Thank you, Madam Chair. If I may, I would like to address, first of all, Mr. Krutko's concern about fairness as we have had frequently in this House. I have spent, as have some Ministers, a considerable amount of time on this issue in trying to find an appropriate compromise to it. I would ask him today publicly, and I know it will be difficult for me to say this to him, to be patient. We genuinely want to, I say this for public comment, genuinely want to do what is right for his constituency and do it in a manner that does not effect others. So, for public record, I want to assure him that there is a genuine effort, whether or not we will be able to satisfy the constituents or not, but there is certainly a genuine effort to try and reach some goal here.

Both Mr. Erasmus and Mr. Krutko talked about the capital budget and I could not agree more with you. In the budget I outlined that we cannot continue to take from the capital budget, you know we are up around $200 million at one point, we are now sitting at about $130 million. It does not make any fundamental change to the cost of running government, it is a short term relief and frankly I am concerned that we cannot continue to erode, if you want, the capital base, because it really does nothing over the long haul.

We did, last year and this year, did take some money from it in an effort to try and make sure there was some fairness in the cuts. I appreciate Mr. Erasmus's comments about the floor arrangement and as he said the erosion of our basin in the formula. And, I think, it is a complicated issue, the formula financing arrangement and it complicates itself even more, by the fact that we are not totally in control of our own fiscal destiny because a provincial and local government spending has a critical impact on how our formula is arranged.

As I said on a number of occasions, I am concerned that those who imply, and some have publicly, that we are moving too quickly, or deficits are okay. In fairness, I do not fully understand the fact that it is not this government alone making these dramatic changes, it is, you know, it is a combination of a variety of people. Now, that is not to suggest that I, as the Finance Minister, or us as Assembly are not ultimately responsible. We are. But some of this stuff is, whether we like it or not, beyond our control. I mean, if Mr. Bouchard decides to cut x-billion dollars from his budget, then I do not think he is going to listen to me, even though I would try to talk to him, or for that matter Mr. Harris and it does have an impact.

In fairness to the federal government, Mr. Martin, and I have to say this, in my meetings with him, has been very co-operative, and I am not saying because it is politically fashionable to say it these days, but I fundamentally believe the man is being as straight with me as he can, and if there is some room for compromise or room to establish a floor arrangement and he can live with that, I am confident that we will be able to come to an arrangement.

We are setting the stage, in a sense, for 1999, because two new formulas will be negotiated, so these issues of the floor, the erosion of our base because of provincial spending, have to be understood by more people. And, in particular, by our legislators and those who are directly involved in the east/west discussions on two new formulas.

I appreciate Mr. Erasmus's comments on the fact that we have been able to, at least on paper so far, come to an arrangement on broad representation at the financial table when we take a look at the fiscal arrangements that are necessary for the two new territories. I absolutely believe this is essential to the successful conclusion of two new arrangements. I would hope that my western colleagues, and I put on just temporary my Nunavut hat, would really at some point be able to reassure all Members and the public at large that the division of the territories is not a Nunavut issue and in fact will not impinge upon the western Arctic's ability to continue with a quality of life and the services that we have. I see it, as the Finance Minister, as the development of two territories, and the development of two new formula financing arrangements.

If I may try and answer a couple more issues, I think it would be fair to say that as I have spoken about earlier and Mr. Erasmus spoke about and others have, it is the struggle we are all having in relationship to the social envelope and the fact that it has got this enormous first growth, and with some it feels like it is outside of your control. And I use the terms in the budget, I believe, I do not have them before me, that the Minister Ng who has got an inordinately difficult task, needs to take a hard look at some radical form to the system. I can tell you, this is not unique to this jurisdiction. That is going on all across the country, and it is going to require all our patience and all our support in discussion and debate when Mr. Ng's budget and others come forward because, remember it is like the formula arrangement, it has a first growth component to it that makes it extremely difficult to contain, or to control. So, he has an inordinate difficult task of trying to satisfy the constituency at large, meet the targets that have been set by, et cetera.

As the Finance Minister, I have an overriding concern that the social envelope, and I have spoken on many occasions of this, the budget in the social envelope is continuing to rise. If it continues to rise to the degree it currently is, and there is no containment of it, then you know the logical end to that is that all the money will be in the social envelope and little will be in other areas: job creation, essential services, et cetera. I know many of you view it that way, but I think it is important that you do.

One last thing Mr. Erasmus eluded to, and I think this is probably where him and I differ slightly, in that is his comments as they relate to privatization and his concerns raised. I appreciate what he is saying and my position is that I really I wish there had been more progress, not less. But I want to assure him that, as we move forward with deciding on whether we should privatize POL and the larger computer services, et cetera, that would not be done without full discussion by the committees.

In summary, Madam Chair, I appreciate the Member's comments and I am going to try and reassure my colleague, Mr. Krutko, that we are trying to make every effort, and I know it is extremely frustrating for him, I appreciate that the chairman of the government ops committee has taken an interest, in particular, in the larger issue of the formula financing arrangement, the erosion of the base. The fact that we do not have total control on the budgetary process as we would like, and I want to reassure the House that Mr. Martin, the Finance Minister, is agreed and working diligently to try to meet and come forward with a satisfactory compromise that will safeguard the base that we have and avoid any further erosion as we move forward to April 1, 1999. Thank you, Madam Chair.