Province		 Législature	Session Type de discours	Date du discours Locuteur	  Fonction du locuteur	Parti politique
Terre- Neuve et Labrador 37e		1ère  	Discours du Budget	26 mars 1976	 William C. Doody Ministre des finances PC

INTRODUCTION
MR. SPEAKER,
   
   These are decisive times in the history of the Province of Newfoundland and Labrador and 
the presentation of my second Budget to this Honourable House in just over four months reflects 
that fact.
   
   On November 24th, 1975, I presented a Fall Budget which took the necessary steps to correct 
unfavourable budgetary trends and which outlined Government’s program to achieve 
expenditure restraints in line with the national Anti-Inflation Program and within our own 
financial capabilities. Today, my 1976 Budget measures the significant results of the 1975 Fall 
Budget and contends with the realism of the economic situation both in our Province and the 
Canadian Nation, !t indicates that those financial decisions have indeed alleviated the more 
serious financial problems with which we were faced at that time.
   
   Many of the economic uncertainties which existed in 1975 remain with us in 1976. The 
declining growth rate in expenditures by the Government of Canada will spill over to the 
Provinces and adversely affect our growth. Inflation, while showing signs of slowing down as a 
result of the Anti-Inflation Program, remains a very major concern of all Governments in 
Canada. In addition, there are concerns over our future Federal/Provincial fiscal relationships and 
as federal transfer payments represent 50 percent of total provincial revenues, the current 
comprehensive review of all fiscal arrangements for revised implementation in 1977 is a matter 
of great significance and importance to this Province.
   
   It is against this background that	i	present the sixth Budget of the
Progressive Conservative Government	of	Premier Frank D. Moores.	It is a
tough, realistic and necessary fiscal document.

REVIEW OF FALL BUDGET - 1975
   
   The financial situation which was unfolding in the 1975—76 fiscal year was not encouraging 
at the time of the November Budget. The rapid rate of inflation, the significantly higher than 
budgeted wage settlements in the public service and the declining revenues from the Federal 
Government had forced us to address the prospect of a $30,000,000 deficit on	current account. 
Government decided that such budgetary trends could not be tolerated and had to be 
expeditiously reversed. Therefore, we took several difficult but necessary steps to	deal 
with the situation, including:
   (i)	an increase in the	retail sales tax from 8 percent to 10 percent, modified by the 
introduction of a complete exemption on clothing purchases and by the raising of the minimum 
purchase subject to tax from 8 cents to 20 cents;
   (ii)	the elimination of commissions paid to businesses and
corporations for the collection of retail sales, tobacco and gasoline taxes;
(iii)	an increase in the cost of motor vehicle registration and driver licences;
   (iv)	an increase in personal income tax from 40	percent of the basic
federal tax to 42 percent, effective July 1st,	1976;
(v)	the deferral of several major capital expenditures, particularly in the area of hospital 
construction; and
(vi)	the implementation of a freeze on the creation of new positions in the Public Service and on 
the filling of vacant positions.
   
   Mr. Speaker, these Fall Budget decisions, along with earlier actions announced by our 
Premier when he endorsed the national Anti-Inflation Program, have had a significant and 
favourable effect on the projected results for the fiscal year about to end March 31st, 1976.
   
   The Fall Budget projected an $11,322,200 deficit on current account and a total borrowing 
program of $222,143,200. Present estimates now indicate, however, that the current account 
deficit has been completely eliminated and when the figures are finalized a small contribution to 
capital account of $3,348,000 will have been achieved. Equally as important, total borrowing 
requirements have been reduced to $203,937,700 or $43,000,000 less than the trends in existence 
prior to the Fall Budget:
   
    The favourable swing from a deficit on current account to a contribution to capital account is 
largely due to positive revisions of revenues associated with personal income taxes and with 
revenue guarantee payments from the Federal Government. While total positive revenue 
revisions were $18,800,000, there were other negative revisions of $11,100,000 comprised of 
$2,500,000 due to slower growth in sales of alcoholic spirits; $5,800,000 in retail sales tax due to 
the magnitude of several major industrial disputes and a higher than forecasted effect on 
revenues of the clothing exemption and a $2,000,000 reduction in equalization payments due to 
prior years adjustments. In total, therefore, revenues are estimated to have increased by 
$7,700,000 over the Fall Budget projections.
   
   In addition, measures to restrain expenditures have been mainly responsible for net savings 
of approximately $7,000,000 more than was estimated in the Fall Budget thereby producing the 
overall contribution to capital account. These results are encouraging even though the financial

performance for 1975—76 is still not as strong as we would have liked. Total expenditure 
growth averaged an unacceptably high rate of 19.8 percent and our revenue base grew at 18.4 
percent and the Province borrowed in excess of $200,000,000 inclusive of debt retirement.
   The financial outcome for the year ending March 31st, 1976, does, however, demonstrate the 
determination of this Government to implement its financial policies. The difficult taxation and 
expenditure decisions on current account and the deferment of major capital expenditures have 
produced a contribution to capital account and resulted in a reasonable borrowing program for 
the 1975—76 fiscal year. More importantly, these decisions have set the stage for a more 
manageable approach to the 1976 Budget.


ECONOMIC OUTLOOK 1976-77
   
   The year 1975 was a difficult one for most Western economies and a particularly tough one 
for Canada. The Canadian economy has experienced its first decline in real growth, since 1954, 
caused by a continuance of excessive inflation, a deterioration of the competitiveness of 
Canadian goods in foreign markets, a continued escalation in the prices of key imports and an 
unenviable record of industrial disputes. However, there is now some indication that the Anti-
Inflation Program is beginning to have a positive effect on wage settlements and recent statistics 
indicate a decline in the rate of inflation.
   
   !t is expected that there will be modest improvement in most sectors in the Canadian 
economy during the first half of 1976 with further acceleration in the second half. The favourable 
outlook for the United States economy is a major factor in the optimism with regard to this 
recovery. Conservative estimates for Canada point to between 4 to 5 percent real growth in 1976. 
The restraints on Government expenditures will, of course, offset many of the growth prospects 
for the next year but it is generally recognized that Governments are correct in giving top policy 
priority to the control of inflation.
Newfoundland Economy
   
   The latest available indicators show that in 1975 the Newfoundland economy real growth 
was less than one percent reflecting a small improvement over 1974. This low rate of growth 
reflects the national recession in general and the downturn in forest products, fisheries, 
manufacturing and construction industries in particular. Major industrial disputes also negatively 
affected output in 1975. The main areas showing substantial improvement were the mining and 
energy sectors.
   
   The outlook for 1976 is dependent upon an economic recovery nationally and internationally. 
We expect that Newfoundland’s Gross Provincial Product will grow in real terms by 2.0 percent 
to $2,576,000,000. We feel that we can look with some optimism towards the forestry sector, 
now that labour problems have been settled and that foreign markets are improving. In the 
mineral sector, it is reasonable to anticipate a continued expansion of output because of 
improving production and market conditions. The fishing industry as well is expected to show an 
improvement over 1975 with better market and labour conditions.
   
   These positive aspects are expected to be tempered by slower growth in the manufacturing 
and construction sectors. In addition, the employment situation is not expected to change as 
people are added to the labour force at a similar rate to new job creation. Consumer expenditure 
is not expected to provide the economic impetus which is usual in an economic recovery period 
as it will be impeded by the wages and prices policy of Government, coupled with a reduced rate 
of growth in Government expenditure.
   
1974-77 FINANCIAL OBJECTIVES
   
   The achievement of a financial turnaround in the 1975 Budget position is important. The 
1975 taxation decisions have provided an increased revenue base for 1976—77 and the restraint 
on current and capital expenditures have halted a deteriorating budget position. However, we 
must keep in mind that it did not significantly alter the fundamental problems of rapid 
expenditure growth and the high borrowing requirements facing this Province.
   
   We must realize that the restraint program started just four months ago and which had been 
labelled an eighteen-month period of restraint, will have to be continued for all of the next fiscal 
year. This is particularly necessary considering that in 1976—77 we will bear the full financial 
effects of the substantial salary settlements which were negotiated in 1975. We will also 
experience the full effects of the restraint program on our revenue projections and will continue 
to feel the effects of inflation on our expenditure programs.
   
   This Government is determined to achieve two financial objectives in its 1976 Budget and 
these are (i) a reduced borrowing program which would not exceed $200,000,000 inclusive of 
debt retirement, and (ii) a contribution to capital account in excess of $10,000,000. Difficult but 
necessary decisions have had to be taken in order to achieve these objectives and to reflect 
responsible financial management.
   
   Expenditures on current and capital account total $1,040,496,500 and when we add the 
expenditures of our Government agencies and also include debt retirement needs, Government’s 
Budget for 1976 will approximate $1,250,000,000. Education and Health continue to be the 
largest areas of Government expenditure with Education requiring $264,319,000 and Health 
totalling $194,213,900. The magnitude of Government’s budget continues to be highly 
significant and expenditure increases on both current and capital accounts total $103,350,500 
over 1975—76 or an 11 percent increase. This is considerably lower than the percent rate of 
increase experienced in the 1975 Budget.

CURRENT ACCOUNT 1976-77
   
   Expenditures on current account continue to grow and in 1976—77 will total $819,127,300 
(see Table IV). These expenditures reflect the growing demands and expectations of the people 
of this Province for new and improved services. It also, reflects the high cost of providing 
services in Newfoundland because of the rapid pace by which we have been required to build up 
our essential social and capital structure. The need for new construction in hospitals, highways, 
schools and water and sewer systems in the last decade has been financed through borrowings 
and the on-going costs of these expenditures are clearly indicated by interest costs which will 
total $106,490,600 in 1976—77. Government has had to grapple with this fundamental problem 
in arriving at a final position on current account in
1976-77.
   
   The other major current account items include hospital operating costs ($141,108,100), 
teachers’ salaries ($125,000,000), general salaries ($119,775,200), social assistance 
($49,500,000) and maintenance of highways ($44,164,400). I should explain that the apparent 
growth in salary costs represents the full effect of settlements negotiated in 1975.

   The projected contribution from current account of $10,413,800 is only 1.6 percent of current 
revenues which total $651,661,000. Yet it has demanded a tough budgetary review process in 
addition to a continuation of our restraint policies. In order to achieve this current account 
position.

Government was obliged to look at harsh options related to existing programs, particularly those 
which are more generous or in fact do not exist in other parts of Canada. We examined the 
elimination of the free dental care program for children under age 11, charging for school books 
which are now free up to Grade IX, introducing options for public contributions for medical 
treatment, re-introducing pro-ration on doctors salaries, reducing the recently announced sales 
tax exemption on all clothing and reducing student aid and scholarships. We looked at these and 
other options but have decided not to take any budgetary action on them.
   
   However, the decision not to proceed with these items necessitated decisions in other areas of 
our Budget and Government has therefore ma:de tough decisions with respect to (i) hospital 
services, (ii) public service salary limitations, (iii) public service staff reductions, (iv) general 
areas of expenditure restraint, and (v) additional taxation measures. These actions are 
burdensome but financially necessary alternatives if we are to realistically live within our means.

Hospital Services Restraint
   
   To be effective, our policy of financial restraint must apply to all Government services and 
while our health services are some of the most essential we provide, they cannot be made 
immune from financial reality. This is especially true when we examine the rapid increase in 
health care costs in recent years and the continuing efforts of the Federal Government to 
withdraw or reduce their share wherever possible in the health service field.
   
   Accordingly, the decision has been made to close approximately 200 acute care hospital beds 
during the fiscal year 1976—77. In making this decision Government realizes that additional 
pressures will be placed on remaining hospital beds and to minimize these pressures we will 
concentrate an intensive effort at inaugurating less costly alternative health care programs such 
as home care and day care programs. Similar actions have been taken in other Provinces during 
the past several months.
   
   It must be emphasized that no closures of hospital beds will take place until there has been 
full consultation with the hospitals concerned. The staff reduction made necessary by these bed 
closures will, wherever possible, be achieved through attrition rather than lay-offs. In taking this 
decision to close beds, our intent is not to reduce costs without regard to consequences, but rather 
to economize in areas where we feel this can reasonably be accomplished. With the co-operation 
and support of the medical, para-medical and non-professional staff involved, the quality of our 
health service will not be seriously affected.

Collective Bargaining Restraint
   
   In this fiscal year twenty-seven public service collective agreements are due for re-
negotiation between March 31st and December 31st, 1976. These contracts which were 
negotiated in 1975 provided for unprecedented improvements in the salaries and working 
conditions of employees in our Public Service. Given the inflationary trends at the time and the 
need for catch-up in some areas, these improvements were justified and necessary.
   
   However, Government has to provide for approximately $350,000,000 in public service 
salaries and we are faced with the reality that we must exercise restraint in collective bargaining. 
In recognition of this necessity, the Government of Newfoundland and Labrador entered into an 
agreement with the Government of Canada under the Anti-Inflation Act on Febraury 2nd,
1976.
   
   We will continue to negotiate on a reasonable basis and while we do not expect public 
service employees and their bargaining agents to be happy with the consequences that restraints 
impose, we request and expect to obtain a responsible recognition by all concerned of the 
realities of our economic situation.
Other Restraint Areas
   
   Government realizes it must set an example in limiting expenditure growth and cutting back 
wherever possible. The decisions in the Fall Budget to cancel the third phase of improvement in 
the pupii/teacher ratio and to defer action on an expanded recreation program have been 
implemented resulting in reduced expenditures on proposed new programs of $6,200,000. In 
addition, growth in our highway maintenance program will be curtailed and expenditures are 
expected to total $44,164,400 or an increase of 5 percent over 1975—76. Grants to School 
Boards will be limited to $22,000,000 or 10 percent over the 1975—76 provision. An operating 
grant of $37,500,000 will be provided to Memorial University compared to $32,900,000 in 
1975—76. It is anticipated that these amounts will necessitate difficult decisions by School 
Boards and by the University to live within their budgetary provisions.

   Government will be introducing a program of public service staff reductions with an initial 
objective of totally eliminating a minimum of 500 positions through attrition and program 
cancellation. These staff reductions will be in addition to continued freezes on new posts and 
restrictive practices with respect to filling of vacancies. Initial areas of review for staff reduction 
will be the Emergency Measures Organization, the Tuberculosis Control Division, and various 
other areas of Government activity particularly in the social and services field. Government will 
also be asking the various Crown Agencies to undertake similar staff reduction programs.
   
   In the Fall Budget Government deferred the cost of living increase for those individuals on 
the social assistance program. The increase had been due to be effective January 1st, 1976. 
Government has reviewed the overall situation and will be proceeding with an increase of 10 
percent on existing social assistance rates effective April 1st, 1976.
   
   With a view to assisting our financially strained municipalities, Government will increase the 
ceiling on its revenue grant program for municipal governments. This action is not inconsistent 
with the austere theme of this Budget. At the present time Government gives to municipalities 
revenue grants which bear a direct relationship to tax collection by the municipalities. There is an 
existing ceiling of $100,000 on the grant and we intend to increase the ceiling to $150,000, 
thereby giving greater incentives to the local authorities to increase their tax levies and to 
improve their tax collection efforts. At least 18 of our larger municipalitiies are expected to be 
directly affected including Wabush and Labrador City, and the additional grants will 
approximate $750,000.

Taxation Measures
   
   In addition to expenditure restriction and in order to achieve a meaningful contribution to 
capital account, it will be necessary, for Government to introduce additional taxation measures. 
These are undertaken with great reluctance and with the full knowledge of the existing tax 
burden on Newfoundlanders, but these measures are necessary to complete our plans of firmly 
placing current account on a sound basis. We have, therefore, decided to increase the provincial 
corporation income tax from its present 13 percent to a revised rate of 14 percent effective 
January 1st, 1976. This measure will result in an additional $1,300,000 in revenue during 1976—
77.
   
   In addition, we have decided to place an extra 2 cents per gallon on the price of gasoline in 
order to bring in additional 1976—77 revenue of $3,000,000. The gasoline tax increase was a 
difficult step to take particularly in view of the already high cost of gasoline in Newfoundland 
and Labrador. While the provincial gasoline tax has remained fixed since 1968, the oil 
companies have been increasing their prices dramatically in the last three years and the Federal 
Government has added 10 cents per gallon as recently as June, 1975, in the form of increased 
excise tax.
   
   The two new taxation measures combined will result in additional revenue in 1976—77 of 
$4,300,000. The total current account revenue for 1975-77 is estimated at $651,661,000 as 
shown in Table V:
   Tax increases are not long term solutions to our budgetary problems and Government 
recognizes this fact. Under present economic and financial conditions, expenditure reductions 
and controls aided by program elimination are the only answer. It is quite evident that this 
Province has to seriously question its ability to support existing programs at present levels. 
   
   While tax increases have been necessary in recent months to meet expenditure demands, 
future tax reductions can take place if significant areas of expenditure are eliminated on current 
account and if capital programs are reasonably and responsibly curtailed.
   
   Expenditure cuts on current account free up funds to introduce new programs of high priority 
or to maintain existing programs with lower tax levels. Expenditure cuts on capital account help 
keep down future interest costs on borrowed money and future operating costs on capital assets. 
This Government is pledged to intensify its efforts in the next twelve months to accomplish a 
significant program of expenditure reduction and with the support of the people of this Province 
will create a new efficiency in Government spending. The ultimate objective of such a program 
must be to reduce the current tax burden carried by the average Newfoundlander and his family.

CAPITAL ACCOUNT 1976-77
   
   Our budgetary objective to achieve a borrowing program of less than $200,000,000 inclusive 
of debt retirement has been met but it has meant many tough decisions in priority capital 
spending areas. The major capital account spending areas are shown in Table VI.
   
   Highways expenditures including cost-shared projects under the DREE program will be 
maintained at high levels in 1976—77 as an estimated $52,000,000 will be spent. In addition 
hospital completions totalling $14,400,000 are scheduled for the Health Sciences Complex, 
Carbonear, the Waterford, Twillingate and Corner Brook. Government will also be continuing 
with expenditures in resource and social programs for school construction ($11,000,000), 
community sports facilities ($2,600,000), rural electrification ($5,301,000) forest access roads 
and equipment ($9,783,300), Gros Morne National Park ($6,125,000), marine service centers 
($3,625,000) and municipal paving grants ($2,458,000).
   
   The capital requirements for Labrador Linerboard Limited for 1976-77 are estimated to be 
$25,000,000. This compares with $28,000,000 advanced to Linerboard in 1975—76 and is based 
on the major assumption that the plant will sell 240,000 tons of linerboard product. The company 
has implemented a cost reduction program during the past several months with an objective of 
improving operating efficiency wherever possible. The projected cash operating losses for the 
Linerboard mill total $8,900,00 and the remaining cash requirements are for debt servicing 
charges. The fundamental problem with Linerboard continues to be the availability of wood at 
economic prices, a problem which the company and Government are currently addressing with a 
view to an early solution.

   Despite the austere nature of this Budget its economic effects on the construction industry 
should be minimal. When we take into account the capital expenditures related to construction 
and add in the construction program of Newfoundland & Labrador Hydro, which is expected to 
exceed $50,000,000, and the housing program of Newfoundland & Labrador Housing 
Corporation, which is expected to approximate $56,000,000, then total construction activity 
stimulated by this Budget is well in excess of $200,000,000.
   
   Some major projects will have to be deferred in 1976—77 in order to keep within our 
borrowing objective. These projects include all the proposed hospital construction which was 
deferred in the Fall Budget and necessarily include (i) the new and essential Constabulary 
building, (ii) the proposed Polytechnical Institute, (iii) the University Library, (iv) the very vital 
residence at the College of Trades & Technology, and (v) the Labrador West Arts & Culture 
Centre. Expenditures on jiew water and sewer systems will also be restricted.

BORROWING REQUIREMENTS
   
   The borrowing requirements for 1976—77 will be less than in 1975-76 and represent the 
achievement of a significant financial objective. The Province's debt has been growing at a rapid 
rate in the past and must be restrained in future years.
   
   The total cash requirements of the Province in 1976—77 after taking into consideration the 
projected contribution to capital account of $10,413,800 is $196,433,200. The financing program 
for the Province will represent an increase in net debt of $134,433,200, as redemptions, sinking 
funds and earnings on sinking funds total $62,000,000. The cash requirements will be obtained 
from the following sources:

General Market Borrowing  $155,000,000
Canada Pension Plan  32,607,000
Canada Pension Plan 8,826,200
Government of Canada Loans $196,433,200
   
   The requirements for capital market borrowing should not cause difficulties as the Province's 
credit rating has remained stable and it has been successful iti raising long term debt in various 
markets during the past several years. In 1975—76 the Province continued its policy of raising 
its long term debt only in Canadian and United States dollars.
   
   In addition to the financing requirements of the Province, the Newfoundland and Labrador 
Hydro Corporation will likely require approximately $50,000,000 in long term financing for its 
capital expenditure program (exclusive of Gull Island) and Newfoundland Municipal Financing 
Corporation will have to borrow $25,000,000.

FEDERAL/PROVINCIAL FISCAL RELATIONS
   
   One of the most significant components in the long-range financial planning of the Province 
is the fiscal relations which exist between the Government of Canada and the Province of 
Newfoundland. Federal shared-cost programs and programs under the Financial Arrangements 
Act such as equalization, revenue guarantee and post-secondary education, represent 
approximately 50 percent of the total revenues of the Province.
   
   During 1976 negotiations will be held between the Government of Canada and all of the 
Provinces on most areas of Federal/Provincial fiscal relations. These meetings have already 
begun, concentrating mainly on the Financial Arrangements Act which expires March 31st, 
1977. One of the major objectives of the Government of Canada is to reduce the rate of growth 
in its expenditure programs. This means that revenues from equalization and post-secondary 
education are likely to grow at a slower rate in the period 1977 to 1982. The revenue guarantee 
program is proposed to be be terminated after 1977. In 1975—76 this program represented $20.5 
million of revenue to the Province. In addition, shared-cost programs are to be completely 
reviewed. The Government of Canada is proposing to limit the growth in these programs, the 
major ones being Medicare and Hospital Insurance.
   
   Canada has experienced a major shift in fiscal balance during the past five years due to the 
dramatic increases in natural resource revenue, particularly oil and gas, and the relative slow-
down in the economy. Therefore, new policies on Federal/Provincial fiscal relations must be 
developed and while regional disparities have been narrowing, it is essential for the Government 
of Canada to recognize the limited tax base of the lesser developed Provinces and the fact that 
disparities still exist.
   
   The Province will be negotiating these issues during the next several months, however, in 
light of the shift in fiscal balance and the Federal Government’s Anti-Inflation Program, it can be 
expected that in the future the growth in Federal Revenues will be slower and have consequent 
repercussions on our provincial financial capacity.
   
FUTURE DEVELOPMENT PLANS

   The control of Government expenditures and the achievement of financial objectives with 
respect to revenue sources and borrowing guidelines are desirable policies of Government, but 
they do not address the fundamental economic and social issues in this Province. These issues 
can only be faced with a more rapid creation of new employment opportunities and an extreme 
effort at expansion and diversification of our economic base.
   
   This Government has been working steadily over the past four years towards a strengthening 
of the economy, particularly in the areas of resource development. This has not been an easy task 
during a period of high inflation, high interest rates and relatively slow economic progress 
nationally. During the four years 1971 to 1975 the employed labour force grew by 17.0 new jobs 
or a growth of 3.5 percent per annum. However, our employment level as a percentage of the 
total labour force did not improve. Despite significant steps in job creation, our unemployment 
has continued to increase. This situation must be changed.
   
   Our strategy for development will be based on the conviction that economic progress 
depends upon the best use of our natural advantages. Some of these advantages arise because of 
our geographical position. Other advantages arise from our abundant natural resources and from 
the advantages based on the skills and resourcefulness of our people. These advantages have not 
yet been fully realized and hold great promise for the near future.
   
This Government intends to build upon these natural advantages in order to ensure that we will 
benefit through expanded job opportunities and an improved standard of living. We have already 
achieved significant progress in the mineral and the pulp and paper industries and both continue 
to expand to make a major contribution to the Newfoundland economy.

   In terms of new development, this Government places top priority on realizing the full 
potential of our fishing industry. At present there are almost 2,000,000 tons of fish caught off the 
shores of Eastern Canada, of which only slightly more than 400,000 tons are landed in Canada. 
In view of the Canadian fishing capacity Canada will have to allow potential landings to be 
caught by other countries and processed in Eastern Canada. Our fishery resources are enormous 
and in a world short of protein they must be managed properly. We have taken the position that 
our fishermen have first claim to this resource, which has the potential to create many high 
income jobs.
   
   The key to the long term management of our fishery resources is the enactment of a 200-mile 
limit. When it is declared, it is of critical importance that our commercial position be established 
so that our people can benefit immediately in a meaningful manner. It is our hope that the 200-
mile limit will be declared by January 1st, 1977. As a result, it is hoped to see at least the 
doubling of fish landings into this Province within the next several years, along with a dramatic 
expansion into advanced fish product processing. Fish processing is a very sophisticated but 
labour intensive industry.
   
   It is imperative that we prepare immediately to realize increased landings through co-
operative arrangements with European fishing interests by planning suitable landing and 
distribution facilities. At the same time we must ensure that any such program would not be to 
the detriment of our Newfoundland fishermen and that their best interests are protected.
   
   Our fish processing industry is now operating at less than 30 percent of capacity and is highly 
seasonal in nature. Increased landings have the potential to reduce the seasonal nature of 
employment and create many new jobs. The repercussions and potential for the revitalization of 
a major fish processing industry are enormous, and this Government intends to intensify its 
efforts in bringing about such a revitalization as rapidly as our financial resources allow. We will 
also be seeking special assistance from the Government of Canada because of the national 
significance of the potential which exists.
   
   Another of our initiatives in marine-related industry is based upon the natural geographic 
advantage which we have in Newfoundland for trans-shipment of supplies into the high Arctic 
region, and the transfer of the processing of raw materials originating in that region. Another 
initiative relates to the construction of concrete platforms in our deep water ports to service oil 
and gas production in the Northwest Atlantic. A further example is shipbuilding and ship repairs 
and it is our hope that expanded dry-dock facilities will enable us to capitalize on our geographic 
proximity to major shipping activity. We must capitalize on all of these opportunities if we are to 
survive economically and we must rejuvenate the initiative and spirit of the natural productive 
abilities of our people in order to make it successful.
   
    This Government intends to promote a series of pilot projects in 1976-77 which will form 
the basis for expanded economic activities in the area of small business. For example, we plan to 
undertake pilot projects in fish-farming for trout and salmon. We intend to assist our sawmills to 
become more viable by more productive utilization of its by-products and we intend to promote 
the manufacture of wood products to take fuller advantage of our forest resources. We also plan 
to promote a pilot project for the further processing of blueberries and other native fruits into 
food products. We will also initiate pilot projects for the utilization of our marble deposits and 
for the production of clay and shale products. The concept of a Newfoundland marketing agency 
to promote all high quality Newfoundland products produced by small industry is being assessed. 
Such an agency would assist producers; provide continuous access to the various markets and 
through the use of distinctive Newfoundland brand names provide an efficient marketing image.
   
   These are important steps to diversify the industrial base of the Newfoundland economy. We 
do not want to concentrate our economic development only on large capital intensive industries 
which often bring social and environmental difficulties and do not take advantage of our labour 
skills and natural resources.
   
HYDRO DEVELOPMENT
   
   The development of the Province's hydro resources has been identified as one of the most 
important financial and economic factors for the Province of Newfoundland and this 
Government has worked hard to re-organize the administration of the Province's energy sector. 
However, the magnitude of the expenditures required for hydro development, the uncertainty wit 


respect to the costs of construction, along with the uncertainties of the economic climate have 
made the task of developing our hydro resources extremely complex and difficult in the context 
of the financial resources of this Province.

   In the November 1975 Budget, Government announced that after many months of study and 
exhaustive discussions, it had reluctantly concluded that the construction of the hydro site at Gull 
Island would have to be postponed for at least one year. The construction of the transmission 
system and the tunnel and interties for the 1800 megawatt Gull Island project has continued. The 
major reason for this postponement was the sharp increase in the estimated construction costs 
which now total in excess of $2.3 billion including escalation and interest charges during 
construction. In addition, the necessary agreement on the sale of surplus power during the early 
years of the project had not been completed.
   
   Since the November Budget this Government has been working on a revised approach to the 
development of Labrador hydro resources. A major issue in the determination of whether the 
construction of the transmission lines, tunnel and interties should continue as phase one of the 
Gull Island project is the negotiation of a purchase agreement with Hydro-Quebec to obtain 
sufficient power from the 5225 megawatt Upper Churchill Falls site on a long term basis. In 
addition another major issue is the necessary arrangement with the Federal Government for 
financing the transmission line, tunnel and interties. These issues are still outstanding.
   
   In addition to the work which is continuing on the Gull Island project, the Newfoundland and 
Labrador Hydro Corporation is completing the expansion program at the Bay d’Espoir Hydro 
site and has undertaken the necessary planning to ensure on-island installed capacity will be 
adequate in 1981. The major component in increasing on-island capacity would be installation of 
additional units at the Holyrood Thermal Station.

CONCLUSION
   
   In conclusion, Mr. Speaker, the 1976 Budget is a tough but realistic financial plan for the 
fiscal year 1976—77. It represents the commitment of this Government to a financial philosophy 
of restraint during a period of grave economic uncertainty, provincially, nationally and 
internationally. The long rapid growth of the post war period has ended and a different economic 
framework must be created if the social, economic and political systems in the Western world are 
to survive.
   
   The tax base of the Province is strained by the taxation decisions of the past and those 
outlined in this Budget. The people of Newfoundland should not be asked to carry any further 
tax burdens. Government is taking too much from the economy without accurate measurement of 
the need for expanded programs and of the contribution these programs are making. Growth in 
government spending and government structure must be reduced. In the short term, inflation, 
expectations of society and slow economic recovery make it almost impossible for Government 
to extricate itself from many of its commitments. However, this is not to say that the overall 
objectives cannot be realized and the initial steps taken as demonstrated by this Budget.
   
   The philosophy and goals of the Government of Canada indicate quite clearly that growth in 
federal revenues will be slower and therefore Federal/Provincial programs will be revised and 
growth reduced. The Canadian and Provincial economies are not expected, in the short term, to 
grow at a rate fast enough to relieve these financial pressures.
   
   In the short term this Province can expect little relief from the present taxation levels. All 
Government programs must and will be reviewed and decisions will be taken to eliminate those 
of low priority. I plan to outline my

course of action on this financial policy in the debate on the Budget and in the months ahead as 
the plans develop and are implemented.
   In the longer term the expansion of the Newfoundland economy and creation of additional 
jobs will depend on the success of this Government and the people of Newfoundland to take 
advantage of the opportunities natural to us. The fishing industry must be planned and managed 
properly, the forestry sector must be expanded into employment opportunity areas and our great 
hydro potential must be developed for the people of this Province. The enormous potential for 
offshore oil and gas must be realized.
   This Budget is a responsible financial plan which achieves our critical financial objectives. It 
continues the restraint on Government spending yet it contains in excess of $200,000,000 in 
capital expenditures throughout the
public sector of Newfoundland and total spending on current account of approximately 
$820,000,000. While we must take action to bring about a sound fiscal position it is equally if 
not more important to get economic programs underway which maximize our resources, broaden 
our industrial base and combat our high unemployment.
   While we must take action to bring about a sound fiscal position it is equally if not more 
important to get economic programs underway which maximize our resources, broaden our 
industrial base and combat our high unemployment. This is a decisive year for Newfoundland 
and I know its people have the courage, the energy and the capabilities to respond to its 
challenge.