told this to the Ontario Teachers’ Federation the other day -- owned by teachers’ pension plans or state employees’ pension plans. Ontario Hydro and province of Ontario bonds are considered a very good investment with a triple-A rating and they hold great chunks of our bonds. One of the investors I met in Chicago, who on behalf of his plan owns a lot of our bonds, said “What is this liability to the Canada Pension Plan? What does that mean?” -- it is shown on our balance sheet at $5 billion or $6 billion.

I said, “Well, you should have a liability, of course, on your US balance sheet for social security.”

I am sure the member for Rainy River is aware that the United States social security plan is now bankrupt. They are going to take in less money this year than they will pay out. President Carter has really advocated some very drastic medicine for that situation. I said that in a typically Canadian compromise, the province of Quebec, in fairness, wanted a fully funded plan. Most of the provinces -- including Ontario -- wanted a pay-as-you-go plan and we developed a typically Canadian compromise 10 years ago and we are somewhere in between.

[8:45]

I said if our balance sheet is wrong, or half-wrong, then theirs is completely wrong; because their balance sheet shows no liability for what they owe for social security. Those amounts in actuarial terms would be staggering, and we are somewhere in between. Whether we resolve this whole argument by going to a fully funded plan, I’m not sure. I honestly don’t know where we will be -- oh, realistically, four or five years from now.

Mr. Reid: If I may, what does this do to your balanced budget by 1981?

Hon. Mr. McKeough: We would continue to borrow.

Mr. Reid: Except that you can only borrow so much. The interest that you are going to gain has got to equal the expenses that you are spending, does it not? You are going to have to go to the market, are you not, to get that money?

Hon. Mr. McKeough: I show that interest as a budgetary expense. It’s above the line. One of the vagaries of government bookkeeping, I think, is that we show all the credits on one side and all the debits on the other side; and the twain don’t meet. Realistically they should. But it is quite possible that I could be theoretically paying $1.1 billion and borrowing $800 million from the Canadian Pension Plan. Wherever I pay my interest to -- our interest, your interest, when I say “my” I am being overly protective or something; I’m talking like my deputy minister, who really looks after the dollars and cents. Wherever we pay our interest is one transaction; however we finance or tax for that is another transaction.

Mr. Reid: There is still only so much to be got out of that pot.

Hon. Mr. McKeough: Oh yes. But all of this is out of order, Mr. Speaker, because the -- however, since you are being your usual charitable self --

Mr. Reid: When are we going to have a chance to debate this?

Hon. Mr. McKeough: During my estimates.

Mr. Speaker: I think we should leave it until then.

Hon. Mr. McKeough: We will talk about our money.

Motion agreed to.

Ordered for third reading.

Clerk of the House: The ninth order, second reading of Bill 9, An Act respecting the Registration of Venture Investment Corporations.

ORDER OF BUSINESS

Mr. Cassidy: On a point of order, Mr. Speaker. We’ve got our wires crossed a bit and I wonder whether the Treasurer would agree to going back to the previous order for The Succession Duty Act amendments.

Hon. Mr. McKeough: No. This afternoon the member for Lakeshore (Mr. Lawlor) quite properly pointed out that he had not received the printed bill and asked that we switch the order and I agreed to that. I have no strong feelings on this, but that was the arrangement this afternoon. I am doing six bills, the Provincial Secretary for Social Development (Mrs. Birch) is doing the seventh bill. The Minister of Revenue (Mrs. Scrivener) is doing seven bills, with some assist on the seventh bill from the Minister of the Environment (Mr. Kerr) and I am dealing with my six in a block. I agreed this afternoon at 4 of the clock to drop the succession duty bill to the bottom of my list. That is the understanding I have; we have arranged staff accordingly and we are prepared to go ahead with Bill 9 now.

Mr. Lawlor: Mr. Speaker, if I may just for a moment. The bill hadn’t been properly perused because it wasn’t printed and delivered into our hands until recently and the minister was good enough to put it down. We are in a position where we are prepared to proceed at this time in seriatim order. If you wish to do so, fine. We would prefer to at this stage, but we have had no opportunity to so inform you until this time. We’ll leave it up to you.

Hon. Mr. McKeough: I’m sorry, Mr. Speaker. If I had known that before 6 o’clock I could have arranged staff accordingly, but we really arranged staff to be here now for venture investment and the tobacco tax and I suggested that they should be here later for succession duty. No doubt in the spirit of co-operation which my friend is in, we’ll be onto all of them tonight in any case.

Mr. Cassidy: On a point of order, Mr. Speaker. I believe the minister will agree that the legislative members have priority in this place and not just the staff. I regret that the wires were crossed. I was only aware of this well after 6 o’clock.

Mr. Speaker: Order, please. It is at the discretion of the government House leader, I presume, who made these arrangements and who was a participant in these negotiations and arrangements. As I understand it, Bill 9 was to have been called at this time. I think we should proceed with Bill 9. If the hon. minister will move that we will proceed.

Mr. Cassidy: Mr. Speaker, I repeat my request to the minister. If we could consider the alternative, it may be possible to finish with the other bill prior to 10:30 tonight. As for venture investment corporations in Ontario we did have a number of people who did wish to speak to that particular bill.

Hon. Mr. McKeough: Mr. Speaker, I understood that we were going to finish certain bills on Monday night, certain bills last night and certain bills today.

VENTURE INVESTMENT CORPORATIONS REGISTRATION ACT

Hon. Mr. McKeough moved second reading of Bill 9, An Act respecting the Registration of Venture Investment Corporations.

Mr. Lawlor: We agree with this bill basically, but there are some elements; I just wonder, for example, what the Treasurer thinks of the efficacy of the bill. In other words, how is this going to work?

This is fine. It will be financed by major corporations. True, they can only have a very minority interest in the operation of the investment corporation. As to the range of investment; first of all, it’s held basically domestically and we can’t help but agree with that.

The benefits conferred on small businesses are thin. I think it would be generally conceded to be fairly negligible in the province of Ontario up until now. Even within this kind of legislation, the amounts to be advanced are not great sums of money. They probably are going to be controlled from single sources, that is from whatever the holdings may be. The major financial institutions of the province will still have major control in this particular regard. That’s fine as far as it goes. The point at issue is whether many people can qualify to be so incorporated and how in their operating lines they exist at arm’s length with their shareholders. The eligible investment involved in this is that 90 per cent or more of the assets are situated in Ontario and 90 or more of wages and salaries are paid in Ontario.

Another of the important features is that the venture investment corporation must not hold more than 40 per cent of the equity shares of the small business. One of the beneficial things in the legislation is that they must give some preservation against personal liability of the individual seeking to go forward with the venture investment corporation. That gives them some status and preservation over against personal liability.

In its general purport and tenor, and having some very serious doubts as to what the range of operation of this kind of corporation will be, anything that will be a contribution to the life of small businesses in Ontario is welcome and acceptable. I trust that the institution will flourish. I simply have doubts as to the accessibility of most small businesses to this particular way of assistance. I wonder what the Treasurer thinks as to its future viability and possibility. What response has been anticipated with respect to small business and the stimulation of that area of enterprise in this province?

Mr. S. Smith: I want to say we welcome the fact that there have been the necessary changes in the federal law to allow the Treasurer to proceed with the venture investment bill, although we are a little concerned lest the bill become more of a tax shelter for large corporations rather than a real boon to small ones. However, we are willing to proceed on the best advice that the Treasurer has available to him and we are willing to see how this works out.

Our concern, of course, is that small business in Ontario needs to have a very special set of circumstances created for itself so that it can flourish and so that it can get some of the breaks, in one way or another, that are presently available to large industries.

I am just a little bit concerned about the jungle that a small business person presently has to go through to find sources of risk capital. I hope that the Treasurer has given some thought, and I suspect that he has, to some way of simplifying for the small business people the method by which they gain access to venture funding.

Many’s the time, and I’m sure the Treasurer has himself tried to assist people in his own riding, many’s the time people have sought ways to gain access to capital. By the time they have finished with banks and with trust companies and with acceptance corporations, and have gone through the ODC and various federal manoeuvres and tried to obtain assistance from various programs, they have pretty well had to give up because of the fact that more of their time has been spent on red tape than in doing business. That is not an exaggeration and it’s not meant humorously at all.

I think, therefore, one of the things that should be done is for the government to give real thought, once the Act is set up and various corporations occur, to setting up a kind of clearing house situation. That is one place where information can be given, where one form can be made out and that form can be used by the small business person in applying for venture capital, be it from the government, from the ODC, from the federal government, from financial institutions or from venture investment corporations. A central clearing house mechanism can assist one business person in making out one form and that will be the lot, rather than inundating him in red tape. That’s just meant as a constructive suggestion to the Treasurer, and I trust he’ll have a comment on that.

We are a little worried about how this venture investment corporation Act will work out, but we’re certainly prepared to give it a try and we welcome the fact that after so many years it is finally before us and that the necessary federal changes have been made to allow us to proceed.

Mr. Cassidy: Mr. Speaker, I want to speak for a minute or two about this particular bill. The aim of the bill is to provide a new means of getting risk capital and managerial assistance to small business. I do suspect that the vehicle is flawed to the extent that it may do far less good than the Treasurer and the bill’s proponents hoped. I think the point has already been made that this looks far more like a new game that the people on Bay Street can play rather than something which is going to be of meaningful assistance to small businesses which are outside of the immediate range of Bay Street.

The idea of the bill is to give these big businesses tax privileges in order to encourage them to funnel money into small business, specifically with a 250 per cent writeoff against taxable income on any money which they invest in a venture investment corporation. In practical terms, therefore, a $40,000 investment becomes a $100,000 writeoff.

I would appreciate it if the minister can give a figure on how much is saved in profits taxed. As I would read it, it’s about $15,000 in provincial tax which is saved if a company is paying corporate tax at the full rate. I’m not clear whether there is some comparable kind of benefit out of federal tax as well or only a partial benefit. I would like to know as well whether the provincial government is pressing the federal government to take that action. If it is, then there’s the situation where, in fact, money can be transferred out of profits into a venture investment corporation with absolutely no commitment or no loss to the corporation whatsoever. It’s risk-free, cost-free venture capital. I’m not sure whether we should pass money from the public Treasury into the risk capital business holus-bolus like that, leaving all of the benefits and all of the direction in the big business sector.

However, I wait for further word on that because I believe that what I have just said is a bit hyperbolic. What is happening is that the public, through the tax system of Ontario, is effectively taking about 40 to 50 per cent of the risk that such money will go down the drain and that the venture investments will turn out to be useless.

[9:00]

The one thing that the venture investment corporations do not appear to be is a vehicle for a group of investors to get together in order to get a small business venture off the ground. In other words, if Mr. Conway, Mr. Roy, Ms. Gigantes and myself, for example, wanted to establish a small business to go into the political polling industry in eastern Ontario and we wanted to pool our capital, we could not take advantage of this particular kind of a body. For that matter, the Chamber of Commerce of Renfrew county couldn’t really get into this either if they decided to pool their resources. For one thing, most of them wouldn’t have a corporate tax base from which to draw. For another thing, the requirement of arm’s length involvement can simply not be reached. For instance, if a group of people in an area or a locality in a region decide that they want to get together and help the region pull itself up by its bootstraps by providing venture capital for a number of worthy enterprises, the chances that they will personally be involved in some of these enterprises are simply too great. Therefore, they will not be able to benefit from the venture investment corporations.

The third thing is that the venture investment corporation can only be established if it has outstanding capital worth $250,000 in the first year, rising to $750,000 by the end of the fourth years. Once again, Mr. Speaker, I know that we are all somewhat at sea in trying to define small business. Under certain definitions, I understand that Timothy Eaton Company Limited can be defined or considered as a small business because it is owner-operated and doesn’t have any public shares. The fact that it’s bigger than almost any other Canadian-owned company is sort of irrelevant.

We’ve tried doing such things as putting an estimate on small businesses based on the fact that it’s owner-managed, or based on the fact that it is limited to no more than a certain number of employees, say in the range of 100 to 200, or that it is not a subsidiary; or if it is not owner-managed then it is controlled by a very small group of entrepreneurs who play a direct role in operating the business.

For firms at the upper end of that size range, which may have 100 employees, assets of $1 million or more, or a turnover as high as $5 million or $8 million a year, clearly they stand to benefit from venture investment corporations of the size which are proposed in this particular bill. However, for a bunch of people who want to get involved in the business world, and who come knocking on the door, they’re going to find that the venture investment corporation would simply turn up its nose at them. If you want to start a small machine shop with about half a dozen employees to begin and a capital investment of about $75,000, a few lathes and that kind of thing, you’re just simply too small. The amount of equity required is too limited to really attract the attention of corporations which are going to have to be working pretty damn fast in order to build their assets or an outstanding capital of up to $750,000 by the end of the fourth year.

I understand the requirement that the position in small business should not be more than 40 per cent of the equity shares in that small business. That’s the one protection against big businesses taking complete control, although we all know that a 40 per cent stake is tantamount to complete control in many cases.

Quebec has taken a rather different approach and, I suspect, one that is more promising to the question of developing Canadian-owned small enterprises. The Treasurer may recall that we spoke about that. I spoke about that in the budget reply in April with the concern for small business which, I suppose, hasn’t been demonstrated by the NDP in the past. We’re beginning to understand some of the reasons why, in a mixed economy, and an economy which is largely foreign-dominated, it is important to have indigenous courses of capital and indigenous entrepreneurship. We’re beginning to understand that if you’re going to have a mixed economy, which we accept, and you want some firms to grow into big ones from which you can drain certain amounts of tax dollars and which will contribute jobs, ideas and that kind of thing to the economy, you’ve got to have a nursery and that nursery has to be of small businesses.

The fact is that this particular bill is coming forward very much in isolation. Without repeating a former speech that I have given, we think there are a number of ways in which the government can provide a more encouraging climate for small businesses than it does today. There are such things as a Buy Canada policy, such things as requiring that a certain proportion of government of Ontario contracts be let out to the small business sector and such things as Ontario’s directing public purchasing in the direction of industry in this province rather than being quite uncritical about having Ontario taxpayers pay for goods that come into our public enterprises from anywhere in the world.

In Quebec, Chambers of Commerce and other regional bodies that group together business people are being encouraged to set up small business development banks or small development funds. They are being given tax incentives and that kind of encouragement from the new Quebec government which has simply adopted or recycled proposals which had formerly been launched and developed by the Liberal government.

The idea is regionally based. In certain circumstances, I gather that the guy who sits on the board of directors and who happens to be setting up a machinery repair depot or a small manufacturing outlet or something like that will be entitled to benefit from the funds. That may be more realistic, as long as it is carefully watched, than a situation in which there is an absolute arm’s length provision so that everybody who provides the money will come from Bay Street and nobody who is actually involved in the small business field will be able to be involved in the direction of these venture investment corporations. It seems that the Quebec idea has more of a co-operative spirit about it than what is being proposed here in Ontario and I certainly commend it to the Treasurer for him to look at. I think we should compare and perhaps combine the approaches of the two provinces.

We have raised the question of small business management problems. I don’t think that’s adequately dealt with in this particular bill. We do not feel that this bill should be put forward in isolation without any accompanying industrial strategy or without other techniques of self-help for small businessmen in order to encourage them to participate themselves in their own destiny and not constantly to be having to wonder where the devil the capital is going to be coming from.

Mr. Makarchuk: I just wonder if the minister in his reply would be able to give a definition of what he has or his department has in mind in terms of what the definition of a small business would be for the purposes of this Act. I am thinking in terms of number of employees, assets, and so on, that it would be interesting to know this information.

Ms. Bryden: I just had a few comments I wanted to make. This proposal has rather the flavour of a great many other proposals put forward by the government as its method of getting the economy stimulated or getting some developments in our economy, and some new job-creating activities. It seems to be the rather stereotyped approach of the government that it gives very large and generous tax concessions to large businesses, which are the main ones that can qualify, while the rest of us really pay for it because we pay more taxes when they pay less taxes if there is a given amount of money to be raised. Then we leave it entirely to the people who get these large tax concessions to decide where the money will go, what kinds of businesses will be assisted, whether there will be any specific number of jobs created or what kind of ventures will be promoted.

I think this is much too much 19th century laissez faire, which gets us into a position where we are handing out large amounts of tax money without knowing what we are getting for our money. There doesn’t appear to be any plan in the ministry to monitor the results of these tax concessions.

Of course, as we all know, we never get reported to us the actual amounts of tax concessions the way we get expenditures reported. They just show up in reduced revenue from one sector of the economy and in increased taxes to the rest of us. I think this is a rather stereotyped approach to stimulating small business and new ventures. I think we need a lot more besides that. We are not going to oppose this bill because we are willing to try and see how it works. But we would like more monitoring of it.

Some of the other things that the minister should be considering, in order to get the sort of innovative approach that you do get from freeing up small businesses and letting them get started, is management advice and assistance, which a lot of them need and can’t afford.

Regular assistance in getting bank credit for inventories and for working capital at reasonable interest rates is needed. The bigger the firm the lower the interest rate they are usually able to get from the bank. Possibly guaranteed loans would help. The United States government does some of this for small business. We do have our development corporations which do a certain amount of loaning to small business, but always at a very high interest rate; and we never have been able to find out the criteria on which those loans are made to developing corporations and how many jobs they actually have created.

We also need assistance in the way of helping them with a reasonable rent, if they are in industrial parks or shopping plazas. Again, the larger the firm the lower the rent seems to be. And of course the question of uniform store hours comes up if you are going to help free up free enterprise in this province. You don’t want free enterprise that requires everybody to stay open 24 hours a day because that’s just counter-productive.

I think these are some of the things that must be combined with a bill of this sort, if we really want to have an improvement in our free enterprise economy. In fact, you might even say that the NDP is the only really free enterprise party in this House, because we would like to free up industry and have more competition and more opportunity for these small businesses to get going, rather than giving so much to the large businesses.

Mr. Eaton: Free enterprise, meaning that you control?

Ms. Bryden: One other area that I would like to suggest the minister look at is whether there can’t be some venture capital provided for co-ops in various fields. A housing co-op is a business venture which is providing a service that is badly needed, but they do have great difficulty before they can get their CMHC mortgage.

Hon. Mr. McKeough: It is non-profit.

Ms. Bryden: Other co-ops for groceries and for small manufacturing also need that kind of help.

Hon. Mr. McKeough: They are non-profit.

Ms. Bryden: So that is another area that might be worked into the act in some way, to see whether something could be done for the co-operative sector.

Hon. Mr. McKeough: Mr. Speaker, I really have to have a little bit of thought; without starting debate on either Sunday closing or store hours or something else, I really don’t know how my friends back there --

Mr. Cassidy: You better look back there, those are the only friends you’ve got.

Hon. Mr. McKeough: How do you free up free enterprise by having uniform store hours? That has got to be the greatest dichotomy that I’ve heard in a long time. Without being on one side of that issue or another --

Mr. Cassidy: On a point of order.

Mr. Speaker: Well, do you really have one?

Mr. Cassidy: I would like to know whether store hours are within the principle of this bill.

Mr. Speaker: I haven’t heard of it.

Hon. Mr. McKeough: Of course, if you had been listening, you would know that was a point raised by your colleague from Beaches-Woodbine. Obviously she’s running for the leadership too, so you don’t pay any attention to her and she isn’t paying any attention to you.

Mr. Conway: And the question is, Darcy, what leadership are you looking for?

Hon. Mr. McKeough: Just getting my bill through, calmly and quietly, and being helpful.

[9:15]

Mr. Conway: I have said you are the replacement for Clark.

Mr. Cassidy: You have tasted the royal jelly and --

Hon. Mr. McKeough: Yes. Now, speaking to the principle of this bill, Mr. Speaker --

Mr. Speaker: Meanwhile, back at the bill, right.

Hon. Mr. McKeough: I would, of course, endorse what I think the Leader of the Opposition said about that. We are grateful that the Minister of Finance, with some urging or some assist, indicated that they would not disallow what we might do in this type of legislation, having introduced it I guess as a zero zero bill first, and then as a bill which died at first reading, then as a bill which was introduced in April and is now back here really for the fourth time. It goes back really to a concept which was introduced by my predecessor in 1974 -- I think that would be correct -- when he first talked about it.

Just two or three comments. I would agree with the member for Beaches-Woodbine that the management advice is as important as the money in the starting of a small business and that is part of the principle behind this bill. Let me say very quickly that we don’t look at this as a complete panacea. It is part of a package, part of a program. It is a place to tap for venture capital. Some of the larger firms are interested in getting involved in the venture capital business. This is a way to facilitate their entry. It’s a tap which we think this bill will turn on and allow them to do some investing in small business and in the venture area.

There are other taps. This isn’t going to solve all the problems of encouraging small, venturesome entrepreneurs in our society, but it is probably one of them. I would point out that large firms not only supply the money but can supply the management expertise, some of the advice, without going to consultants which the small business and the new businessman so often very desperately needs.

Let me answer some of the questions. The questions from the member for Lakeshore as to the control: The VIC can’t hold more than 40 per cent of the shares of the small business. The test of that 40 per cent includes the VIC and all its subsidiaries and associates. Provision is made for decontrol once it ceases to be a small business. This is a way to get people into business, and there are provisions to get the investor, the large business, out as quickly as they become a success. If they’re not a success then of course I suppose they go out of business on their own and go down as a bad investment on the part of the large corporation which is putting up part of the money, and certainly in many cases probably will be putting up the expertise.

To date in all this discussion we have had a good response both from a number of large businesses, from the investment community, from the venture capital people and from small businesses. What the results will be I’m not prepared to indicate, or give any kind of an estimate. We’ll put a limit on it at some point. We obviously don’t want to have it cost too much in terms of corporate taxes. I’m not going to put a figure on it at this moment. Perhaps we will when we see, probably by this fall, some indication of how much money might be registered and under way in the first year.

Section 18 provides the protection against the VIC being used solely for a tax avoidance. We believe that the requirement that a VIC should have 80 per cent of its assets in eligible small business will force the VICs to go out and hunt for small businessmen. We think there’s a real pressure on them to look. If that’s really not why they’re in the business, we think that there is pressure within the bill for them to go out and look for risk-taking investments if the risk-taking investments don’t come to them, which is what I really think will happen.

The Quebec venture corporations have more of a field, really, because Quebec can work through the personal income tax system which they control in that province as well. That makes a provincial personal income tax system more attractive in this province, but I am not advocating it tonight at any rate.

Finally, the member for Brantford asked what the definition of a small business would be. This will be dealt with in regulation, and we are developing a regulation for this fall. This is a memorandum on that subject, on the definition. The bill defines a small business as a corporation which meets the asset, number of employee and profit tests prescribed by the regulation.

Members will want to know why such an important definition has been left to the regulations and they will probably press, and properly so, for some idea of the levels at which the parameters will be set by the regulations. We haven’t defined this because originally we thought we were going to use the federal definition. We have decided the federal definition isn’t that appropriate and we are developing our own.

We would be glad -- not necessarily tonight -- to have any ideas. We will be putting that regulation in a draft form and it can be changed to make sure that we are hitting the group we want to hit. The asset, number of employee and profit levels will be prescribed in the regulations for the purposes of flexibility.

A universal definition does not exist. Every government program and every interest group have developed different definitions, I can give members some examples of that. It’s quite likely for these purposes, legislation having been in effect for a period, the size criteria will probably have to be adjusted. The size can be broadened, if an insufficient number of prospects are being found, or the definition may be narrowed if investments in eligible small businesses prove to be replacing conventional financing.

We haven’t defined this as yet. We will be ready in the fall. We have been using section 125 of The Income Tax Act, that definition of small business, and we have been going on that basis, on the basis that the federal government might have parallel legislation. They’ve now indicated they won’t, but they’re not going to hinder our legislation. They having taken themselves out of the field, after having got into the field tentatively a year ago, we wanted to adopt their definition. Therefore, we are really back at square one looking for our own, and I hope we will have that this fall.

Motion agreed to.

Ordered for third reading.

ROYAL ASSENT

Mr. Speaker: Just before we proceed with the business of the evening, I beg to inform the House that in the name of Her Majesty the Queen the Honourable the Lieutenant Governor has been pleased to assent to a certain bill in her chambers.

Clerk of the House: The following is the title of the bill to which Her Honour has assented:

Bill 1, An Act to amend The Unified Family Court Act, 1976.

TOBACCO TAX AMENDMENT ACT

Hon. Mr. McKeough moved second reading of Bill 10, An Act to amend The Tobacco Tax Act.

Mr. S. Smith: During the course of the recent election campaign, I had the privilege of going before the people of Ontario and proposing to them a rather drastic remedy --

Mr. Cassidy: Bizarre actually.

Mr. Roy: You are the only one who is bizarre around here.

Mr. S. Smith: -- to the difficulties that faced the province from an economic point of view. We diagnosed that the reason -- at least one of the reasons -- we now suffer from a combination of unemployment and inflation is that the private sector has been having more and more difficulty, particularly with regard to its competitive position, but general difficulty in competing with the public sector for the share of the dollar that is in each person’s pocket. The heavy demands made by the public sector in recent years are partially to blame for the difficulty suffered in the competitive enterprise system we all believe in.

In prescribing a remedy for this problem we recommended that the revenues of the province, while they could grow for reasons of general economic upturn, should not be permitted to grow by increasing the rate of tax; and that some measure needed to be adopted whereby the share of the taxpayer’s dollar that went to government in this province had to be kept constant and prevented from growing any larger than it already has.

We chose, therefore, to put this in the most graphic and most vivid terms that we could, to put it in what has been called simple terms. I think that sometimes simple truths are the best truths. Sometimes clichés, and so on, have as their greatest virtue the fact that they are true. In any event, they are very understandable.

We felt, therefore, that our proposition was one which was simple and straightforward. We said to the people of Ontario that were we in government we would keep every tax increase and every rate increase, with the exception of those involving energy and energy conservation, every fee increase of government -- and we included, as you know, property taxes -- under the same guidelines as the Anti-Inflation Board applies to wages.

There are reasons to believe that is perhaps an unduly rigid and perhaps to some extent a restrictive way of approaching taxation policy. We recognize the virtue of flexibility, but we feel that flexibility at a time like this, when so many Ontarians are unemployed, when our economy is in such grave difficulty, is something we are willing to give up in the interest of simplicity, in the interest of putting before the people a definite promise that they could easily monitor without having to be economists, without having to delve into the Treasury, without having to look into in great detail the way in which the government spends money.

We put something before the people that every citizen could understand, so that every citizen who was asked to live within a limitation on his income could appreciate that the government was going to apply to itself the same kinds of restrictions and difficulties which ordinary people were asked to live with.

Mr. McClellan: Tell us about your social service cutbacks.

Mr. S. Smith: Consequently, The Tobacco Tax Act, which is presently before us, recommends an increase in the tax vastly in excess of eight per cent. In fact I believe it is closer to 35 per cent. That rate of increase, under the undertaking we made to the people of Ontario, is excessive.

We feel, although we have no particular reason to oppose some increase in the tobacco tax, that the increase should stay within eight per cent. This is the guideline understood by the people of Ontario to apply to their own salaries, this is the guideline used with regard to the rent review procedure, this is the guideline we believe should apply wherever possible to prices; and this is the guideline we believe the government should adopt for itself.

We appreciate there are those who would prefer a more flexible policy of taxation. In ordinary times we ourselves would prefer a more flexible policy of taxation; but these are not ordinary times, these are exceptional times. We need to be clear, we need to be definite. We, therefore, cannot support an increase in the tobacco tax which is in excess of eight per cent; and in this instance vastly in excess.

We would be prepared to vote for an eight per cent increase if the government saw fit to bring one in. But because of the support they are receiving from the third party, we doubt that they will bother to bring in a bill with a lower tax rate. Consequently we will simply vote against the bill as presented to us and we will do so for the reasons I have just explained. Thank you very much, Mr. Speaker.

[9:30]

Mr. Cassidy: Mr. Speaker, I waited with interest to see whether the Leader of the Opposition was planning to divide the House on his principle which he has introduced into Ontario political life.

Mr. Roy: He has got more guts than you guys have.

Mr. Cassidy: I must say that he comes up with a principle which, the way he puts it, sounds like a new tablet of stone containing the Ten Commandments for Ontario and then he applies it to the cigarette tax --

Mr. Reid: Ever hear of the Regina manifesto?

Mr. Cassidy: I don’t know, did the member say charter, I think that’s what’s in vogue right now.

At any rate it’s interesting that he should apply it to the tobacco tax of all things.

Mr. Laughren: Not income tax.

Mr. Cassidy: And it’s interesting as well that in the course of the entire speech, Mr. Speaker, the Liberal leader once again has failed to say where the revenue would come from that he’s forgoing because of this ridiculous principle which is introduced in Ontario life.

Mr. Laughren: Right on, typical.

Mr. Cassidy: The part of the principle about tax increases which do occur from time to time is that you hit different things at different times. One year it may be appropriate to raise income tax. Another year it may be appropriate to lower income tax and raise some other tax.

The tobacco tax tends to go up every two or three years. We’ve never been particularly worried about it, and in fact as an ex-smoker I must say that it’s probably going up by too little rather than by too much. The Liberal leader was not cognizant of that.

Mr. Reed: How the righteous rule.

Mr. Cassidy: What we need to know is this. The former tax was 15 cents a package of cigarettes. It’s going up by five cents a pack, or $58 million. If you cut that increase down to 1.2 cents, or eight per cent as advocated by the Liberal leader, you forgo three quarters of that $58 million or approximately $44 million, and I’d like to know where that money is going to come from, because I think the people of Ontario have got the right to know, if there is going to be a responsible opposition in this House, where taxes forgone are going to be raised.

Mr. Reed: You want to live off the avails of sin.

Mr. Cassidy: It is not good enough for the Liberal leader to say, “Oh, we’ll take it out of the fat,” because they’ve never told us what the fat is. The member for Rainy River and before him the House leader for the Liberal Party (Mr. Breithaupt) were chairmen of the public accounts committee of this Legislature for many years. They clearly had very great opportunities -- opportunities unparalleled by any other private member in the House -- to know whether there was fat and if so what it was and if so --

Mr. Roy: They did cut out a lot. They did an excellent job.

Mr. Cassidy: When you listen to the catalogue of spending cuts though, it’s Minaki Lodge, superministers -- and then they stop. That’s $5 million or $6 million and you can’t spend $5 million or $6 million again and again.

Mr. Reid: On a point of order, Mr. Speaker.

Mr. Cassidy: I am really concerned --

Mr. Acting Speaker: Order please. The hon. member for Rainy River is rising on a point of order.

Mr. Reid: I’d like to point out that there were some NDP members on the public accounts committee while I was chairman, but their contribution was very small.

Mr. Laughren: Not chairing it. You chaired the committee.

Mr. Acting Speaker: The Speaker’s assessment is that that is not a valid point of order.

Mr. Reid: It’s a good point though.

Mrs. Campbell: It’s a point of view anyway.

Mr. Cassidy: Of course, I was a member of that committee.

The fact is, as the Treasurer will tell us from time to time, that it ain’t easy. As an observer of politics at the federal level and then as a participant at this level I would agree with him, it isn’t easy. There are always demands. There are areas of public spending that are very difficult to bring under control and certainly to roll back. But the Liberal Party does not recognize those kinds of problems and it simply says, “We don’t know where the money is going to come from, but take it out of the fat.”

It is certainly worth noting that during the course of all this budgetary discussion that we’ve been having on the tobacco tax and other taxes as well, the New Democratic Party has very specifically said what we would do and where we would get the money to pay for it. The Liberal Party has never said where the money would come from to pay for their tax cuts, to pay for their forgone taxes and to pay for their various programs.

Mr. Roy: You’ve become nasty since you quit smoking, Mike.

Mr. Cassidy: During the course of the election campaign they spend billions of dollars, but unfortunately were never brought to task by the media for what that money was all about.

Mr. Roy: You are just annoyed because you are no longer the opposition.

Mr. Cassidy: During the course of the intervention by the Liberal budget critic they talked about billions of dollars in tax cuts, but never said where the money was going to come from. You know there is always a starting point and I think tonight is a starting point. Perhaps the member for Ottawa East, who is so agitated right now, would like to speak up.

Mr. B. Newman: You got him, Al.

Mr. Cassidy: Perhaps the member for Renfrew North (Mr. Conway), who is always so agitated, would like to speak up and say exactly where that $44 million is going to come from.

If they say that the tax on cigarettes should only go up by 1.2 cents rather than a nickel a pack, that’s okay. It’s a legitimate point of view. They should say, though, where else the money is going to come from. I would hope as well that for the first time we might hear from some of the new members of the Conservative caucus and that they might bring the new opposition to -- what’s the word; to heel, to account? To account.

Mr. Eaton: Kick them around a bit, you mean.

Mr. Cassidy: In order to get them to say exactly what it is they intend to do. I don’t want to do the government’s work for them. You’ve got a bit of work to do as well.

Hon. J. A. Taylor: The government doesn’t want you to do it for them either.

Mr. Cassidy: Because this is the most ridiculous bunch we’ve ever seen in Ontario, it really is.

Mr. Acting Speaker: Order, please. Perhaps we could get back to the principle of the bill.

Mr. Roy: Mr. Speaker, in spite of what he said, I still support him for leader.

Mr. Conway: Only if he tells us about nationalization.

Mr. Cassidy: Good God, that’s the member for Renfrew North. He’s got a one-track mind.

Mr. Conway: I will tell you about the tax cut if you tell us about nationalization.

Mr. Cassidy: One thing we’ll never nationalize is the member for Renfrew North.

Mr. Acting Speaker: Order, please. Perhaps the hon. member for Renfrew North will not interject and cause any discussion irrelevant to the bill.

Mr. Cassidy: Thank you, Mr. Speaker. I hope you pass those words of advice on to the Deputy Speaker because he doesn’t appear to have quite grasped the principle, in particular with reference to the member for Renfrew North.

Mr. Speaker, I’ve said it before, I’ll say it again, and I am concerned about this: It’s obvious that people pay the cigarette tax. It isn’t paid by corporations, it isn’t paid by invisible people up there; it’s paid by real people who’ve got to pay an extra nickel starting midnight a couple of nights ago when they go to the supermarket or to the tobacconist for their cigarettes. It’s an extra expenditure that’s going to come out of people’s pockets. When you add up all of the increases, such as tobacco tax, vehicle registration fees and environmental tax, most of the tax increases in this particular budget are being paid for by individuals.

Mr. Roy: Well; I didn’t realize that was so, Mike. You are coming along.

Mr. Cassidy: The tax cuts are generally going to business. An $84 million cut in the corporate income tax. The government estimates that the concessions on succession duty and gift tax are worth $8 million. Clearly, that doesn’t benefit the ordinary guy because he doesn’t pay succession duty and never will be in that particular position. The cuts in corporate income tax and dividends amount to another $75 million, again for very wealthy people. You’re taking money from ordinary people; you’re putting it into the pockets of corporations and of very wealthy people. I’m disturbed by that direction in fiscal policy which is represented in the tobacco tax increases which we have today.

Finally, Mr. Speaker, and I said this during the budget debate, we of course will support this particular tax. The fact that it’s up by a nickel or by more than eight per cent or whatever isn’t particularly relevant. In fact, I believe that the tax raises the price of a package of cigarettes by somewhere around four per cent or so. In other words, relatively speaking, the price of cigarettes has been rising by much less than the consumer price index generally. In other words, if you will, the government is conspiring in encouraging people to addict themselves further to the poison of nicotine and tobacco --

Mr. Roy: Here we go.

Mr. Cassidy: -- in order to try and get around all of the problems they’re having with their finances because of the inflation, the difficult economic situation and the unemployment which has been contributed to by the Treasurer.

Mr. Ruston: Better talk to some of the members there, Mike.

Hon. W. Newman: What kind of poison have you had?

Mr. Cassidy: For public health reasons, if for no other reasons, it seems to me that the government should seriously consider whether or not Ontario could not increase the tobacco tax by more than the nickel a pack which is being advocated right now.

Mr. Roy: He only says that since he quit smoking.

Mr. Cassidy: I seem to recall that the figures we had from the then Minister of Health (Mr. F. S. Miller) indicated that here in Ontario, through the Ontario Health Insurance Program and other government expenditures, we spend far more in government money, in public people’s money, in taxpayer’s money, to cure tobacco-related diseases and to support people who are disabled because of tobacco-related disease than we collect in the tobacco tax.

Mr. Laughren: The Minister of Health (Mr. Timbrell) admits it.

Mr. Cassidy: That’s right. The Minister of Health admits it. In other words, this is like The Crown Timber Act. We get less in stumpage than it costs us to reforest the trees, and we don’t reforest enough of the trees either. Well we get less in tobacco tax than it costs to look after the victims.

A tax which people keep looking at as a luxury tax, as a discretionary tax since you don’t have to pay it, as a means of softening the blow of other taxes on the ordinary taxpayers, is in fact not that at all. It’s a tax paid by smokers in order to pay for the disabilities that smokers tend to suffer because tobacco is such a poisonous weed. I would like to suggest that this tobacco tax could quite well be increased.

Hon. W. Newman: The tobacco growers will love you.

Mr. Cassidy: That may be.

Interjections.

Mr. Cassidy: I understand that you have a compendium of my sayings, is that right?

Hon. W. Newman: You probably grow it in your back lot.

Interjections.

Mr. Cassidy: You know, the Conservative Party takes everything out of context. They really do. Bill Davis was really misleading when he ran around to ridings such as yours and talked about succession duties --

Mr. Acting Speaker: Order, please.

Mr. Cassidy: -- because the Conservative Party supported and supports the exemptions of succession duties for farmers. They always have and always will.

Hon. W. Newman: He didn’t have to come to my riding.

Mr. Acting Speaker: Order, please. Perhaps the hon. Minister of Agriculture and Food would not interject so that we could continue with the debate.

Hon. W. Newman: Are you against that? I opened my mouth once.

Mr. Cassidy: Mr. Speaker, what is needed, however, is more than just a tax increase. It seems to me that what we need is a general approach on the part of the government as a whole -- we’re not seeing that, of course -- in order to encourage smokers to quit; in order to encourage young people not to take up the habit; in order to provide non-smoking clinics in order to give people a way out of a habit which most smokers, and I speak as a former smoker, deplore and wish to heck they could get rid of. I can’t speak for cigar smokers. It may be that they feel content, particularly if they’re Tories, with that particular noxious habit.

Mr. Conway: Leave Stephen out of this.

Mr. Cassidy: It’s interesting after what the Minister of Agriculture and Food said that most of the ministers in the government do not smoke cigarettes, they smoke cigars; and I’ll bet they’re probably imported from Cuba. Mr. Speaker, we’ll support the bill.

Mr. Conway: Castro is a socialist.

Mr. Roy: I think he’s mad at the world.

Mr. Acting Speaker: The hon. member for Halton-Burlington.

Mr. Reed: Mr. Speaker, I’m always amused at the self-righteousness of an ex-smoker.

Mr. Cassidy: Don’t tell us about your hangups.

Mr. Reed: I’ve got some habits too; and I’m an ex-smoker as well, I might add.

Mr. Cassidy: That’s okay.

Mr. Eaton: You are putting it on in weight, Julian, among other things.

Mr. Reed: It always seems that we assuage our sense of guilt about these sinful weeds and the demon rum by cracking a tax on it, we’ll make the smoker pay. It is as if, somehow or other, in increasing these taxes along with these “sinful luxuries” we assuage our sense of guilt.

Mr. Cassidy: Are you defending the ridiculous position of your leader?

Mr. Reed: I wonder if the member for Ottawa Centre ever wondered, or considered the fact, in the same context that he raised it, that the government may be living off the avails in this particular case.

Hon. Mr. Snow: No, Julian, we wouldn’t do that.

Mr. Reed: I wonder whether or not the government, quietly, when it is putting excessive taxes on tobacco and alcohol and so forth, if that amount of revenue is so very important if it is not really living off the avails of sin.

I don’t want to belabour this debate, Mr. Speaker, but I think it’s a pretty well-known fact, in spite of the words of the member for Ottawa Centre, that price increases, particularly in items that are habitually consumed by individuals, whether it be gasoline, electricity, tobacco or whatever, really do not assist in the reduction of consumption over the long run. You can argue it from the righteous point of view as long as you want, but you can never convince anyone that increases in price will assist in conservation or a reduction in smoking.

We go through these debates all the time. We went through them in a select committee, and every conclusion shows that the increase goes on. There is some reduction in consumption temporarily and then, once people get used to the idea, up goes the consumption again.

Mr. Cassidy: That is why it should be part of an overall program.

[9:45]

Mr. Reed: So I would simply say that the position taken so eloquently by my leader a few minutes ago simply indicates a rational approach to taxation in general and we are not going to single out the smoker and suggest, as you have suggested, that it makes us all more righteous to sock the tax to him.

Mr. Cassidy: Who is going to pay the $44 million?

Mr. Reed: Everybody.

Mr. Cassidy: How? Which tax?

Mr. Reed: Okay.

Mr. Acting Speaker: Order, please. Perhaps the hon. member for Halton-Burlington can continue without interruption.

Mr. Reed: Thank you very much, Mr. Speaker. I would just like to say in conclusion that the approach the Liberal Party is taking on this issue is simply reasonable and rational and right.

Ms. Bryden: I would gather that the member for Halton-Burlington was going to increase the income tax or some other tax. You know it’s an old principle of taxation that you should have a variety of taxes in your basket if you want to get revenue, because what people escape in one area they will pay in another; but if you want to put it all on the income tax, you are certainly not going to be able to keep within your eight per cent increase there either.

On the tobacco tax, Mr. Speaker, I think the one thing on which I would like some comment from the ministry is why we appeared to have such a lack of communication, when the tax was imposed and then when it came off again, between the ministry and the public, and the ministry and the retailers, and the ministry and the wholesalers. There was certainly great confusion at that time. A lot of people paid tax, as customers to retailers, when they didn’t have to pay; but they weren’t sure whether the tax had been suspended or not. The ministry didn’t seem to be clear that what happened to a budget when an election was called before the budget was passed, and the wholesalers had already paid tax on a good deal of their inventory and so they were collecting from the retailers even after the tax was no longer in effect, and the retailers were collecting from the customers after the tax was no longer in effect. I think this sort of confusion should have been cleared up very quickly by not only statements to the public from the ministry but also by immediate telegrams to the people concerned so they would know exactly where they stood.

There is now a bulletin out from the ministry telling the retailers and the wholesalers how they can recover what they overpaid or pay what they didn’t pay, but it’s the most complicated mess you ever saw. I think it illustrates the ineptitude of the Ministry of Revenue which has also got quite a record for ineptitude in administration on its home buyer grants and a few other things. This tobacco tax fiasco was a prime example of how not to run tax collection machinery.

As far as whether we should tax tobacco or not is concerned, I feel that it is a serious health problem, and we do have to be spending some money on trying to correct this problem. We don’t just want to have to pick up the pieces afterwards from lung cancer and so on. We need educational programs to convince young people particularly not to start smoking. I don’t think nearly enough money is being spent on that by the government, and I don’t think they are taking that seriously, and I would like to see all cigarette advertising banned.

Mr. Hennessy: The opposition has mentioned that we go by the guidelines. That is a very good suggestion but how are they going to get the $44 million that we will be out?

Mr. S. Smith: Where did the Treasurer find $133 million overnight?

Mr. Acting Speaker: Order, please.

Mr. Hennessy: Perhaps they can hold a tag day for the Liberal Party. It may help. I think that they have a just cause.

Mr. Conway: Liquor tax.

Mr. Hennessy: Well, it’s a possibility. Those guys all use the stuff and perhaps they could help us.

Mr. Conway: Mickey, you know the Irish don’t drink.

Mr. Acting Speaker: Order, please.

Mr. Hennessy: The member never buys anyway. I think that the government has to raise money from some sources. I smoke cigars, not the Cuban brands, the cheap kind, the White Owls. But in all due respect I support the government’s stand. If anybody wants to hold a tag day, we can all get together and raise the $44 million.

Mr. Laughren: Ugandan cigars.

Mr. Makarchuk: We invested $3 million in getting you there.

Mr. Acting Speaker: Order, please.

Mr. Hennessy: I favour the government stand in this.

Mr. Makarchuk: I have just a few notes to the minister and the party in power right now. The next time they bring down a measure that imposes a tax and then dissolve the House and the measure becomes ineffective, for God’s sake, let them send out some instructions to the people out there who have to cope with that problem afterwards.

I was inundated after the election was called with various retailers and wholesalers in the community wondering just what the heck was going on and just exactly what they were supposed to do with the money that in some cases had been paid out and in other cases had not been paid out. There were other cases where the retailer demanded the money, the customer refused to pay the money and there was mass confusion. In the future, perhaps as a word of caution, when the government intends to call an election, for God’s sake let it not bring in these silly taxes ahead of time. Let it wait until it gets its election through and bring them in as it is doing right now.

Mr. G. I. Miller: It gives me pleasure to rise and speak on this tax. I think a lot of people in this House don’t realize that this is an agricultural product produced here and stimulating the economy of a great area of southern Ontario.

Mr. Roy: Represented by a very good member, if I may say so.

Mr. G. I. Miller: Thank you, sir. I am proud to represent the riding of Haldimand-Norfolk. Norfolk county does produce much tobacco. I think the neighbouring counties of our good Treasurer of Ontario also produce a good amount of tobacco. If it stimulates the economy in that area -- and we were talking about assisting business in the last bill -- we are discouraging this particular business by taxing it to the extent that it is being taxed.

Cigarette tax is going up something like 35.9 per cent. For cigars and other types of tobacco, the tax is being increased 100 per cent. I would like to point out the fact that the tobacco industry was operating last year at 46 per cent of its capacity. This year it has been fortunate enough to raise it to 50 per cent of its capacity. In order to stimulate the market, we shouldn’t tax it out of existence. I don’t feel that land is needed for agricultural purposes at this particular point in time, because corn is at $2 a bushel. If they are not producing tobacco, they are going to be producing corn and taking the market away from something else. We ought to take a realistic look at it. We should be encouraging production, rather than discouraging it. Somebody pointed out that you can afford a cigar. I can well recall when a White Owl cigar and a Marguerite were worth 10 cents; today they are worth 25 cents. Since the tax came on they are worth $1.75 for a package of five. The average person can’t afford it. If you see anybody smoking a big cigar, he must have money.

I would like to point out a couple more facts too. The tobacco industry last year produced a $175 million crop at $1 per pound. The tobacco tax amounted to $152 million. This year the tax derived from tobacco will be $210 million. That is more than the revenue returned from the tobacco itself.

Mr. Lewis: You are against mercury, but not the effects of tobacco.

Mr. S. Smith: We are opposed to smoking mercury as well.

Mr. Acting Speaker: Order, please.

Mr. G. I. Miller: Smoking has been going on since time began.

Mr. Acting Speaker: Order, please. Will the hon. members extend the courtesy to the hon. member to complete his debate.

Mr. G. I. Miller: I think that smoking will probably go on for generations. As much as you would like to see it stop, it may never stop.

Mr. Cassidy: Do you think the schools should start teaching against tobacco?

Mr. Lewis: I smoke too.

Mr. G. I. Miller: I think there should be health protection and I think we are taking precautions by putting on filters and this type of thing. It is a protection for health. I think all these packages indicate that precautions should be taken.

But again, it does stimulate our economy; it does stimulate it. It provides a tremendous amount of employment for the areas where it is grown. There is a lot of hard work, there is a lot of investment. There is not only the tax that it generates into the economy --

Mr. Cassidy: This is unbelievable.

Mr. G. I. Miller: -- the tobacco itself, the tax from the product is used, there is the sales tax and all the other taxes connected with the tobacco industry. I think it should deserve some recognition and I would expect the --

Mr. Eaton: Circulate the member for Ottawa Centre’s statement about tobacco.

Mr. G. I. Miller: -- Treasurer of Ontario to take these into consideration rather than tax it out of existence. They should perhaps be stimulating the export market by providing a portion of that tax to get the tobacco crop rolling at its fullest capacity.

I would also like to point out that during the election campaign there was much talk about the tobacco tax that was put on before the election was called and the money that was paid out and couldn’t be refunded or retrieved. It caused a great stir and I think it was unfortunate that the Minister of Revenue couldn’t have seen fit to return that money until the legislation was rightfully in place. I would hope maybe that consideration still could be given to that aspect. I’d like to say that I do support my leader’s comments on the fact --

Mr. Cassidy: You don’t even understand it.

Mr. G. I. Miller: -- that we should tax according to the percentage, the AIB guidelines.

It gives me great pleasure to speak on behalf of the tobacco farmers who contribute so much to the --

Mr. Cassidy: It sure shortens our life expectancies.

Mr. G. I. Miller: -- Ontario economy and I think we should take a realistic look at the tax that’s being put on at this time.

Mr. Eaton: I’d just like to say a word on this tax and particularly on the principle put forth by the Leader of the Opposition in regard to the eight per cent control.

Mr. Roy: Are you for the tax?

Mr. Eaton: In fact he referred to the eight per cent control on municipal taxes as well. And I well remember --

Mr. Reed: Are you opposed to the AIB?

Mr. Eaton: -- I well remember a bill introduced in this House, a private member’s bill introduced by myself, for an eight per cent control on municipal taxes and how the opposition over there scoffed. And you know --

Interjections.

Mr. Conway: But you told us you were going to be Minister of Agriculture too.

Mr. Eaton: -- I introduced that to draw attention to the fact that rent controls were being put on at the time --

Mr. Roy: You made too many promises, Bob.

Mr. Eaton: -- but the controls weren’t on municipal taxes. I knew it couldn’t go through. It was to draw attention to something.

Mr. Conway: You said you were going to be Minister of Agriculture too.

Mr. Eaton: But to see that party come forth with that kind of a policy is absolutely astounding.

Mr. S. Smith: Good.

Mr. Conway: I’m going to smoke the charter; I’m going to get high on the charter.

Mr. Cassidy: You’re getting high, all right.

Mr. Acting Speaker: Order, please. The hon. member for Renfrew North will kindly refrain from interjecting.

An hon. member: And get in your own seat.

Mr. Eaton: You know, to see our municipalities facing, say, a winter where they’ve already spent their eight per cent --

Mr. Cassidy: Did he say he was filibustering or something?

Mr. Eaton: To see a situation where the municipalities had already spent their eight per cent control, the increase that the Liberal leader would so generously give them, and then find that they haven’t any money left to spend and still have the roads to plough. Your member for Huron-Bruce said, “Oh, they’d exempt my county. They’d exempt mine” -- even he doesn’t agree with it.

Mr. Gaunt: We get a heavy snowfall.

Mr. Eaton: I just wanted to point out the ridiculousness, the complete ridiculousness --

Mr. Gaunt: We get a heavy snowfall up in Huron.

Mr. Acting Speaker: Order, please. The hon. member for Halton-Burlington has a point of order.

Mr. Reed: The member is beyond the terms of this bill.

Hon. Mr. McKeough: Oh, nonsense.

Mr. Acting Speaker: The hon. member for Middlesex will continue.

Mr. Roy: Are you for it or against it?

Mr. Eaton: I just would like to point out how ridiculous that kind of a fixed control is, whether it’s on the tobacco tax or on the municipalities -- particularly the municipalities. You know, they talk about local autonomy and then the Liberal leader says he would control them to eight per cent increases --

Mr. Reed: What have the municipalities to do with this bill?

Mr. Acting Speaker: Order, please. The hon. member will return to the principle of the bill.

Mr. Eaton: -- whether it’s on the tobacco tax or on many of the other things he would place the eight per cent control on --

Mr. S. Smith: Come to Hamilton and tell my voters that they should pay more than eight per cent on their property tax.

Mr. Eaton: -- I think his proposal is completely and utterly ridiculous.

[10:00]

Mr. Laughren: I thought the member for Ottawa Centre explained very clearly why it is that we in this party are supporting the bill to increase the tobacco tax. But I think a couple of points need to be made. One, the position of the Liberal Party is simply unbelievable, given the position of their federal counterparts on the price of oil going up at the rate at which it is.

Mr. Reid: Too bad you haven’t got a federal counterpart.

Mr. Laughren: I assume they are supporting the position of their federal Liberal brothers and sisters in Ottawa. Secondly, I assume as well they will divide the House on this bill, seeing they feel so strongly about it.

Thirdly, the point that has been made several times, it is surely irresponsible to talk about reducing a tax in the province of Ontario without explaining what services to the people of Ontario they are going to reduce to a corresponding amount of money.

Mr. Roy: We don’t want to reduce it, we are just opposing it.

Mr. Laughren: I am waiting to hear the Liberal Party position on all the services to the people of Ontario they are going to reduce, services which the people of Ontario have indicated they want, because of their reduction in the kind of revenues we are talking about. It will be very interesting to hear because some day the day of reckoning will arrive and they are going to have to explain it.

Mr. S. Smith: You guys want more spending and more socialism.

Mr. Laughren: The leader of the Liberal Party has his head in the clouds right now but some day that is all going to end.

Mr. Cassidy: That’s right.

Mr. Laughren: The day of reckoning will be here and he is going to have to answer for the irresponsible policies of his party. That day is coming and it is coming a lot faster than he seems to realize it is.

Mr. S. Smith: And some day you think you will be back in these seats.

Mr. Laughren: When we talk about the tobacco tax, which I am attempting to do if I can ignore the interjections, there is a very serious problem that we run into in this party when we attempt to debate an issue as serious as this with the Conservatives or with the Liberals. That is the diversion they always bring in; that is fine and we agree with you in principle, but what about the jobs? Whether we are talking about northwestern Ontario development, whether we are talking about mercury in the river system, whether we are talking about the tobacco tax or whether we are talking about cans, there is always the issue that they bring in that the New Democrats are only concerned about what is right and not what is pragmatic.

Mr. Roy: No, excepting cans.

Mr. Laughren: I would say to you, Mr. Speaker, that in this party we have consistently maintained, if I can quote my leader, and I am sure he will correct me if I misquote him, that politics is the art of the possible.

Mr. S. Smith: What did Dennis McDermott say?

Mr. Laughren: We understand that very clearly. It is simply not fair to talk about a tobacco tax and the dangers of tobacco to health without recognizing the fact that the taxes we collect do not pay for the attendant diseases and problems that we face in society because of the smoking habit. I too am a former smoker and occasionally indulge even now.

To hear the Liberal members talk about the need to stimulate the tobacco industry for export purposes as well as to keep down the taxes here, presumably because of the need to stimulate the industry, is simply not to deal with it as a social problem. We understand very clearly what the problems are in the farm community in this province. We have attempted to deal with that in a very serious way with farm income stabilization, much more so than the Liberal Party has ever attempted to do.

Mr. Eaton: Didn’t you get the message on stabilization?

Mr. Laughren: No, we didn’t get your kind of message, I’ll tell you that.

Mr. Eaton: Hill got the message in Middlesex about stabilization.

Mr. Acting Speaker: Order, please. Perhaps the hon. member for Middlesex will allow the hon. member for Nickel Belt to continue.

Mr. Cassidy: He is over-excited, Mr. Speaker.

Mr. Laughren: I will conclude my remarks, but stay on my feet because I anticipate a division of the House in view of the Liberal position on this bill.

Mr. S. Smith: You can divide the House very easily; just stand up.

Mr. Laughren: Why don’t you? You are opposed to it, not us. Go ahead.

Mr. Mackenzie: I have just two or three comments on this tax, which we support. I talked to some small merchants tonight in my own community. They have raised again with me questions they have raised since the fiasco or confusion or lack of clarity in the on-again, off-again tax and the way it was handled by the Tory government. Some of the small merchants who have already put their claim in and had it in for better than three or four weeks are wondering when they will get their money back where they had prepaid the tax on tobacco products. It would be interesting to know when they will get their money back.

The other point that was raised with me tonight is why are some of the wholesalers who were charging an additional 50 cents a carton in the brief period the tax was on are now asking for, as of today, 53 cents a carton for the cigarettes. I would like some answers to that. Are they entitled to ask for 53 cents or is the tax five cents a package? When will they get their money back that they prepaid in the last brief period the tax was on?

Mr. Roy: I just want to make a few comments about this piece of legislation and possibly rectify some of the inaccuracies coming from the people to my left.

Mr. Cassidy: Where’s the $44 million coming from?

Mr. Roy: First of all, the $44 million that the member for Ottawa Centre keeps talking about. The minister admitted this afternoon that just by looking at the books and rearranging the figures he saved $133 million or something. Actually, if we got into those books imagine how many millions we could save. So that the question of $44 million is not going to be a problem.

Then we bear the pious comment from the frustrated ex-smoker. The member for Ottawa Centre has become so aggressive. I don’t know if it is because he quit smoking or because he got a good run from Brian Cameron in the last election or because he’s no longer the opposition, but there’s a frustration. He appears to be mad at the world.

Mr. Cassidy: How could I be happy?

Mr. Roy: And he’s saying at least some of this money should go for the treatment of people who suffer from tobacco-induced disease. Yet I see nothing earmarked in the budget about channelling some of this $44 million for exactly that purpose. So that is bringing in one aspect of it which, in fact, does not exist. Now, if I may say something about the members to my left, because I find it extremely interesting when they talk about their policy. You know, the thing I found most interesting in the last election --

Mr. Laughren: What about the bill?

Mr. Roy: -- was the approach taken by the NDP on certain of their policies, including this bill.

Interjections.

Mr. Acting Speaker: Perhaps the hon. member would return to the principle of this bill.

Mr. Roy: But I want to give you a little example just to make my point on this bill. The member for Ottawa Centre in talking about this bill says that most of the tax increases -- and I point this out to the Treasurer -- are going to be paid by individuals. That’s some realization. He is the financial critic who dares to walk in here with a striped suit and he finally realizes that it’s individuals who pay taxes in this province. Well, good for you, my good friend. Isn’t that something? Imagine what kind of shape we’d be in if they ever got on the government benches, to finally realize that.

Mr. Cassidy: Don’t talk about my suit until you take off that jacket.

Interjections.

Mr. Roy: You know, it’s really something --

Mr. Acting Speaker: Perhaps the hon. member would return to the principle of this bill.

Mr. Roy: -- but he still has my vote for leader. I still support him for leader.

Hon. Mr. McKeough: How about your money?

Mr. Roy: My money --

Mr. S. Smith: We will make a contribution, and to you. That’s the ticket we want.

Interjections.

Mr. Roy: But if I may say something, Mr. Speaker, about the NDP, one of the members mentioned their so-called consistency approach on the question of jobs. He said it doesn’t matter about jobs, we talk about principles. I just talk about their approach, their flip-flop, for instance, on one of the bills that is coming up, the taxation on cans.

Mr. McClellan: Did you say “flip-flop”?

Mr. Roy: Talk about a flip-flop there.

Mr. Laughren: No, none at all.

Mr. Roy: But you know, the most interesting thing --

Mr. Laughren: You have the patent on flip-flop.

Mr. Roy: -- the most interesting thing, Mr. Speaker, if I may say, and I will be very brief, is that during this whole election -- those guys are beautiful -- I wish we could fight another election with the NDP because I thoroughly enjoyed it when the criticisms used to take place in relation to the corporate welfare bums. Remember that? That’s important, Mr. Speaker.

Mr. Acting Speaker: Order, please. The Speaker doesn’t really understand the relationship of your comments to the principle of the bill.

Mr. Makarchuk: Neither does he.

Mr. Roy: I’m getting to that, Mr. Speaker. The point I wanted to make is, as the member for Ottawa Centre said, that it’s individuals that are going to be paying this tax. But, remember, they used to criticize the corporate welfare bums who were always getting the breaks.

Mr. Cassidy: We still do.

Mr. Roy: Yes, they still do.

Interjections.

Mr. Roy: Yet at the same time they are running after those corporate bums for political donations.

Interjections.

Mr. Acting Speaker: Order, please.

Mr. Roy: Sure, they’re asking for political donations. And they are not going to nationalize anything any more; remember that during the election? Those fellows in that party have lost their virginity; that’s what has happened. It’s unreal.

Mr. Makarchuk: We’re late starters.

Mr. Roy: I just want to say that the point this party is putting forward, and the reason we’re over here and they’re over there, is that we put forward policies which were consistent.

Mr. Cassidy: This is a commercial for Virginia Slims.

Mr. Acting Speaker: Order, please.

Mr. Roy: We supported wage and price controls. The NDP opposed it, and they bragged about that

The point is simply this: If we are saying to the taxpayers of this province that you limit your income or your profits to eight per cent, then government should limit itself to eight per cent. That got through to the people. It didn’t get through to them, but it got through to the people. That’s why we’re here, and we’re being consistent on this bill.

Mr. Laughren: We’ll get through to you one of these days.

Mr. McGuigan: I thank you, Mr. Speaker, for this opportunity at this late hour to add my confession to the many confessions made tonight. Mine is that I do not smoke, nor do I at the moment grow tobacco, although I have grown it in the past.

Interjections.

Mr. McGuigan: There’s just my word on that. Nor do I know the answer to the question of where the taxes would be substituted from. But during the course of the campaign -- and I hope I don’t have to go through that again for a day or two -- I was very impressed by the industry, the neatness and the number of people from tobacco farms that I visited in Kent-Elgin riding. Certainly these people feel that the imposition of a 35 per cent increase in tax is a discriminatory item on their agricultural production; it’s one that is not imposed upon other agricultural products.

I’d like to add my words to those of my colleague who spoke earlier, the member for Haldimand-Norfolk, in defence of the tobacco farmers who regard this as a pressure that will eventually work down to the price of tobacco and the amount of tobacco that is grown.

I’m not going to prolong this debate any further. I would hope that this would not be considered my maiden speech. I would like to do that at an appropriate time --

Mr. Cassidy: You haven’t lost your virginity yet.

Mr. McGuigan: Quite a few years ago.

Mr. Roy: Don’t worry; you have lost yours.

Mr. McGuigan: -- and pay tribute at that time to my predecessor, Mr. Jack Spence.

Mr. Acting Speaker: Is there any further discussion on second reading of the bill?

Mr. Cassidy: Here’s the tobacco lord himself.

Hon. Mr. McKeough: Mr. Speaker, may I say that I have enjoyed this debate today and the discussion on various parts of the budget, and undoubtedly I look forward to tomorrow. My colleague, the Minister of Revenue, the parliamentary assistant to the provincial secretary and I look forward to the discussion of these 14 bills.

I have tried to be as non-provocative --

Mr. Conway: That’s the last premier’s phrase.

Mr. Cassidy: But you are working yourself up.

[10:15]

Hon. Mr. McKeough: I really said, Mr. Speaker, all of us went through an experience for not just 37 days, I think it was 41 or 42. I suppose none of us ever completely recover from those days but sooner or later it’s time to get those feelings off your chest. Some of my friends, particularly on my far right -- your far left, your honour -- got some things off their chest. I just want to say, Mr. Speaker --

Mr. Laughren: Louder.

Hon. Mr. McKeough: I just want to say as simply and as nicely and as unprovocatively, if there is such a word, as I can, that I have never heard anything more simplistic, silly, or fatuous than the speech of the Leader of the Opposition tonight trying to defend his position on an eight per cent increase in this tax. Never in my life.

Mr. Roy: You’d think he was going after you.

Hon. Mr. McKeough: You know, it was great stuff during the election, but to come in here tonight and sheepishly stand up the way he did and try and defend that position -- and I’m told they really don’t want to vote on this. We’ll just have a voice vote, we won’t stand up.

Mr. Cassidy: That’s right. They are really --

Hon. Mr. McKeough: Does the Leader of the Opposition really believe what he said during the campaign or not? The question is, where does the money come from? Where does the money come from?

Interjections.

Hon. Mr. McKeough: A simple, silly proposition --

Interjections.

Mr. Acting Speaker: Order, please.

Hon. Mr. McKeough: -- and he should be put on the spot tonight.

Mr. Acting Speaker: Order, please.

Mr. S. Smith: You got $50 million for an election, didn’t you? Ten million dollars a man.

Mr. Acting Speaker: Order, please.

Hon. Mr. McKeough: I think there are a few things that better go on the record tonight.

Mr. S. Smith: You found $50 million.

Hon. Mr. McKeough: Because you can’t sweet talk your way through this any more, my friend, not any more.

Mr. Acting Speaker: Order, please.

Mr. Gaunt: You can’t talk sweet your way.

Hon. Mr. McKeough: You tried it and it didn’t work. It didn’t work.

Interjections.

Hon. Mr. McKeough: Our expenditures in this province are up by nine per cent. The economy is growing by 12 per cent. Our share is going down. Do you really want to take it up the eight? That’s what you’re advocating.

Mr. S. Smith: Include the municipalities. Include the municipalities.

Hon. Mr. McKeough: That’s what you’re advocating.

Mr. Acting Speaker: Order.

Hon. Mr. McKeough: And we’re giving the municipalities, I say to my friends, we’re giving to the municipalities 12½ per cent more.

Mr. S. Smith: Include what they are taking out of the taxpayer’s pocket.

Hon. Mr. McKeough: Do you think we should limit that to eight per cent? Is that what you’re advocating?

Mr. S. Smith: I’m advocating they not take more than eight per cent out of the taxpayer’s pocket.

Mr. Acting Speaker: Order.

Hon. Mr. McKeough: Are you advocating that we reduce your transfer to --

Mr. S. Smith: No.

Hon. Mr. McKeough: No. That’s it. That’s it. Well, then where does the money come from?

Mr. S. Smith: Don’t take any more from the taxpayer’s pocket.

An hon. member: Show them your guts, Stuart.

Mr. Acting Speaker: Order, please.

Interjections.

Mr. Acting Speaker: Order, please. Order. Order, please. Perhaps we can continue with a more orderly debate.

Mr. Roy: Darcy, tell us about the deficit for the last five years.

Mr. Acting Speaker: Order, please. The hon. minister will continue.

An hon. member: Give or take a billion, Darcy.

Hon. Mr. McKeough: Mr. Speaker, I’m glad we’ve got that on the record. It is now clearly understood that we’re going to limit municipal tax increases to eight per cent.

Mr. Ruston: Off your chest.

Hon. Mr. McKeough: That’s what you said.

Mr. S. Smith: That’s right.

Hon. Mr. McKeough: But we in the province will still pay 12½ and take 12½ per cent out of the provincial taxpayers some way or another. You made a hero of yourself with municipal taxpayers. Where do you think the money’s coming from?

Mr. Makarchuk: That’s the new Social Credit Party.

Mr. Acting Speaker: Order, please. Perhaps we -- Order, please. Order, please. Order.

Interjections.

Mr. Acting Speaker: Order, please. Perhaps we could return to the principle of this particular bill, Bill 10.

Mr. Cassidy: He is squarely on it, Mr. Speaker.

Mr. S. Smith: On a point of order, Mr. Speaker.

An hon. member: Show him your guts, Stuart.

Mr. Acting Speaker: Will the hon. member state his point of order?

Mr. S. Smith: On a point of order, Mr. Speaker, it seems to me that the Treasurer has deviated --

Mr. Cassidy: Force the vote.

Mr. S. Smith: -- from the matter under discussion by referring to my policy on municipal tax increases.

Mr. Eaton: You referred to it yourself.

Mr. S. Smith: The policy is that what we have to do is limit the tax increases to the eight per cent guideline. Naturally what additional money is required would come from the province --

Mr. Acting Speaker: Order, please.

Mr. S. Smith: -- because of the way in which the municipalities are limited to property taxes --

Interjections.

Mr. S. Smith: -- while the province has kept to itself all other forms of taxation. And you know that.

Mr. Acting Speaker: Order, please. Order, please.

Interjections.

Mr. Acting Speaker: Order, please. The Chair has already asked the minister to return to the principle of the bill.

Hon. Mr. McKeough: Mr. Speaker, I do so with pleasure.

Mr. Deans: Shove it back at him. Don’t let him get away with that.

Hon. Mr. McKeough: I do so with pleasure, Mr. Speaker. I don’t enjoy bringing this bill before the House. I recognize the words of my friend from Haldimand-Norfolk; and if my friend from Brant were here tonight, as he was last night much to my regret, he would have spoken on behalf of the tobacco growers of this province. I don’t like raising taxes in this fashion but the money has to come from somewhere.

Mr. S. Smith: You do have some tobacco farmers in Chatham-Kent, don’t you?

Hon. Mr. McKeough: The fact is that we’re reducing taxes by $200 million and raising taxes less than that amount.

Mr. S. Smith: Humbug.

Mr. Roy: You don’t like deficits either, eh?

Hon. Mr. McKeough: We’re taking less from the economy this year than we took last year. I ask my friends opposite to look at the budget. There are the figures. We’re taking less from the economy this year.

Mr. S. Smith: Humbug.

Hon. Mr. McKeough: We’re taking less --

Mr. Reed: Living off the avails of sin.

Mr. S. Smith: Yes, $50 million for an election; $130 million overnight.

Hon. Mr. McKeough: We’re taking less and your friends in Ottawa are taking more. Your friends in Ottawa have been taking more year by year; and we and the municipalities are taking less.

Do you have something to say? Go ahead. Defend yourself. You can’t defend yourself.

Interjections.

Mr. Roy: Tell us about your deficit, Darcy.

Mr. S. Smith: I am not attacking Ottawa. I am attacking you.

Mr. Acting Speaker: Order, please. The motion is for second reading of Bill 10.

Hon. Mr. McKeough: Mr. Speaker, the Leader of the Opposition, of course, said that he was opposed to this bill; and I think a discussion of alternatives is in order.

We’ve reduced personal income taxes in this budget -- we’ve approved that bill, all but third reading -- by some $32 million. We’re reducing the tax -- my colleague will, when we approve that bill, as I’m sure we will -- by something like $25 million in retail sales tax.

I don’t like raising taxes but if it has to come from some place the tobacco tax isn’t a bad place to get it. I suppose there is an alternative, if you listen to the silly, simple nonsense which the Leader of the Opposition would have us believe. He would say do the simple thing, raise taxes eight per cent. Let’s put that on the record, let’s just put that on the record. If you’re going to raise the gasoline tax -- here’s one, we haven’t touched the gasoline tax since 1972.

Mr. S. Smith: That has a lot to do with the tobacco tax.

Hon. Mr. McKeough: Since 1972.

Mr. S. Smith: Read out the property tax.

Hon. Mr. McKeough: Well eight per cent on the gasoline tax -- it doesn’t matter whether they’re high or low, you’d just raise everything by eight per cent, that’s your simple position.

Mr. Cassidy: That is their policy, that’s right.

Mr. S. Smith: Read the Hydro rates for basic light and power; read the OHIP premiums.

Hon. Mr. McKeough: That would raise the gasoline tax to 20.5 cents. He’d raise the personal income tax from 44 points to 47.5 points. He’d raise the corporation income tax from 12 to 13; and I suppose you’d raise the retail sales tax by eight per cent which would take it to 7.5.

Mr. Roy: He is out of order.

Mr. S. Smith: You can suppose what you like, but when we are in your benches you will find out what we do; after the next election.

Mr. Speaker: Order, please.

Hon. Mr. McKeough: That’s the sort of simple, tortuous approach which the Leader of the Opposition took during the campaign. You may have kidded some of the people but you don’t kid us.

Mr. Roy: We would cut your salary, Darcy.

Hon. Mr. McKeough: I think I agree for once tonight with my friends over there; for once.

Mr. Deans: No, no; don’t you dare.

Mr. Cassidy: You are reconsidering your position.

Interjections.

Hon. Mr. McKeough: I say this simply to the Leader of the Opposition. You know how he started off this session, he wanted a leaders’ council so we’d all govern together. Well you’d better start talking sense.

Mr. Deans: For God’s sake, move the hands of the clock.

Hon. Mr. McKeough: When you talk sense the people of the province may listen to you, and you’re not talking sense on this piece of legislation tonight.

Mr. S. Smith: The council would be on national unity.

The House divided on the motion for second reading of Bill 10, which was approved on the following vote:

Ayes

Nays

Baetz Breaugh Brunelle Bryden Cassidy Charlton Cooke Davison (Hamilton Centre) Deans Drea Dukszta Eaton Elgie Foulds Germa Gigantes Grande Gregory Grossman Havrot Hennessy Hodgson Johnson Jones Kennedy Kerr Laughren MacBeth Mackenzie Maeck Makarchuk McCaffrey McCague McClellan McKeough McNeil Miller (Muskoka) Newman (Durham York) Norton Pope Rhodes Rotenberg Scrivener Snow Sterling Swart Taylor (Prince Edward-Lennox) Taylor (Simcoe Centre) Turner Villeneuve Walker Wells Wildman Wiseman -54

Campbell Conway Eakins Edighoffer Gaunt Hall Kerrio McGuigan McKessock Miller (Haldiman-Norfolk) Newman (Windsor-Walkerville) Reed (Halton-Burlington) Reid (Rainy River) Riddell Ruston Smith (Hamilton West) Van Horne Worton-18

Ayes 54; nays 18.

Motion agreed to.

Ordered for third reading.

On motion by Hon. Mr. McKeough, the House adjourned at 10:50 p.m.