The House resumed at 8 p.m.
GIFT TAX REPEAL ACT
Hon. F. S. Miller moved second reading of Bill 48, An Act to repeal the Gift Tax Act, 1972.
Hon. F. S. Miller: Mr. Speaker, in our opinion, having passed the repeal of the Succession Duty Act, it is necessary to repeal the Gift Tax Act, since its reason for being was to prevent a short-circuit of the Succession Duty Act. Therefore, we are repealing this act, with your permission.
Mr. Peterson: Mr. Speaker, we regard this as a companion piece to the bill we debated on Tuesday of this week. Probably the same philosophical and financial arguments apply thereto. I am sure this is not necessarily going to prevent our socialist friends from some degree of repetition; some of them do it fairly eloquently, and I do not even mind on occasion. But at this point my colleagues and I, having accepted the original bill to repeal the Succession Duty Act, accept this bill; I do not think it is necessary to repeat the arguments in favour thereof.
Mr. Laughren: Mr. Speaker, it certainly would have been a jar to my entire metabolism if the member for London Centre had said anything differently from what he did.
Mr. Peterson: Maybe I’ll change that. I would like to jar him.
Mr. Laughren: The member for Muskoka did not have to tell us why he wants to put this bill through; it is obvious why a Gift Tax Act was brought into place in the first place:
If we did not have a gift tax and we had a succession duty, then of course the people would simply give their legacy in the form of a gift before they died, if they could accurately predict when and where that might occur. Obviously there had to be a gift tax to protect the revenues from succession duties.
What we must understand about this bill is that the Gift Tax Act already protected people who wanted to give away money; they could give $10,000 to any one recipient and $50,000 in a year by a donor. There was ample protection there. It was not as though people suddenly were not going to be able to give Christmas gifts; that was obviously not in the purpose of the Gift Tax Act. Over a period of 10 years a person could give away $500,000; now we are going to do away with that entirely.
What the Treasurer and the Liberal Party tried to do the other night on this kind of tax was to deceive us in this chamber and anyone else who might happen to read --
Mr. Peterson: That is highly unparliamentary, Mr. Speaker. He should withdraw that.
Mr. Laughren: Deception is unparliamentary, I say to my friend.
Hon. Mr. Davis: This is the Allan Blakeney legislation.
Mr. Laughren: I want to tell him it is quite appropriate for him to deceive but not appropriate for us to accuse him of deception. I see the game he is playing. I would like to briefly quote from Provincial and Municipal Finances, 1977, put out by the Canadian Tax Foundation, an organization I am sure the Speaker is most familiar with, having practised before the bar, maybe numerous bars.
“In Ontario a system of tax forgiveness eliminates any adverse effect of a succession duty on family incorporated businesses and family working farms, including incorporated farms and family partnerships. Duty is forgiven over five years at the rate of 20 per cent of the duty and interest each year, computed on the market value of the shares of the business or the farm, provided it continues to be owned and operated by members of the deceased’s family.”
All the protection for small businesses and farms was already provided right there. The Liberal members the other night were attempting to deceive us into thinking those people would be hurt. Nothing could be further from the truth, and yet there they were. The Treasurer is party to the whole game of deception as well, but we simply will not buy it.
Mr. Lawlor: Your next move will be the move against capital gains taxation.
Mr. Laughren: Not only that, but the tax which people paid under these acts was already I deductible from the federal capital gains tax they paid. That has been in effect since 1977. Did the Treasurer stand up and say that when he was saying why it was so necessary?
Mr. Lawlor: I don’t think he is aware of that.
Mr. Laughren: He may not have been aware of that, even though he stands up and says, “We can’t have double taxation in the province of Ontario because of the capital gains tax.” The Liberals nod sagely and say, “Yes, that’s true; we can’t have double taxation.”
What a lot of nonsense. This is clearly a case of the other parties not wanting to tax wealth. It is as plain and simple as that. They do not want to tax wealth.
Mr. Kerrio: Put yourself in our shoes. Who would you support if you had to support the government or your gang?
Mr. McClellan: Try being your own man for once, Vince.
Mr. Laughren: If we could convince the member for Niagara Falls that his talents are required elsewhere we would all benefit, except the people he went to help.
Mr. Worton: If you had nothing you wouldn’t mind giving it away.
Mr. Laughren: That is a very interesting interjection; another Liberal says, “If you had nothing, you wouldn’t mind giving it away.”
Mr. Worton: That’s right.
Mr. Kerrio: NDP policy.
Mr. Laughren: Isn’t that interesting. That is exactly the point, isn’t it? The majority of the people out there don’t have anything to give away, but you are protecting the ones who do. That is exactly what you are doing. Don’t tell me that people who are getting protection are the ones who need protection.
Mr. Kerrio: If you could pick anywhere in the world, where would you go from here?
Mr. McClellan: Why should he leave here? Why should anybody leave here?
Interjections.
Mr. Acting Speaker: The member for Nickel Belt wants to be serious. May we have a little order for him?
Mr. Kerrio: Certainly.
Mr. Laughren: It is going to be doubly difficult, with the member for Niagara Falls and the Premier here at the same time, being serious about any issue in this chamber.
Hon. Mr. Davis: Now, Floyd, that is not polite.
Mr. Hennessy: What about your leader for the past three months?
Mr. Laughren: The Premier has refused to address any issue seriously in the last month.
Mr. Kerrio: When you can’t stand the heat get out of the kitchen.
Mr. Acting Speaker: The subject of the bill is to repeal the Gift Tax Act.
Hon. Mr. Davis: Take a look at the questions.
Mr. Laughren: Yes, we have looked at the questions. The Premier should be looking at them too.
Mr. Makarchuk: You have been taking lessons from Pierre, you know.
Hon. Mr. Davis: Who?
Mr. Makarchuk: Pierre.
Hon. Mr. Davis: Who?
Mr. Martel: That’s Joe you are talking about.
Mr. Makarchuk: Not Joe, Pierre, he is having a tough time living that down.
Mr. Laughren: I did not for a moment think the Premier entered the chamber tonight to seriously engage in or listen to the debate. That never entered my mind; nor did it enter the Premier’s mind. I have no illusions about why he came into the chamber tonight. It was not to engage in the debate, was it?
Hon. Mr. Davis: I came to listen to the member.
Mr. Laughren: Did the Premier come in to engage in the debate? No; only if he is abused to the point where he feels he has to do so to maintain any honour.
Mr. Acting Speaker: Will the honourable member please return to the repeal of the Gift Tax Act and I will try to control the House.
Mr. Laughren: If the others will stop abusing me, I will get back to the bill.
Mr. Peterson: Why is the member for Nickel Belt so testy tonight?
Mr. Laughren: I am testy tonight. When I think about the debate the other night on the succession duty tax and the arguments that were used by the Treasurer and by the official opposition, I get angry all over again.
Mr. Hennessy: An angry young man.
Mr. Martel: The Liberals the other night changed their position again.
Mr. Laughren: Well, it is true. The performance of the Premier during question period in the past month has been deplorable, absolutely deplorable.
Mr. Laughren: It was a pretty shabby performance.
Mr. Martel: They voted against succession duty in 1973 and 1974.
Mr. Lawlor: The feds step out of the whole field and make room for you guys so that you could get a little money. What do you do? You abolish it immediately afterwards so that there is none for anybody.
Mr. Laughren: My colleague from Lakeshore made the one intelligent interjection of the evening.
Mr. Kerrio: He’s really suffering too.
Mr. Laughren: He’s absolutely right. The feds did stand aside and this government was supposed to take up the tax room that was left but the Treasurer abolished it and stepped out of it. It is not as though we were protecting a single person who needs protection. The people who are getting protection because of the abolishment of these two bills are people who need no protection from this government or anybody else.
Mr. Kerrio: They only make the country go; that’s all.
Mr. Laughren: There were lots of exemptions under the existing legislation without abolishing this legislation. For example, in the gift tax exemption, for $25,000 or less there was a 15 per cent tax; over $25,000 and up to $50,000, it was 37.5 per cent plus 20 per cent on the next $25,000. There were lots of exemptions. I could go right through the list up to $200,000. There were lots of exemptions there under the existing legislation and there was no need for the Treasurer to abolish either of these bills.
I understand the difficulty of maintaining one of the bills without the other; that’s why they are companion bills. But there is no justification whatsoever for it. I said before that the abolishment of these bills is not protecting people who need protection. I look at a very quick list of income tax shelters available to people who have the kind of discretionary incomes to invest in them. I look at the multiple-unit residential buildings program, MURBs as they are known, capital gains, RRSPs, RHOPs, BPPCs -- that’s registered pension plan contributions -- return preferred stocks and the interest income deduction program. There are more exemptions and protections there than they need for people who have income, particularly when they have already got exemptions under gift tax and succession duties as well.
Here we have the Treasurer saying to the people of Ontario, the vast majority of whom don’t have any opportunity even to take advantage of these things, “We haven’t given you enough; we’re going to give you more.” That’s what he’s saying. We can’t buy that kind of argument at all. The Treasurer at some point along the way is going to have some answering to do for this budget.
My own suspicion is that because of the federal election which is under way now the Treasurer has got off very lightly on his budget because of the kind of budget he has brought down. If we were not in the middle of a federal election, he would be feeling the heat a great deal more than he is now because that is a bad budget. One of the worst parts of the whole budget was the abolition of succession duties and gift taxes. There was simply no economic or social justification for the abolishment of those taxes.
I know the Treasurer sneers at egalitarianism. He stood up the other night and said he was most proud of the fact that the people who have high incomes were getting more. He stood up for his response the other night and said that. He is quite proud that people in the top three per cent are getting even more protection than they had before because of the abolition of this tax. It defies my being able to describe it without obscenities that, because the top three per cent of estates are being taxed, he says that’s too much. He abolishes that even. That takes some kind of chutzpah, and the Treasurer has it. The Treasurer cries about the hardship of those people who --
[8:15]
Mr. Bradley: Party of privilege, that’s the Tories.
Mr. Laughren: -- receive the benefits of the state -- or gifts, I suppose he would use the same argument -- but doesn’t talk about the exemptions. That’s what I call deception.
He talks about the hardships without saying the exemptions look after any of those possible hardship cases where a family business is passed on or a family farm is passed on. The Treasurer doesn’t tell us that when he stands up, does he? No. He’s hoping that people will either forget or won’t pursue it with him.
Of course, if this Treasurer has one ace in the hole when it comes to introducing regressive legislation or abolishing progressive legislation, it’s the Liberal Party in this province. They can always be counted to support anything regressive and to aid in abolishing anything progressive.
Mr. Kerrio: Thank God for sane people. Common sense will prevail.
Mr. Charlton: Mr. Speaker, I would like to rise and join my colleague, the member for Nickel Belt, in opposition to this bill, and take a slightly different tack to the withdrawal or the abolition of this tax.
My colleague in his comments mentioned a number of times the negative, regressive nature of the Treasurer’s budget. I would like to go into that a little bit further in relation to this bill.
This bill, along with the succession duties bill and the repeal of those two taxes, is costing this government tax dollars. We saw a whole list of other taxes increased, every one of which affected the people at the bottom of the scale most severely, the people who could least afford it.
But with the repeal of this tax and the succession duties tax, we only see a benefit to those at the very top end of the scale, those who don’t need any protection, those who have no financial problems, those who will smile more broadly because of the assistance as they walk to the bank. But all of the tax increases in the budget affected consumers from the top of the scale to the bottom of the scale and affected those consumers at the bottom end of the scale most severely.
The repeal of this tax and the repeal of the succession duties tax on Tuesday point very clearly to this government’s attitude and this Treasurer’s attitude; they point very clearly to their approach to the problems of average and low-income people in this province and the plight they face in being able to afford the ever-increasing tax burden.
Their own federal leader runs around this country telling people we need to put money back into the hands of consumers, yet everything they do is in contradiction to that. It makes it very difficult to believe a Tory now, or at any point, in terms of economic strategy,
Mr. Martel: Very well put.
Mr. Charlton: It’s just not acceptable to debate --
Mr. Martel: With a head start.
Mr. Charlton: -- this gift tax bill in isolation as has been said by the other participants in this debate. First of all, it’s a companion bill to the succession duties tax and secondly, it’s a part of this government’s approach in the budget, an approach which is just not acceptable in this time of economic hardship. It’s just not acceptable to the people of Ontario in terms of the kind of economic leadership and economic assistance they need.
So with that, Mr. Speaker, I’ll end what I have to say by emphasizing that the reason why we’re opposing this bill and why we opposed the succession duties bill on Tuesday night is because of the regressive nature of what had to happen to replace those tax dollars in this budget.
Mr. Acting Speaker: Is there any other member who wishes to speak? If not, I will call upon the Treasurer.
Hon. F. S. Miller: Mr. Speaker, I have no Comments.
The House divided on Hon. F. S. Miller’s motion for second reading of Bill 48, which was approved on the following vote:
Ayes
Belanger; Bernier; Birch; Blundy; Bradley; Brunelle; Campbell; Cunningham; Cureatz; Davis; Eaton; Elgie; Epp; Gaunt; Gregory; Hall; Havrot; Hennessy; Hodgson.
Johnson, J.; Kerr; Kerrio; Lane; Maeck; Mancini; McCaffrey; McCague; McGuigan; McNeil; Miller, F. S.; Miller, C. I.; Newman, B.; Newman, W.; Nixon; Norton; Parrott; Peterson.
Ramsay; Riddell; Rotenberg; Rowe; Roy; Ruston; Smith, G. E.; Snow; Sterling; Van Home; Villeneuve; Walker; Watson; Welch; Williams; Wiseman; Worton.
Nays
Charlton; Cooke; Davidson, M.; Davison, M. N.; Foulds; Gigantes; Isaacs; Johnston, R. F.; Laughren; MacDonald; Mackenzie; Makarchuk; Martel; Samis; Swart; Warner; Wildman; Young.
Ayes 54; nays 18.
Ordered for third reading.
[9:15]
THIRD READING
The House divided on Hon. F. S. Miller’s motion for third reading of Bill 48, which was agreed to on the same vote.
ONTARIO LOAN ACT
Hon. F. S. Miller moved second reading of Bill 50, An Act to authorize the Raising of Money on the Credit of the Consolidated Revenue Fund.
Hon. F. S. Miller: Mr. Speaker, I’d be glad to make some comments on this bill. It is a routine annual bill but this year we’ve made some changes in the act that incorporate recommendations the public accounts committee suggested a year ago. That is there is an expiry date for the borrowing of the funds authorized in this bill rather than an open date. I would say that really is the most important of the changes in the bill itself.
Mr. Peterson: We’ll let the hockey fans empty out of the House. Mr. Speaker, I must say, just by way of preamble, I’m very disappointed, as a member of this Legislature, to have had to sit here for an hour tonight waiting for a bell on that last bill, just because a particular member happens to be a little cranky and subjects all the rest of us to that kind of thing.
I’m just a little tired of it. They take an hour and they go out and whip 18 members back into the House.
Mr. Martel: Mr. Speaker on a point of order: I believe the rules of the Legislature allow for divisions and an opportunity for members to be brought back in. As the government House leader well knows, and as the Liberal House leader knows, we calculated this bill would come in for a division approximately between 8:45 and 9 o’clock.
Mr. Nixon: Eight-thirty was the number I gave.
Mr. Martel: Well it might have been the number the member gave. He hasn’t been known to be right before anyway.
I’d like to say, Mr. Speaker, that was what the whips were told and so, consequently, the members were advised of approximately the time they should return to the Legislature. I think the clown who just spoke, should withdraw his comments about my colleague.
Mr. Speaker: The member for London Centre has the floor on Bill 50.
Mr. Peterson: I say there’s just a limit to how much this House has to put up with because of the petulance of one little particular member.
Mr. Speaker: Order!
Mr. Peterson: It’s the kind of self-centred-ness that party collectively exhibits on --
Mr. Speaker: Bill 50, please.
Mr. Peterson: And even though there is the odd --
Interjections.
Mr. Speaker: If you have a contribution to make on Bill 50, I suggest you do it right now or I will recognize another member.
Mr. Peterson: I do have a contribution to make, Mr. Speaker but I was speaking to the member for Sudbury East’s point of order, which you allowed in its totality.
Mr. Speaker: Do we have a member of the Legislature who would like to speak to second reading of Bill 50?
Mr. Foulds: A point of order.
Mr. Speaker: There is no point of order. There is nothing out of order.
Mr. Peterson: Well, on the point of order --
Mr. Speaker: There is nothing out of order.
Mr. Peterson: Then you should have ruled him out of order at the time.
Mr. Speaker: There is nothing out of order. He was responding to your ill-advised point of order.
Mr. Peterson: I wasn’t speaking on a point of order; I was speaking on the debate, Mr. Speaker.
Mr. Speaker: No, you are not. If you don’t proceed with it now, I will recognize another member.
Mr. Peterson: I am going to forthwith, immediately, Mr. Speaker.
I want to speak to Bill 50 which, as the honourable Treasurer has pointed out is a routine bill. It is an annual bill; we face it every year and frequently it is passed over as another piece of housekeeping legislation, even though, interestingly enough, over the years some very interesting debates have transpired around this particular bill. I remind you that it was my colleague, the former member of the Liberal Party, who --
An hon. member: Former member?
Mr. Nixon: I may join up again.
Mr. Peterson: -- brought to this House the government’s intention of borrowing in German marks and forced the Treasurer of the day, one Charles McNaughton, to at least tell the House what he was doing in Germany and what he was planning on borrowing. He was warned subsequently against that.
I discussed this to some extent in my budget response, but interestingly enough, so far we have already lost something like $28 million in exchange losses on that loan. That is just one example of the vicissitudes of borrowing in the foreign marketplace. Our exposure today is something, as I recall, over $100 million for the province of Ontario if those loans had to be paid off today.
And that is not speaking about the massive Hydro debt. As I recall, Mr. Speaker, if that Hydro debt for which the province is responsible had to be paid back today, it would increase the province’s exposure some $924 million; close to another billion dollars in exchange losses, if one is playing in those kinds of marketplaces.
This bill is a little bit different because what it does is authorize the internal borrowing of funds. We are borrowing a maximum of $1.6 billion. I am very happy to see the time limit on it this year; it is a progressive move. The Treasurer is responding to the advice and to the beseeching of the provincial auditor on this matter. But we are borrowing from the Canada Pension Plan, from the CMHC waste and control loans, and the teachers’ superannuation fund.
Believe me, Mr. Speaker, this bill is fraught with difficulties -- the procedure and the past behaviour of this government. We are quickly running out of time with this kind of borrowing practice. Five years from now the Treasurer will not be able to bring this kind of bill to the House because there will be no more money. He is going to be in a net cash-flow deficit position with those funds, at least with the Canada Pension Plan. He is going to be paying back more than he can borrow.
Every serious observer of this scene says we are necessarily headed to a very difficult situation. The former Treasurer acknowledged this on more than one occasion, but he never could do anything about it. He talked about increasing contribution rates on CPP, he alluded to the fact that we are going to face a financing crisis in the 1980s. I have tried within the limits of my powers of persuasion to convince this Treasurer that he, or whoever is the Treasurer in the 1980s, is facing a massive problem of financing in this province. As yet I have seen no evidence that he understands it, and if he does understand it, that he has done anything whatsoever about it. I find that quite alarming.
I would at least like to see the start of a public debate about the nature of the financing of this province sometime in the 1980s. The classic response is, “Well, we will wait for the response of the Haley commission.” That was supposed to be out this month, as I recall, and now I gather it is going to be out next fall and we are not even sure about that. The Minister of Consumer and Commercial Relations told me today to the best of his knowledge it is probably coming out sometime in the fall. And this is in the wake of a lot of very serious people looking at this issue.
We have had the Confirentes report in Quebec which addressed itself to borrowing by the province as well as other aspects of the pension program. We have had various submissions to the federal government. Some governments are starting to address their minds seriously to this issue. What we are doing is putting ourselves progressively every year into a larger hole. In the 1975 budget, 6.9 per cent of our budget was in interest; in 1976, 7.6 per cent; in 1977, eight per cent; in 1978, 8.8 per cent and in 1979, 9.2 per cent.
The only thing we know for sure about the budgeting practice of this province is that interest payments as a percentage of expenditures are necessarily growing year by year, and that necessarily, as it has this year and will next year and did last year, leads to higher taxation. And necessarily, as interest payments increase, the transfers to pay off our debt for money already borrowed increase. We know for a fact that transfers to the various other jurisdictions under the province of Ontario -- to health care, to education or whatever -- are necessarily going to be squeezed and necessarily occupy a smaller percentage of the overall budget. That is one of the reasons we are seeing the tremendous squeeze in social services, health care and many other services of this province, when the transfers are below the effective rate of increase in inflation. We are necessarily, as a result thereof, seeing cutbacks and a serious squeeze in many parts of this province.
I say very seriously one of the important reasons this is happening is that we are having to honour our debts of the past; obviously we cannot renege on them. What we have done in this generation of government -- of the Davis-McKeough-White now Miller government -- is to continue on this excessive path with no recognition of what is going to happen in the future.
Even though this bill is treated as a routine bill, it is far more important to the province and the people of this province than the two bills we have just discussed, the Gift Tax Repeal Act and the Succession Duty Repeal Act. It is more important to the future of this province than those two bills, even though those two bills invite far more interest and even though those bills incite the passions a little more and get a few people a little more cranky and a little more upset where people divide on philosophical grounds or whatever.
Mr. Foulds: I thought second reading was for debate. It’s too bad the Treasurer didn’t debate the last bill.
Mr. Peterson: Serious people are saying, “Look, we are going to have to address our minds to it.” The Treasurer, as a long-term fiscal planner, is going to have to come up with some answers. I know he is new on the job. This is his first time. Just today I was looking at the debate we had a year ago with the former Treasurer, Darcy McKeough. I was prophetic. I say so with some degree of humility.
I said then, and I quote myself: “In our budget responses some six weeks ago, I predicted then the start of a demise and the decline of the Treasurer.” Was I prophetic? I was prophetic.
Mr. Nixon: Where is he now?
Mr. Peterson: Everything we said then has proved subsequently to be true. The former Treasurer did understand, even though he did nothing about it, some of these problems. He could see the forces conspiring against him. He could see his predictions were not going to come true. He could see the money was: not going to be there. He could see his dream of balancing the budget, part of the great Brampton charter, was going to be an impossibility. He could see his ridiculous attempt to increase OHIP premiums at that time was not going to wash with this Legislature. As a result, I have no doubt, he lost his personal clout in cabinet and he lost his own efficiency and ability to influence the course of events in this province --
Mr. Nixon: That is what is happening to the Minister of Transportation and Communications (Mr. Snow) right now.
Mr. Peterson: -- because he was part of the creation of a series of events and numbers that overtook even him. We are looking to the new Treasurer -- God bless him, he is a nice fellow --
Mr. Nixon: You are going too far.
Mr. Peterson: -- to address seriously some of these issues of long-term financing, because when one extrapolates the trends and when one looks at them, one knows we are headed for some trouble.
This Treasurer has adopted some of the techniques of the former Treasurer. He is confusing net cash requirements with deficit He has successfully confused the majority of the editorial writers in this province, They all say, “A wonderful fellow, Frank Miller, the deficit is $1,153,000,000.” But that’s not true; the deficit is $1.7 billion. There has been a $38 million improvement in the budgetary process of this province this year.
[9:30]
He is using the same devices as before, fiddling with the below-the-line transactions, the non-budgetary transactions. He is taking them into current income to obfuscate the amount of the current account deficit -- mortgages he is going to sell off, more assets of the province of $100 million, and of course patriating his $105 million investment in Syncrude.
Mr. Nixon: Burning the furniture to heat the house.
Mr. Peterson: All of those are fine. I’m not against that. But what I am saying is that there are limits to that. Last year when I was asked the question, “Will McKeough balance the budget by 1981?” I said there is only one way he could do it the way he runs the province, and that is to sell off the furniture. He could sell off the Robarts library; he could sell off this building if anybody would buy it. There are a few other assets.
One of the things the Treasurer should start thinking about is selling off some of that $600 million or $700 million worth of land the government acquired which is sitting growing poplar trees and lying fallow. That was a classically terrible mistake of this government. All of those nonproductive assets are accumulating interest on an annual basis, and that is part of the legacy of debt we have inherited today.
Back to my earlier suggestion: The Treasurer said that our net cash requirements are $1,153,000,000; I say the real deficit is $1.7 billion. But if that is the case, if he is right, why is he, with a net cash requirement of $1,153,000,000, borrowing over $1.5 billion? In fact, he is borrowing $1,544,000,000 this year. He is borrowing much more than his net cash requirements. That has to trigger something in even the most average of minds. Some of my friends in the NDP may understand it when I put it in those terms.
Why is he borrowing $300 million, $400 million or $500 million more than his net cash requirements? What is happening is that he is trying to make up for another way that be obfuscated the figures last year by retiring some of the treasury bills from the $195 million worth of treasury bills he took out saying at that point with a firm commitment, we would go to the marketplace for no more public borrowing.
After that be ran into a revenue squeeze and because of 12 successive quarters of irresponsible and wrong predictions he had to go to the public market and increase his treasury bill offering on a weekly basis to bring in another $195 million worth of revenue that year. And now he is going to try to retire them. That was after a firm commitment from the Treasurer of that day that he would go to the marketplace for no more public money.
This Treasurer tried to obfuscate that a little. He said no more public “debenture” borrowing. He snuck that little word into his statement. But in fact they violated a tenet that was held very close to their hearts. They were so proud of the fact that since 1975 they had not gone to the public marketplace for any more money; but they did last year. The Treasurer is going to have to speak to that I am sure, in a moment.
This is an alarming trend. We are seeing the biggest single increased expenditure in the budget this year is 12.5 per cent for debt servicing; it is now close to $1.4 billion a year, adding up to about $3.8 million a year. We know for a fact that is going to be up next year. Probably in the order of 10 per cent of the budget next year will go to interest. We know that now. And probably that is going to run in the order of $4.5 million a day as opposed to $3.8 million this year, to pay off that interest of the past.
We can predict also with some certainty an increase in taxation. There is no other way. This government is not prepared to cut back in expenditures. It hasn’t done so in the past; it has built up a legacy of debt in the past that we have to honour. We know for certain with this government, that necessarily, year by year, we are going to have an increase in taxation.
One of the problems is that this money has been available to borrow. Probably the biggest corruption that came about in provincial financing in most of the provinces, not all of them, in different degrees -- Quebec has been far more responsible in handling its provincial pension fund borrowings than Ontario -- the fact that this money was available at all, in my view, has created a major distortion for which we are going to pay a price in the future.
John Robarts in those days could see a big pot of money would be available to the province to borrow, and so he borrowed it. And part of the preconditions of his going into the Canada Pension Plan -- because it is a provincial jurisdiction under the BNA Act -- was that the provinces would be able to borrow that money back.
This year we’re going to borrow about $960 million from CPP. We’re going to have to pay them back about $600 million or $700 million on money we’ve already borrowed. We know, and we’ve already established in this House, we’re going to go into a negative cash-flow position in about 1982 or 1983.
But all this big pot of money was available -- this big pot from the teachers’ superannuation fund -- for which they paid less than market interest rates. Still, out of $2.5 billion they owe the teachers’ superannuation fund, about 28 per cent of that portfolio is in six per cent money, paying the teachers far below what market rates would get at this particular time.
Had they allowed that money to be used in the marketplace; had they treated it as responsible fund managers would, the unfunded liability in that teachers’ superannuation fund of about $1.5 billion to $6 billion, according to the 1977 actuarial notes -- that’s not the real actuarial update; the last real evaluation was in 1975, although they have looked at the fund in 1976 and 1977, under pressure from some of the members of this House.
Still, had that money stayed in that fund and been used in the private marketplace, there would be much less of an unfunded liability and the taxpayers of this province would not have to cough up as much money in the future as they are going to have to now.
Those funds have created the great distortion. I have advanced before in this House the availability-fed demand thesis. They looked at how much money was available to borrow; they borrowed; and they spent it. Now, as we head into the 1980s, that money is not going to be available. I have no idea what the Treasurer of this province has planned to finance the deficit that he’s become so accustomed to running on an annual basis.
Even the Ontario Economic Council, a responsible body in most respects, has advanced the same availability-fed demand thesis, saying there is no incentive for the Treasurer of this province to balance the budget as long as he can borrow all this money and without having to go to the marketplace.
But it does say this, because it has a long-term, responsible view. Knowing the shortage of capital in the markets of this country, heading into the 1980s, and knowing the massive amounts of money we’re going to have to spend to keep our capital infrastructure built up in this country, it says this:
“As the level of government investment gradually accelerates, led by energy and resource development, the need will arise to redirect a larger percentage of domestic savings from the government to the private sector and from short-term investment instruments to long-term investment instruments more suitable for financing long-term capital investments.”
“An increased flow of private savings from the public to the private sector could be encouraged in several ways. The largest flow to the government sector occurs through the medium of the Canada Pension Plan. Consideration should be given to depositing at least a portion of the net contributions to a special trusteed fund in each province to be available to the private sector on a competitive bid basis. To ensure the maximum availability of such funds to finance business capital investment, it might be desirable to limit the use of such funds to equities or debts with terms of 10 years or longer.”
What they are recognizing very clearly is that we are going to have to liberate some of these moneys we have spent in the public purse in order to build the kinds of projects we need in this country.
As I alluded to earlier, Quebec has been far more successful, through the caisse de depots system. They have taken about 30 per cent of the eligible moneys they could have borrowed and spent on current consumption or to make up for the deficit, and spent it on productive capital, investing in banks, investing in business and building a capital infrastructure for that province.
Had we done that, there are studies available that say had we built the capital infrastructure, had we invested in companies and plants, machinery and capital here, our unemployment rate would be less, there would be more real income. All the economic indicators and some of the problems we are facing in this province would be much less than they are today.
They’re some of the examples of the short-term greed of this province. And 10 years ago, that was the problem. It was almost like putting a bottle of whisky in front of an alcoholic, when you put those funds in front of this government, because they spent every single penny with no regard to the future. And they’re doing it again this year.
Mr. Kerrio: You spend every penny, Frank.
Mr. Peterson: Frankly, it disturbs me very greatly to have to vote for this. I would vote against it, except that it would cause an election and that is the only conceivable reason for not voting against it. That is another different and separate issue. But it bothers me very greatly to see how this government has treated this issue. We have questioned it in the House. My friends have questioned it in the House. We have questioned this Treasurer and other Treasurers. But I have yet to see either a recognition of the seriousness of the problem or any kind of feeling about what they’re going to do about it beyond saying, “Yes, it’s a problem, and we’ve got to think of something to do sometime.”
If I could do anything, if I could impress upon this Treasurer just one or two things, I would have to tell him about the seriousness of the pension crisis from a macroeconomic sense. I would talk of the serious distortions that are brought into this province and that he has to address his mind to these long-run problems and the sooner he does it the better.
Every solution to this problem is unattractive. I cannot, for the life of me, devise a simple solution. I can’t see anything that is going to be easy. But if we don’t start now and ease our way into it, then 10 years from now it’s going to be apocalyptic. It’s going to be almost impossible to handle, and there’s not going to be anything we can do short of some major kinds of defaults.
And it’s not as if the evidence is beyond us. Good Lord, New York City went into default -- for a myriad of reasons obviously, but principally because they had become overextended in their pension funds. They created obligations they couldn’t honour -- subsidizing the middle classes. It wasn’t because it was a welfare situation. It was because of the middle-class ripoff and because they created obligations they just couldn’t sustain.
Mr. Laughren: This is going to be a new slogan for the Liberal Party -- a middle-class ripoff.
Mr. Peterson: We are heading in that direction, and it’s coming probably sooner than we like. It’s too bad we got into the habits that we’re in, but had the Treasurer been subjected to the disciplines of the marketplace 10 years ago, if he had to go out and compete against General Motors and Inco and all the other sort of people wanting cash in the marketplace, pay competitive rates, then I suggest that this government would have been substantially more responsible than they have been heretofore. It was like giving whisky to an alcoholic. It was like giving catnip to a cat. We have seen just irresponsible behaviour with this money.
Mr. Mancini: Why don’t you resign?
Mr. Peterson: It saddens me a great deal. I have suggested some of the solutions, all of which I said would be difficult.
Mr. Kerrio: Do the honourable thing, Frank.
Mr. Peterson: But I say to the Treasurer very seriously, if he comes back to this House recognizing a comprehension of the problem and some solutions to this problem, I’m sure he would get the full co-operation of all the responsible members of this House.
Mr. Kerrio: That leaves out the NDP.
Mr. Peterson: It better be done sooner rather than later.
Mr. Mancini: They’re not responsible anyway.
Mr. Peterson: It is with a heavy heart and with a great deal of sadness that we support this bill. I think it’s far more serious than housekeeping.
Mr. Hennessy: A heavy head.
Mr. Peterson: I think it’s far more serious to those who come after us and many, many of the pieces of legislation that come through this House. I say only I am looking for some recognition of the problem by the Treasurer and, hopefully, some solutions.
Mr. Laughren: I notice the Treasurer is keeping notes. It might even mean that he is going to lower himself to take part in the debate at the conclusion of the opposition remarks.
I must say that it does take courage for a Liberal to harangue a Conservative about government deficits. Of course, if one is an Ontario Liberal rather than a federal Liberal I guess it comes a little easier.
[9:45]
Mr. Kerrio: You socialists know what deficits are all about. Wherever you form a government you have the biggest in the world.
Mr. McClellan: That’s fortunately not true.
Mr. Mancini: Fortunately, you don’t form governments in too many places.
Mr. Kerrio: Just go over to Britain and see.
Mr. Laughren: I’m trying to be non-provocative, Mr. Speaker. I’ll continue.
The New Democrats have always looked at deficit financing by governments in a very serious way. We’ve always said you can draw a comparison between running a government and running a home, a household, a family, in that the amount of debt must be in relation to the ability to pay. Just as people have higher mortgages on their homes now than they did 20 years ago, so are their incomes substantially higher.
It's true, of course, that the provincial debt, as a ratio to the provincial budget, has indeed gone up in the last four years from something under seven per cent to a little over nine per cent. That is a substantial increase when we’re talking about that kind of money.
On the other hand, the province of Ontario, by incurring its large debt, has undoubtedly built up a fairly substantial reservoir of socially useful assets.
Mr. Peterson: Vacant land.
Mr. Laughren: I’m talking about schools, and I’m talking about hospitals and roads; that is a responsible use of debt.
The member talks about land. We have always believed that there should be land-banking in the province of Ontario. There are funds available from the federal government to the provinces, and the provincial government can co-operate with the municipalities to have land-banking. We see that as a responsible use of deficit financing as well. It’s building for the future; that’s the kind of thing we would endorse.
What has happened, of course, is that while the public sector has engaged in a great deal of deficit financing, the Treasurer should take a look at the behaviour of the private sector. Whereas we have increased substantially the public assets in Ontario, and we have some of the finest in Canada --
Interjections.
Mr. Laughren: I’m setting you up. Just wait for it.
Hon. Mr. Davis: I’m glad to see you’re smiling.
Mr. Hennessy: A hit man.
Mr. Laughren: I want to tell the Premier it was the Treasurer who made me cranky by an arrogant display not even bothering to debate what we regard as a substantial bill.
Hon. F. S. Miller: We debated it last night.
Mr. Laughren: We did not debate it last night. There is no rule of the House that the Treasurer has to debate; I understand, that’s fine. He can sit there and smirk while a substantial bill goes through if he likes.
Mr. Kerrio: Just like your responsibility when it comes time to vote tonight; you sat out in the hall like a poisoned pup.
Mr. Hennessy: That’s it; give it to him.
Mr. Mancini: You were pouting out in the hall.
Mr. Laughren: What I started to say was that while the province of Ontario has invested substantially in public assets, the Treasurer and his predecessors have also presided over the private sector, which has not been responsible about reinvesting in this province. The industrial machine in Ontario has been allowed to run down. It’s not dead yet, but it has run down substantially.
It bothered me a great deal to see the Treasurer and the Minister of Industry and Tourism (Mr. Grossman) over in England trying to sell off more of Ontario --
Interjection.
Mr. Laughren: -- and the Premier is trying to sell us to Japan; and so it goes.
Mr. Hennessy: You’re trying to sell us to Russia.
Mr. Kerrio: They were over there studying Margaret Thatcher. That’s what they were doing.
Mr. Laughren: Now the minister is going to Japan to further exacerbate the problem. So there has been an irresponsible component in the whole supervision of Ontario’s Treasurers too, in that they have presided over the deindustrialization of Ontario. That’s not even my language, that’s the language of the people of the Science Council of Canada who are saying that about this province. We are the industrial heart of this country and we have an obligation that goes beyond the borders of Ontario.
Perhaps the Treasurer could share with us this evening some of his plans as to how he intends to start the rebuilding process, because surely the debt of the province of Ontario can be used partly to do that. Whether or not he is looking at the province in the long term and seeing how we rebuild it rather than just sell it -- we can always sell off our assets, I guess, but that’s a pretty sad way to rebuild the Ontario economy.
The Treasurer and his colleagues play the odd game, too, as to how they’re going to reduce the debt in Ontario. In the budget speech, which I could quote if I had it in front of me, the Treasurer talked about financing the Employment Development Fund through the sale of the province’s share in Syncrude. He made that statement on budget night. A couple of weeks later the Minister of Energy (Mr. Auld) stood up with another plan for the use of the Syncrude share.
Mr. Peterson: And they included a capital asset, which is nonsense.
Mr. Laughren: If it is the same, perhaps when the Treasurer responds he could tell us what that is. As a matter of fact, the Leader of the Opposition (Mr. S. Smith) rose on a point of something or other that day and made the point that they were selling the same asset twice to do two different things. That is rather perplexing. Perhaps the Treasurer could explain what he intends to do.
The Treasurer and the official opposition, particularly the official opposition, talk a lot about how we pay for debt, what debt costs us, how many millions of dollars a day and how the people have to pay for it through higher taxes.
Mr. Peterson: It’s real catchy.
Mr. Laughren: There is another kind of debt that we in this province are paying for, and paying a very high price for, that is the debt we pay out to non-residents every year. It is a substantial sum of money.
Mr. Peterson: Of course you’re right.
Mr. Laughren: That bothers us a great deal when we see them trying to increase that problem by selling more of Ontario to the Japanese, the British, the Americans and so forth. That doesn’t make any sense at all. It is going to make the problem worse, That part of our debt has to be looked at in a much more careful way, because that is very serious matter.
There is an investment house in Toronto called Burns Fry. Perhaps other members in this chamber would be more familiar with it than I. They published a document last year in which they painted a frightening picture of what is ahead for us on our balance of payments over the next 10 or 15 years. That really is a terrifying picture if those figures come true -- and some of them are so incredible it is hard to believe they could come true.
On the other hand, when one looks at how our interest and dividends payment debt is going up every year -- and going up dramatically, perhaps Burns Fry knows something we don’t -- that is going to have a substantial effect on the standard of living in Ontario, a much more substantial effect than the interest on Ontario’s debt. That is something we simply must address ourselves to. They are talking federal figures, but one cannot talk federal figures on the economy of this country without zeroing in on Ontario. This is where the action is, this is where the bulk of our industrial production is. We have simply got to take a federal view of our balance of payments problems.
The Treasurer has to involve himself more in those debates with the federal government because it really is serious. We are very worried about the emphasis on stimulation of exports rather than import replacement. We think the government is fundamentally wrong in concentrating on export stimulation. We are not saying there shouldn’t be export stimulation, I want to make that perfectly clear.
Hon. Mr. Davis: We have to have both.
Mr. Laughren: Of course we have to have both. What is happening is that the Treasurer and the Minister of Industry and Tourism are centering on and emphasizing export stimulation. That is exactly what they are doing. They can’t do both, because the two programs require a different set of policies and it is not happening.
If the government thinks that by inviting the Japanese and Americans to come and set up their operations here, if it thinks that is going to solve our problem on our balance of payments, then it is wrong. It won’t solve the problem, because historically the branch plants that are here have not cracked the international market and have not cracked the export markets because that is not why they are here. They are here to cater to the domestic market.
Hon. Mr. Davis: But if the Japanese establish car plants here and replace the imports that now come from Japan -- it is important to the economy.
Mr. Laughren: Of course. I would suggest to the Premier -- and I am glad he interjected -- that when he is talking to Japanese businessmen he should say to them: If you are going to come here, you must realize we give up something when you come here and own a portion of this province.” I think the Premier would agree that with increased foreign ownership we give up something. There is a return in terms of import replacement, which the Premier agrees with, but there is something else. The long run costs of foreign ownership are such that we should be very, wary. Studies have been done which show that the long-run benefits of foreign ownership are a delusion. This is not the time to do it, but I can prove that to the Premier.
I would hope when the Premier talked to those Japanese businessmen he said to them:
“If you’re going to come here and locate in this province and own a share of Ontario, when you ship your cars in here there’s to be a reciprocal agreement on where replacement parts for those imported Japanese cars are produced.” That’s only fair, to demand in return for selling them part of Ontario that we get a return on producing auto parts here. We have a serious deficit on auto parts; I know the Premier knows that.
Hon. Mr. Davis: We suggest two things: they have the parts made here and also export them for the same vehicles in Japan.
Mr. Laughren: I wish the Premier would stay around and take part at the end of the debate. What I want him to say is that we don’t have to have Japanese auto parts manufacturers do it, we can do it with Canadian parts manufacturers; that’s what he is saying?
Hon. Mr. Davis: I said that.
Mr. Laughren: No, the Premier was talking about Japanese auto parts manufacturers.
Hon. Mr. Davis: I was saying the Canadian auto parts people make the parts over here and export them.
Mr. Laughren: I find it hard to believe that we’re on the same wavelength.
Hon. Mr. Davis: The member should never give up on me.
Mr. Laughren: We feel very strongly we can produce our auto parts here.
Hon. Mr. Davis: You should have come up to the meeting.
Mr. Laughren: I wasn’t invited. Perhaps they knew they couldn’t bludgeon me over our environmental standards and our minimum wage laws.
There will be other times to debate the whole problem of the Ontario economy, but I’m serious when I say the Treasurer, the Minister of Industry and Tourism and the Premier are on the wrong track if they’re trying to sell off more of Ontario. That will not solve our problems; it will make the problems worse and the Treasurer and the Premier should understand that.
I’ll conclude, but I want to refer to the fact that the member for London Centre (Mr. Peterson) talked about this bill being more important than the succession duty and gift tax bill. It’s rather silly to compare this bill with the succession duty bill. This is not blatant, rank, class legislation, despite his reference to the middle-class ripoff. I think that’s going to be the next Liberal campaign slogan: “Stop the middle class ripoff.” I can see it now. It fits so beautifully in with Liberal philosophy it’s irresistible for them.
Mr. Van Horne: What do you know about Liberal philosophy?
Mr. Laughren: Well, I’ve listened to it for --
Mr. Van Horne: Come on, elucidate.
Mr. Laughren: I’m glad the Premier is here. When Premier Levesque was here a couple of years ago for a reception -- we had a reception in the Lieutenant Governor’s suite -- the Premier brought him around and he was introducing him to members. He introduced him to one member and Premier Levesque said: “Oh, he’s NDP.” The Premier said: “No, no, you’ve got the wrong philosophy, he’s a Liberal.” Premier Levesque said: “If he’s a Liberal he can’t have a philosophy.”
Perhaps the Premier recalls that. I was standing nearby and I heard it.
Hon. Mr. Davis: That’s not true. He was talking about the New Democratic Party.
Mr. Laughren: No, no. As a matter of fact that particular member is in the chamber tonight; I wouldn’t think of identifying him but he’s in the chamber tonight.
Mr. Acting Speaker: Now that the member for Nickel Belt has rambled so much would he please return to Bill 50?
Mr. Laughren: Yes, I will. I should tell one very short anecdote, Mr. Speaker, just for you.
Mr. Acting Speaker: Can we tie it in with the credit of the province?
Mr. Laughren: Yes, because I think I am a credit to the province, even though I wasn’t born here. I was born in the province of Quebec. I was born in the Ottawa valley north of Ottawa, which is very staunch Orange lodge country. When Premier Levesque came around and the Premier introduced him to me, I said: “Yes, I’m from your province.” “Oh,” he said, “where are you from?” I said: “Shawville,” “Oh,” he said, “I don’t blame you for leaving.”
Thank you, Mr. Speaker.
[10:00]
Mr. Acting Speaker: We will accept that. Is there any other member who wishes to speak to Bill 50? Mr. Treasurer.
Hon. F. S. Miller: Mr. Speaker, I will make some brief comments. The debate tonight had certain overtones, and properly so I suppose, of the budget debates we had recently. I would like to assure both of my critics that while we may not always agree on the way to solve the financial problems of the province, I do take my position very seriously and I am very concerned about the problems.
Mr. Lawlor: You talk about the problems, but what are you going to do about them?
Hon. F. S. Miller: I think I have talked about them at length in my budget, and I think most people in Ontario who have reviewed that budget have found it reasonably satisfactory.
Mr. Van Horne: They did for the first day, until they realized how they were getting hammered.
Hon. F. S. Miller: I have to say to the honourable member, never did I try to confuse cash requirements and a balanced budget. I have been quite careful in the terminology I use and I am quite keenly aware of the difference in the two meanings. Of course the eventual desire is to have a balanced budget. I am working first towards minimizing the cash requirements, as I would in any business venture, trying to maximize our use of cash and of assets in the province. I don’t see anything wrong with that.
The member was talking about the dollars in this particular Loan Act, as we would call it in its short term title, not necessarily coinciding with our cash requirements. That’s true, but the member should remember the time period does not coincide either. He should remember we do bring forward some unused authority from the previous year which is used during this interregnum, if he wants to call it that, this period between the end of the fiscal year and the passage of this particular bill.
Under the old act, since there was no termination date, there was no particular worry about that hangover. We had, for example, some authority to go ahead and take up the Canada Pension Plan borrowings as they came due each month. We had some $584 million, if my figures are correct, left over from last year’s authorization when this fiscal year began. We are currently using it. This bill runs until September 30, 1980, if I am not wrong; and of course the number of dollars, the $1.6 billion or thereabouts, is authorized here.
Mr. Peterson: You’re borrowing $1,554,000,000.
Hon. F. S. Miller: Yes, $1,153,000,000 I think, is the cash requirement.
The reason for the difference, of course, and I can document where it goes, is to increase our liquidity. I think the honourable member will admit we have been winding down the amount of cash kept on hand to meet our daily bills and we are going to increase it slightly. We are going to pay off some $60 million of public maturity, of debenture debt. We are going to use about $195 million in the course of that period to reduce the Treasury bill, and I think he referred to that. There are other non-public retirements of about $26 million. We use about $427 million of that for purposes other than the moneys needed to operate the province.
This year, I believe for the first time, the Ontario Municipal Employees Retirement System will not be called upon as a source of money.
Members have all the data on our debt in the budget; I don’t think I need to review that, except to say that as a percentage of provincial income the cash requirements have actually dropped somewhat dramatically over the years. I look back into Mr. Frost’s years, the years when many of us thought Ontario had its heyday in terms of the growth of the province, the apparent liquidity of the province, the state of health and so on, and I think members will find that in those years we were actually borrowing a greater percentage of our annual cash income than we are today.
The honourable member for Nickel Belt, with whom I don’t always agree, pointed out quite properly that one’s debt should or can have some relationship to one’s income. I think that is one of the key points.
Although I am an advocate of a balanced budget, I think a good argument can be made for the proposition that capital goods or capital assets produced in one year in some cases should be shared by taxpayers in future years, rather than being paid off completely in the one year.
I looked across the table, on page six of I think budget paper A, which showed capital investments versus financing from borrowing in the years 1972 right through to 1977. In all of those years there was only one -- the 1975-76 fiscal year -- when the borrowings actually matched or very slightly exceeded, it is hard to tell from the bar chart, the investments in capital in the province. In that particular year we had $1.48 billion worth of capital investments and we financed $1.092 billion from borrowings and $388 million from revenues.
Pardon me, but I am suffering from a cold tonight, so if I sound a bit nasal you will have to get used to me.
I think it is important --
Mr. Peterson: Sorry, but this year the Treasurer is borrowing more than he is spending on capital investments. There is just no way that $200 million in the Employment Development Fund is for capital investments.
Hon. F. S. Miller: Oh, that is a point I want to get into. The member for Nickel Belt (Mr. Laughren) said that the Minister of Energy and I had used the same dollars twice. I would like to point out that the $140 million we talked about that came from the sale of Syncrude, which we said in the budget would be used for the Employment Development Fund, was the amount Treasury recovered from the sale of Syncrude. The total sale was in excess of $160 million. This explains the apparent double counting of the money.
What Treasury got back from the sale of Syncrude was Ontario’s original investment, around $105 million, plus the interest it has cost the Treasury in the meantime, which came to about $143 million. The difference was allowed to remain in the hands of the Ontario Energy Corporation for investment in energy-related projects. So they kept $23 million of that money -- I think that was the exact figure. We got about $140 million. So neither of us is double counting any dollars in that.
Mr. Laughren: I’d never play the shell game with you.
Hon. F. S. Miller: I know that. I only say that is the way we counted it.
I have to say to the member for Nickel Belt that he and I share one very real and genuine feeling, and that is we do want to see Canadian industry owned by Canadians.
Mr. Laughren: The minister is going about it in a funny way.
Hon. F. S. Miller: One has to recognize that in today’s day and age, as technology requires larger and larger corporations, it is very difficult to have large corporations like automobile companies, steel companies or petrochemical companies owned within one nation. I guess one of the better alternatives is to have those corporations at least registered in Canada with shares available to Canadians to purchase on the market. So Ford Motor Company of Canada for example at least is an entity in which Canadians can buy shares.
Mr. Laughren: You are using the EDF in the wrong way.
Hon. F. S. Miller: Interestingly enough, the very first project that was mentioned today by the Minister of Industry and Tourism, for Smiths Falls, where $430,000 was granted to a company --
Mr. Laughren: A branch plant.
Hon. F. S. Miller: Yes.
Mr. Nixon: It’s good stuff, Frank. Right from the horse’s mouth.
Hon. Mr. Parrott: You are reading the wrong budget.
Hon. F. S. Miller: I probably am.
Mr. Nixon: I know there was some reason he kept the member for Oxford around.
Hon. Mr. Parrott: At least I feel useful.
Mr. Nixon: We will give the Treasurer a minute to read it.
Hon. F. S. Miller: Now I am blushing.
Mr. Laughren: Let the record show it.
Hon. F. S. Miller: The grant today not only created roughly 300 jobs in Smiths Falls in an area where we badly needed them, but will give Canada about $100 million of import replacement. I think that was one of the objectives we spelled out.
I want to say that while obviously it is premature to announce other decisions until they are totally finalized, I think the honourable member will discover we are getting some interesting Canadian-based requests. Sure there are going to be American-based requests, but we are getting some Canadian-based ones, Canadian companies that in fact are selling into export markets as well as filling the home market. Believe it or not, one is filling the very criterion the honourable member mentioned a few moments ago of sending Canadian parts to Japan, It is really very interesting to see a Canadian company able to do that. We hope some of these will be finalized soon and we can share them with the members as soon as the decisions are made. We are encouraged by some of these things.
Mr. Laughren: You’re spreading it around too thinly. You aren’t rebuilding any sectors.
Hon. F. S. Miller: I’ll tell the member what we’re doing. I am not frying to spread it around too thinly with my colleagues, what we are trying to find out in each of these negotiations and this is why a formula doesn’t necessarily work -- we are trying to determine the minimum number of government dollars, in the best possible form, that will cause a decision to be made to locate in our province.
Because one company gets 10 per cent doesn’t mean all companies should get 10 per cent. It may take only two or three per cent to trigger the difference in some instances; or it may be considerably more with others. It may take a loan guarantee with one; it may take a cash grant with another. That has already become abundantly clear in the discussions we have had with the first ones.
Mr. Speaker, I would like at this point to stop my discussion. I think we can have philosophical arguments later on. I ask that this bill receive its second reading.
Motion agreed to.
Third reading also agreed to on motion.
FINANCIAL ADMINISTRATION AMENDMENT ACT
Hon. F. S. Miller moved second reading of Bill 51, An Act to amend the Financial Administration Act.
Hon. F. S. Miller: The Financial Administration Act, as I am sure my honourable colleagues in the two other parties know, is perhaps one of the major pieces of legislation under which the Ministry of Treasury and Economics operates. There are certain amendments in this particular bill aimed mostly at clearing up housekeeping problems.
There is one I think deserves particular attention. In section 3 of the bill we talk about increasing from $50 million to $250 million the amount of money which the Treasurer, with the approval of the Lieutenant Governor, may borrow by way of temporary bank loans without it being charged to the Loan Act.
The only thing I point out to the honourable members in this connection is that the cash flow of the province is now some $27 billion a year. This then represents less than one per cent of the cash flow. We believe this is required for what you might call overdraft privileges, Mr. Speaker, the overdraft privileges required to make sure you do have chequing abilities over weekends, for short terms. In the one case under the Loan Act, if we have an overdraft of $10 million five times, as members know it counts as a $50 million charge against the Loan Act.
This act was set up with this provision so we didn’t have that kind of short-term utilization charged against the Loan Act. I would suggest it is in order. We have that line of credit already established with the banks. We have $50 million at each of the five chartered banks.
[10:15]
Mr. Peterson: They have never looked at your books.
Mr. Mancini: They are afraid you’ll tax them more if they don’t lend you money.
Hon. F. S. Miller: I suspect that If I signed the notes tomorrow we could get it, and I’m quite willing to share it with the member. It would take them a week or two to catch us too.
Mr. Peterson: You run down with your little book every morning, do you?
Hon. F. S. Miller: I do this account balance stuff.
We also have a section in the act that is allowing interest rates to be in excess of five per cent. I think one would agree the time has come for us to face that.
Mr. Peterson: We certainly don’t plan to vote against this bill.
I understand the Treasurer’s reasoning for section 3. It is probably quite reasonable and I will support it; but in other ways I do so somewhat reluctantly.
Mr. Laughren: I would hope so.
Mr. Peterson: The more disciplines we have on this government the better it functions. As I said before, when the Treasurer saw the availability of all those pension funds he spent them, he runs everything to the limit.
I recognize he needs flexibility, but I have more faith when I see some responsibility, or more responsibility than the Treasurer has demonstrated, at least in my judgement in the handling of these funds in the past.
Like this little sneaky move into another $195 million worth of treasury bills last year; clearly a violation of what the previous Treasurer said. The government obviously looked around for money and said, “There is a place we can cough up $195 million.”
I recognize clearly it was done before the member for Muskoka became Treasurer; I recognize clearly it’s something he had to deal with in this budget and I respect him for doing it. But it took a lot of pressure on a lot of guys on Bay Street, putting the wood to them, saying, “You must pick up your weekly allotment of treasury bills.” You know the way the system works.
Mr. Laughren: Make him name one.
Mr. Peterson: Everybody bids on them, hoping they won’t get them. They want to look credible, so they can’t put in a ridiculous kind of bid; they just put in a little bid hoping someone else will take them so they don’t look silly.
The point is it was another little way to raise $195 million, quietly and without announcement, until people figured out what the government was doing.
That’s why shortterm provisions, increasing a line of credit, can become a long-term line if one isn’t careful; particularly if one has good credit, and the taxpayers of this province still have reasonably good credit. It is a bottomless well, really if the government gets in trouble it just increases the tax rates.
I can see so-called temporary lines turning into permanent lines or turning into long-term debts; in the same way, in a sense, it happened with the treasury bills, although the government is paying that off this year; and the same way it has almost become with the pension funds available to the government.
I have to put that concern on the record. I hope the Treasurer uses that extra $200 million for the purposes for which it was intended, as a short-term line for overdrafts, for special contingency situations, and that it does not turn into a long-term line.
Had the government had the power last year to borrow this kind of money I am quite confident the Treasurer of the day, not being the member for Muskoka, would have said:
“There’s a way we can get another couple of hundred million dollars, because our revenue projections were off and no one will really know.” Who really knows if the government is borrowing an extra couple of hundred million dollars at any given time? He would have obscured, at that time, the real debt position of the province.
That is the danger, and I know this Treasurer knows that danger. I recognize that when he has -- I accept his number -- a $27 billion cash flow, relatively speaking this is not a lot of flexibility in terms of assisting with his banking, and obviously he doesn’t want to run overdraft interest if he doesn’t have to do it.
I understand all that, and that’s why I will certainly vote for it, but with that strong reservation that I think has to be put into the record.
Mr. Laughren: Mr. Speaker, I was glad the Treasurer singled out the section of the bill that raises the limits on borrowing from $50 million to $250 million. I did want to assure the official opposition that if they want to vote against this because of the irresponsible level of borrowing which they talk about so often, we would be quite happy to support the government. They don’t need to worry about an election. We will not have an election over this particular issue.
At any rate, I just wanted to make the Liberals feel at ease so they could really stand on their principles on this particular bill and vote against it without worrying about the dire consequences of a provincial election in the spring of 1979. They can return the favour to me some other time.
Interjections.
Mr. Laughren: The other part of the bill I found rather interesting -- and since we won’t be sending this to committee, I assume, I just wanted to mention it briefly -- where they take out the rate of five per cent per annum of money that’s owing to the crown. I’d be interested in knowing a little more about that. I’m a little vague on that.
I do not understand, quite frankly, who it is that this applies to. I’m sure that we don’t want to subsidize creditors to the crown; those are creditors to all of us. I’m not particularly interested in leaving it at five per cent, but I’d like to know exactly who these people are who have been getting away with five per cent interest rate, owing to the crown. They’d be crazy to pay it off. It would be better to borrow money and leave the debt stand at five per cent interest rate.
Perhaps the Treasurer, when he responds, could tell us who these lucky folk are who have been getting a five per cent interest rate for all these years. Perhaps there are others who owe the crown money and are getting away with five per cent as well. I don’t know whether this is an isolated example or whether it runs throughout the Treasurer’s administration.
But, basically, we do seriously regard this as a housekeeping bill and I’m always very jumpy about saying any bill is housekeeping because you know I know, Mr. Speaker, that the Treasurer plays the shell game without a pea under any of the shells. We always are very careful before classifying any bill as being simply housekeeping, because it could be used to slip a lot of things through. I’m sure the Treasurer and some of his colleagues would call the abolishment of the Succession Duties Act a housekeeping bill if we gave them the opportunity to do it.
We shall not vote against the bill; we shall support it. But, once again, I want seriously to make it clear to the Liberal Party of Ontario that if they feel anxious about what they would regard as irresponsible borrowing, they needn’t worry about precipitating a provincial election, because we will stand with the government in this particular case.
Mr. Speaker: Does any other member wish to speak to the bill? If not, the honourable, the Treasurer.
Hon. F. S. Miller: Mr. Speaker, I appreciate the support of both the parties.
Mr. Laughren: You don’t very often.
Hon. F. S. Miller: That’s true. Apparently, the kinds of moneys that we’re talking about with the five per cent rate aren’t large amounts. They are individual amounts that may be owed to the crown, such as an overpayment to a physician through OHIP that has to be recovered a payment to OHIP by a person who underpaid, or who was late in paying their account or something of that nature. Apart from that, Mr. Speaker, I would move that the bill receive its second reading.
Motion agreed to.
Third reading also agreed to on motion.
The House adjourned at 10:23 p.m.