Assemblée législative de l'Ontario

The House resumed at 8 p.m.

BUDGET RESOLUTION

Hon. F. S. Miller moved that this House approve in general the budgetary policy of the government.

Applause.

Hon. F. S. Miller: I wish I could count on the same response after I speak, Mr. Speaker.

As I look around me and before I start my prepared text, I feel very honoured to see two of my friends and former Treasure in the audience, Mr. Jim Allan and Mr. John White, who are in the balcony.

Mr. Sargent: What about Gordon Sinclair?

Mr. Roy: Where’s Darcy McKeough?

Hon. F. S. Miller: He is a private operator. He is out earning money.

Hon. Mr. Davis: That we are going to tax.

Mr. MacDonald: Where is the Treasurer’s haberdasher?

BUDGET STATEMENT

Hon. F. S. Miller: Mr. Speaker, this evening I am pleased to present to you and to the members my first budget. It’s an honour to serve as Treasurer of Ontario and, under the leadership of the Premier (Mr. Davis), to share with my colleagues the opportunity to mould the future of this great province.

In carrying out the responsibilities of the Treasurer of Ontario, my goal is clear: to continue the outstanding achievements which have benefited this province so greatly in order to guarantee future employment, prosperity and happiness for our citizens.

Interjections.

Hon. F. S. Miller: You can at least look happy.

Hon. Mr. Davis: Smile over there.

Hon. F. S. Miller: Without question, the most important problem facing Ontario today is the need to create more jobs. The employment creation record of the province over the past few years has been outstanding. But because our labour force is growing so quickly -- more than three times as quickly as Great Britain’s or Germany’s -- we must further strengthen our efforts so that all new entrants to the labour force find employment. In creating jobs, we must not fan the flames of inflation. If we do so, we will do lasting damage to our economic prospects. While employment problems affect some people, inflation affects everyone. It is especially hard on the elderly and those on fixed incomes.

When I sat down to prepare this budget, the issues of unemployment and inflation were the first priorities I had to face. I realized that Ontario was subject to national and international forces that strongly influence our economy. No one government can singlehandedly wipe out inflation and unemployment. Also, while much of the responsibility for tackling these problems lies with the federal government, Ontario can and must provide responsible leadership and policy initiatives that will help create jobs and reduce inflation. I believe that the proposals I will place before you tonight will do just that.

The path to greater economic prosperity in Ontario is clear. Only by stimulating the private sector can we create lasting jobs and growing incomes for our citizens. That is also the only way for us to provide the taxable resources so essential to provide the high standard of public services our citizens have come to expect. The efforts of this government must be concentrated on making sure that we create the confidence and the atmosphere needed for private sector investment in Ontario.

The private sector flourishes best with a minimum of government regulation. In fact, one of the main reasons prompting me to enter politics was my perception as a small businessman of the need to encourage government to lighten the burden of regulation and interference on the business community in Ontario. To be candid, I also believe that businesses should prosper without a lot of government financial concessions. But we do not set the international rules of the game. When other jurisdictions are aggressively competing for new investment, we cannot bury our heads in the sand and let job opportunities slip outside Canadian borders into other countries. We must take effective action to make sure that the Ontario economy is secure.

In the weeks before preparing this budget, I met with many individuals and groups: small businessmen, consumers, corporations, union representatives, bankers and farmers. The meetings were very useful. I learned a great deal about the individual problems of each group. I want to thank them for the time they took to give me the benefit of their thinking about our economy and about our way of life. I can assure them all that I have listened to their recommendations very carefully and have weighed them while preparing this budget.

One point came up repeatedly in these conversations. If government keeps its own house in order, maintains a positive climate for the development of the private sector and aims for reasonable cost and salary increases, the outlook for our continued prosperity is very bright.

This government wholeheartedly shares those opinions. Accordingly, this budget proposes to maintain a high quality of public services in Ontario; to help create more jobs; to provide incentives for economic growth and small business development; to continue our sound management of provincial spending, thereby helping to contain inflation; and to reduce the deficit.

Mr. Bradley: You need water after that.

Hon. F. S. Miller: Who says it’s water?

Hon. Mr. Davis: I do. So there.

Hon. F. S. Miller: It’s water.

Mr. Conway: Tell us you can turn water into wine.

Hon. F. S. Miller: I hope the television sets are not colour sets, because I am blushing.

Hon. Mr. Davis: Who could tell against your jacket?

Hon. F. S. Miller: Mr. Speaker, the interjections are supposed to come from the opposite side of the House.

Mr. Foulds: That’s how bad your budget is.

Hon. F. S. Miller: They don’t know what’s in it yet.

Before outlining specific measures to achieve these objectives, I would like to review briefly the economic outlook for the province.

Ontario’s economy continued to perform well in 1978. Growth was 3.6 per cent in real terms and a record 133,000 more people were employed in Ontario than the year before, on average. All of these jobs were created in the private sector. This was an outstanding accomplishment by any standard. I was particularly encouraged by the fact that our manufacturing output growth accelerated by almost one full percentage point, to 4.8 per cent, and 36,000 new jobs were created in manufacturing. In part, our economic performance was assisted by the lower value of the Canadian dollar, which improved our export competitiveness, as well as by the temporary reduction in retail sales tax.

There were disappointments in the year as well. Because of the rapid growth in the number of young people entering the labour force, an unacceptably high level of unemployment has persisted. While this surge will pass in two or three years, currently almost 75 per cent of the unemployed in Ontario are young people under 25 or adult women. Reducing the rate of unemployment is a major challenge for all governments. Comparatively speaking, however, the Ontario record of job creation has been outstanding.

Turning to the outlook, I have noted that many economists believe that the Canadian and Ontario economies will grow at a modestly slower rate this year. I have included a forecast for 1979 that reflects a consensus of economic forecasters, both inside and outside government. It calls for a slight moderation in the rate of real growth in Ontario to 3.3 per cent. This moderation in growth is predicated on the assumption the United States economy will experience some slowing down during 1979. Nevertheless, we can look forward to seeing well over 100,000 new jobs created in Ontario this year.

I would like to observe that this year -- and it is almost our centennial year in this sense -- Ontario’s gross provincial product will, for the first time, exceed $100,000,000,000. This landmark takes on even more significance when one realizes Ontario’s economy has tripled since 1969. As a matter of fact, I look back to 1953 and the Ontario economy was just under $10,000,000,000 in that year, so in 26 years it has gone up 10 times. They are all Conservative years too.

An hon. member: Most of it in price increases.

Interjections.

Hon. F. S. Miller: If the federal friends of members opposite could get a deficit in line with ours they would be proud.

Mr. Conway: Wait until Maureen gives them $7,300,000,000 extra.

Hon. F. S. Miller: That’s more than Margaret does for Pierre.

Ms. Gigantes: You are stupid.

Hon. F. S. Miller: At this point I would draw the attention of the members to budget paper A, which provides a thorough review of the performance of the Ontario economy through the 1970s and looks at our prospects for the next decade.

I noted with interest the federal Minister of Finance in his November budget referred to a recent survey which showed 300 large corporations in Canada are planning to increase their spending on plant and equipment this year by an average of eight per cent in real terms.

I have also had a survey conducted of 100 corporations in Ontario and that indicates that Ontario business is moving ahead with expansion plans at a healthy pace.

Mr. Foulds: What are the details?

Hon. F. S. Miller: I am confident, as we continue to provide a sound climate for investment in Ontario, our citizens will reap the benefits of better jobs and higher incomes.

Mr. Warner: No one believes you.

Hon. F. S. Miller: In fact, I would, personally, not be surprised if the forecasters have underestimated growth in 1979. It may turn out, in my opinion it will turn out, to be a year of better economic performance than 1978. This growth-oriented budget is designed to make this happen.

I have emphasized the need to improve the climate for employment growth in investment in Ontario. We must continue to seek new ways to help our people, especially the young, to find lasting and rewarding employment. To do this, the government of Ontario has led the way with programs such as the Ontario Career Action Program and the Ontario Youth Employment Program. Last week I announced the details of OYEP for 1979.

Mr. Wildman: Is that lasting and rewarding employment?

Hon. F. S. Miller: My statement contains a table showing the funding and job creation levels of Ontario’s programs for youth employment in 1979-80. In total we will be spending $79,000,000 and creating directly some 70,000 jobs this year for young people in Ontario.

When we look at the problem of unemployment, we are confronted with the paradox that many job vacancies exist while a large number of people are seeking work. During my pre-budget consultations, both employers and union representatives told me of their concerns about the shortage of skilled workers. In fact in some parts of our province I am told machines are lying idle because there is no one to operate them.

Mr. M. Davidson: Because you never trained anybody.

[8:15]

Hon. F. S. Miller: Some of us are untrainable, and I am just hearing from one.

My colleagues, the Minister of Education (Miss Stephenson), and the Minister of Labour and Manpower (Mr. Elgie), are developing long-term measures which will improve the situation through better training and closer co-ordination among unions, employers, job seekers, and the educational system.

We will support these efforts with a new program to assist employers directly to hire and train people in areas of critical skill shortages. This program will be financed through the employment development fund which I will describe shortly.

The details of this new thrust for skilled training will be announced later in the session, but I’m convinced labour and industry leaders will co-operate with each other and with the government to design and carry out practical skill training programs.

In preparing this budget I conducted a thorough review of our taxation system to see what changes might be made to stimulate business development and enhance confidence. In this regard, I would direct the members’ attention to budget paper B, which discusses the appropriate fiscal policy for today’s economy and looks at the changing role of fiscal policy over the next decade.

At this stage, I don’t believe any kind of across-the-board tax cut would be justified, but I do believe that some taxes bear particularly heavily on small businesses -- and generally hurt the climate of confidence in the province.

Mr. Sargent: This is the year you were going to balance the budget.

Hon. F. S. Miller: No, no; the member wasn’t listening.

Ms. Gigantes: Next year, Eddie.

Hon. F. S. Miller: I’d like to outline additional incentives to create jobs and improve our economic performance. In 1969, the honourable Charles MacNaughton, then Treasurer, observed that the introduction of capital gains tax would gradually eliminate the need for succession duties and gift taxes in Ontario. As revenues from capital gains increased, Ontario would be able to phase out succession duties and so avoid what many consider to be double taxation.

At the time, the province was prepared to vacate the succession duty field in return for a share of the federal estate tax. The federal government, however, unilaterally abandoned the estate taxation in 1971 when it introduced the capital gains tax. The province, therefore, continued to levy succession duties and gift taxes, although its long-run objective was to get rid of these taxes. Over the past seven years we’ve progressively reduced the burden of succession duties. But meanwhile, our sister provinces have vacated the field one by one, leaving only Ontario and Quebec.

I am convinced that the continuation of this tax is hurting our economic performance and costing us jobs. Business people making investment decisions, particularly as to location, are bound to take into consideration the tax position of their estates in Ontario. Succession duties and gift taxes have been a source of great concern to farmers and small business owners in Ontario. In spite of the fact that less than three per cent of estates in Ontario are subject to tax there is a widespread opinion the successors of the average citizen will be subject to tax.

For estates which are taxable, complex and costly legal procedures are involved to keep businesses within families. As well, individuals often experience great difficulty in disposing of assets so that they may pay duties. I’m satisfied the present combination of other taxes provides government with an adequate return as wealth is accumulated. As of midnight tonight, there will be no succession duty or gift taxation in Ontario.

Interjection.

Hon. F. S. Miller: Gordon, last till midnight. Pardon me, the House leader has adjusted it to one minute after.

Later I will be introducing bills to repeal the Succession Duty Act and the Gift Tax Act effective with respect to deaths or gifts occurring after midnight, April 10, 1979. I should point out that the legislation will continue to apply to deaths occurring and gifts made up to midnight this day.

I estimate that the annual revenue loss from this change eventually will amount to some $50,000,000 to $60,000,000 a year; however, in this fiscal year, the revenue loss will be $28,000,000.

It is much more difficult to estimate the revenue gains and employment gains that will occur in Ontario due to the elimination of succession duties. However, I am satisfied that on balance Ontario will profit in many ways from this decision. Our citizens will have one less burdensome concern to deal with in planning their private lives.

In addition, I heard the lawyers were a bit slack this week, and it will make for a lot of rewriting of wills.

Provincial revenues are bound to increase as investors take advantage of this decision.

I would now like to turn to the mining industry. The importance of mining in Ontario is unquestioned. Almost 20 per cent of Ontario’s dollar earnings from exports are from its mines. Many northern Ontario communities depend entirely upon the mining industry for their employment. I am disturbed that this province has not seen a major new mine brought into operation for some years. Last year the federal government and the provinces reviewed the current situation in the mining industry. This review showed that high marginal tax rates were considered to be one of the most important problems facing the industry.

The members will recall that several beneficial adjustments were made to the Ontario mining tax last year. Tonight I am proposing additional changes to improve further the investment climate for mining in Ontario. First, the top marginal mining tax rate will be reduced from 40 per cent to 30 per cent. Second, the basic exemption from mining tax will be increased from $100,000 to $250,000 of mining profits. This latter move will encourage the creation of more small mining companies and assist those already operating.

I am also proposing a modest reduction in the top processing allowance rates. This will bring them more closely into line with those offered elsewhere and will soften the impact of the rate reductions on our revenues. These measures affecting the Ontario mining industry will apply with respect to fiscal years of companies ending after April 10, 1979. Enabling legislation will be introduced tonight by my colleague the Minister of Natural Resources (Mr. Auld).

I would like to discuss the situation in the province’s hospitality industry. This important industry provides employment for over 400,000 people, or about 10 per cent of Ontario’s labour force. In 1978, tourist spending in the province exceeded $5,000,000,000, including $1,000,000,000 of sales to nonresidents.

Mr. Warner: It would be nice if you would be a tourist.

Hon. F. S. Miller: In this job there is no time.

In the last two years, the government has undertaken to stimulate this industry through the temporary removal of the sales tax on transient accommodation, and other measures. This positive support has helped produce a momentum in the industry that I believe should be sustained. Accordingly, I propose the following:

First, the sales tax on kitchen machinery and equipment used in restaurants serving the public will be temporarily withdrawn as of midnight tonight. This will provide restaurants with the same kind of exemptions currently available to manufacturers.

Second, purchases of furniture and furnishings for use in the hospitality industry will also be temporarily exempt from the retail sales tax.

These two exemptions will be available until March 31, 1981, and will provide the hospitality industry with an incentive to upgrade and expand its facilities.

Third, the temporary sales tax exemption for transient accommodation that was originally scheduled to expire December 31, 1979, will be extended to March 31, 1981. The combined additional cost of these measures to stimulate tourism will be $13,000,000 in this fiscal year and $45 000,000 on an annual basis.

One of the best incentives for economic development that any government can provide is to manage its spending and its affairs efficiently, and be seen to do so. This province has led the way in Canada in containing public sector spending. A great deal of the credit for this must go to my predecessor, Darcy McKeough.

In the fiscal year just ended, we have held spending below the original estimates for the third year in a row. This year, the estimates provide for an increase in our ongoing expenditure base of only six per cent. When we add the employment development fund supplementary estimates, our total growth rate will be 7.4 per cent This is still well below the projected growth rate of the economy.

I want to make it abundantly clear what our expenditure control policy is all about. We are not trimming the growth of government spending because we cannot find the money to pay for high rates of growth. Ontario’s credit is sound and its economy is strong.

Mr. Swart: There are 319,000 people out of work.

Hon. F. S. Miller: Rather, we believe that the same high quality of our programs can be maintained without excessive cost escalation. We do this by demanding more efficiency, and we are getting it.

Mr. Gregory: You would not know the meaning of that over there.

Hon. F. S. Miller: The government will continue to allocate most of its resources to areas of high social priority, including health, education and social service institutions. The existing high quality of Ontario’s health services is being upgraded with the extension of the home care program for the chronically ill to additional centres in the province. The budget of the Ministry of Community and Social Services has been increased by 6.9 per cent to provide greater emphasis on support services to the elderly and the handicapped. To enhance the participation of the physically handicapped in community activities, the five pilot projects providing special transit services will be made permanent. Additional funding has been made available to extend this program to other municipalities in Ontario.

Ms. Gigantes: What about all those people with estates?

Hon. F. S. Miller: I thought marriage would silence you.

Mr. Foulds: Why?

Mr. Breaugh: I have never seen a plaid sexist pig before.

Ms. Gigantes: Explain that to my husband.

Mr. Martel: The jolly miller.

Hon. F. S. Miller: In case that last remark be misinterpreted, I quickly explain to my wife I did not mean it.

In addition to the measures I have just discussed, I would now like to outline details of another important new program to stimulate the development of our economy. This is the employment development fund announced in the speech from the throne.

The fund will be managed by a committee of ministers called the employment development board, which I shall chair. The Minister of Industry and Tourism (Mr. Grossman) will be the vice-chairman, and his ministry will carry out the administrative functions of the fund. The Provincial Secretary for Resources Development (Mr. Brunelle) will also be on the board. The major function of the board will be to co-ordinate the government’s policies as they relate to providing direct economic development incentives to the private sector. The board will also participate in the development of, and provide funding for, the new job training program to which I referred earlier.

[8:30]

The amount of the fund has been set at $200,000,000 for 1979-80. I stress that the proceeds from the sale of our shares of Syncrude and of Ontario Mortgage Corporation mortgages, as well as additional revenues the province will raise from the corporate sector, are more than adequate to finance the employment development fund this year. This means that ordinary taxpayers’ dollars are not being diverted away from the normal programs of this government.

To maximize the economic benefit to Ontario of the employment development fund, the board will encourage projects that make a long-term contribution to employment, foster the development of needed job skills, have the potential for significant export development or import replacement, involve the development of new products and processes through Canadian-based innovation and stimulate key industries and regional development.

There are some people who have questioned why we should be giving financial incentives to industry, particularly large and successful firms. Quite frankly, I was one of them. Nevertheless, I have concluded we must follow this course of action. Many jurisdictions are aggressively competing for new investment. This is a challenge we cannot afford to ignore if we are determined that Ontario should have its fair share of new investment. The financial incentives for the automobile and pulp and paper industries will be provided from the employment development fund. Further details on the operation of the fund are provided in appendix C to this statement.

We must recognize that Ontario’s pulp and paper industry is facing tough competition. At the same time, the industry is under pressure from this government to clean up its pollution. The facts are simple. If we are going to impose high environmental standards we must recognize the competitive and cyclical environment in which the industry operates. Therefore, it must receive special assistance.

Mr. Cassidy: They didn’t even ask for it.

Hon. F. S. Miller: I’ve talked to a lot of workers in towns like Iroquois Falls, workers who follow the party of socialist members opposite, and they think we’re right.

Mr. Martel: You’re wrong.

Hon. Mr. Davis: You’re never going to get another vote in Iroquois Falls.

Mr. Foulds: I’ll bet you a dollar.

Hon. F. S. Miller: Mr. Speaker, who in this assembly prefers the alternatives of continued damage to our environment, or perhaps mill closures and whole towns out of work? Such alternatives simply are not acceptable to this government.

I would now like to turn to the area small business development. Let me state I am a strong supporter of two principles. First, I believe the future success of our society is dependent upon the maintenance of a very strong commitment to free enterprise. Second, I believe the bedrock strength of free enterprise lies in private equity investment. Individuals should be encouraged to take risks through the ownership of equity, and hopefully most of them will turn a profit. I make no bones about this, and I say woe betide those who think we can prosper in the future yet give up on those principles.

Mr. Cassidy: Like preaching to the converted.

Hon. F. S. Miller: Ah, they’re waking up on the right-hand benches on the left-hand side.

Mr. Eaton: You confused them, Frank.

Mr. Breaugh: If you were only a foot taller, Frank, you could get away with this garbage.

Mr. Cassidy: There is no left-hand side of those benches; none left.

Hon. F. S. Miller: Members will recall the government introduced the Venture Investment Corporations Registration Act in 1971 to encourage corporations to increase the supply of venture capital and managerial advice to small business. To be candid, this program has not worked. There appear to be a number of reasons for this. First, the federal government chose not to support the initiative, thereby reducing the tax incentives for investors; second, the incentive excluded individuals; third, some of the provisions in the legislation may have been too restrictive.

I believe it is vitally important to make sure there is a stream of equity capital available to new enterprises. Ideally, the lure of profit in return for risk capital should be enough to attract investors. People today, however, receive such generous tax treatment under the personal income tax for much safer investments, that they are reluctant to invest in new ventures. I believe we must do something about this.

Accordingly, I am proposing to introduce legislation this evening to encourage the development of new ventures in Ontario and to make it more attractive for more people to become directly involved in financing small business and building our economic future. Specifically, I am advancing the following program:

A Small Business Development Corporations Act will replace the existing venture investment corporations legislation. Individuals and corporations investing in small business development corporations, called SBDCs, will receive a share credit from the province equal to 30 per cent of their equity investment. The SBDCs will be empowered to invest in a broad range of new and expanding small business enterprises. This means if an individual purchased $1,000 worth of equity in an SBDC, the province would refund, directly, $300 to the private investor.

Mr. Sargent: In the meantime you won’t loan them five cents.

Hon. F. S. Miller: Eddie, don’t judge us all by your own loan applications.

Mr. Sargent: How did you know?

Hon. F. S. Miller: There’s very little we don’t know. I had your SIN number.

Hon. Mr. Davis: That should be numbers.

Hon. F. S. Miller: Honestly, I timed this earlier and it’s not going to be as fast as I thought it would.

It is not possible to estimate with any precision the cost of this program; however, as the year progresses, I will set an upper limit to costs. Further details of the small business development corporations programs are included in appendix B to this statement.

I would like to propose a further measure to assist small business. Perhaps the tax that creates the most problems for small businesses in Ontario is the capital tax. While rates are not high, this tax poses complex paperwork problems for many firms.

Recognizing this problem and the nuisance of filling out a capital tax return, a reduced fiat tax for small corporations was introduced in 1977. Tonight I am proposing to extend this benefit The fiat tax for corporations with taxable capital in excess of $50,000 and up to $100,000 will be reduced from $100 to $50. For corporations with taxable capital in excess of $100,000 and up to $200000 a flat rate of $100 will apply instead of the regular rate. Also, in order to phase small corporations into the regular rate smoothly, I will introduce a formula to apply to taxable capital in excess of $200,000 and up to $300,000.

I am proposing one additional measure to lighten the burden of this tax. Real hardship exists for some small businesses in a year in which they have lost money, yet they still must pay the full tax on theft capital. In recognition of this I am introducing, in lieu of the regular rate, a flat tax of $100, which will apply to corporations with taxable capital of up to $1,000,000 that have experienced a negative cash flow during the year.

I estimate these capital tax changes will reduce revenues by $20,000,000 in a full fiscal year, but they will ease and simplify the capital tax for some 58,000 small businesses in Ontario. Large corporations will continue to pay tax at the regular rates.

I would like to review briefly the area of provincial-local finance. Later this week, my colleague, the Minister of Intergovernmental Affairs (Mr. Wells), will be tabling a document entitled Ontario Assistance to Local Governments. This publication provides an overview of total transfers to the local sector and the details of the province’s unconditional grants in 1979.

There has been some criticism of the government’s announcement that total provincial transfers to the local sector would be increased by five per cent in 1979-80. This increase was directly in line with the target growth rate the government set for the total of its own regular ministry programs.

Mr. Speaker, politicians at every level of government worry about the amount of taxes they must collect, and so they should. Predictably, most politicians would rather see any level of government but their own raise taxes. Taxpayers, however, do not see it that way. They are concerned with the total amount of taxes they must pay. The obligation, therefore, rests with each level of government to contain the tax burden. We have to do this by controlling spending as much as possible.

To the extent that tax increases are necessary, politicians at every level of government have to take the responsibility for raising them. We have not asked any more of local governments and their agencies than we have asked for the last four years of our own ministries. If there still is a need to increase local revenues, then I’m sure the councils and local school boards will accept that responsibility, just as I must do.

I am pleased to note that local governments have followed the province’s lead by achieving steadily decelerating growth rates in their spending. I estimate that total local spending in 1978 rose by only 8.2 per cent, compared to a growth rate of 20 per cent in 1975. In 1979, it appears likely the local sector will increase its spending by around seven per cent. I find this progress in restraint at the local level most encouraging.

This restraint, combined with realistic increases in provincial assistance, is reflected in local taxation developments. On average during 1978, residential property taxes per household rose only about five per cent and remained at about 2.0 per cent of average household income. In 1979, we expect increases in per household property taxes to average around seven per cent.

I would remind the members that the province’s tax credits continue to modify considerably the impact of property taxes, particularly for low-income families and pensioners. This year some $375,000,000 in property tax and rent relief will be provided through this program.

Mr. Speaker, the financing of health care in Ontario bas been a contentious issue in this assembly, and in this context --

Mr. McClellan: Sock it to them, Frank.

Mr. M. Davidson: Hit the working poor again.

Hon. F. S. Miller: -- I think it is useful to draw to your attention the magnitude of our existing health budget. This year the health budget will increase by $213,000,000 to a total of $4,200,000,000, or on average $488 for every man, woman and child in Ontario.

Some members of this House participated in the review of health-care financing conducted last year by the select committee on health-care costs. In spite of its best efforts, the committee could not arrive at a consensus on the best way to pay for our health system.

The government has considered the committee’s report and continues to study the issues. In so doing, we are aware of a number of important principles. We must continue to provide first rate health care on a universal basis, as we are now doing; the health-care system has to be adequately financed, and we must continue to control costs, despite the public musings of the spendthrifts in Ottawa.

With these principles in mind, the government continues to believe the OHIP premiums should be maintained. In my view, a visible financing link between individuals and their health-care system is useful. In an area of government expenditure as massive as health care, it is important that people contribute some portion of costs through a public insurance system.

Of equal importance, I do not believe our economy should be subjected to the massive disturbance that would be caused by a shift away from health-care premiums. I would remind the members that about 70 per cent of health costs are already financed out of general revenues. An analysis of the question of OHIP financing is included in budget paper D.

[8:45]

Mr. Speaker, we have made considerable progress in controlling the growth of health-care spending. We have done so without reducing the quality of services provided. However, costs continue to escalate; therefore, I propose to increase premiums by $1 per month for single people and $2 per month for families, effective for the benefit month of October. This modest increase of 5.3 per cent will be less than the growth of the cost in insured services, which are projected to increase by 5.5 per cent. I need not remind the members that elderly people in Ontario and those who receive social assistance do not pay premiums and will not be affected by this change. I estimate this measure will raise $40,000,000 in this fiscal year.

Turning to the question of providing assistance to lower income people, we have studied the features of a possible new health tax credit for Ontario citizens. A credit might better ensure that all who are entitled to premium assistance actually get it. Budget paper D lays out a possible design for a health tax credit. The government will be interested in the views of the members and of the public on the ideas outlined in this paper. In the meantime, lower income people remain eligible for assistance under the existing program operated by the Ministry of Health.

I now come to the most difficult part of the budget for any Treasurer, particularly a new one. I am going to talk about tax increases.

When I examined our tax structure, I was concerned not only with improving economic incentives but also with the overall level of revenue coming to the province; for while we have pared down the growth of spending our revenue growth rate has also been declining, therefore we still have a deficit level in Ontario, which in my view should be reduced. For those interested, I would direct their attention to budget paper C which analyses Ontario’s revenue and expenditure performance over the past several years.

I will now propose a number of tax increases to restore a more appropriate balance between provincial revenue and spending. I shall begin with the area of corporate taxation.

I have outlined tax reductions for some businesses and given the House the details of the new employment development fund. While such actions unquestionably are needed, we must recognize that corporate profits, as a whole, have been growing at a healthy rate. It’s only reasonable to expect the corporate sector to contribute a fair share of both the cost of incentive programs and the tax revenues required to improve the overall financial position of the province. At the same time, our industrial policy places a high priority on the need to upgrade manufacturing and to support small business.

I propose, therefore, to maintain the low 10 per cent corporate income tax rate on small businesses, and the 13 per cent rate on manufacturing and processing income as well as on income from farming, fishing, mining and logging. Effective midnight tonight, there will be a 14 per cent rate for all other corporate income. I anticipate additional revenue from this measure of some $30,000,000.

In addition, I propose to increase the capital tax rate on banks from three fifths to four fifths of one per cent effective midnight this date. This measure will increase our revenues by $5,000,000. The capital tax rate for loan and trust companies will remain unchanged.

Mr. Laughren: You really clobbered them, Frank.

Mr. Foulds: How much did you gouge out of hospital premiums? It was $40,000,000, and $5,000,000 from the banks.

Mr. S. Smith: You are sure they won’t close their doors on that one, Frank?

Hon. F. S. Miller: I withdrew my $12.30 just in case.

Returning to the retail sales tax, I propose to expand the base of this tax by including all services relating to telecommunications. This will take effect at midnight tonight. Currently, only telephone and telegraph communications services are taxable. The major new areas affected by this change will be Telex and teletype communications. Cable television will be affected also. On average, cable TV subscribers will pay an additional 50 cents per month. This measure will augment provincial revenues by $30,000,000 this fiscal year.

The gasoline tax and motor vehicle fuel tax rates have not been changed since 1972. Fuel taxes are not applied on an ad valorem basis and, therefore, revenues have grown slowly. In the meantime, the cost of building and maintaining our highways has continued I to escalate. Accordingly, I propose to raise the tax on both gasoline and diesel fuel by four tenths of one cent per litre to 4.6 cents and 5.9 cents per litre respectively. Contrary to what many people believe, revenues from road users still fall below spending on highways, roads and related services.

Mr. Martel: Why don’t you talk to the ayatollah from Alberta?

Hon. F. S. Miller: I also propose to increase the tax rate on aviation fuel from 0.06 cents to 1.32 cents per litre. This tax has not been changed since 1968. Since that time, the province has significantly increased its expenditure for building and upgrading airports, particularly in the north.

Mr. Wildman: You give with one hand and you take away with the other.

Hon. F. S. Miller: With the $11,000,000 the government is planning to spend this year, the province will have spent $27,000,000 on airports since 1976. Railway locomotives, unlike other commercial transportation vehicles, are at present exempt from the tax on diesel fuel. To improve equity among commercial carriers, I propose to impose a tax of 2.2 cents per litre on diesel fuel used in railway locomotives. I might mention that until now Newfoundland and Ontario were the only provinces which did not tax diesel fuel used in locomotives.

These gasoline and fuel tax changes will become effective midnight tonight and will add an additional $79,000,000 to provincial revenues.

I also propose to increase revenues from alcoholic beverages and tobacco.

Mr. J. Reed: The wages of sin.

Mr. Bradley: How about cigars?

Hon. Mr. Davis: And pipe tobacco.

Hon. F. S. Miller: With respect to alcoholic beverages, I am making mark-up and licence fee changes effective April 30 to increase revenue by $22,000,000 in 1979-80. The changes are as follows:

Mark-ups on domestic spirits will be increased by the equivalent of 20 cents per 25-ounce bottle. Ontario table wine mark-ups will be increased by the equivalent of 20 cents per 26-ounce bottle.

The licence fee on the production of beer for sale in Ontario will be increased by the equivalent of 10 cents per 24-bottle case. A licence fee on sales by Ontario wineries through their own stores will be reinstituted tonight at 10 per cent. The mark-up will be reduced on lower alcohol strength Ontario wine by the equivalent of 15 cents a bottle and the mark-up on Ontario brandy will also be reduced.

Mr. Conway: You will have to stick to moonshine.

Mr. Breaugh: That’s the first Baby Duck you ever had.

Hon. Mr. Davis: That’s right.

Hon. F. S. Miller: Finally, there will be no mark-up increases for imported spirits and imported wine or for other provinces’ domestic wines.

Mr. Foulds: What happens to Kool-Aid?

Interjections.

Hon. F. S. Miller: It’s easy to see where you spend your money.

Mr. Eakins: The tourism industry comes last.

Interjections.

Mr. Speaker: Order.

Mr. Eakins: We need help for the tourism industry.

Hon. F. S. Miller: In spite of these changes, Ontario continues to have the lowest beer prices in the country, as well as the lowest prices for domestic spirits in any province that has a sales tax. Ontario’s prices are still the second lowest in Canada for imported scotch whisky before sales tax is added.

With respect to tobacco, the tax on a package of 20 cigarettes will be increased by two cents effective midnight this day. Also, the taxes on cut tobacco and cigars will be increased.

Mr. Breaugh: By how much?

Hon. F. S. Miller: Retailers will not be required to take inventory of existing tobacco stocks. This will lighten the load for retailers and allow cigarette products on hand to be sold at existing prices. These tobacco tax increases will yield some $22,000,000 in additional revenue.

I propose to change and increase the basic rate of land transfer tax to two fifths of one per cent on the first $45,000 of the value of a transaction, and to four fifths of one per cent on the remainder. This change, which will take effect midnight tonight, is the first adjustment on the basic land transfer tax in seven years. I anticipate additional revenues here of $20,000,000 this fiscal year; and as well I propose to provide a tax-free roll-over for transfer of land to family farms and small business corporations.

Many fees and licences are related to the cost of services and I believe that they should be reviewed regularly. This year a number of fees and other charges will be increased. In total, I estimate that revenues will increase by some $15,000,000 as a result of the changes; my colleagues, whose ministries are involved, will announce the details in due course.

Before concluding taxation matters, I would like to propose a number of other changes, changes that reduce taxes. First, I propose to raise the retail sales tax exemption -- and this is for administrative reasons -- for all candy, confection and soft drinks to 49 cents, effective midnight this day. This measure will provide a tax saving to consumers of $16,000,000 this fiscal year. What it will really do is assist a lot of --

Mr. Cassidy: Is your mother a dentist?

Hon. F. S. Miller: Judging by the size, the member must be edentulous. Is that the right word? I have a dentist behind me to check that.

Hon. Mr. Parrott: Send him my card and I’ll make sure he is.

Hon. F. S. Miller: Did the member hear that offer from the dentist behind me? He said if he sent him his card he would make sure he was edentulous.

Second, I am proposing that, with respect to admission fees, the ticket price exemption for theatres and so on will be increased from $3 to $3.50. The annual cost of this measure will be only about $1,000,000. Exemption from the 10 per cent tax will be available to all entertainment provided by organizations qualifying as charitable, non-profit or amateur athletic associations under the Income Tax Act, Canada.

Third, all purchases of aircraft and aircraft parts will be exempt from retail sales tax for all carriers licensed to provide commercial, public transportation and cargo service. This action will eliminate an administrative discrepancy between inter- and intraprovincial carriers and will assist Ontario airline operators. It will cost $4,000,000 this fiscal year.

Fourth, to encourage energy conservation, promote safety and help homemakers cope with the cost of living, the following changes will be introduced. These measures will also be effective midnight tonight.

Retail sales tax will be rebated on all materials purchased for incorporation into solar heating systems. The maximum rebate will be $700. This measure will ensure that people who build their own solar heating units receive the same tax benefit available to those who buy factory-built models.

Interjections.

Hon. F. S. Miller: Can we have a brief caucus? I understand members supported that one.

Mr. Cassidy: Is this what you mean by a sunshine budget?

Hon. F. S. Miller: Anyone who goes around with a cloud over his head like the honourable member wouldn’t recognize sunshine if he saw it.

Household smoke alarms will be exempted from sales tax.

In response to requests from consumers, I propose to provide a full sales tax exemption for yard goods and clothing patterns purchased for household use. The cost of these retail sales tax reductions will be $6,000,000.

[9:00]

In concluding my discussion of tax changes let me inform the members that my colleague the Minister of Revenue (Mr. Maeck), will be introducing a bill later tonight which will maintain Ontario’s personal income tax rate at 44 per cent of basic federal income tax for 1979. This rate remains the second lowest in Canada. The Minister of Revenue will also be introducing other legislation to implement tax changes announced tonight.

For the next five to 10 minutes I will speak in Canada’s other official language.

Monsieur le Président, avant de résumer notre position financière pour le nouvel exercice qui s’annonce, je voudrais récapituler brièvement, dans l’autre langue officielle du Canada, les principaux éléments contenus dans ce budget. Permettez-moi également de mentionner que cette année encore, le texte complet du discours sur le budget et des documents budgétaires est disponible en français.

J’ai déclaré que nos principaux objectifs consistent à maintenir la haute qualité des services publics offerts en Ontario, à créer des emplois, à prendre les mesures requises pour encourager la croissance économique et le développement des petites entreprises, à continuer notre sage gestion des dépenses provinciales et à combattre l’inflation en réduisant notre déficit.

Je crois que nous arriverons à atteindre ces objectifs grâce aux nouvelles initiatives que j’ai proposées.

Grâce à son programme d’emploi pour les jeunes, le gouvernement pourra fournir plus de 70,000 emplois aux jeunes do l’Ontario. Nous consacrons également de plus en plus d’efforts, en vue d’améliorer la formation professionnelle, afin que notre population puisse se trouver de meilleurs emplois et que nos industries deviennent plus productives.

L’élimination des droits de succession et des taxes sur les dons contribuera à améliorer le climat susceptible d’attirer des investissements qui entraînent la création d’emplois dans la province. Cette mesure fera également disparaître une source d’inquiétudes réelles pour les fermiers et les propriétaires de petites entreprises.

Le Fonds pour la croissance de l’emploi veillera à ce que les investissements et la création d’emplois dans le secteur privé continuent de s’accroître à un rythme vigoureux. Grace à ce fonds, il sera également possible de réduire les effets polluants dans l’industrie des pâtes et du papier.

Notre nouveau programme pour stimuler les placements dans le capital-actions des petites entreprises contribuera à l’essor des petites entreprises, en vue de créer plus d’emplois et de revitaliser les collectivités. Je propose également de réduire l’impôt sur le capital et d’en faciliter la perception pour 58,000 petites entreprises en Ontario.

An hon. member: You do better in French.

Hon. F. S. Miller: At least members opposite are quieter when I’m speaking French. En toutes les deux langues, c’est magnifique--n’est-ce pas?

Mrs. Campbell: Quel dommage.

Hon. F. S. Miller: Quel dommage?

Mr. S. Smith: Your French is better than your budget.

Hon. Mr. Davis: Your colleague said that.

Hon. F. S. Miller: L’industrie hôtelière, qui assure des emplois à plus de 400,000 personnes en Ontario, bénéficiera d’un stimulant qui prendra la forme de trois exemptions provisoires de taxe sur les ventes.

L’industrie minière, si importante pour le nord de l’Ontario, bénéficiera des amendements que j’ai apportés à l’imposition des compagnies minières.

Je propose certaines exemptions de taxe sur les ventes et une remise de taxe pour aider les consommateurs, promouvoir la sécurité et la conservation de l’énergie, et aider les ménages à faire face au coût de la vie. Ces mesures s’appliqueront aux friandises, aux boissons gazeuses, aux éléments utilisés pour la construction de systèmes de chauffage solaire, aux détecteurs de fumée pour usage résidentiel et aux textiles vendus au mètre.

Dans le secteur des services médicaux, j’ai proposé une très modeste augmentation des primes de régime d’assurance-maladie, de 1 $ par mois pour la couverture individuelle et de 2 $ par mois pour la couverture familiale.

Le gouvernement a fermement gardé sous contrôle ses propres dépenses. Cette année le taux global d’accroissement de nos dépenses sera de 7.4 pour cent. Si l’on retranche du total les sommes allouées au Fonds spécial pour la croissance de l’emploi, le taux d’augmentation de nos dépenses se ramène à six pour cent. Ces taux sont de beaucoup inférieurs au taux de progression de 10.9 pour cent prévu pour l’ensemble de l’économie de l’Ontario.

Je considère important de réduire le déficit de la province, si nous voulons continuer de lutter avec succès contre l’inflation. Dans ce but, j’ai proposé un certain nombre d’augmentations des taxes et impôts. Au total, notre déficit sera réduit de 184 millions de dollars.

Les augmentations de taxes affecteront les corporations, les utilisateurs d’essence et de carburant diesel, les usagers des services de télécommunication, les personnes qui consomment de l’alcool et du tabac. Il y aura également une hausse de l’impôt sur le transfert des terrains et de certains droits et permis relevant des autorités provinciales.

Même si nous maintenons un strict contrôle de nos dépenses, nous avons quand même réussi à allouer des sommes additionnelles pour répondre aux priorités sociales d’importance majeure. Par exemple, nous avons prévu une augmentation spéciale du budget du ministère des Services sociaux et communautaires afin d’offrir plus de services aux handicapés et aux personnes âgées.

Je suis persuadé que le caractère progressif et judicieux de ce budget contribuera à assurer une plus grande prospérité à tous nos citoyens.

Mr. Speaker, I would now like to sum up our financial position.

Looking at the fiscal year just ended, interim figures show that our total spending was $14,500,000,000, an increase of 6.9 per cent, which was under the original target. I would like to commend my colleague, the Chairman of the Management Board (Mr. McCague), for the fine job he has done in managing our expenditures, and his predecessor.

As I said earlier, for the third year in a row, we have spent less than was originally budgeted. That is what good management is all about.

Ms. Gigantes: Who pays? Who pays?

An hon. member: If you estimate high, you’ll do it every time.

Hon. F. S. Miller: They always wake up when the news is good.

Our revenues in the 1978-79 fiscal year were under $13,200,000,000, with the result that net cash requirements amounted to $1,300,000,000. This represents a substantial reduction of $425,000,000 from the previous year. Details of this improvement in our financial position have been documented in the quarterly Ontario Finances.

At the beginning of this statement I indicated that one of my objectives was to further reduce the province’s net cash requirements and establish a better balance between revenues and expenditures. The government’s expenditure plan, which the members will be asked to approve, projects total spending, including the $200,000,000 we have allocated to the employment development fund, of $15,600,000,000 in 1979-80. The increase in ongoing spending, excluding the fund, is only six per cent.

The tax changes I have proposed tonight will increase our revenues by $181,000,000 and all of these new revenues will be applied to reduce the deficit. The resulting net cash requirements of $1,153,000,000 are well within the financing capacity provided by the province’s non-public borrowing sources. In fact, we will have additional financing flexibility this year of over $400,000,000. I plan to use part of this flexibility to reduce outstanding treasury bills by $195,000,000. This will help alleviate upward pressure on interest rates and improve the availability of capital for the private sector.

As members know, the bulk of our nonpublic borrowing comes from internal pension funds and the Canada Pension Plan. The entire pension system, both public and private, has been a matter of concern in recent years. In 1977 the government established a Royal Commission on the Status of Pensions to examine the issues and make recommendations for improvement. Later this year the government expects to receive the report from the very able chairman of the commission, Miss Donna Haley, Q.C.

Mr. Martel: I thought you were going to balance it by next year.

An hon. member: Here it comes, Old Man Ontario.

Interjections.

Hon. F. S. Miller: Look, I am becoming theatrical so sit down.

May I just add this concluding word? When I became Treasurer I wanted to set for myself a high standard. I could think of nothing better than to follow the creed of one of the finest Treasurers this province has ever known, the honourable Leslie Miscampbell Frost. A new portrait of Mr. Frost hangs in the lobby of the building which also bears his name and beside it is a plaque quoting from his first budget speech.

He said: “For the fine old province of Ontario there will be a great future. We are building not only for these times; we are planning for a greater population, for industrial expansion, for prosperous farms, for happy, healthy people. We are laying the sure foundations for a greater and stronger Ontario.”

Mr. Speaker, I am confident that the proposals I have put before you will meet the needs of our people and help build for the future. This budget will create more jobs for Ontario’s young people. It will restrain inflation by keeping the cost of government in check -- something you guys could never do; it will reduce the deficit; it will provide new incentives for job-creating investments; it will help our farms, small businesses and manufacturing industries to grow and prosper; it will eliminate the costs, delays and fears of inheritance taxes; it will improve the investment climate in Ontario; it will promote economic development and employment in the north; and it will ensure a dynamic and prosperous future for all of the people of Ontario.

[9:15]

On motion by Mr. Peterson, the debate was adjourned.

INTRODUCTION OF BILLS

SUCCESSION DUTY REPEAL ACT

Hon. F. S. Miller moved first reading of Bill 47, An Act to repeal the Succession Duties Act.

The House divided on the motion, which was agreed to on the following vote:

Ayes

Ashe, Auld, Baetz, Belanger, Bennett, Bernier, Birch, Blundy, Bradley, Brunelle, Campbell, Conway, Cureatz, Davis, Drea, Eakins, Eaton, Elgie, Epp, Gaunt, Gregory, Grossman, Haggerty, Hall, Havrot, Henderson, Hennessy, Hodgson, Jones,

Kennedy, Kerrio, Lane, Leluk, MacBeth, Maeck, Mancini, McCaffrey, McCague, McEwen, McGuigan, McKessock, McMurtry, McNeill, Miller, F. S., Miller, G. I., Newman, W., Nixon, Norton, O’Neil, Parrott, Peterson, Ramsay, Reed, J., Riddell, Rollins,

Rowe, Roy, Ruston, Sargent, Scrivener, Smith, S., Smith, G. E., Snow, Sterling, Stong, Sweeney, Taylor, G., Taylor, J. A., Timbrell, Turner, Van Horne, Villeneuve, Walker, Watson, Welch, Wells, Williams, Wiseman, Worton, Yakabuski -- 80.

Nays

Bounsall, Breaugh, Bryden, Cassidy, Charlton, Cooke, Davidson, M., Davison, M. N., di Santo, Foulds, Germa, Gigantes, Grande, Laughren, Lawlor, Lupusella, MacDonald, Mattel, McClellan, Philip, Samis, Swart, Wildman, Young -- 24.

Ayes 80; nays 24.

GIFT TAX REPEAL ACT

Hon. F. S. Miller moved first reading of Bill 48, An Act to repeal the Gift Tax Act, 1972.

SMALL BUSINESS DEVELOPMENT CORPORATIONS ACT

Hon. F. S. Miller moved first reading of Bill 49, An Act respecting Small Business Development Corporations.

Motion agreed to.

ONTARIO LOAN ACT

Hon. F. S. Miller moved first reading of Bill 50, An Act to authorize the raising of Money on the Credit of the Consolidated Revenue Fund.

Motion agreed to.

FINANCIAL ADMINISTRATION AMENDMENT ACT

Hon. F. S. Miller moved first reading of Bill 51, An Act to amend the Financial Administration Act.

Motion agreed to.

MINING TAX AMENDMENT ACT

Hon. Mr. Auld moved first reading of Bill 52, An Act to amend the Mining Tax Act, 1972.

Motion agreed to.

INCOME TAX AMENDMENT ACT

Hon. Mm. Maeck moved first reading of Bill 53, An Act to amend the Income Tax Act.

Motion agreed to.

MOTOR VEHICLE FUEL TAX AMENDMENT ACT

Hon. Mr. Maeck moved first reading of Bill 54, An Act to amend the Motor Vehicle Fuel Tax Act.

Motion agreed to.

GASOLINE TAX AMENDMENT ACT

Hon. Mr. Maeck moved first reading of Bill 55, An Act to amend the Gasoline Tax Act, 1973.

Motion agreed to.

TOBACCO TAX AMENDMENT ACT

Hon. Mm. Maeck moved first reading of Bill 56, An Act to amend the Tobacco Tax Act.

Motion agreed to.

LAND TRANSFER TAX AMENDMENT ACT

Hon. Mr. Maeck moved first reading of Bill 57, An Act to amend the Land Transfer Tax Act, 1974.

Motion agreed to.

RETAIL SALES TAX AMENDMENT ACT

Hon. Mr. Maeck moved first reading of Bill 58, An Act to amend the Retail Sales Tax Act.

Motion agreed to.

CORPORATIONS TAX AMENDMENT ACT

Hon. Mr. Maeck moved first reading of Bill 59, An Act to amend the Corporations Tax Act, 1972.

Motion agreed to.

On motion by Hon. Mr. Wells, the House adjourned at 9:45 p.m.