ORDERS OF THE DAY

Hon. Jim Ernst (Government House Leader): Madam Speaker, would you call Bill 2, please.

DEBATE ON SECOND READINGS

Bill 2--The Balanced Budget, Debt Repayment and Taxpayer Protection and Consequential Amendments Act

Madam Speaker: To resume debate on Bill 2, The Balanced Budget, Debt Repayment and Taxpayer Protection and Consequential Amendments Act (Loi sur l'équilibre budgétaire, le remboursement de la dette et la protection des contribuables et apportant des modifications corrélatives), on the proposed motion of the honourable Minister of Finance (Mr. Stefanson), standing in the name of the honourable member for St. Johns (Mr. Mackintosh).

Some Honourable Members: Stand.

Madam Speaker: Stand? Is there leave to permit the bill to remain standing?

Some Honourable Members: Leave.

Madam Speaker: Leave has been granted.

Hon. Gary Filmon (Premier): Madam Speaker, I am pleased to rise in support of Bill 2, The Balanced Budget, Debt Repayment and Taxpayer Protection and Consequential Amendments Act. I believe that it is a bill that is right for the times, that it is necessary to build a strong foundation for this province's future economic growth and stability.

Members opposite have contributed to the debate as have editorialists and many self-interested public groups over the past number of weeks. In particular, members opposite and their friends and supporters in the public sector union movement have heaped scorn on the legislation because of course we all understand that they do not want any legislation in place that would prevent them from accessing the public purse for all of their wants and demands in future.

I believe that very simply put that is old-think. They believe, as did their colleague Bob Rae, that all you need to do to solve any problem is to spend your way out of it. Throw money at the problems. That is not, obviously, what most people in society believe today, and they have had some bitter experience upon which to found their conclusions.

Members opposite have said, why did we not do it seven years ago? Well, that is the silly sort-of smart-aleck response that you would expect from an opposition that is as irresponsible as the members opposite. They, of course, fail to recognize that we were coming out of an era in which their administration had run deficits that averaged almost a half billion dollars a year through some very buoyant times throughout the '80s, I might say.

(Mr. Marcel Laurendeau, Deputy Speaker, in the Chair)

They had consistently maintained a deficit that averaged above 3 percent of GDP during that period of time. We, of course, had to not only go to work to get the budget in a position where it could consistently be in a balanced position, but we did it through the second worst recession this century in Canada, and we did it without raising any of the major tax rates.

That is the kind of fiscal stability that cannot be created overnight; that is the kind of fiscal stability that needs to be addressed over a period of time till you get the basics in place. Now that they are in place, we are in a position to introduce, to pass and to maintain balanced budget legislation in this province in future. So the arguments about what should have been done in the past, of course, are factious, and the arguments have to concentrate on why would not you do it in future when you have the basics in place?

Well, Mr. Deputy Speaker, there have been many observers who have contributed to the debate as well and who have pointed out to that solid fiscal foundation that has been laid in this province in preparation for balanced budget legislation. For example, the Investment Dealers Association of Canada recently said, and I quote: Over the past seven years, Manitoba's deficit has averaged about 1.3 percent of GDP, consistently below provincial medians across this country.

Well below, I might say, the target that has been set by the federal government of 3 percent of GDP to get their deficit down to that level with all of their various moves.

This carries on the comments of the Investment Dealers Association: Deficit reduction in the province has been achieved through expenditure restraint while holding the line on taxes. Manitoba was one of the first governments to rein in spending, focusing on controlling public wage costs, streamline government operations and increase efficiencies in the delivery of public services, end of quote.

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The Dominion Bond Rating Service has said, and I quote: Manitoba's fiscal performance since 1990-91 has consistently been among the most favourable in Canada.

Nesbitt Burns stated, and I quote: The fiscal progress made by Manitoba is remarkable, considering that it has frozen taxes for the past eight years.

Finally, Lehmann Brothers has said, and I quote: We view the province of Manitoba as a high A credit with an improving outlook. We believe an upgrade by the rating agencies is possible over the next two years. Manitoba's strengths include sound fiscal policy, a central geographic location and an increasingly diversified economy. The fiscal plan factors in credible economic assumptions and natural growth revenues. A balanced budget and improved debt position appear likely over the net near term.

There is the answer, Mr. Deputy Speaker, as to why we are doing it now.

So, with our 1995 budget, we began a new era of balanced budgets, of fiscal surpluses and paying down the debt. The surplus is budgeted this year at a modest $48 million, but it will improve as we continue in our renewed mandate to restore Manitoba to long-term fiscal health. If fiscal health is the objective, then our program of expenditure management and tax limitation is the medicine, and our balanced budget legislation is the fiscal equivalent of leading a healthy lifestyle in order to prevent further illnesses. It is the long-term view.

Bill 2 has three main parts, and they are all important. The first requires that the budget be balanced or in surplus every year beginning with this year. In contrast to many American states and the province of New Brunswick which have similar laws, this requirement covers capital spending as well as current. Exceptions are few in number, and they are very specific. Deficits may be incurred only if there is a war, a disaster or a 5 percent decline in revenue in one year. A decline of that magnitude has occurred only once since the 1930s.

If a deficit is incurred and the exceptions do not apply, all members of cabinet would have their salaries reduced by 20 percent. If a deficit is incurred for a second consecutive year, the penalty doubles to 40 percent of the salaries of the members of the Executive Council.

Mr. Deputy Speaker, I might say that, when I was at the financial markets in New York, they emphasized that as being real accountability, teeth in the legislation. They said that it is time that all governments put in place those kinds of sanctions to ensure that there are real and severe penalties for governments that do not meet their own targets, that do not keep their word on commitments of this magnitude such as balanced budgets.

Critics, of course, say that it ties the hands of government to respond to downturns in the economic cycle or unexpected disasters, for instance, forest fires, flooding situations and those kinds of things. That is not so. The Fiscal Stabilization Fund, of course, plays an important role in this legislation by providing the flexibility to deal with unexpected fluctuations in revenue or necessary expenditures that come on an urgent basis and still achieve the balanced budget.

The fund is somewhat like a provincial savings account where we set aside revenue in the good times to help out in the bad times. The Minister of Finance must endeavour to maintain the fund at a level equal to 5 percent of annual provincial expenditures, which would be something just under $300 million in today's context.

The second part, of course, provides repayment of the debt so that interest payments will decline over time. Since the taxpayers of Manitoba now spend approximately $650 million a year in interest, this is a matter of no small importance.

The bill establishes a debt retirement fund and requires an annual deposit into the fund starting next year. The minimum annual deposit will be $75 million plus a share of the interest costs savings which are achieved as the debt declines. Under these provisions the debt will be eliminated over 30 years.

The third provision of the bill will protect Manitoba taxpayers from increases in the rates of major taxes. These are the personal and corporate income taxes, the retail sales tax and, of course, the payroll tax. Together they account for fully 70 percent of our own source revenue. In effect, the bill extends the freeze on major tax rates that we have been enjoying since 1987 indefinitely into the future.

I point out that the draft legislation was printed in the budget last March so that details were in the public domain during the election of last April. I point out that members opposite were very fearful of criticizing that legislation during the election campaign because they knew that the public supports balanced budget legislation. They tiptoed around that so cautiously and carefully and never came out and said that they really opposed balanced budget. They said, we are in favour of balanced budgets, but we are not sure about legislation. You know, it is really the wishy-washy kind of thing that showed a party in real difficulty and a party of course that is very fearful of opposing something that was so evidently popular in the minds of the public.

Of course, Mr. Deputy Speaker, the public looks at it very simply. The public says, we are expected and we must, if we are going to have a reasonable quality of life, live within our means. We cannot indefinitely live beyond our means and expect that somehow things are going to work out for our families. They say that in their homes; they say that on the farms; they say that in their small businesses; they live within their means; and, they say, we cannot understand why governments would not live within their means.

No doubt, of course, the members opposite having the election behind them and knowing that they may not have to face the public for four years or more, they now are sort of reverting to their own ideology, Mr. Deputy Speaker, and their own ideology says do not put anything in place that would restrict governments from spending all the money they want, from showering and lavishing all of the funds possible on their friends in the public sector union movement. That is the kind of thing that is irresponsible and that is why members opposite are going to stay in opposition for a long, long time.

Some of the most outrageous criticisms that I have heard in the course of this debate have come from the Leader of the Opposition (Mr. Doer), who said in the House, quote, people will be starving to death in our streets because you have a silly balanced budget legislation. Well, when you hear such incredibly inane criticisms, you can be reasonably sure that the critic knows he is defending a very weak position. In fact, some of the critics have admitted as much. [interjection]

Mr. Deputy Speaker, would you please bring the member for Radisson (Ms. Cerilli) to order. She seems to be getting carried away with herself, and I am having difficulty hearing myself speak.

Mr. Deputy Speaker, some of the critics of course have admitted that they really do have a weak hand. At a recent convention of the Manitoba Federation of Labour in Brandon, outgoing President Susan Hart-Kulbaba announced that the federation would be mounting a campaign against Bill 2. While admitting that public support is high even among union members as she told a Canadian Press reporter in obvious disgust, and I quote, there is a whole bunch of union delegates who came to this convention who thought balanced budgets would be fine.

Well, it is her job to spend tens of thousands of dollars of her union members' hard-earned dues to convince them that they do not know what they are talking about. That is real leadership.

Weak or not, the criticisms levelled at the balanced budget bill should be addressed; so let us take a look at some of them. How about the claim that social services will be slashed and that people will be starving in the street? In fact, the real threat to social services is to continue running up the debt because higher debt means that the money which could be spent on services is instead diverted to paying interest on the debt.

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This year, we expect to spend about $650 million servicing our general purpose debt. Let us assume an NDP government came to power, Heaven forbid, and started running deficits of $400 million a year; $400 million a year is less than they were running consistently in the '80s when they were last in power. Let us assume that they run $400 million a year. At current interest rates, they would add more than $100 million to the annual debt charges in just three short years. It would take only eight years before annual interest costs toppled a billion dollars.

Where would they find the money to pay these outrageous interest charges? Would they raise taxes? Would they cut spending? Sooner, rather than later, they would have to do both of those things. That is, in fact, what Bob Rae found out to his chagrin. Because, if you just added the new interest cost to the deficit, the deficit would quickly exceed $1 billion and the interest costs would be rising even faster. The power of compound interest is a wonderful thing if you are saving, but it becomes a terrible master if you are borrowing more money year after year. Just ask Bob Rae if you do not believe me.

To put this another way, when Sterling Lyon left office in November of 1981, the annual interest charges were less than $100 million--less than $100 million. By the time we took office in 1988, they were $450 million higher. That additional $450 million of annual interest costs would pay for a great deal of services and a few tax cuts, I might say, at the same time.

You know, there is a Free Press editorial on September 23 that claimed that the bill, quote, is full of stupidities, unquote.

Well, first on the list of their so-called stupidities was the bill's effective enforcement mechanism, namely, the salary penalty for cabinet ministers. But governments in this province throughout the past number of decades have run deficits continuously, in fact, continuously for over two decades through several complete business cycles. I believe it is clear evidence that governments have to do more than promise balanced budgets, because they have certainly done it in the past.

It must be a requirement, and that requirement must be backed up by meaningful sanctions. Independent observers agree. That is why the Canada West Foundation wrote, and I quote: The best single component of the Manitoba legislation is its clear enforcement mechanism.

Similarly, the International Centre for the Study of Public Debt, and I quote: The government of Manitoba is to be congratulated for introducing the penalty provision in this proposed act.

A recent survey of balanced budget laws of U.S. states concluded that tough provisions for noncompliance are necessary for an effective balanced budget law.

I also point out that an enforcement mechanism can only be considered stupid if you also consider it stupid to balance the budget, because why would you say it is stupid to have an effective enforcement mechanism in place if you believe in the principle that budgets should remain balanced?

The same editorial also argues that we cannot commit to balance the budget because it is just too hard to forecast revenue. Is the editorial suggesting that Manitoba has run deficits for two decades because the revenue forecasts were consistently wrong? Well, there is no question that it is not an exact science, no question about it. There can be transfers from Ottawa that are moved up and down as various estimates come through; there can be changes in the business cycle. But the interesting thing is that over the last 20 years the average variance in the forecast revenues from the actual revenues is under 1 percent, less than 1 percent. More importantly, revenue has been underestimated more often than it has been overestimated during that period of 20 years. Cumulatively, in fact, the revenue has exceeded the forecast amounts by almost $500 million over that 20-year period.

So, if you are worried about the estimates of revenue being the problem, they have been, in fact, underestimated, and the results show that $500 million more over 20 years was in the budgets.

Spending estimates, of course, tend to be quite accurate because that is an area in which governments have direct control, and that is an area in which governments--I would say, certainly our government has been very, very accurate and certainly has not exceeded its forecast.

In short, deficits did not occur year after year because of forecasting errors in revenue. On average, over any period of a few years, the revenue forecasts tend to be not only pretty accurate but on the conservative side. Still there will be unanticipated fluctuations in revenue, and we will have to deal with them. That is why we have the Fiscal Stabilization Fund as a key feature of the legislation.

In years when revenue is greater than expected, the excess will not be spent the way it used to be by the members opposite when they were in government. If they got a little more revenue than they were expecting, they put out the word to departments to find ways to spend it, but we have not done that. We would not do that. The legislation would prevent it, in fact, Mr. Deputy Speaker.

The excess will not just be spent. It will be set aside in a provincial savings account. The money will be drawn out in years when revenue is weaker. This mechanism will smooth out those unpredictable year-to-year fluctuations in revenue.

Some critics, of course, have objected to the balanced budget and debt retirement provisions by arguing that government debt is just like a family mortgage. Just like a family mortgage, they say. So why not go into debt like you do to mortgage your house? Why not go into debt to pay for roads and hospitals and schools and so on, say these critics? Unfortunately, the analogy does not work because history tells us that governments for the past three decades have not repaid the mortgage over any period of time. They have, in fact, just added to it and added to it and added to it.

Most people in their own homes pay off the deficit, pay off the mortgage. They work hard. But what has happened with governments is analogous to a family that takes out a mortgage and then finds that because it is not paying off that mortgage it has to take out a second mortgage, then a couple of car loans, then a vacation loan, then a loan to pay the interest on the loans, and so on and so forth. That is exactly why governments of all provinces in this country have gotten into the state that they are. That is why you need to have a provision to pay off the accumulated debt over a reasonable period of time.

Critics, of course, have taken issue with the taxpayer protection provisions of Bill 2. It is argued that the bill will protect only the rich from tax increases. That is absolutely flat out wrong, because one of the major areas in the bill that is protected is, of course, the sales tax and that is paid by everybody of any income level. Certainly, poor- and modest-income people will gain great benefit by knowing that the government cannot raise their sales tax without having a referendum.

Personal income taxes, of course--one Free Press columnist seems to think that income taxes, quote, hurt most those with money. That is the same columnist, I might say, who has written other columns arguing that our income tax system favours the rich. Well, which is it? Is the income tax system hurting the rich or does it favour the rich? She has written both sides of the argument, I might say, in the past, but this time it is convenient for her to take this side of the argument. I might say that the majority of Manitobans pay income tax and every one of them would be hurt if it were not for the protection that is in this bill that restricts the ability to increase their taxes.

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Thirdly, of course, the bill restricts increases in the payroll tax. Members opposite say, well, that only protects big businesses in this province, but most economists believe that payroll taxes are largely passed on to the employees in the form of lower wages or lost jobs. So Manitoba wage earners will also benefit from this bill.

Another criticism that we are hearing is that the government is playing games with the numbers and using accounting tricks to balance the budget. That is also not true and the argument on this point has a number of parts. Firstly, it is noted that in some years the deficit would be larger if not for the draw from the Fiscal Stabilization Fund. Precisely. That is why the fund was created. That is why it was there in the first place. We have had the experience to know that it works. That is why it is an integral part of this bill.

In years when revenue is greater than expected, we will not spend it. We will save it for a rainy day. We think that makes for prudent fiscal management. The process though is entirely transparent. It is so transparent that even members opposite understand it when they see it in the annual financial statements and in the Auditor's Report. Even they can see through it. That is how transparent it is, Mr. Deputy Speaker.

The budget document, the quarterly financial reports, the public accounts, all show clearly what the deficit is before and after any transfers from the Fiscal Stabilization Fund. They show the amount of the transfer and they show the amount remaining in the Fiscal Stabilization Fund. Nothing is hidden and the accounting is very, very straightforward.

The second part of the argument concerns the Provincial Auditor's expressed view that future pension liabilities should be reflected in current accounts. Again, that information is all disclosed accurately in our financial statement so that nothing is hidden, and I might say that is a practice that has been followed in this province by successive governments dating back into the '60s. That practice is not new to this government, and it is a matter that has been referred to by successive Provincial Auditors, not just this one.

The fact of the matter is that it will be easier for us to be able to set aside funds for things like deferred pension liabilities once we have the balanced budget legislation and once we pay down the accumulated debt, because we will be reducing both the burden of the debt and the associated annual interest payments, making it easier for us to meet these future obligations. All of these matters are covered in the legislation. That is why it has been referred to by many, many observers as the best balanced budget legislation anywhere in North America.

Most importantly, and I say this, independent observers see how well this legislation is laid out. The fact that we say that there cannot be a change in accounting practices in order to achieve the balanced budget is referred to by the Canada West Foundation. In their report, they note: Changes in accounting practices may not be used to hide a deficit. The same accounting practices used to develop the budget must also be used to determine whether the government has actually balanced that budget at the end of the fiscal year.

So, Mr. Deputy Speaker, I have covered some of the criticisms that have been directed at Bill 2 by the opponents of fiscal responsibility, and I want to emphasize that independent observers have come out strongly in support of the legislation. Let me give you some examples. The Financial Post published an editorial entitled, Manitoba shows the way, which said, and I quote: Premier Gary Filmon and his Tory government deserve full marks for proposing a balanced budget law with teeth.

The Canada West Foundation prepared an analysis of the balanced budget legislation in the four provinces which have such laws. The foundation awarded Manitoba an A-plus. In contrast, Alberta received a B; Saskatchewan, whose legislation is supported by the New Democrats here, received a C; and New Brunswick, whose legislation is supported by the Liberals in this House, received an F.

The International Centre for the Study of Public Debt stated, and I quote: The government of Manitoba will soon have the best balanced budget law in Canada. In one piece of legislation, Manitoba's law should ensure that the provincial debt will be eliminated over a period of time and that the tax burden does not increase. The features of the proposed Manitoba law are worth studying and adopting by other governments if they are serious about deficit and debt elimination.

I might tell you, Mr. Deputy Speaker, that when the Minister of Finance (Mr. Stefanson) and I were in New York, this was a topic that was referred to time and time and time again when we visited with all of the various brokerage firms in the New York market. In fact, the people from Merrill-Lynch said that this deserves to be written up in The Wall Street Journal. It is legislation that should be a model for people all over North America, is what they told us.

Let me conclude by reminding you of the critical link that members opposite never can understand, the critical link between fiscal policy and economic performance. If we were to follow the fiscal policy of our critics, the ones who think that balanced budgets lead to people starving in the streets, then we would be condemning the Manitoba economy to shoulder an ever-increasing burden of interest payments. To meet that burden, taxes would inevitably rise, leading to lower investment and lower spending by consumers. There would also have to be cuts in government services which support economic development, such as training and infrastructure maintenance.

As we have restored Manitoba to fiscal health, we have seen an increase in economic activity in this province. We are able, not only to preserve all of our vital government services while providing consumers and businesses with a stable tax environment, we are also attracting major investment.

Mr. Deputy Speaker, just in the last few weeks, we have had several hundred million dollars of new investments announced for Manitoba, jobs for Manitobans, economic activity. I have talked earlier about the fact that for the first nine months of this year, we have had an average of 14,000 more people employed in Manitoba than we did a year ago. I have talked about the fact that our manufacturing sector employment levels have been at almost all-time record highs, that we have seen reductions in our unemployment numbers and rate.

The balanced budget legislation commits governments of this province to maintain that state of fiscal health that we have today. As a direct result, it enhances and preserves a climate which is favourable to economic growth. In other words, Bill 2 is not just about keeping our finances in order. It is about enhancing our economic well-being today and into the future, and I invite all members to join with us in supporting this legislation, this far-seeking, visionary legislation that will ensure that Manitoba has the fundamentals in place to grow and strengthen and have a stable environment for economic activity for all time in future.

Thank you very much, Mr. Deputy Speaker.

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House Business

Hon. Darren Praznik (Deputy Government House Leader): I know the member for St. Johns (Mr. Mackintosh) wishes to rise to address this issue.

Just on House business for a moment, I would like to announce the referral of the Annual Report of the Communities Economic Development Fund for March 31, 1995, to the Standing Committee on Economic Development, which is already scheduled to meet on Tuesday, October 24, 1995, at 10 a.m. to consider the same corporation's 1994 report.

As well, when this matter is concluded, I would ask if you could please call Bills 10, 17, 22, 31 and 6 for continuation of debate on second reading.

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Mr. Gord Mackintosh (St. Johns): This is a very important debate for Manitobans and for this House and for members. It really is a quasi-constitutional document that is under discussion here. It is a rare kind of statute which purports to limit the powers of this Legislature and purports to limit the ability of governments to do whatever it wishes or sees in the best interest of Manitobans. It is somewhat, I suppose, like the Charter of Rights and Freedoms in that it does put restrictions on MLAs and governments, somewhat like international or multijurisdictional trade agreements.

But it is interesting that despite the importance of this kind of legislation, we only had five Conservatives get up, by my count, and speak to this bill. I find that absolutely astounding, Mr. Deputy Speaker. I think that represents about 15 percent of the caucus members on that side.

So I suppose today, when the Premier (Mr. Filmon) got up--I am sure some people were begging him to get up and try and save this debate and turn things around, because it was obvious that this government was not really committed. I think, quite frankly, they are embarrassed by this legislation. I think there are many people over there who cannot support it. I think it also shows, on the part of some, a certain arrogance, that they do not have to justify; and, in fact, they could not rally themselves to make the necessary arguments in support of this bill.

It was interesting that when the First Minister (Mr. Filmon) was giving his remarks, he was going on about how rosy things have become particularly in the last year, and I think by listening to that the First Minister made the best argument as to why this bill is not even required.

It is interesting, this bill is the first quasi-constitutional type of document that it has brought in, and, of course, it is no surprise that it brought in this kind of legislation and did not, for example, bring in any legislation to require minimum standards for, say, poverty levels, health care or educational achievement. The quality-of-life objectives are not within this government's ambit. Improving the human condition and meeting need is rejected by this government. Indeed, I think this legislation shows that the overriding objective of this government is centred on the bottom line of each year.

That is the real symbol of this bill. The real symbol is that this bill represents the overriding, permeating objective of the Conservative government. Now I know the government actually wants the symbol to be something else. It wants the symbol to be one of fiscal prudence. It needs such a symbol, Mr. Deputy Speaker. It is in desperate need of such a symbol. It needed that symbol going into an election campaign.

The Premier just got up and spoke about how the government held the line on taxes when we all know what the truth is, what the reality is, and that is that in 1992 and '93 there was a revenue grab by this government to the extent of an increase in the sales tax of 1.4 percent; in other words, 8.4 percent would be the effective sales tax rate of those increases in revenues.

This is the government, of course, that had deficits year after year after year including this year, a deficit of $96 million. In 1992-93 this is the government, this government, this Conservative government, had the highest deficit ever in the history of Manitoba, this government a deficit of over $800 million, and the debt was growing every year including this year, this year by $141 million. That is a long way, Mr. Deputy Speaker, from the $58-million surplus that the NDP left to this government in 1988-89. Oh, they needed a symbol, Mr. Deputy Speaker. They needed it badly.

Now, the other thing, this government really does not believe in this bill. Well, this bill requires a referendum. It requires a referendum in the event that the government seeks increases in particular categories of tax. What does the First Minister (Mr. Filmon), who came in here today and spouted off, really think about referendums?

Reading from Hansard, when we asked this government to consider a referendum on the arena issue, the true beliefs of the government came out when he said, "In our parliamentary democratic system in this country, which all of us are elected under and which all of us . . . support, Madam Speaker, the fact of the matter is that people elect governments on a whole series of issues: on a philosophy, on integrity, on leadership, on all sorts of issues. Primarily, though, they elect people to make judgments on their behalf, judgments that are ultimately in the best interests of the province and its future. We are in office with a mandate to exercise our judgment and to make decisions on a whole range of issues under new and changing circumstances . . . ." And, by the way, rejected the notion of a referendum. According to the First Minister, that was contrary to his belief, contrary to his vision and his understanding of parliamentary democracy, at least in Manitoba.

Now, it is interesting that, even if a government runs in an election on increasing revenues, increasing a certain tax, it still must, on attaining office, go back then to the people with an expensive referendum. I do not know where the sense of that is.

This document, this symbol, may have worked in the election, I do not know. It may have worked a bit for the government, I do not know. It may have worked a bit against them. But what it raises by its symbolism is the question of the integrity of this government and its members. This bill represents another reliance by this government on public relations, on public relations efforts and statements made that are not related to the reality.

I believe that it is a corrupting experience to be a member of this government. It is corrupting to have to rely on the facile symbolism of documents and initiatives like this bill.

Now, there are two features of this bill which lead me to say this. First, this bill can be amended as early as the next session. Second, when we examine the bill, we find hole after hole. It has been said that there are loopholes big enough in this bill to drive a truck through.

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You know, I probably will not be on record as ever doing this again, but I am going to agree this one time with Paul Martin. He recently said that laws, bills like this are, and I quote, not the way to go. Apart from limiting the choices of duly elected governments, this legalistic approach simply encourages ingenious politicians and bureaucrats to spend time looking for ways to get around the rules through accounting hocus-pocus and subterfuges of various kinds--close quote.

Now, unfortunately, we must acknowledge that the bill does contain some limits on the ability of government to choose from some of the revenue options that currently it has available to it. But, given the ability to circumvent and smuggle in both new revenues and deficits, whether, for example, through off-budget borrowing or revenue changes outside of those listed and those that require referendum, we have to conclude that the bill and its wording itself is only part of the threat to the quality of Manitobans' lives. We think that the worst threat is how governments like this one can use this legislation, how mean governments, how governments elected to protect the interests of those with with power and privilege will use the legislation.

The bill's repugnancy is that mean-spirited governments, like this one, can use the bill as an excuse to gut services to those most in need. They can use it to continue to intensify the politics of what I think is ignorance, intolerance and greed. They can use it to solidify the inequality that we are suffering in the Manitoba community.

They can use it to preserve the status quo. If you are happy with the status quo, then you should support the bill. If you are eagerly awaiting the loss of $220 million in transfer payments from the federal government and the crunch that that will bring, then you should support this bill. If you are happy with the unemployment and poverty levels in Manitoba, then you should support this bill.

So the bill gives excuses. It gives excuses to the government, and, as well, it does limit in actual fact the ability of the government to deal in the best interests of the public with the ebb and flow of the business cycle. It will limit and can be used as an excuse not to invest in the future of Manitoba and the future of Manitobans. It can be used as an excuse and can serve to eliminate the government's ability to be a factor in the lives of Manitobans. It will reduce the ability in fact of the community to take control of its own destiny and to plan for its future and ensure its well-being.

It is interesting that a deficit under this legislation is okay under the bill if there is a loss of revenues in excess of $270 million a year by our calculation. We want to know what the effect will be on growth, what the effect will be on the most vulnerable. We have not been given those answers, Mr. Deputy Speaker. While revenues can be reduced by up to $270 million a year over four years, that will mean that revenues can decrease by $1 billion. That is 19 percent of current revenues. That is more than the entire Department of Education budget. It is more than half of the budget of the Department of Health. What effect will that have on our future? What effect will it have on growth, the economic argument? What effect will it have on the most vulnerable, the moral argument? The province can wait for a reduction of this magnitude, of $1 billion over four years, and we will never get out of the hole.

Now, we have been saying time and time again that this government does not understand the importance of investment in people and long-term investments to ensure our well-being. Again, I want to remind the government of an interesting experiment and project that took place in the United States called the Perry [phonetic] preschool project. I think it exemplifies more than any other investment how critical it is that we look ahead and we plan, that we accept the truth that investing today will result in savings in the future. The Perry [phonetic] preschool project was initiated by educators concerned about the disadvantages facing children from low-income homes when they began in the school system.

It was a 30-year study called a longitudinal study that followed individuals who were enrolled in high-quality early childhood education as children and compared them to a control group who had no such experience. As a group, the individuals in the childhood education program had significantly higher monthly earnings at age 27. More had found jobs, higher-earning jobs, had finished school, owned their own homes, even a second car, and fewer had been arrested, received special education or were dependent on welfare services.

Trying to assign an economic value, it was discovered that over the lifetime of the participants in the study, the preschool program returned to the public an estimated $7.16 U.S. for every $1 invested; in other words, I guess, $1 invested, $5 Canadian saved.

But investments aside, this government can say, no, we are not interested in investments, whether in capital projects, in human services. They can say, no, we cannot do that. The bill prevents me from doing that. Remember that bill back in 1995, and now, at a time when the rich are getting richer like never before in this province, this government brings in this legislation.

Citing statistics from Frances Russell in the Free Press of October 6, 1995, she said, according to Revenue Canada, the number of people earning more than $50,000 almost doubled in the first four years of the Filmon government. The number of people earning above $70,000 rose by almost a third between '88 and '91. That year, just 15,600 individuals took home almost $2 billion of the $17 billion of total provincial income.

We do not need those figures really, Mr. Deputy Speaker. We can see right in front of our eyes, in our neighbourhoods, the effect of this government's policies on people, on our expectations, on the quality of life.

Now, I have argued many times, I believe, that those on the left in this country and in this province have a good reason and, I think, the strongest reason to recognize that balanced budgets are a virtue and to pursue equalizing revenues with expenditures when that can be done. When we are struggling to ensure a role for government in equalizing the social and economic condition, sound public finances and public confidence in the management of fiscal resources, I think, is a prerequisite.

I know the Premier (Mr. Filmon) got up today and wanted to build on a myth that New Democrats lavish money on problems and on people. He would like to believe that, and he did not take that from any of the speeches that were given on this side, Mr. Deputy Speaker. It is just a myth because we recognize on this side that the redistribution of income from the taxpayer to the moneylenders of the world, which results from unusually high debt load, is not in the interests of the working people and the people in need in this province.

But what we recognize on this side is that we also have to consider human need. We have to balance the present and future and the needs of the present and the future. There is a business cycle that this government has ignored in this legislation, and it is the biggest flaw underlying the bill. The International Monetary Fund has said about balanced budget legislation and I quote: The costs of a balanced budget law are the loss of fiscal stabilization over the cycle and the loss of flexibility in reacting to shocks on expenditure or revenue--close quote.

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The recurring cruel effects on people of the marketplace, especially in downturns in the business cycle, often necessitate some balancing. In other words, there must be a balance achieved not just between revenues and expenditures in every year; there must be a balancing out of the business cycle necessitating flexible financing. We must balance the budget in the whole sense, Mr. Deputy Speaker, but this bill is an unbalanced budget bill. That is what it promotes. Balancing is not just revenue and expenses every year. Balancing requires a much broader view of community, of need.

I have often gone around and I have argued, well, this government thinks it is a business; the government is not in the business of making widgets, as it thinks. It is supposed to be in the business of making a community. But now I am going to have to rethink that part of my speech, because the government is not in fact like a business. It is not acting like at least a rational business or an intelligent business or a viable business, because it is purporting to limit the borrowing capability of its operation.

According to the government's task force on capital markets, I quote: The majority of small businesses usually require some debt financing. The report goes on to note that small business uses debt financing to purchase capital assets such as buildings and equipment and for current assets and ongoing operating costs; financing of operating costs is usually by way of loans, mortgages or leases backed by the required level of collateral security. They just do not get it. This bill cannot make a community, at least not a healthy one.

It is interesting, just outside of the Legislature, right next door, there is a church. In front of the church, there is a sign that is lit, and last week the sign said, we are more than our bottom line.

We are more than our bottom line. I think that sign was there to try and reach out to MLAs, catch their attention as they were coming to and from this building. The sign was saying to this government and its members, you have to balance the community's needs. I think it was saying, rethink your unbalanced budget bill.

What this bill is doing, it is saying that we are all just barnacles on the sinking ship of the marketplace. It says we are only here to serve the economy, be its slaves, rather than saying that the economy is here to serve us. It says we are just all winners and losers in the marketplace and dismisses us as a community, as beings who cherish security and dignity.

I could not believe it when I heard the First Minister (Mr. Filmon) today say that this bill represents, and I quote "the long-term view."

This bill is the very opposite. This is the short-term view. The government is saying, like Groucho Marx has said, why should I care about posterity? What has posterity ever done for me?

Well, Mr. Deputy Speaker, I am going to vote for posterity; I am going to vote against this silly bill and this silly public relations stunt.

In conclusion, we are now prepared to vote on this bill. Given that there is less than three weeks left of this session, we want to get this to the committee and hear the public representations. Thank you.

Mr. Deputy Speaker: The question before the House is second reading, Bill 2, on the proposed motion of the honourable Minister of Finance (Mr. Stefanson), The Balanced Budget, Debt Repayment and Taxpayer Protection and Consequential Amendment Act (Loi sur l'équilibre budgétaire, le remboursement de la dette et la protection des contribuables et apportant des modifications corrélatives). Is it the pleasure of the House to adopt the motion?

Some Honourable Members: No.

Voice Vote

Mr. Deputy Speaker: All those in favour of the motion, please say yea.

Some Honourable Members: Yea.

Mr. Deputy Speaker: All those opposed, say nay.

Some Honourable Members: Nay.

Mr. Deputy Speaker: In my opinion, the Yeas have it.

Formal Vote

Ms. Becky Barrett (Wellington): Yeas and Nays, Mr. Deputy Speaker.

Mr. Deputy Speaker: A recorded vote has been requested. Call in the members.

(Madam Speaker in the Chair)

Madam Speaker: Order, please. The question before the House is second reading, Bill 2, on the proposed motion of the honourable Minister of Finance (Mr. Stefanson).

Division

A RECORDED VOTE was taken, the result being as follows:

Yeas

Cummings, Derkach, Downey, Driedger, Dyck, Enns, Ernst, Filmon, Findlay, Gaudry, Gilleshammer, Helwer, Lamoureux, Laurendeau, McAlpine, McCrae, McIntosh, Mitchelson, Newman, Pallister, Penner, Pitura, Praznik, Radcliffe, Reimer, Render, Stefanson, Sveinson, Toews, Tweed, Vodrey.

Nays

Ashton, Barrett, Cerilli, Chomiak, Dewar, Doer, Evans (Brandon East), Evans (Interlake), Friesen, Jennissen, Lathlin, Mackintosh, Maloway, Martindale, McGifford, Mihychuk, Reid, Robinson, Sale, Santos, Struthers, Wowchuk.

Mr. Clerk (William Remnant): Yeas 31, Nays 22.

Madam Speaker: The motion is accordingly carried.

Mr. George Hickes (Point Douglas): I was paired with the member for Gladstone (Mr. Rocan). Had I not been paired, I would have voted against this bill. Thank you.

Madam Speaker: The hour being after 4 p.m., time for private members' hour.