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FINANCE

Mr. Chairperson (Marcel Laurendeau): Order, please. This section of the Committee of Supply will be dealing with the Estimates of the Department of Finance. We will begin with a statement from the honourable Minister of Finance.

Hon. Eric Stefanson (Minister of Finance): Thank you very much, Mr. Chairperson. I have a very brief opening statement and comments. I am prepared to get on very quickly with responding to any questions that members might have, but it is my pleasure to present for your consideration and approval the Estimates of Expenditure of the Department of Finance for the 1995-96 fiscal year.

The department proposes to spend $823.6 million in 1995-96. This represents an increase of 10.6 percent or $79 million over the '94-95 print. Almost the entire increase is due to a 14.4 percent or $77 million increase in public debt costs, and the increase is primarily due to increased interest rates and to a lower Canadian dollar since October of 1993. As members know, public debt is far and away the largest component of the department's spending. It is a price that must be paid today as a result of past overspending. Six hundred and ten million dollars in public debt costs along with the $38 million through Manitoba properties in the Department of Government Services represents almost 12 percent of the entire provincial budget. These costs underscore once again the importance to Manitobans of balancing the provincial budget.

Apart from debt servicing, the other main appropriations in the department are more or less flat and some are in fact declining. Operating reductions are being achieved without hampering the essential work of the department and are fully consistent with the government's determination to bring and keep the costs of government in line with what Manitoba taxpayers can afford.

With these brief opening comments, I would be pleased to listen to and to respond to any questions that honourable members may have. Thank you.

Mr. Leonard Evans (Brandon East): Mr. Chairman, just a few opening remarks, I think by and large this department historically has been a very well-administered department, with senior people who have been around for many a year and generally have done a very conscientious job.

I am sure they are carrying on that way at the present time. There are a number of issues that come up for consideration naturally under this department, various financing arrangements that we have with the federal government, of course, but there are other issues such as the tobacco tax issue, what is happening in this battle of tobacco taxes and the whole question of interprovincial trade.

There are some other issues. We have some concerns about various taxation revenues, where we are standing on the GST at the present time. We have concerns that should come under this minister, such as advertising guidelines. We are concerned about the amount of money spent by the government on so-called administrative governmental advertising but, at times, it appears to be more political than straight administrative.

We have other questions regarding monitoring of agencies. We are concerned about what is happening to the data services being provided by the private company that took over from MDS.

Of course, we have other concerns regarding the credit rating of the province, the whole matter of how we calculate our books, how we calculate to the bottom line of surpluses or deficits and, of course, the whole matter of bond rating. We also have some concerns about how the issuing of the Manitoba Builder Bonds is going. It seems to me that it is being offered at very attractive interest rates, so their should be a good take-up.

Also, neither last nor least, the issue of the Winnipeg Jets and the financial arrangements being added into by the government, the commitments made by the government, we have other members, of course, in our caucus who have some great interest in that issue especially.

So I look forward to spending some time with the minister and others in reviewing some of these major issues. Thank you.

Mr. Kevin Lamoureux (Inkster): Mr. Chairperson, I would like to ask for leave to give opening remarks.

Mr. Chairperson: Is there leave for the honourable member for Inkster to give opening remarks?

An Honourable Member: Leave.

Mr. Chairperson: Leave has been granted.

Mr. Lamoureux: I appreciate the leave granted so that I can provide opening remarks. With the Department of Finance, it is in fact a new portfolio for me so I tend to do more listening than asking or participating in any extensive debate. For me, I will be talking or hoping to hear from the minister on a number of different issues in which the member from Brandon has already referred to.

I would like to hear more about this government's vision on the multiyear budgeting, the idea of multiyear budgeting, what this Minister of Finance's thoughts are with respect to that. I know his predecessor, Mr. Manness, had often talked about multiyear budgeting and I believe even once referred to how wonderful it would be to have a five-year plan. It is a very commendable idea to plan for a five-year plan, but in the short term I do believe it is reasonable for Manitobans to expect a two-year budget, budgetary process if you like, so that departments are better able to prepare and plan and so forth.

Of course, another issue during the provincial election was balanced budget legislation, and I am hoping to get a better idea, a better understanding in terms of where it is the government is coming from and would like to go to with respect to balancing budgets. They have made obviously a lot of very strong comments during the election and have a number of questions they would like to ask in that area.

Thank you, Mr. Chairperson, and again the critic and minister for allowing me to speak.

Mr. Chairperson: I thank the honourable member for his opening statement.

At this time I would remind the honourable members of the committee that the debate of the Minister's Salary, item 1.(a), is deferred until all other items of the Estimates of this department are passed.

At this time we invite the minister's staff to take their place in the Chamber.

Is the minister prepared to introduce his staff present at this time?

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Mr. Stefanson: Joining me is Mr. Charlie Curtis, the Deputy Minister of Finance and Mr. Don Rice, the ADM of our Administration Division. We will move on to 1.(b)(1), Salaries and Employee Benefits, $353,500. Is it the rule of the committee to deal with the Estimates on the whole or line by line?

Mr. Leonard Evans: I guess line by line but as the Chair is suggesting--Mr. Chairperson, are you suggesting that we go at any policy issue, regardless of where we are on the lines, and then pass all the lines later? Is this what you are suggesting?

Mr. Chairperson: The Chairperson is recommending nothing, I am waiting for the opinion of the committee.

Mr. Leonard Evans: I would like to go section by section.

Mr. Chairperson: The honourable minister?

Mr. Stefanson: That is fine, Mr. Chairperson.

Mr. Chairperson: In that case we will consider it resolution by resolution.

Mr. Leonard Evans: Mr. Chairperson, I wonder if the minister could tell us under the section dealing with the administration of the department, whether there have been many changes in personnel. I note the Deputy Minister, of course, a long-time civil servant who has done an excellent job over the years remains. But what about other ADMs or directors and so on, have there been many important changes, or any changes in the department in that respect, and if so could the minister tell us about those?

Mr. Stefanson: Mr. Chairperson, there have been really very few changes and really at the senior levels there have been none. There is an organization chart on about page 7 that shows the ADMs, and I think all the names will be very familiar to the member for Brandon East.

Mr. Leonard Evans: So the minister is telling us on page 7, this will give us the update, the latest information on the persons who are filling these particular positions. It seems to me,

Mr. Chairperson, that these are familiar names, although I am not sure about the Comptroller's Division, but I believe the others have been around for some time. So what the minister is saying is that there has been no change in this first line under the Deputy Minister, that the Administration Division, Treasury, Comptroller's, Taxation, and Federal-Provincial Relations are all the same.

Mr. Stefanson: That is correct, Mr. Chairperson.

Mr. Leonard Evans: I gather because we have been given the information on SYs that generally there has been no significant change in the number of staff in this area. Again, I am trying to find the right page here showing the SYs, but I want to make sure I do not get the wrong schedule. It seems to me that we are looking at, in the Administration and Finance area it is a constant number of 18 staff years.

In this area, I am talking generally, if this is agreeable we are dealing with Resolution 7.1, except the Minister's Salary, so I gather we can move around within that segment.

I wonder if the minister can tell us whether there have been many achievements made in terms of further automation, in terms of further computerization or in systems change to improve the efficiency of the operation of the administration of the department.

Mr. Stefanson: There have been several initiatives over the past couple of years. I think some we may have discussed before. One that started a little over a year ago is the Corporate Human Resource Information System, they call it CHRIS, is the acronym, which is full integration of our human resource information. Another initiative that started several months ago is the Integrated Management Information System, again, IMIS is the acronym, for integrating our, basically what it says, our management information system. So there is work being done in that area to improve our financial reporting and other aspects of our management information systems.

A smaller item that is just out now for request for proposals is an electronic payroll system which I am sure the member for Brandon East (Mr. Leonard Evans) will be somewhat familiar with.

Mr. Leonard Evans: If I heard the minister correctly, he referred to the Integrated Management Information System. Could the minister elaborate a bit on that. What is that going to achieve for the department and for the government?

Mr. Stefanson: The IMIS, or the Integrated Management Information System, is a process that will be unfolding over the next several years really to integrate our management information reporting, but on the basis of finding savings in the system. I guess that the best examples might be issues like our old financial reporting. It is somewhat outdated in terms of the systems, in terms of the integration between all of the departments. Some of that is still done manually and is also very time-consuming, as the member can appreciate. We have a steering committee with representatives from various government departments that is working with all departments to look at the information system, and we will then start to prioritize which ones should be moved forward with first. Obviously they will be moved forward on the basis that it is the cost-effective thing to do, that any costs that have to go into system improvement can also be found through cost reductions in other areas and also hopefully providing better information to us internally in government and to the public if that is a component of it.

Mr. Leonard Evans: I gather then the scope of this integrated information management system is government-wide, not just within the department. In that respect, would it include the Crown corporations?

Mr. Stefanson: Not at this time.

Mr. Leonard Evans: I wonder, is this the area where there is some responsibility for monitoring the services provided by I guess it is ISM, Information Systems Management Corporation, which I believe is the latest name of the successor of the Manitoba Data Services which was a Crown agency that was privatized or was sold a few years ago? I guess the question is, are we in the right spot to discuss this particular information systems company?

Mr. Stefanson: It is technically under the Comptrollers division but if the member wants to discuss it now, that is fine as well.

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Mr. Leonard Evans: As I understand, Mr. Chairman, I believe the minister is the responsible minister for that particular contract with the ISM, Information Systems Management Corporation, and I gather he is nodding agreement. What I would like to know is exactly where does that contract stand at the moment? I believe originally it was a five-year contract. In effect, this company was given a monopoly to engage in data services similar to those which have been provided by the Manitoba Data Services Crown corporation. We had some concerns at the time about confidentiality of course, but there were also concerns about the cost to the taxpayers in Manitoba, whether the fact that this company was virtually being given a monopoly, whether the Manitoba taxpayers may be ending up paying more than they should for these information services. Then it came down to the question of monitoring the service, monitoring the cost, monitoring the value acquired for the amount of money spent. So I am just wondering whether the minister could update us on this particular contract.

How many more years have we got to go? How much has it cost the taxpayers? What is our annual fee to this company? What monitoring systems does the minister have in place to ensure that the taxpayers are being well served at a reasonable price?

Mr. Chairperson: Order, please. I would like to inform the honourable member that this does fall under a separate resolution number. I know the minister has said that he would be prepared to answer, but the staff would not be present in the room to give any information to the minister. If we are going to go in depth into that, could we ask the staff to come down to the room? Are you going to be spending some time on that line of questioning?

Mr. Leonard Evans: What other area was it--

Mr. Chairperson: It is okay. I notice the staff is here now. That was my only concern.

Mr. Leonard Evans: Out of curiosity, in which section would it have been?

Mr. Chairperson: It would have been Resolution 7.3, No. 3, Comptroller.

Mr. Leonard Evans: Mr. Chairman, I had understood from the minister nodding approval that he was agreeable to discussing it at this point, or that this was the appropriate point. Since the staff are here, maybe we can get some answers.

Mr. Stefanson: Mr. Chairperson, I could give a partial answer, but I do think it would be more appropriate--I will make a note--that when we do get to actually--I said our Comptroller's division but it really falls under our Treasury Board Secretariat because of the involvement of the ITRO division, and I will gladly respond to that question at that time.

Mr. Leonard Evans: I did not hear everything that the minister had just stated. It is partly because of the air conditioner, but I am not suggesting we cut it off because it is comfortable.

Mr. Chairperson: Could I ask the honourable minister to repeat that answer. The honourable member did not quite hear it over the other noise.

Mr. Stefanson: Mr. Chairperson, I indicated I could give a partial answer, but I think to do justice to the question, I should wait until we get to the section called Treasury Board Secretariat, because the contract basically falls under ITRO, or information technology resource office. Therefore I will give a more detailed answer when we get to that section.

Mr. Leonard Evans: Where is that section?

Mr. Chairperson: That would be Resolution 7.7. At this time we are dealing with Resolution 7.1.

Mr. Leonard Evans: Could the minister repeat the agency within the Treasury Board or the group within the Treasury Board that monitors this? Is it ITRO, did he say?

Mr. Stefanson: The Treasury Board, the acronym again is ITRO--Information Technology Review Office.

Mr. Leonard Evans: At any rate, the Expected Results according to the Supplementary Information that was provided to the members of the house dealing with this subappropriation makes reference to Expected Results including efficient financial and management systems, which we dealt with very briefly, and payment and recording of all transactions. Then there is preparation and submission of Estimates. I would have thought that this would fall in other parts of the department as well, but I guess this is where the final authority has to be or the final decisions are made.

Quarterly forecasts of expenditures, is that done by the staff within this particular branch? I would have thought that would have been done elsewhere, but could the minister elaborate exactly who makes the forecasts in this respect?

Mr. Stefanson: I think the confusion is on page 28 that the member is referring to. That refers to the preparation and submission of Estimates as it relates to the Department of Finance and the Department of Finance only. When we look at it government-wide, that is a function that is performed for this ministry by Treasury Board.

Mr. Leonard Evans: Just passing on to a couple of other items in this section, Soldiers' Taxation Relief--I gather there is no staff years provided and very little money, but can the minister elaborate more or less what the function is of this particular program?

Mr. Stefanson: As outlined on page 32, Mr. Chairman, it is to provide financial assistance to individuals who served in the Allied Forces during either of the two World Wars or the Korean War, in respect of municipal taxes, so it comes through the municipal entities. The provision is to a maximum of $50 per claimant and you can see the total allocation is $3,000.

Mr. Leonard Evans: How does one qualify? I know a lot of veterans from these wars, at least from the Second World War and the Korean War, who I believe do not get assistance through municipal taxes. What is the criteria for this?

Mr. Stefanson: Mr. Chairman, I will certainly undertake through the department to provide the precise details around this issue, but my understanding is they basically cannot have any income over and above the old age security. If they have any investment income or any other source of income, then they do not qualify. The criteria are as outlined in the document here, and I believe it is for the individual themselves or for the spouse of an individual if the individual is deceased. But I will certainly undertake to give much greater detail around that issue to the member.

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Mr. Leonard Evans: I thank the minister for that commitment to give us some more information because many Manitobans, I am sure, are not aware of this particular program. I am wondering what, if anything, is the department or the minister doing to make veterans aware of the fact that there is some limited amount of relief available towards municipal taxes to those individuals who unfortunately find themselves living strictly off of government old age pensions.

Mr. Stefanson: Mr. Chairman, the main source over the last period of years of communicating this has been through the various veterans associations in terms of making them aware, and obviously through them, encouraging them, to make their members aware of what is available here.

Mr. Leonard Evans: What if some veterans are not members of these organizations? That is a possibility, or at least they are not active members and really are not in communication with the veterans organizations. This to me, I am sure if some advertisements had been placed in the papers or wherever by the department there would be a considerable bigger takeup than is shown here. There are thousands and thousands of veterans from these wars, and unfortunately many of them are in a rather low income. I cannot quantify it, but many of them are in low income categories and could perhaps qualify.

I am not criticizing the program. It just seems to me that it is rather unique because in a way it is a social welfare program, something that you would think would be under the Department of Family Services or some such department that administers various kinds of social assistance because that indeed is what this happens to be. So I do not know how it got into Finance. There is probably some historical reason for this, and I am not being critical. Maybe the minister could tell us when it got in. It has probably been decades ago.

I guess my concern is, well, okay, if you have the program--I do not know how much assistance is being given. I gather it is a rather minimal amount, $50 or some amount, but the minister could perhaps elaborate. It cannot be very many if all we have got is $3,000 assigned to this, but roughly how many people do qualify, say have qualified in the last year? Has the government ever tried to make an estimate of how many could possibly qualify?

Mr. Stefanson: The Deputy Minister of Finance tells me that this program has been around as long as he has and longer, so we know how long that is. But last year apparently there were 90 claims at $50. I do want to point out, it is quite restrictive. I believe the only source of income is old age security. There cannot be any other pensions, any other source of income beyond old age security. But I will certainly, in light of the member's questioning today, look further into how this is communicated, if there is anything else we could or should be doing and so on.

Mr. Leonard Evans: I thank the minister for his commitment in that respect, because as I indicate I am sure there are many--and I cannot quantify it, but there should be many veterans out there who might be glad of some assistance, as minimal as it is. The fact that if the program is around I think there is an obligation on the part of government, whatever the program is, to make the public aware. In this respect I would not criticize government spending money on advertising to make the public knowledgeable about the existence of the Soldiers' Taxation Relief program.

We have been very critical of government advertising. My Leader has, I believe, through the Provincial Auditor asked for guidelines on the whole matter of advertising, and we could get into that later. I believe the minister did undertake to look into that question. We would have no problem whatsoever if monies were spent, if it were deemed advisable after due research, to make this program more well known among the public of Manitoba.

Just passing on to the other item here, Tax Appeal Commission, again we are talking about $20,000. Based on that amount of money, it would seem that either there are few people who appeal, or as my colleague from Elmwood is indicating, perhaps there are many people who do not know about the right to appeal, or that if they do appeal they are generally unsuccessful. So I wonder if the minister could shed a little more light. I know there is an explanation of objectives of the commission, which is fine, but if he could sort of elaborate what is the degree of activity here. What generally are the kinds of appeals that most often appear? Are they located in mainly Winnipeg or elsewhere in the province? Just generally how does this Appeal Commission now function?

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Mr. Stefanson: I will not read the page as the member pointed to, but this is very restricted to The Retail Sales Tax Act, The Corporation Capital Tax Act and The Health and Post Secondary Education Tax Levy Act or the payroll tax.

There is a series of ways that individuals can end up going to the Appeal Commission. One is anybody who disagrees with our department is informed of the opportunity to go to the Appeal Commission. Sometimes people write to myself and even though ultimately the minister is the final appeal, I will usually inform them that an interim step is for them to go to the Appeal Commission. Obviously, legal and accounting and other advisers are aware of this and can inform their clients.

In terms of the very specific questions about volumes and so on, I can get that kind of information for the member as to how many appeals there were and that type of information.

Mr. Leonard Evans: Well, I gather that there cannot be too many appeals with $20,000 or else, as I indicated, there may be a lot of appeals but very few successful appeals. Could the minister indicate whether when a typical appeal is heard by the commission, do you find--let us say we are talking about retail sales taxes--that the business concerned hires a lawyer or two and comes prepared to make a major case about a ruling about a decision made by the department with respect to The Retail Sales Tax Act administration, or do you find, does the commission work on an informal basis with the operator or the owner appearing before the commission and more or less making his or her own case?

In some ways, I am reminded of the Social Services Advisory Committee, otherwise known as the Welfare Appeal Board, where you find some people who come with legal assistance or advocates and others who just come on their own and make the case based on the information they have.

Mr. Stefanson: Just to provide some history on this. In 1992, the Legislature passed a Tax Appeal Commission Act which was proclaimed into force on March 1, 1993, and the act permits the appointment of one or more commissioners for the purpose of dealing with notices of objection filed by taxpayers who disagree with assessments under The Retail Sales Tax Act, payroll tax or The Corporation Capital Tax Act. They or their representatives on their behalf file an actual notice of objection which is similar to what they do with Revenue Canada in terms of corporation income tax and so on.

Prior to March 1993 the job of reviewing and researching the basis of a taxpayer's appeal had been undertaken by the Audit branch of the Taxation Division. The Tax Appeal Commission Act was implemented to address a concern that the situation could be construed by the public as a conflict of interest since the Audit branch was originally responsible for issuing the assessment being contested. So it really has provided another step in the process that did not exist prior to 1992 where if the taxpayer was not satisfied with how they had been dealt with, then they would go directly to the minister. This gave another opportunity for an interim step to deal with that appeal.

Mr. Leonard Evans: I appreciate that. I think it is a good idea to set up this commission as it has been as of 1992, I gather, because it does avoid this problem of presumed conflict of interest and also, well, it is a bit more public in a sense. But I wonder if the minister could tell me whether the procedure is such that people tend to come with lawyers. Are these very formal hearings or do they tend to be informal in the sense that--well, it is always formal in the sense that a decision has to be made, but is it informal in the process where the business person or the individual whose appeal is grieved comes on his or her own and makes a case as opposed to coming with a battery of lawyers or one or two legal advisors?

Mr. Stefanson: Mr. Chairperson, I am told that it tends to be fairly informal, but what the taxpayer or his or her representative will do is forward the information based on the original assessments and their correspondence and their information to the Tax Appeal Commission. I believe they can appear, but that is not necessarily the norm. I think the appeal commissioner looks at all the documentation on both sides, because obviously at that point in time there has been a disagreement over an interpretation, so usually that involves some correspondence and documentation. Having done that on various occasions for clients before I was doing this I can identify with that. So that information is then forwarded to the Tax Appeal Commission to review and make a determination. As I say, if the taxpayer still is unhappy with the decision at that point, then there is a final appeal to the Minister of Finance.

Mr. Leonard Evans: Mr. Chair, I understand. It is essentially a review of documentation rather than a verbal presentation and cross examination, et cetera. Could the minister indicate, is it one person or is it a group and exactly who constitutes the Tax Appeal Commission?

Mr. Stefanson: The commission is one person, a chartered accountant, and I will provide the member with his name.

Mr. Leonard Evans: That is fine, Mr. Chairman, but I gather, at least in the interim, that person is not a civil servant, it is someone outside the public service.

On a matter of order, Mr. Chairman, the deputy critic of Finance was sitting beside me, which was convenient and handy, but I understand that there is some requirement for members in this Legislature to remain in their chairs, which I find a little awkward and inconvenient and not really practical.

There is also the member from Crescentwood, who, I believe, would have liked to come a little closer, because he has some questions to ask. I am wondering, does this committee, so my point of order is a question, have the right to allow members to--I appreciate that we are sitting in the Assembly, not in a committee room per se, but to allow the members to move to seats of convenience to expedite the rational and expeditious consideration of the Estimates of the Department of Finance or any department.

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Mr. Chairperson: Just to inform the honourable member for Brandon East, unanimous consent of the House is required to have the critic come and sit in one of the forward seats in the House to ask the questions. As far as the question of another member sitting out of his seat to ask a question, again, that would require unanimous consent of the House, and that has not been obtained at this time.

The honourable member can sit anywhere he would like in the House. He just cannot ask a question from that seat. He has to be in his own seat to ask a question. It also is more convenient for Hansard if the honourable member is asking a question from his seat, because we do have 57 seats in the House and if one day we had 14 of us asking questions in here, it does make it awkward for Hansard at that time.

Mr. Leonard Evans: Mr. Chairperson, does that apply to all members?

Mr. Chairperson: All members except for the ministers. The ministers take this seat because they have their staff that come in and that is the only place that we can connect Hansard up for the staff to come in.

Mr. Leonard Evans: Fine, thank you, Mr. Chairperson, but I gather this is a matter that will be addressed subsequently by the House or through the House leader, to enable people to speak from other seats as has occurred in previous sessions.

Mr. Chairperson: This is a matter that the House leaders can look into and bring forward.

Mr. Leonard Evans: Mr. Chairman, we have a few more questions in this area that will be posed by the deputy Finance critic of the opposition, the member for Elmwood (Mr. Maloway).

Mr. Jim Maloway (Elmwood): I would like to ask the minister, relating to the Tax Appeal Commission, I understand that there is a list of arrears that finally get written off at some point by the Finance minister, and I am wondering how this relates to the Tax Appeal Commission.

Mr. Stefanson: Mr. Chairperson, the issue of collections, and I know the member for Elmwood has asked questions about this before, should come up under our Taxation division, which is a little further in our Estimates. This really has no relationship to that function in my department.

Mr. Maloway: Mr. Chairperson, I would have thought that it would, though, Mr. Minister, because what I am interested in knowing is that if a person appeals, be it retail sales tax or other tax, to the commission and if the appeal is dealt with then is there any further appeal to the minister?

Mr. Stefanson: I believe I outlined earlier that depending on the outcome from an appeal to the Tax Appeal Commission, if a taxpayer is not satisfied with that outcome they can still appeal it to the minister. But it is important to note that a taxpayer who disagrees with a tax assessment, once they have been assessed, let us say by The Retail Sales Tax Act that they have received, that they are allowed 90 days to file an objection with the commissioner appointed by the minister. So they have a 90-day period, so we are usually dealing with collections within the same one-year period of time as opposed to the issue of collections and when accounts may become difficult to collect or stale dated and so on, which, again, I know we have discussed before.

Mr. Maloway: Could the minister tell the committee how many appeals he has dealt with then in the last year?

Mr. Stefanson: I believe in the '94-95 fiscal year the Tax Appeal Commission dealt with 23. In terms of my office I would have to get that detailed information, and I will and provide it to the member.

Mr. Leonard Evans: I guess we have not answered all the questions under this appropriation, but the minister has undertaken to provide us with some considerable additional information on these various items that we have brought up. Assuming that that information is forthcoming and those questions that we have raised are therefore being answered, we are prepared to pass this section, except for the Minister's Salary, of course, and go on to Treasury with the various programs that it is responsible for.

Mr. Lamoureux: Actually I have a couple of questions for the minister on this particular line. Getting back to the Soldier's Taxation Relief program or grant system, can you tell me, Old Age Security is one of the requirements--you can just be collecting Old Age Security. Does this apply to anyone that was involved in the world wars, that was a part of the allied forces?

Mr. Stefanson: Yes, it is individuals who served in the allied forces during either of the two world wars or the Korean War. The member is correct that the only income that they can be receiving is Old Age Security. I will also undertake to provide the member for Inkster with the same information I indicated to the member for Brandon East.

Mr. Lamoureux: For example, a war veteran from the Philippines-- if they are just collecting old age pension, would they then qualify for this particular program?

Mr. Stefanson: Mr. Chairperson, they have to be residents of Manitoba, and they have to have served with our services, with the Canadian forces.

Mr. Lamoureux: For example, if they are a Canadian citizen today--or anyone, I used the example of the Philippines--if they participated in the allied forces as opposed to--I do not know--they maybe were not on the front lines with our own Canadian forces but did participate in the allied forces and they are Canadian citizens, would those individuals qualify?

Mr. Stefanson: Mr. Chairperson, I believe it is the Canadian services but I will confirm and, as I have indicated, I will provide detailed information to the member for Inkster.

Mr. Lamoureux: Yes, just for the minister, it would be appreciated if in fact you could do that. I know first-hand of one of the veterans' clubs. There was concern expressed with respect to, you know, if veterans are not aware of a particular program, they are not able to necessarily tap into it. Having participated in the Allied Forces, I believe it is very significant, and being a Canadian citizen is also very significant.

It would be good to see some sort of response. The sooner the minister could get back to me--I will indicate to him, because there is no hidden agenda, of course, I am thinking in particular of the Philippine Veterans Association, Pablo Rivera. I will get the minister the name and the address of this particular individual and their association. I am sure that they would be most definitely interested. What you might want to do, and suggest it as a possible recommendation, is that, yes, we have our legions and so forth that are out there, but there might be other avenues to look at as opposed to putting an ad in the Free Press and things of this nature, which could be fairly substantial in terms of cost, given the total expenditure of this particular program. I do not know if a full-page ad would be a practical thing to do in the Free Press type thing, but as I say, I will get the name and address of this particular individual, and whatever he could do would be very much appreciated.

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The other thing I would ask is: How much discretion is it on this particular line? For example, I had asked some questions during Question Period that I would like to be able to explore. Would it be an opportune time for me to do that now? Is that okay?

Mr. Chairperson: Could the honourable member for Inkster repeat the question?

Mr. Lamoureux: I just wanted to know if it would be okay to continue to explore the questions I was asking earlier today in Question Period at this particular line?

Mr. Stefanson: Mr. Chairperson, that would be questions related to our Manitoba Entertainment Complex and the Winnipeg Jets. It is really up to both. I mean, I am not opposed to doing it now or doing it later in the--there is really no appropriate area here.

An Honourable Member: Minister's Salary.

Mr. Stefanson: That is probably the best place.

Mr. Chairperson: The Minister's Salary would probably be the most appropriate place for those questions to be asked of the minister on that. At this time, we have the staff present for the other lines so, if we could deal with the other lines, then we could do the initiative of the Entertainment Complex under his salary.

Mr. Lamoureux: I noticed the Minister of Finance did offer to entertain maybe a few questions. What I will do is just, as a follow up--because I know that the Minister of Finance, during Question Period, did not really catch on, and maybe I did not express it clearly enough in my supplementary question. What I was referring to was, there was a potential deal in Minneapolis, and one of the owners in there had indicated that there was concern expressed to the losses of the Jets. Would they be responsible for back payment of those losses? I had asked the Minister of Finance if in fact the Jets or MEC or the current agreement, is there anything that allows us to get out of those back losses? That was the question. Then I will just leave it at that, and he can just respond to it. Hopefully I have explained it better than I did during Question Period, and then we will continue on.

Mr. Chairperson: I would just like to clarify for the committee's sake the reason I am asking to do this line of questioning under Minister's Salary. We do have some staff here from the department which is all around us. If we spend any amount of time on that, we do not require the staff for those questions. If the honourable minister wants to answer this question at this time, that is fine.

Mr. Stefanson: I guess my only concern, as you suggested, is under Minister's Salary. I am not opposed to answering the question, but I made a note of it, and I will respond when we get to Minister's Salary.

Mr. Tim Sale (Crescentwood): I think, Mr. Chairperson, the member for Brandon East wanted to start the second appropriation and was then going to move over.

Mr. Chairperson: At this time then we will pass 1.(b)(1) Salaries and Employee Benefits $353,500--pass; (2) Other Expenditures $69,800--pass.

1.(c) Financial and Administrative Services (1) Salaries and Employee Benefits $239,800--pass; (2) Other Expenditures $63,000--pass.

1.(d) Human Resource Management (1) Salaries and Employee Benefits $159,800--pass; (2) Other Expenditures $59,000--pass.

1.(e) Payments Re: Soldiers' Taxation Relief $3,000--pass.

1.(f) Tax Appeal Commission $20,000--pass.

As previously agreed, the Minister's Salary will remain until the other resolutions have been passed. We will move on to Resolution 7.2.

2. Treasury (a) Administration (1) Salaries and Employee Benefits.

Mr. Leonard Evans: On the Activity Identification of the Administration in this area, reference is made to maintaining close contact with the world financial community to be knowledgeable about markets relevant to the province. There are many, many questions to be asked here by myself and by the member for Crescentwood who has some interest in this area. Initially, we would like to get some general information. Among that is the question about maintaining close contact. Exactly who is doing this and how is he or she doing it? Generally, can the minister give us a report on this activity?

Mr. Stefanson: As to the means of keeping informed and keeping in touch, our representatives of Treasury Division are literally in daily telephone contact with our underwriters and our money managers, whether it be in Canada or in New York or indeed other parts of the world. Obviously, as well through the systems that we have through our computer network, we are hooked up to the transactions that are occurring throughout the world on a daily basis. Those are really the main day-to-day mechanisms of keeping informed and keeping in touch. Obviously, individual representatives from various firms and organizations come to Manitoba periodically, and as well the firms and organizations send us written material on all issues on a regular basis. In terms of the ongoing, it is really the daily telephone contact and our own computerized information system that give us the ongoing day-to-day information.

Mr. Leonard Evans: Mr. Chairperson, I can appreciate the information that can come forth through telephone, faxes, I guess computer linkups, et cetera. Is there any agency or several agencies that give advice to the government? I have some background information, but I would like the minister to elaborate on this regarding advice given to the department, given to this part of the department. Do we rely heavily on one or another financial advisory service?

Mr. Stefanson: I think, as the member from Brandon East knows, we do have lead underwriters in various markets and in Canada I believe, as he knows, our three lead underwriters are Wood Gundy, Richardson Greenshield and the Royal Bank Dominion Securities. We have additional lead underwriters in the US, Solomon Brothers, Merrill Lynch and First Boston. We have similar arrangements in parts of Europe and in Japan. Those would be the underwriters who would give us the most ongoing regular contact. Obviously, we also receive information from a series of other entities, but these are the ones that are our lead underwriters and we have the most regular contact with in terms of sharing information and so on.

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Mr. Leonard Evans: You hear from time to time the minister visiting various major financial centres, New York, Tokyo or whatever. I am just wondering--is it in connection with the activity that is being described here as part of the process of keeping in touch with the world financial community?

(Mr. David Newman, Acting Chairperson, in the Chair)

Mr. Stefanson: The more regular contact is made by representatives of Treasury Division. In fact, a representative of the Treasury Division travelled occasionally to other locations, again, to meet with our underwriters, to meet with investors and so on, whether it be Toronto or New York or elsewhere on occasion.

Mr. Leonard Evans: Mr. Chairman, well, could the minister elaborate on this? I just might say that in the past two or three years we have not had as much time as we would have liked for the department and many of these questions were not asked. So these are the sort of questions you may not want to ask every year, but I think this year it is appropriate to get more detail on this. Could he give us an idea of how many trips would be made by himself and the staff in a year, say, this past year? What is the nature of the trips? Are they many days? Many weeks? Approximately how much money is spent on travel by the staff in doing as it says here, keeping in "close contact with the world financial community"?

(Mr. Chairperson in the Chair)

Mr. Stefanson: Mr. Chairperson, I can certainly undertake to provide detailed information as to what the activities of staff and myself have been. The staff sometimes go to Toronto to actually be on the trading floor with our underwriters and so on. I can say in a general sense, I am going by memory now, for myself for 1994-1995, I think I would have gone to New York once, I believe, to meet with a combination of our underwriters, investors, and to meet with Moody's and with Standard and Poor's. I believe I went to Toronto either once or twice. Basically, it was the same kind of a trip but also again, meeting with investors who were looking at our problem. Last year we did one-year-old Canadian issue with a closing in London, England. That would have involved being over there for three or four days. I believe that was it for 1994-1995, but since that is purely going from memory, I will gladly provide that detailed information to the member.

Mr. Leonard Evans: Mr. Chairman, I thank the minister for that information and, again, for his agreement or commitment to provide more detail. I presume in that we will get some cost information as well as the number of trips, the staff involved, the cost of the travel, and, of course, he would identify who went--for the past year, that would be satisfactory. I assume we will get the information within the next week or two. When the minister refers to taking a trip, let us say to London, or whatever, when the deal is closed exactly, whom does the minister meet with? What do he or his senior people have to do by way of closing a deal, to use a familiar phrase? Ultimately a deal has to be finalized by way of Order-in-Council, I would imagine. That is the legal instrument by which the government of Manitoba borrows money at whatever rate of interest and under whatever conditions. Nevertheless, what type of people does the minister make these deal closings with, and just what is involved?

Mr. Stefanson: Mr. Chairperson, in terms of the closing of an issue, the way it works is the Minister of Finance has certain parameters based on a preliminary O/C that allows the Minister of Finance to sign on behalf of the government. A specific O/C is also then passed by cabinet.

The functions that would take place in terms of a closing, as asked by the member for Brandon East, is obviously myself if I am representing, or the deputy minister can actually be signing on behalf of the government. There will be a signing ceremony closing the issue. We will meet with various firms that actually sell the Manitoba product to find out how the sales are going, what their impression is of the issue, what the impression is of the interest rate, what they know about our province, all of those types of things, provide them with as much information as we can about the fiscal performance of our province and other issues that might help them with selling issues.

We also meet with investors to find out why they are buying our product or why they are not buying our product, what it is they like about Manitoba, what they know about Manitoba and so on. So I think all of that, I would hope the member for Brandon East (Mr. Leonard Evans) would appreciate, is very, very important. Unfortunately, we do have to borrow money, and we want to be sure we have access to capital. We want to be sure that we borrow at the lowest rates that we possibly can, and a major part of doing that is making sure that people who are both buying and selling our bonds have a full and complete understanding of our province.

Having said that, he can tell by the information I have given him how infrequent travel has been, and I can assure him when we do travel, if I am travelling, it is usually myself and possibly the deputy minister with me, and that is the extent of our delegation.

Mr. Leonard Evans: As one of my colleagues asked me, is it first class or economy?

In the area of interest rates, interest rates are a function of the degree of risk involved and there are the various market forces, supply and demand, who else is in the market and so on. Does the minister and his senior staff have any opportunity in striking an interest rate? Maybe I should know this but I am going to ask. Do we go, say, we have an offer, here we are offering you X millions of dollars of bonds at Y rate of interest? Or does the person who could be a dealer in this come back and say, well, if it was Y plus Z interest then we could sell more or whatever? In other words, is there room here for some flexibility in the rate of interest prior to any final decision being made on offering the issue at a particular rate of interest?

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Mr. Stefanson: I think firstly, the single most important thing is, as we discussed earlier, the continual monitoring of the market so we determine when it is we want to go into the market. We are never forced to be in the market because we require capital. We determine in advance when we want to be going out and trying to do an issue. Having said that, we then start to work with our underwriters and investment dealers, not only our lead agents, but we will even spread that further to determine what kind of rate we can end up with. Within that there is some give and take. Having said that, we reported in 1994 that we had the third best borrowing spreads in all of Canada. I think that is a compliment to Manitoba.

So yes, there is some negotiation and some bargaining that does take place, and based on that we make the final decision whether or not to launch an issue and then move forward.

Mr. Leonard Evans: I thank the minister for that information. Could he give us some indication--maybe he cannot--of what currently seems to be the effective rate of interest that we are able to sell our bonds? Maybe we are not in a position right at the moment to do that. I do not have that information. I do not know where we are standing on this. What kind of interest rate do we have to offer in order to be able to dispose of a particular amount of offering?

Mr. Stefanson: I believe that the question is, if there were an issue today, as an example, what would we be borrowing at today? A Canadian issue, five-year term, would be at 7.74 percent. A 10-year term would be at 8.25 percent. Longer would be at 8.65 percent. Of course, as the member for Brandon East probably knows, we currently are in the market with the Manitoba Builder Bond at 7.25 percent.

Mr. Leonard Evans: Those earlier numbers, did he indicate this was in Canadian dollars? Is this what I heard him say? For whatever reason, I guess I am not hearing as well as I should. They made a reference--a 7.74 for five-year term. I got that. That is what Manitoba would have to pay in Canadian dollars. Is that correct?

Mr. Stefanson: Yes, if we did an issue today. That is more or less the rate that we would be borrowing at if we did an issue today, a five-year issue Canadian dollars 7.74 percent. I said if it were a 10-year term, it would be 8.25 percent. If it were a longer term, it would be 8.65 percent. I just pointed out that the Manitoba Builder Bond today is being sold at 7.25 percent.

Mr. Leonard Evans: Obviously this is a matter of commentary here. Obviously, the minister would want to sell more of the Builder Bonds at 7.25 than he would want to have to issue whatever amount of paper at 7.74 percent. Perhaps we should be discussing this later, but I am tempted to ask him now in terms of the Builder Bonds, how much does he expect to raise with the Manitoba Builder Bonds, or is this just an open-ended matter, in other words, raise as much as you possibly can, or do you have some very specific targets?

Mr. Stefanson: Mr. Chairperson, the only comment I wanted to respond to was the member for Brandon East's comment that we should be selling the Builder Bonds because they are 7.25 percent. That is telling me he knows something about what is going to happen to the market for the next five years, because the only concern that one would have is that Builder Bonds are redeemable every six months and we are potentially faced with a situation of having to adjust the interest rate every six months. So that is one of the reasons that it is lower than a five-year, locked-in term at 7.74 percent.

But his specific question about what we are anticipating or looking for in terms of this year's issue of Builder Bonds, we are looking for something in the range of about $200 million.

Mr. Leonard Evans: Mr. Chairperson, I appreciate that, that you have different terms and conditions for Builder Bonds than you have for these other issues, obviously. The amount of money raised, is that a net amount or a gross amount, because there are always redemptions? Was it last year or the year before we actually had a net loss or a negative situation, more redemptions than sales? I do not know how that can come about, but is that the case?

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Mr. Stefanson: Mr. Chairperson, we are anticipating the $200 million gross from the new issue. This is now our third Manitoba Builder Bonds. I think, as the member knows, before that there were four Hydro Bonds and as I pointed out there is the opportunity for redemption every six months. We have never had more redemptions in an issue, but we did have some redemptions in December of 1994 because of what was happening to interest rates, that they had gone up significantly in the fall of '94. But they were still significantly below even last year's total issue. Last year's issue, by the way, was approximately $300 million.

Mr. Leonard Evans: So the $200 million is a gross amount and it is very difficult, I am sure, to tell at this point whether there will be any redemptions, depending on what happens to interest rates in the future. There is a lot more that could be said about this, but I will just go on to the other reference here about the responsibility of administration establishing interest rates for loans to Crown corporations and government agencies as well as school boards, hospitals and municipalities. Exactly how does the department go about establishing those interest rates?

Mr. Stefanson: Every month we deal with our three lead underwriters and obtain interest rates at that point in time. We accept the average of the three, and subject to any other costs of the service, that is the rate that is then passed on to these various corporations and agencies.

Mr. Leonard Evans: So, as I understand it, from the minister's answer, we are really relying on the underwriters to do this work. We are more or less going to the underwriters, three of them, and I am not sure whether you take an average of what they are suggesting or you take one agency over another by way of specific advice and go with their recommendation. Is that what the minister is saying?

Mr. Stefanson: The member is basically correct that we do take the average of our three lead underwriters, but as I indicated earlier, our staff in Treasury Division are watching the screens daily and they will still do a review of the reasonableness of those three. If there is anything that seems to be out of line, or out of whack, they will then talk to that particular investment dealer and determine whether or not any adjustments should be made, but normally it is the average of the three.

Mr. Leonard Evans: Mr. Chairman, just to get a better idea of how this works then, I assume a municipality or all municipalities would be coming to the Department of Finance, asking for guidance and advice as to the interest rate they should strike on the debenture issue that they may be interested in. Is this how it works? Officials of a municipality--let us try just to talk about a municipality--will come, or a municipality is required to come to the government, or is this just a free service available to municipalities? Is there something in legislation that requires municipalities to come to this part of the department asking for guidance? Maybe the minister could enlighten us about this.

Mr. Stefanson: Firstly, the City of Winnipeg does its own financing, and I believe on occasion Brandon does. The rest of the municipalities, other than the City of Winnipeg, would come to us to determine what a rate would be. They then would appear and go to the Municipal Board for approval. When I say they would come to us, they would come to us through the Department of Rural Development. They would then go to the Municipal Board and get ultimate authority and approval to borrow funds. If that is approved, it would proceed from there.

Mr. Leonard Evans: What about school boards and hospitals? They would come to you for advice. Are they required to go to an agency, say, the Public Schools Finance Board or Manitoba Health Services Commission or whatever?

Mr. Stefanson: In terms of schools, all of the borrowing is done through the Public Schools Finance Board. They do in fact come through us for their issues, other than school divisions who might have an operating line of credit, but all of the major borrowing is through the Public Schools Finance Board.

In terms of hospitals, they have to get approval, again, from us to proceed. They can go direct or they can do their borrowing through us. I do not think a hospital has done any direct borrowing for several years.

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Mr. Leonard Evans: What about Crown corporations for loans to Crown corporations? Is every Crown corporation obliged to come to the department to get its assistance in establishing interest rates or does the odd large one, say Manitoba Hydro, go on its own and establish its own or attempt to calculate its own interest rate?

Mr. Stefanson: Mr. Chairperson, we do the financing. The Province of Manitoba does the financing for the large Crowns like Hydro and Manitoba Telephone System. We borrow under our name and then we advance the funds to the Crowns. They then pay the same rate and they pay the guarantee fee. So really we are using the overall ability of the province to borrow and to borrow at more favourable rates and then flow that through to the Crowns along with the guarantee fee.

Mr. Leonard Evans: Mr. Chairperson, I guess MPIC, as a Crown corporation, also relates to the department, and I guess it has a bit of a different role because MPIC does have accumulated funds that are available for investment. Just what role does your department play in advising MPIC regarding where to put these funds and also with regard to rates of interest that may be involved?

Mr. Stefanson: We remember as correct, we invest on behalf of Manitoba Public Insurance. Usually it would be in either municipal bonds, school bonds, hospital bonds, probably some Manitoba bonds, obviously meeting the maturities with their requirements when they will require their cash. We would charge a fee to them for providing that service on their behalf.

Mr. Leonard Evans: Are any investments out of the province or are they strictly within Manitoba?

Mr. Stefanson: Mr. Chairperson, there are some other provincial bonds and Government of Canada bonds. Those are only invested in when we cannot fulfill the need or requirement within the other areas that I have already outlined, municipal, school, hospital or our own Province of Manitoba bonds.

Mr. Leonard Evans: Could the minister give us an estimate of what percentage then would be bonds sold outside of Manitoba, outside of Manitoba institutions and governments?

Mr. Stefanson: I will provide the member with that exact breakdown of what the percentage is that is invested outside of Manitoba.

Mr. Leonard Evans: Specifically, can the minister tell me right now whether we have any money in Hydro-Quebec and if so, how much?

Mr. Stefanson: I will provide that information.

Mr. Leonard Evans: Mr. Chairperson, would the minister indicate whether or not it is true that there is investment in Hydro-Quebec?

Mr. Stefanson: In terms of our total investments, including our sinking funds, yes there is some investment in Hydro-Quebec. I am not sure if there is from the Manitoba Public Insurance portfolio but as I have indicated, I will certainly provide the details.

Mr. Leonard Evans: I thank the minister, and we look forward to getting that information. Another policy question, I suppose, are there any considerations about ethical investments? Let us just take the MPIC monies, if you wish. It could be broadened, but are there any considerations about ethical questions the minister has obviously heard, ethical mutual funds, ethical investment programs whereby organizations limit their investments to various kinds of industries? Putting it another way, they exclude certain industries. They may exclude tobacco, for example. For ethical reasons they may exclude certain armament industries, manufacture of military weapons, et cetera. So I wonder if there is any guidelines or any policy directed in this respect.

Mr. Stefanson: We have no corporate bonds whatsoever. As we discussed earlier in terms of Manitoba public insurance, all of those investments are either in hospitals, schools, the Province of Manitoba, or if they are outside of our province they are exclusively either in another province or the Government of Canada. So on an overall basis as well, there are no corporate bonds at all.

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Mr. Leonard Evans: Is that as a matter of circumstance or is that because of the policy position of the minister or the government?

Mr. Stefanson: That is because of The Financial Administration Act which outlines where we can invest.

Mr. Leonard Evans: Just a quick question in regards to this. Does that mean that The Financial Administration Act restricts you from investing in private corporations?

Mr. Stefanson: It technically can be done. It has not been our practice to do it, and if we were to do an investment of that nature, it would have to be approved by Order-in-Council.

Mr. Leonard Evans: I just have one or two very quick general questions. Then I am going to turn it over to my colleague for Crescentwood (Mr. Sale), who has some more questions in this area. Indeed I have as well, but I want to give my colleague, the MLA for Crescentwood, an opportunity. He has been waiting patiently, I know, with some of these questions.

Just very specifically, is it correct that the underwriters were changed for your Grow Bonds, and if this is the case, when was it done and why?

Mr. Stefanson: Grow Bonds do not fall under the Department of Finance. I would have to take that question as notice, but it really is more appropriate under Rural Development, because they deal with all aspects of the issuing of Grow Bonds. I can certainly inform my colleague of the question, but it is more appropriately asked in Rural Development.

Mr. Leonard Evans: I can appreciate the administration being in the Department of Rural Development dealing with the municipalities, dealing with specific projects and so on, but I am very surprised that the Department of Finance is not involved overall with the financial aspects of issuing of bonds.

At any rate, Mr. Chairperson, as I indicated, the member for Crescentwood (Tim Sale), I believe, has some questions in this area. I have further, but I yield the floor at this point to my colleague.

Mr. Sale: Thank you to the member for Brandon East for allowing me to ask some questions. I would like to just preface my remark briefly with a thanks to the minister and his staff, particularly his staff who taught me a great deal when I worked in the department. I know that any of the many night meetings, early morning meetings and weekend meetings certainly put paid to any stereotypical notion that civil servants did not work long hours. If I happen to chance on asking the minister a particularly difficult question, he should blame his staff, because they taught me most of what I know. I want to pay tribute to the staff, because they are a very fine and long-serving group that have faithfully served governments of all stripes and the people of Manitoba have benefited from that.

My first question, Mr. Chairperson, is the level of capital access in Manitoba versus Canada versus offshore, I think the minister undertook to provide some of that information to my colleague from Brandon East (Mr. Leonard Evans). I wonder if he could provide, in some form of a table, the capital that is borrowed within the province, within Canada, within North America and then offshore, and I wonder if it would be possible to do that in a time series. I will leave the minister and his staff to choose the starting date for that. What I am interested in is the trend over time in terms of capital market access, and ability of those various capital markets to supply varying proportions of our requirements.

Mr. Stefanson: Mr. Chairperson, I will certainly provide the detailed information that the member for Crescentwood asks. I think, as he probably knows, we have been making a concerted effort over time to maximize our borrowings in the Canadian market or in Canadian currency. In fact, when we formed government back in 1988, I believe, approximately 25 percent of our exposure was in non-North American currency. Today, all of our exposure is in North American currency.

In terms of our general purpose debt, the operating debt of the government, today 67 percent of it is serviced in Canadian currency and 33 percent in U.S. That is a significant improvement, I believe, over where we were back in 1988 and that is certainly a major approach of our government.

The detailed breakdown he asks for in terms of within Manitoba, within Canada, within North America and then any offshore--although recognizing again, I think as he knows, that over the last many years any of the offshore or non-North American borrowings we do, we swap back into either a Canadian exposure or a U.S. exposure, and the rationale is, I think, pretty straightforward. We ideally want to have it in Canadian currency, which is our source of revenue, but if we do not have it in Canadian, we have it in U.S., which is our largest trading partner. Particularly when it comes to Manitoba Hydro, a significant part of that is hedged through the U.S. revenue source that Hydro has, but the detailed information I will provide to the member.

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Mr. Sale: Mr. Chairperson, thank you to the minister for that. I agree that that has been a desirable direction. I also would agree it has been an achievement of your staff and your government over the last seven years. I think it is consistent with trends that other provinces have been seeking and the wisdom of that, I think, is self-evident.

My second question is around the whole question of swaps. I notice from the information that, as you would expect, the department is actively involved in swapping to protect against--well, essentially to fix the risk of the government in regard to any issue. Again, I would not question that.

I do have some question about how that process is done, who advises on it and what safeguards are in place. It is an obvious question, but we are a big business. As the minister has provided us with information, we flow some $11 billion through and we borrow and take in large sums of money.

Could the minister provide us with some detail about the safeguards and the procedures for the process of swapping?

Mr. Stefanson: In terms of who advises us, it is similar to what we discussed earlier. Many of our major underwriters, particularly if we are doing a swap from Japanese yen, we have the Industrial Bank of Japan, Nikko [phonetic] Securities, and others.

In terms of the safeguards, our whole objective of doing a swap is to reduce risk. We do not get into speculation. We do not get into leveraging or any of those types of things. The kinds of institutions we deal with, when we look at their credit rating, they have to have at least a mid-AA threshold for our acceptance to deal with them, other than the Canadian banks which do not meet that criterion. Those are the kinds of things we do.

As I say, it is not done on the basis of being speculative or hedging. It is done on the basis really to reduce risk and to get our exposure back into a Canadian or U.S. currency.

Mr. Sale: Mr. Chairperson, does the government occasionally or actively trade its own or other securities for the purpose of improving on its debt-management process?

Mr. Stefanson: No, we are not active traders in the market. Although I am told that we will sell our bonds on occasion to help the market to accommodate a need or address a particular need, but beyond that we are not actively trading our bonds.

Mr. Sale: Mr. Chairperson, could I just ask one more question in that same vein? Hypothetically, would the government, would the department, go into the market to purchase an attractively priced or what it viewed to be an attractively priced Manitoba bond that had been issued at a high rate of interest, for example, and looked like the yield curves were right, and so you would purchase that bond with a view to retiring something that had a high interest cost, in effect, to bring it in to your portfolio and thereby retire it?

Do you do that kind of--I am not sure what the right term for it is--do you trade in the market in that way and under any conditions?

Mr. Stefanson: Mr. Chairperson, under scenarios like that, we will certainly take Manitoba bonds into our portfolio, if I understand the question, if we are out there again aggressively trying to purchase them. We do not necessarily do that. If it is an attractive investment, then it is attractive to other individuals as well, so you get into the whole competitive aspect, but we will certainly take bonds under the scenario described by the member into our portfolio.

Mr. Sale: Mr. Chairperson, could the minister then give us some estimate of the degree of activity of the kind of which I was just speaking, that is, where the department moved to repurchase--not to redeem at maturity, but to repurchase outstanding issues because it seemed a prudent thing to do?

Mr. Stefanson: I will provide that information to the honourable member.

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Mr. Sale: Moving in a slightly different direction, the minister, like all other Finance ministers in the country, was sideswiped by various interest rate fluctuations which did not appear to be rooted in much of Canada's realities but had a lot to do with somebody's decision to speculate against our currency, people who have been characterized as the boys in red suspenders. I do not know whether that is a sexist term or an accurate description of the trading floor.

I wonder if the minister has taken a position or if his government has taken a position in regard to the exploration of currency speculation taxes such as the tax proposed by James Tobin, the Nobel laureate, which is being actively discussed by numbers of people today, dismissed by some and promoted by others. Has the minister discussed this issue, taken a position with his federal or other provincial colleagues on currency speculation and the deterrents of currency speculation?

Mr. Stefanson: Mr. Chairperson, in my time in this portfolio the issue has never come up at any ministerial meetings or in any way with any of my counterparts across Canada on a formal or an informal basis. It has not been brought up at the staff level either.

I would think if there were merit to doing anything in this area it would be something that should be discussed on a national basis. If there ever were any activities in this area it would be again, I would think, on a national basis. I would certainly have to have a lot more information on the pros and cons of the entire issue.

Mr. Sale: I am a bit surprised at the minister's response, although I certainly accept it. I think there was wide-spread agreement across Canada that interest rate projections and fluctuations were wreaking havoc with federal revenue and deficit projections. I cannot imagine that they had anything other than the same effect, although obviously at a lower order of magnitude on provincial projections.

We know, Mr. Chairperson, that something in excess of 75 or 80 percent of all overnight trading, which now exceeds a trillion dollars a night in the world's money markets, is not connected in any way to the finance of international trade but is for the pure purpose of speculation on tiny, tiny fluctuations and interest rates, arbitrage, between the various money markets of the world.

Would the minister undertake to examine this question and to report to the House whether it is a matter that the government should raise with Finance ministers at an appropriate moment and whether this government would take a position against international currency speculation and its impact on all our lives?

Mr. Stefanson: Mr. Chairperson, yes, I will undertake to start by doing some additional research on the issue.

Mr. Sale: Thank you to the minister.

Could I now ask the minister what programs or policies the minister and the department have developed to increase the access of the government to pools of capital or individual holders of capital in Manitoba as opposed to other areas? I am obviously aware of the Builder Bonds and the Hydro Bonds, but to what extent has the government developed a forceful policy of accessing to the maximum possible potential Manitoba pools of capital?

Mr. Stefanson: I think, as the member for Crescentwood knows, both the Hydro Bonds and the Builder Bonds have been very successful programs in terms of meeting the financing requirements of Hydro and certainly of our government of Manitoba.

In terms of creating opportunity to access more Manitoba capital, again, I think he knows we supported the establishment of the Crocus Fund here in Manitoba to create another pool of capital for Manitobans to invest in although that is an issue that falls under Industry, Trade and Tourism. But I think he is, rather than sort of the access to capital markets like the Crocus Fund and the capital market task force, he is focusing more on our direct requirements, what we are doing to meet as many of our direct requirements as possible through Manitobans.

Really the main program today is the Builder Bonds program. It did raise us $300 million last year. That was approximately 25 percent of our total financing requirements last year including refinancing and our financing for our Crown corporations and so on, so a very significant contribution.

We will continue to certainly use the Builder Bond program. I think, as he would acknowledge, we do aggressively promote the Builder Bond program through various forms of media advertising--television, radio, print and so on. It has been very successful, but we will continue to look at opportunities to give Manitobans the chance to invest here in our province and meet our own borrowing requirements.

Mr. Sale: I thank the minister for that answer. I want to follow that a bit more. I think this is a very important area for us in terms of public policy.

We know that when income is earned in the province, we are the direct net beneficiaries of the taxation on that income. Has the government undertaken calculations that would show what the interest rate shaving might be that could still be tolerated in terms of the net return to the province through income and other taxation by virtue of the person in the province who holds the bonds receiving the interest and paying income tax thereon? Has the department done that kind of calculation and indicated what sort of higher interest rates might be available and still be a benefit to the government?

Mr. Stefanson: Mr. Chairperson, a study of the form referred to has not, to the best of my knowledge, been done, but I guess my general comment on that approach would be that most of those Manitobans are going to invest anyway. If they invest in Builder Bonds or they invest elsewhere we are going to get that tax revenue one way or the other because they are going to invest that money. They are certainly not going to leave it in a sock or buried in the ground, so we are getting that tax revenue one way or the other, and to be offering higher rates through our own borrowing really just adds to our cost of borrowing.

I would be interested to discuss it further with him, but I do not think that there is the direct relationship the way I understood the question to be asked that we could offer a higher rate because we are going to get some of it back in taxes. We are going to get that tax revenue anyway, so we should be offering a rate that is competitive in terms of where we could borrow elsewhere and to make sure we are borrowing in the least cost way on behalf of Manitobans.

* (1700)

Mr. Chairperson: The hour being 5 p.m., time for private members' hour. Committee rise. Call in the Speaker.

IN SESSION

Committee Report

Mr. Marcel Laurendeau (Chairperson of Committees): Madam Speaker, the Committee of Supply has adopted certain resolutions, directs me to report the same and asks leave to sit again.

I move, seconded by the honourable member for River Heights (Mr. Radcliffe), that the report of the committee be received.

Motion agreed to.