Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697720337295.pdf (Canada)
The Budget-Mr. Abbott OOMMONS Mr. CHEVRIER: Yes.

Se<:tion agreed.

to.

Sections 8, 9 and 10 agreed to.

On section Il-ExemptioWl by minister.

Mr. GIBSON (Como:l-Alberni): We are going so rapidly that we cannot even read the 6ections.

Section agreed to on division.

Sections 12 to 16 inclusive agreed to.

On section 17-Repeal.

Mr. GIBSON (Comox-Alberni): We are put ting through this bill and I do not think any one bas the foggiest idea of what it is.

It is going through and that is all.


SelltJon agreed to.

On section l&---Certi6.cate of disc-harge.

Mr. GIBSON (Como:l-Alberni): should like to speak on this section a1though I have I shall read it for the edifiution not read it.

of hon.

members of the committee.

It reads: 18.

Subsection one oC IleCtion one hundred and eijhty-two of the nid act i, repealed and tbe fol owlng IUbatituttd therefor: I 182.

(1) The muter aball ailJll .and gil'e to a aeaman dliacharged from hi.
,hlp, either on hia discharge or on payment of hi.

wlllea, a certi ficate of hia discharge iD a cOlltin-uou.

ditcharle book iD • form approl'ed by the mini_er, or any form afproved by the proper authority in that part 0 Hia Maje&ty'l dominiOIll in which the ahip i' regiatered.

speciCying t.he feried of his aenice and the time and place 0 bis dia charge, but Ilot containing any atatement.

u to t.he quality oC hia work unIe.

re hia wage.

01' quested by the leaman.

Progress reported.

At.


si:l o'clock the bouse took recess.

After Recess The house resumed at eight o'dock.

THE BUDGET ANNUAL FINANCIAL STATEMENT 0 .. THIi MINISTEB 0" I'1NANCII Hon.

DOUGLAS ABBOTT (Minister of Finance) Dloyed: That Mr. Speaker do now leal'e the chair Cor the house to go into committee oC way.

aDd means.

He Mid: Mr. Speaker, in the budget speech last year I was able to aay that.

the CirCUDl stances of the time were much more favour able than in any of the immediately preceding years.
Thia year I can again report, ao far as [Mr.

Hazen.]

Canada is concerned, an unprecedented rate oC economic activity and a new record of progreS'!

in our government accounts.

But no minister of finance can survey world events of the last.

twelve months without thinking more in terms of problems and difficulties than oC progresa and achievement.
From the time oC Stalingrad and EI Alamein until last year the western world bad seen its fortunes improve year after year, first in war and then in recon struction.

Last year brought a cheek to this advance and for many countries a Berles of troubles and' misfortunes.

AB between nations, striCe and bickering increased and once more the threat to political security became a real one.
There is atill cause for optimism, both in regard to the great political i911ues and in economic and financial affairs, but it rouat be an optimism tempered with a realistic appre ciation of the formidable difficulties that must be overcome if we are to achieve peace and proaperity for the world· and for Canada.

ita political aspects I It baa clearly been this international back ground that has exerted the dominant influ cnce on our own affairs during the past year.

Of need not speak tonight.


They have been on the tongues and in the heartB oC us all in the last year and we have recently had in this house a masterly exposition of their bearing upon Canada's external relatioWl by my colleague, the Secre In the tary of State for E:ltemal Affairs.

economic field, adverse weather in western Europe of an extreme surp8ll8ing the records following upon the losses and of centuries, de~truction of war, greatly.

intensified troublell oC a more persistent nature.


Britain tried to re--eetablish the converti without aucce/l/l bility of the pound and to forgo discrimination in her import cont.rols.

One country after another was forced to reduce consumption and restrict imports in order to conserve rapidly dwindling exchange resources.
This gathering crisis in international finance and trade led not only to the recasting oC reconstruction plana on less ambitious Jines but also to an intensive re-examination of the economic position and prospects of Europe and ultimately to the formulation and enactment oC the Marshall is now called the European plan, or, as it recovery program.
The enactment of this large--6cale, well-thought-out, great-hearted approach to the restoration of international economic health represents, in my opinion, a triumph not.

only for the individual statesmen who conceived and moulded it but aOO for the United Statea congress which roee to this risen to otber great occasion as emergencies.
it has MAY 18, 11H8 The Budget-Mr. Abbott other transactioll8 with The impact on Canada of the developing fin:mdal difficulties of countries in western Europe snd elsewhere waa reflected in our own exchange diffieu.lties.

We faced limita tion on our salel abroad for cu"ency which we could use in the United Statu, and we had to sell too much of our production on credit.
becatl8e of our high level of Meanwhile, economic activity and prosperity, our imports ~'ere going up hy leape and bounds, both in quantity and in cost.

The surplus in our countries current dwindled and threatened to disappear.

Our !llIles on credit continued in many cases bec3uae of commitments alre&dy made.

The consequen~s, of cout'Se, are too familiar to thi~ house.

Our exchange reserves were reduced to dangerously low levels.
We were foreed to impose distasteful reatrictioll8 on our imports of both consumer gooda and capital goods.

We found it prudent to arrange for a credit froro the Export-Import bank of Washington.

We have tried to restrict our domestic COll8umption, particularly of relatively less necessary articles which have a. high United States dollar content.

We have taken other positive measures to increase our e:lports.
In thelie and other ways we have endeavoured to r~reate that surplus in our b:l.lance of paymenta which moat he the baaia for any re-eatabli.shment of our international p~ition.

now all From our point of view, the operation of the European r(l(:overy program will be of real importance.
It will be impOrtant, fit'St, in its effects in strp.ngthening thoar countriee which have been and wi.1I in future remain essential mal'kets for our products and, aeeondly, in making it possible for us to sell our e:lports to these countriea now for United States dollars whieh we can me to pay for our own importa from the United States.

These are clearly great I wish to emphasize that advant.ages, but in itself solve our ex the program will not It should help to aliSure us change problem.
much larger cash markets for our exports than would otherwi$e be available but we mwt m:lke for export by iucreasi.o.g production, by bei.o.g sparing in the use of imports and by holding our domestic consumption in reasonable ch~k.

We mllst re-create lind make as large lUI possible the current have referred.

The magnitude of that surplus will determine two tbings: to which we can repleni&b.
our e:lchange reserves and, second, can continue to play our part in providing assist ance to the European nations which must be put back on their feet.

goods available to which' we to which I the extent the extent account surplus first, the 5St9-257 Clearly our own e:rchange difficultiea will severely limit our capacity to provide BUch aasial&nce, but I think it would be the deaire of this hoWle and of the Canadian people to con ti.o.ue to play our part in this field to the e:ltent of our capacity.
Our e:ICbnp n=eenea aN still abnormally low.

At the end of March they were 160'1 million, of which 160 million repreaented drawinp upon the E:rport-Import bank loan.

At the end of April they were I!l68 includin« sao million dtawinp upon million, the loan.

These totals, however, refted.ed.

not only the use of that loan but also the effect of certain transactions of a special or non· recurring character.
Nevertheletll!, makinl due allowances for any abnorm&l factors on both the favourable and unfavourable aides, I think we have a right to be iratified with the first the emel'lency six months' operations of program we put into effect last fall.
We have stopped the abrupt decline in our e:lchanae reserves and have started to rebuild them; 11" have reduced our importa from hard currency areas and obtained an increuin« proportion of our needed supplies from other aources, and we have had an encouraging increue in our exporta to the dollar area u well as to the world lUI a whole.

But our cash reaerve.

must still be increased substantially before we can regard our l':Ichange position lUI satisfac tory.
We can neither be too hasty in reluiq the irritating controls we have had to impose nor too optimistic in appraising our capacity to give further a68istance to world recovery.

Our domestic economy haa continued to boom, despite the international &boch that WI!

have received and despite the inroalh we have made during the last three years into our backlog of demands accumulated during the war.

The pace of economic activity has been such as to strain our resources.
Shortage of labour in certain sectors of the economy hu been acute, and despite the substantial expan sion of our industria.!

capacity the shortages of certain categorie6 of materials and/or prod ucts have been by no means eliminated.

Our increll6Cd but only national production hlUl moderately 80 on an over-all blUlia when account is taken of the effect of adve~ weather In any case, on crop production last year.
once full employment i.e reached as it was lut year, any e:lpansion in total output ill bound to be limited and gradual.

Our groes national production in llMo7 e:ICeeded S13 billion, up by 13 per oent over the previous year, but moet of Ihis increase was due to the riae in prices and wage rates.

When one enmines the figures of national income, production and eJ:penditure in 1947, which are set forth in the white paper servin, as an appendix to this budget-and I hope it.
The BudiJet-Mr. Abbott OOMMOKS improved form will pron more helpful to hOD.

membere--it ill notable tbt ill. UK7 upendi.

ttlreI'by IOvernmeaUi 011.

Iooda aDd ..-vies were redu«d, deepite the increue ill. prices.

This reductioD, which wu cOD1iDed to expendi~ 'urel of &be dominion.

IOnrDDlent.

arDee, of CDWM, from the virtual diaappearance over the put year of our purely ...ar and demobili lation activities.

The Ja~ total increue in doUar fi%PeD.ditun!l in UK?
over previOUl yean .... by aouumen, but the proportionate inCf1!&le ...... anaU and when allowance ill made the iDere&Ie in the for chal1pl volume of COuumptiOD ..... in fact.

on only a moderate lC&le.

in prices, iI It.

The moet Itrikina: feature of the national upenditure lui.

year abd no... iI the hi&b level of capital u:peDditure on new conatruetioD, inetu.trial plant and equipment, public utility projeeta and re:eidential howinc.
this, topther with the hicb level of domeltic lIOn· NIDption and of uporta, ...hich ill keepiDa: us 80 fully employed and, indeed, Iltrainiog our economic capacity.

It ill aI80 one of the main forces behind our hup volume of importa.

The nry larp increMe in t.beee uptnwturs between INft and IM7, both in dollan and terms, broucht the totals up to levela in rMl far beyond anytbiq ever before UJ)erieneed or expected.
A llUTVey of intentioDS, recently made by the department of reeoDBtruction, abo.... that further IUbrtantial increuel in Incb eJ:peDditures are anticipated for 1948, but these increuetl are Jarply accounted for by bi&her CO!ItI.
There ill lOme evidence here and there of industrW es:penditures beiDa: restricted now or deferred beeaOM of hi&her c0et8, but the backlog, particularly of utility apenditAlres and howing demandl, is very la.rl\:e and it eeems unlikely that there will be any &erioue faUina:-oft' in this atl'&tesic item of national expenditure despite • wholly understandable reluctance on· the part of bwineas to pay pre8eot bish coets.
This government has, of couree, been deliberately reatricting its own expenditures on eoutruetion and equipment during the lut two years, partly beea.Ulle of the high coet of !lUch work under ClUT'eDt con ditiona but more fund&mentally becauae of its desire to keep exeeMive natioul ezpenditure within haunda &ad to defer wberever poesible the the eoutruction of uteful projects until time when private upenditure ...iII be lower and additionAl IOvernmeJ1t work will help to m&intaoin employmeJIt aDd income.
To most or UI, the n.e in pricel bu been the immediate p~ fact of OW' economic life.

There 11 DO need.

to IC into IlatiItiCl ud detai1I here.

The main index fi.IurM are eet forth in the white paper.

Oar pm.

han 101M np [Mr.

Abbott.)

the total quite aubflt.a.ntiaUy in the paat fifl.een mODthi.

They are no... cloeer to Ameriea.n levq than previousJy, but they .uu lac behind in MrmI iDcreue over pre-...ar 1I:gurn.

of In mOllt oountrie.


prioea have continued to advance aubetantially and the upward .up of our price!

has been.

part of a worldwide movement exerting ita influence on ua throuch In CanadA, moreover, imports aDd export&.

the pr0eet8 of removin.

IUbcidiea and price ceilinp hu now been nearly completed, leav~ ing prices free to adjuat tbem.eelves to eoat and market eonwtioDB once apio.
For theR and other reuona, Canadian prieM han moved up much more c10aely in line with ...orld prices for importa and upor1a, an adju..etment that ...e had to face a" .ame 8tap aDd which b.. been made much euier by tbe return of our dolIa.r to parity with the United State.

dollar.

These adjuslmente have accounted for a IUbstantial pari of the inereue in our priUlll aince the I.ut budaet.
Ho...ever, part of this inereue is &lao due to the fad that the ac:grepte volume of expenditure in Canada ill pre.ina: Upon our limited aupplies of re aoUree8 aDd manpower.

AJ couumen, ...e are bidding ~rJy for a limited aupply of 1OOda, throwing into the auction not only meet of our current incomes but aleo part of our put savings and additional funch obtained by iMtaIment credit.
AJ producen, we are spend· ing a record.btftking volume of funda in the coD!truction, repair and equipment of iDdu.. trial plants, commercial establishmenta, pub lic utilitietl and honaine, bidding apinat eacb other for a biehly limited supply of coutme tion labour and m&teria.la.

An inevitable retUlt of thi.s endeavour to do too much too quickly iI the peraiAeD.t upw&rd pf'elleUJ'e OlIo the price level.
Wbetber undue advantage ie heine taken of thie condition of eqt:r demand and Dort IUpply and ...hether there are otber factors in the situation are que.. tiona which have been under prolonpd.

investi~ galion by a special committee of \hie honae.

Tbe policy of the government haa been to return to a free price eyatem and to moderate the inevitAble increuel in pricee at this time by whatever fiaeal and other methode are poi sible under lIUch a IIYItem.
Neitber thie IQV ernment nor this parliament haa either the political mandate or tbe connitutional power to maintain indefinitely in peacetime a etrait.

jacket of controls over pricM.

productioD an.1 dilltribution.

Our ...hole eeonomy hu been orpniJed, to operate On a price wi.

through private .incentivee and private initiatives, not by centralised direction.

the great majority of Ce.n.adiana want it to work that way, want it to work by free aod open competition.
and not by IOvernmeot direet.ion I believe that MAY 18, 1948 4.057 7'llc Budact-.1h'.

Abbott on lhe one hand nor on the other hand by direction of the irresponsible power of monop.. olies, cartels and other org:loized groups.

It.

would have been more comfortable hn.d we been ~ble to return to :I. free price system under Seneral condition!

of st,bilil~, ""'IUl"..d importl!'.

Fate did production and abundant not afford u., that opportunity.
We cannot now relain onr·sll controls Ind subsidies in the hope that conditions will llOOn ~turn to normal.

We have consequently removed con· trois on all hut a very few items where short.

ages are 60 acute lhat no reasonable increase in pricc could either correct them, on the one haad, or bring about a better distribution on the other.

We have.

of course.

been forced, into emergency control of against our will, imports and of a few prices where import restrictions ha ve produced temporary shorl· ages.
but this exceptional n{'ce~sity does not alter or vitiate the basic policy which I ha\'e described.

Apart from residual measures of price con· Irol ond the operation of the Combines Inves- tigation Act, the government.

has actively countered inflationary pressure by its budget.

It has also done ary and financial policies.

infta· what a go\'ernment could do to meet tionary preeute by the most fundamenlal method, that is, by stimulating increased pro duction to 118tisfy excessive demands.
Our budget policy has been clear and f'xplicit.

We h,we striven to bring expendi.

turu dOll'n :1nd 10 keep them down.

War activitiCl!l have been curtailed as rapidly as possible.

Economy has been observed in the expenditures we have had to make.

We ha\'e deferred wherever possible expenditures on construction, new equipment and new projects in general.
Some we have had to undertake because of the urgenry of t.he need or, as in the ca!C of expanded research facilities, be· cause of the value of the retufllll we f:xpect to get in Ihe future; but the government flnd tile treasury hllve !>Cen tough in approving expendi tures, particularly for new projects, for equip.

ment Dnd for construction.

We have been more N'strictive than would probably be wise in normal times, Dnd more restrictive, I belie\"f!, than private industry has been.
On the taxation side, our policy has been to reduce our wes wbere they were impeding work and production, but othenriae to keep them as high as is reuonabl)O practicable in the circumt!tances, in order to produce a surplus that could be used to make the loan!

and in\'Cstmmt.

we are requind to make and to reduce the huge debt lI"e neceaarily accumulated during the war.
Some tal: reduc· tions have been made, of course, to encour&p that 5849-2571 the expansion of production, and some because the burden of income tn on individuals which had to be imposed in wartime wu greater than that which could ressonllbly be borne in l.eacetime, howc\'er urgent the financial or economic necessity.. At the termination of our wartime tu: agreements with the provinces, we were obligated to reduce our rate of corpora· tion tax, and consideration for the revenue requirements of the provinces led U$ also to gi"e up some of our wartime tues. B~' and large, howe\'er, the taxation aspects of our the expenditure :15 well as .policy, budget :l.spects, hue be('n primaril)' direded to coun· tering the inflationary pressures threatening Canada in recent )·eara.
The results of our budgetary policy are e\'ident in the figures.

Our total expenditures of aU kinds were reduced from $5,136 million in 1945-46 to 12,634 million in 1946-47, and there was a further substantial reduction last.

)'ear to a total or $2,199 million.


Our revenues, on the other hand, declined only from 53,013 million in 1945.46 to 13,007 million in 19-16-47, and the further decline la.st year was very moderate, considering the substanti3.1 reduc tions in tax rate" beeause the total for the year was no 1e..'"8 than 12,869 million.

From this it is evident that we had & surplus of reveoue oyer expenditure.

in the DCilounting scaM!.


of 1670 million in 1947.....8, following one of 1373 million in 194.6-470 This !Urplus-eoosiderably larger than our lsrgest pre-war total budget and large eaough to gladden the heart of any minister of finan(!

(!-would not be justified All good policy were it Dot for the need to check inflationary forces at this time and to redeem our debt fl.S quickly as we CAn under ciroom l':laaces u favourable as they have been.
There t\'ilI never be a better time to reduce the burden of our national debt.

We can do it now t\'ithout hardship and thereby get ourselves in better position to bear the extra.

burdens we may havc to 3.!!

!ume when our national income becomes less buoyant or other untoward developments occur.
In order to judge the effects of our budget policy upon the income and expenditure oC the nation, we must make a number of adjust ments and take into account our loana and in\'estmenta, our borrowings and repayment.. First, we must correet our surplus of revenue O\'er expenditure for those items included on both aides of the accounts that are essentially bookkeeping entries and not actual pay ments; for eIample, the amount set sside in the reserve for 10M OD.
realization of our active ISFets, which is shown as an expenditure but which does not repr8Cn~ any actual payment of cash.

These adjustments chanle our account ing surplus of 1670 million to a cash surplWl of .... TM JJudget--Mr. Abbott COMMONS 1727 million.

Then we must add the CMh we have received from IOUrces other th&D.

revenue, DUlinly repaymentl of d!

!bta and .mountll receiv~ in annwty and penaion funds.

Adding theee itema to our calIh IIlI'plUl brinp our total up to 11,181 miIliOD.
The largest item of tbis nature i, the repayment by the foreign exehanle control board of 1220 million of advances formerly mad!!

by the sovernment to to aequire uchanp ~rYl!l', and enable it which are repaid with the Canadian doUafll theM reserves are liquidated.

obtained whcD.

Nonnally we do not make public the amount of our reee"et or fUeb fi«ul"l!l .. theee until much more time bas paseed, beeauet tbis would usi!t and encourace iptCU.Lion.
However, bet-awe parliament requirtd futl and up-to dale information in order to dul intelli&mU,.

with the f'mergt'ncy eJ:chaDle mUNl'ft, I ma.de information cUfTentJy anilable duriq the lUI.

few monLhe.

1 have therefore broucht tbe information up to date but I propose to revert hereafter t.o our normal poliey.

e&DDot, A moment ago I lPOke of the total of our cub llUrplUl plua the amoUllta of .cub reeeiTed from 10&0 repa)"lDenta and inereues in certi..in to 11,181 million.

nu.

funds .

.
nu.

funds .

.

.mauntinl to«ether with our caah balanees OD amount hand at the besinniac of tbe year represented the total cuh funds available to tbe IOVer11 mf'nt during the year, after taking care of the YMr'a bud«etary eJ:peDditures.

A aubl theee fuDda wu uaed to tantia!

portion of make loms and in...estmenll whicb pn rise to income and eJ:penditures in Canada and therefore, be coD8idered as which anti-inflationary.
The principal itemt of this character were our loane: to the United King, dom and other countriee for use in purcbuing Canadian eJ:portll, whicb amounted in all to .

14.00 million.

Leee important itema having tbl!

same effect were portione: of the advances the Veterans Land Act and to crown for cGmp!lnie!, and the paymenla made out of the held ior to draw an enct U:fRRA.

line, hut the total of thetlt paymenta likely to rive riae to income or directly and M!rvicHl would be ltll than aeoo million.
The this larse euh fund--over a remainder of in fac1-".. for billion dollars, current upendit~ nor for loana and invert· menta but to reduce outatandiug lovemment debt in the banda of -the public and the baob.

in which this wu effected are worth notinl.

The lUlst pari of the ,otal, approJ:imately 1636 million, was used to redeem l<7Vemment M!curitiee.

ThUi .... in financed by Iddition to \bose redemptioD.
it would appear that account which we to upenditure It il difficult The waYI on gooda uaed not deposit (Mr.

Abbott.]

the iallue of ne.. securitiee.

A furtber Iman amount of funds ..u made available in a similar but indireet way to lend money to the Canadian National Railway, to ~na.ble tbem to redeem their securitiea.

Still another portion of these fundi accompliabed the ume purpoae in being paid over for purchaae.

01 our own atrorities before their maturity.


This '\11'41 done in the operation of the .ecuritiet investment account, wbich is the account u* for the inv!Stment in out own obligationa of IlU"Pha lunda on band.

Lut year our Itcurit]'" increaaed by 14010 boldinp on thia aceou.nt million, nearly all much .. our net redemptioo of debt.

Thetle IeCUrities may be beld .. tempor:uy invl!

@tmentaof aurplUl cuh balancM or until the eecuritiea mature or are cancelled but their purchue for purpose.

of tbi!
of tbi!

aeeount h.u the same erODomic effect .. the retirement of debt.

recentl,· The fiscal po!ir,· and action which I b....e de8Cribed ha\'e been accompanied by a ctMa tion of the wartime increaae in the monetary aupply and a tilhteninl in the field of credit.

The cub reserves of the chartered baw were al~tly 101fer in 11M?

thaD they bad bem in IMS---when the)' had reached their peak.
The suppl)' of acth'e money-all indicated more accun.tely than before by the new ItatistieaJ tbe Bank of aeriel compiled by Canada-reached it.

peak in October, 1lM&, just o,'er $I billion and b.. remained at during the put yf'llf at a level e1ichtly below that figure.

Any increaae which hu taken place in the total Canadian dep<l6iu of the chartered banka aiDce October, 1M3, haa been in the inactive aavinp deposita beld by tbr public primarily as inveatment of their uvinga.
It Wll$ possible to have thia stability in our active money 8upply becauae the government WAS able to reduce itl outatanding aeeuritis held by the banlriDg IIlYltem and 10 larJely offset increue which look place in chartered banks' kiana I will not and non.government endeavour here to ';0 intA) th, for important been explained and emphaaized by the ,;overnor thl!

Bank of Canada in bia lut lUUlual of report.

the aublltandal the l"ffect of investmenta.

the detaila; featurn have 1947 Members of thi!


bouae and others will allo bave noted that the gtlvernment and the Bank of Canada permitted market folUlll to brin,; about acme inereue in the yield on sovernment "l'biII .eeurities durin,; inere&lle in interest ratel at thia Lime iI DOt expected to have any peat effect in relrtrainiDc level of capital expenditure that.• \he • !

'CUte on nnder presentc~~aDd.

~hicb .ia contributing towards an mBati01:l&lT .tua,.. the paat few monUw.
MAY 18, 1948 The Budllct-.11r.

Abbott '059 tion in Canada, but ~uch effect as it may have wil-l be in the right direction.

However, I do not believe that any reasonable increase in ratell would act as a. serious brake interest upon bu~iness expenditures under the circum stanceiJ of today nor would it serve effectively to persuade consumers to ~end less and lllIve more of their income, Perhaps I might amplify this statement,.
Looking at the rupply side of the market for funds, I cannot attach great importaoce to the influence of interest rates 00 the volume of It ~ difficult to savings by the general public, believe that the mass of small ~aver8 are likely to reduce their living expenditures under cur rent conditions, merely beC3.use they can obtain a highl;r interest rate on the money they would It is possible, of course, that higher rates save, would induce the public to increase its pur cha5Cl!
of government bonds but thia would not be anti-inflationary unle~s they were doing 80 by increasing their current lllIvings.

Otherwi~e it would simply represent a switch from idle sa\·ings depo~its 10 bonds and h:l\·e no national economic ('ffeet.

An:L!

)·sis of the dem:and side of the m3.rket leads me to the condu.sioD that no reasonable increase in interest rates is likely to affect materially the action of the industrial borrower.
In that fielJ demand is so intense that it would take a really ~ubo;t:lnti3.1 change in interest fates to dampen his enthusiasm and make him defer his capital project.

But a rise in r:ltea sufficicnt to proouee the~e results wouid cau~e 50 dmstie a fall io the prices of boads aod such chaotic ("onditions that I doubt whether .

'Iny responsible pereon would recommend it as a deliberate policy, What we need is a slowing .
'I ~lIdden cessation, of the capital down, not dc\·elopment which has been takiD~ place aL a pace which hflll been straining our reSOUf("es.

Without any further diS("u~sion of the econ omic b.1ckgruund.

I propose now to note briefly the lllnin points roncerning our expendilurca and 1'(,n:llue.~ in the past year and then to con~ider what this ucw lhe prospects :\re for fiscal year 3.nd whnt pOlieies and measures should he adopted, As i..,s now the cu:::tom, det.
'liled inform)tion concerning our expenditUl'CS, revenues, assets, liabilitica and m.'lin financial operatioDs for the last fiscal year are included in the while J'3.per constitUiing an appendix to the budgct, and I ?ould suggest lhnt han.

members and others cxamine this at their lei5ure-if the ruse of that this is applicnble to hon.

membefS of iernl hou~{>.


The ligures are, of course, preliminary, as it takcs aome time to clo:e the al'connts for an organiution as \·ast ond \·ol'ird as the (o,·ernmcnt of Canndn.

timea such Wi As I have already slated, our total expendi tur('9 amounted during the ti!ICaJ year 1947-48 to S2,199 million and our total revenuCll to 12,869 nlillion, leaving Ua with a surplua now eati moted 3.t 1670 million.
This~, of COUI'lle, • large surplua-in absolute termll and in rela tion to the magnitude of our revenues and It is larger than we anticipated expenditures.

Illst year, because our re\'enUell turned out to be \·el·~· much higher than we expected.

Our re\·enues are sensitive to increases in prices and incomes and in expenditure on leS!!
eSllen tial or luxury goods and they increase more than in proportion to the rise in incomea and prices at In forecL'ltinc the time of the -last budget, our revenuea :at we had, of course, assumed a rise in prices and iucomea, but we bad to be reuonably con servative in doing so.

Any minister of finance, should and would, I think, tend 10 err on the ~(jfe side.

Our foreeaat proved to be mucb too cQosen·ative; prices, wages, profitll and expen dilUreS, all increased much more than we had anticipated.
As a consequence, our re,'enUe8 from the aales tax, income tax, and the taxes on corporste pr06ta weffl an ijUbsl:mtially higher tban we had counted on in the budget.

The same was true of customs rt:l"enue, because both the volume nnd the priceg of importa were much higher than we h:\d expected a year ago.

It was also tl'lle of special receipts and credits.

the personal these.
the personal these.

I h:'lI"e already explained the important role which this large surplus has had in helping to hold in check the inflationary forces which bave threatened us in the past year.

It is thelle n~IY foree._, and the ext{'nl to \\'hich they have prevailed, that have caused the surplus to be III br:;e :IS it i~.

Had we not geared our tax system 10 produce such a surplus in these conditions, prices ,,·ollld In'l\'e risen mOI·e rapidly than they ]U'tually did.
the :amount Expenditures ha\·e tU!

'Dl'd out to be slightly higher lhHn I forecast a year ago, but mainly Ul'l'UUSe I hal·e come to the conclusion thnt to be added to our this year I·uwr\·e for pOS8ible 1000"s on ultimate realiza tion of Olll' aetil·e assets should be 175 million than lhe umount of 825 mHlion, pro r:l;lll~r \"ided ellCh ~·rar for the previous !len'n yelu'!!.
the This will b(' sufficient dl<lrgca whkh have bef:n mllde to this re..erve riuring the pll.,t two years lind will restore the l"t'sen·e to a lel·el which I believe will be lTlon"l in keeping with the magnitude of our 'l~~eIS ,m,1 the proportion of them I\·hich con ~isls of loan:; to orerseas countries.

rou"hly to offset Apart tolorl irom this item, Olll' hudget forecaat (\f to be very l'xpcnditure lumed Ollt dose to Ihe mark.
Total t:'xpenditures, exclud illg th" S,5 million :lrprOl'rintion to the gen- .... T~ BudQet-Mr, Abbott OOMMONS of -eraJ reaerve, amounted to 12,~ mlJiOQ apinat 'a b~t foreeMt of 12,100 million, hpendi~ t'l:l.ree in many Clll8l!II'Were as'ected by the n.e -of priees and income.
; just u revenuel were .for enmple, the bi,her leDeral level of waees and .1EL1UfJ levels of civil required b.igher _rv~ l8J.uicll, and the c:oet of both materials ,and conatruetion cOnliderabiy ezeeeded the h.·\'els upon which the Mtimat.el were baeed, On the other hand; eapendituree were held in ..eHek in certaira euelJ by the diftieulty in F~ tiDe tabour, materials and even contraetorl for construction projeetll, .

,Aa compared with the previoUi fear, the _ief featuf'Qll in our e:rpendituree lMt.
yMr in the war ad .trere the great reductiolUl utiOllaI e:llpendituree :tiemobilisatioD.

,delence, and in eJCpenditme.

on termination aM liquidation 01 war oontncll, OD.

COlJt of living aubeidiee and on ....teraDl' benefi1B, ·There were, on the other hand, in~ in paymente to the provincee and in eIpeDdituree :00 healih and wellaTe, public "orb and traDa port faeilities, The detaila are !let forth clearly .in the white paper and the Ialient pointe An!!
.lUmmari-ed, in the tnt of that document, so I will not take the time of the houl5e to recapitu~ It might, however, be appro ·late them bere, priate i.o make the comment that lut year'.

expenditures .til included fairly lIllbtItantial tft~&-particularI1 on mbndiee, foreip.

relief, are 'and benefits, veteran!'

eMentially temporary, poet-war reconvereion requiremenUi: which llbould Iarply diMppear in time, though they may, of COUT1le, be replaced by other itema, In di&culil!lins: the effect of Iaet.
year'.

cub aarplus UpOD the economic situation, I have alread}' 1P0ken of the main features of our d.illbursementl by way of loanl, advancel and invetltmp.nts, and ] will not endeavour to repeat any of the comments here, The details are set forth in the white paper.

Our borrow ing operatioIll!l during the IllSt fuJcal· year were not such &I to call for much in tbe way of special comment.
I have referred alrHdy to the ahort-term Joan, arranged with the Export Import bank of Washiq-ton, about which I pve dewla earlier thiI ae.ion in the debate on our emergency es:chanp le8ielation, The only securities sold to the general public dur inC the )'e&r were Canada IAviop bonda which were on Mle throUlhout the year, a new and second series being offered in October last, Gr08S wes during the liscal year were Leaderllhip on the part of S309 million, employers was of great importance, and more employerll than ever expretl8l!d the belief that it was in their interest to lUlIiat in the carry ing Ollt of a 8ucte88ful canvlUll of employees, houaing-that During and mnee the iotelllive ..lee period, from many elnployere bave telItified repbrbl to the value of the apecial featuree of the Canada .vinp bond and of the payroll a.y inp: plan in promotq ..tiafaetory employee relaliou, rw.bility in 1amily r8lOUrees and The net eontiDuity of purchasing power.
amount of Canada !l&vinp bonda outstandilll roee from M83 million at March 31, lIM7, to 1665 million at March 31, INS, Figur8ll of our total iutlded debt and ita oomposition 1M of Mareh 31 Jut are pven io the appendis:, and ] need not weary you with that detail here nor, I think, with figurea of our debt redemptioD8 during the year, Our net debt, of COUT1le, declined during the year by the amount of our lurplUll, and thiB reduced to '1~,378 million.
the toW &I of March al AlthOUCh LhiA repreeentl .. decline of 'l,<K3 million from' the peak of t"o yeanJ aco, it ill Itill a very high figure and .. reminder of the revenue!

and need "e face to m&nap our expenditurea in such a way &I to tbrow off the muimum praeticable aurplUICs under such prosperoUi conditiOn!

as we enjoy ~ay.
as we enjoy ~ay.

The aver8le interest payable on our funded debt outat.andinc aa of thil date W&8 2'66 per cent, compared with 2'65 per cent a year earlier, 1'OUCJr.9T POR 1948-4.9 llEFOB& TAX CIIAN~ lIB last year, particularly as The total es:penditurell provided for in the main estimates this year are appros:imatel)' $1,985 million.
Actual es:pendituree under individual votea normally fall at le88t a little short of the estimates, heca.uae the vote itself i, the outaide limit rather than the beIlt fore ust of probable expenditures, This year, how Her, with increaeed prioell and salariell, with the dcnlopment of pos~wa.r departmental recruiting results programs, and with beUer .

in the armed sen'ices, I would not es:pect the margin between "oles and expenditures to be a8 great the treasury board.
restricted severely the intro duction of new projects or of eJ:panded pro gram.

in KTeening the estimates, There will also be substantial supplementary eetimate.s later thill year, thougb I do not expect quite lJUch large supplementary e8timates &Dd fur ther supplementary estims.tes tbis year a8 we had last year.
The major inerealles to be covered by supplementary estimates tha.t a.re now known are additional s.mounttl for veter ans allowances and diMbility pension8 and for freight All8ista.nce on feed grains beyond July 31.
There is a considerable variety of amaller items to be covered all well, In addition, there are some new or increased statutory expenditures, including, for example, the gold MAY 18, 1948 The Budget-Mr. Abbott '061 While it that our I would estimate mining assistance payments and certain health grants announced last week.
Allowing for the same provision as last year for our general reserve against IOSBes on the ultimate rea.liza~ tion of active assets, and apart from any expenditure arising from new developments in total policy, expenditures in this new fiscal year will be last year, notwith~ very close to those of standing the increase in prices.

I am, there· fore, putting down a forecast of $2,175 million.
ill not possible or appropriate at this stage to make any allowance for major developments in policy not yet decided upon by the government, I feel we cannot afford to overlook the possibility that developing c"cnts in the international field may sooner later make it necessary to increase our or expenditures on national defence.

The main essentials of the international situation and of the defence problem are already publicly known.
As yet, the situation, despite ita threatening appearance, has not led the gov ernment to believe that an immediate expan· ~ion in our defence activities now is necessary.

Events are marching swiftly, however, and we must be prepared to change our program on short notice.

While we would not be justified in forecasting higher expenditures this year on this basis, I think we must bear these circum stances in mind later in considering our In policy.

I turn now to the revenue side of our accounts.


Assuming no change in existinc tax laws, we now estimate that our revenues in this fiscal In making year will amount to $2,724 million.

this forecast, we assume 1I0me small further increases in wages and other incomes and some prices, a small increase in our national pro~ :iuction, normal crops, and no serious industrial disputes or other setbacks to production and income.

These are, I would say, eonserva~ tively optimistic forecasts.
Prices, wages and profits may increase much more if inflationary forces pre\'ail.

Good crops would increase our rcal production and our revenues abm'e what I have llssumed and forecast.

On the other hand, serious difficulties in our export marketll, poor crops, prolonged stoppages of produc tion or an abrupt decline in capital expendi.

reduce lures of Canadian business might incomes and our tax basc and make our ellti· mates appear too optimistic.
We have made these forecasts carefully, fully conscious that our lMt year's estimates proved unduly con· servative.

We belie\'e them to be lair and honest figures, gi\'en the assumptions I hav.e made.

With the COIlSCllt of the house, I shall place this point a summary table on Hansard at showing the forecast this fiscal year of for revenuea from' each.

main source, compared with the actual receipts lallt year.
Foree8.llt of Revenuetl Forecaat FilCal year 194849 Actual Fiacal yellr 1947-48 (17~ limiDary) (Millions of DoHan) Cu,toms dutie8 Exeise dutiet Salu tax (net) Other excite taxe.

Income tax .

Personal .

Corporate Exceu profit.

t&:l: .

Interest and dividends, etc.

SucCe1lllion dutie•........... .

:\Ii.eellaneou.

.

Total tax revenue .

~on-tax revenue ....•...... Total ordinary revenue ... receipt.

and credit.

Special 250 200 395 270 675 ".


• 60 38 32 2,444 1" 2,634 90 Grand total revenue •.... 2,724 293 197 372 268 660 227 36 31 '" , ".

2.630 23.

2,869 2,452 receipts aggregate It will be Doted from this table that we anticipate in general relatively little change in from taxes, 12,444 the million against $2,452 million, but substantial changes in the receipts from individual sources of revenue.

Excise duties are expected to remnin stable at about S200 million.
Customa level duties last year reflected the abnormal of imports particularly in the months just prior to the imposition of our import restric tions.

As a result of these restrictions and of the Geneva agree lowering of tariffs under ments, customs duties this year are being estimated at $250 million against S293 million last year.
Taking into account the partially the 10S8 of offsetting effects of higher prices, certain excise taxes and new or increased taxes, we estimate that the total yield of excise taxes, including the sales tax will exceed that of last year by 825 million.

In the case of persona.l income taxes we estimate a moderate increase, the effect of incre3sing incomes not being fully offset by the fact tbat the reductions in rates made in last year's budget will be effective for the full year.
We are also estimating that there will only be a modest decrease in the combined yield of corporation and excess the excess profits tax ceased to profits taxes; apply to profita earned after January 1, 1948, but the consequent decline in this tax should - .coMMOlilI .. larply _ .

by lb...... yiold of "" WiJ:larJ' corporat.ioo lax ••e to taer-d .rninp. "

In reprd to DPD....t.\X rev~ue.

I aaticipat.e .. awderate mer- due to Lhe in~ return on jav_tln.t.

and .eNOe inereue ia poIt office recei~.


Bowever, tpeCw receipt.

aDd.

cre4itA, "'iell Include reeeipta from -.lei of war _ta, mUDd.

of previola yeare' expendiWreI, aDd nrioua iLema: pra"rioualy of .. bookbepiDa ........, .nt .Upecled to deeliM Will.

1239 ~ 1aet year to .ppro~tely'too m,illion duriDI the "CWTeat year.

With aaticipated u:pcd!itvel of .,175 ID.illiOD find 1"InlWllll of a,m millio.

; it would fIPI*1 like!

;j that in dle u-eaee ol Uy .IP ~ we ihould bave a budpt&ly 1UrP)~.of .

.
.

millioa in .

.

eun-t a-J year.

,BoW II"" before eominc teo the tax ohupI .tMida I all recommend, t -.Qh to.

ref... &o -wn ~onal ~tiOlll ,in our IOvemment ~....~ are ftt;nmeIy imporiaDt from the 8COnom.ic ItaDdpoiDt .d '·impttrt.aD.t -&180 ill t.ppraiUc tbe IIipifiCUlce of this p~ ti,.. IUlPNI.

'.

, ", (eM' ·the .""

YMt l baVe ..1reidy DOtei:l. 1he eurp1Ulla ill. termt of ~\.Uree in lbe a.ccounUnI' eenee ..d doei!l not inclUde our t.ne, 'advalltell ud iD,¥~&I which, i.A fact, Nquirt!
Aiabu.nement in euh u much .. do upaditW'8l, bave in .lD&ny l:lUeI Iimil&r .conomic eft'em" and dif,r ooIy in &i'Vinc rise ~ foil ~~ or claim which we ~o... on our &oob.

iome "of the wport&nt it:em.ll in tbia c:atqory in I])e&king at our oped:UODII lut ye&!'.

It is DOt pi*lJDle to foreGUt.

daeee iteDIII in think I -~·DGI'·with,ar-tMioUracy, but I tall _ely ~ .

.~ ... -.u MV.

lGIIle ro;~y -.tial it... at tlrio 010_ t1Wo rear, as we did lut feu.
ProviliOil it made bl the eBtima.... itJrDdy tabled for 1O&U ADd mvMt.men.te of approsimately 151 m.illiOD, of ';'bich aoo million it for ...noWi purpoiel under the Soldier 8ettlem.ent.

and Veterani Land Acy and apprommately 'I million for 'the eon· Itructioa apelldiwrw of the Ilational harbours _rd.

,We m1llli -aI.o aatieipate lOme lOUUl \0 the c:..aadiu.

Nltiooal RailwaY' and other corporatiou nd uf.erpn.ee, aoverument althoUlb at the prMent time I am unable to forecaet the mapitude of Lhese.

.
.

The important itema in the lut few years bave been those relatinl to the financina; of exports.

In this cu",ent fiscal year, we Iblll Dot have such talle \oan.e: to overseu coun tries .. we did Jut year, but we Ihall bI,n Ibould expect that, 'takinc into ac JOme.

eount.

what we know about our proIpeCtive balance of paymenla (or the current 6sc&l year, "e than bave to WIe an important p&l't of our I [:Mr.

Abbott.]

bwJcet WrpIWl~.


fiD&noe the ue_ of our ex porta- ef ~ and eerTicee OYtIl' our import III JOC)dI Uld Jerrie•• -Thil will iaclude the find to fin CeD·diu dollan which we muM; a~ a:pt:lI'tI to foreip.

c:ountrielll 011. credit and kt b.,- UnltAlld' eat.. ;doJ1aN from ~dian uporterw which we muIt add.

to our re.ervee or '* to pay our deb... abroad.

nu.

u.e of OuacHaa 40Uan to 6Jwlce current iatem.a tiona!

payment.

add.

to income.


and uuonal ~tUNil-eod.oWd be deducted from our tIIrplue in apprailinc the real effect of lovern .

.t, ~ on the iIlllaUonary mtuation.

W. IhoWd dedu.t ia a eimllar way that part 01. our dam.tic lotLlM &Dd -inv-woeeUl which will be UIed on capital expenditurtlll or for oObor.,.....linl ......-.

I Mot"IM.r, a _t.tutial portion of our rHtDDpticm 01. dllbt.

U:I.iI oaminc ,eu will take tbe!fDnla Df,.,.,.,m-.


of refundable tuM, ad we ~ 'Gpeo'_ thet .. 1t.rIe proportion ef: thia puticuJt.r tnle of ·debt repayment will Jive rile to eurreat upeaditurtlll and ca.nttot be reckoud 1IIlti.-inht.iOnary.

The law requires WI to rept.y before Ule eDd of thil fiIcal year the ref\llldab.

portion of tae taIt.

011. the income of Ita, wbieA we have utimated at 1160 lncoma tax.. and IIIS7 million for penonal millioD {or noelll pro&" tuM.
In addition, the ,,"ernment baa decid.d that in _vi... of the iocreuina diftl,~lty of tn.eing Ul.e mov.eDlent.

of tupayers and identifying them, and in order t.o ave the heavy e:qr1Vlg of .. double i..le of cheques tn over ODe million recipfenu, the refuodable tu that w.. collected on that part.

of the personal income of 18« that wu 1IUb- ject le Ift1ch tax, will be repaid at the .me time III the refWlditble lou on 1M3 Wcome,.
'J;'bia .UI mean an addit.i~1 refund of 180 mullan or .. total for the two years combined of .ppro~m&tely 1230 million.

That part of theee refund4ble wee ADd of our lOan!

and iIlve8lmente: that wm be used to finance open di\url!ll will account for & qe pe.rt of our lUI' plua and only the rem&inder will have an iinportant Conae quently, it ie upon this remaioins portion that in considering our weahould concentrate budset policy.

anti-inftationary effect.


BUIl(lft POLleT it From the information I have liven, is clear that if our budget problem were-simply and eolely to 6nd enouch revenue thII,.eAr to meet our expenditures, defined in the narrow ILCcoUl1ting 8e1llle, we could afford to reduce t&:lesby a substantial amount.

But that is not our budget problem, and if we Approached our daifll in such a shortsighted manner, .e .ould betray the relpoDJibility which the people or Canada ha-ve entl'Ulted to d. MAY 18, 1m The Bud~et-MT.
Abbott ....

In tbe first pl~, lI'e must look further iDto the fut-ure thlD Ibis year.

Quite apart from any effort to influence the economic s.ituation, which 1 will consider later, we must.

bear in mind that times are exceptionally good at present, economically and fina.nci.Ur, aDd it would not be prudent to rely on such condi tions continuing indefinitely.
We should no" be preparing for times when marketa and empJoyment are not so favourable-or at leut when we will ba\'e to spend money to suPJ)Ol"t them and to m~t other expenditures that tum up when business turns down.

Our surplusee now are temporary surpluses and will quickly disa.ppear when lI'e have more difficulty in ~eJling our goods abroad IlIId less capital n:penditure by bu!iness in Canada, We shouJd, therefore, be putting away what.

we can now for 11 rainy day.

In our case, we put.


it away oy paying off debt, Thirdly, in8uencing and, Secondly, we face today very great uncer tainties in internationaL affairs and, as I said, we may be confronted at any time op.

short notice with a large increase in expenditures on national defence.

As long as that remaina a po&>ibility, we should have some considerable margin of safety in our revenues to take care of !uch an incre&.
!ie in our expenditures; otherwise, we would have to add to the other disturbing effects af an expanded defence program the camplicatiaDS af l!Udden inftatiaDary expeDdi tures or sudden increases in taxes.

A mbetan tial surplus will help to keep our powder dr')'.

this gnvernment and this parlia ment must accept a coMiderable meuure of re:sponaibility for indeed, directing economic trends in 10 far .. that ran be done within the framework of our pelitical and economic principles.
Were we only a small municipality, unable to influence the mighty economic forces determining the it would still ~ prosperity of our citi.ens, wise for us to look further ahead than thlA year and to put something by at present.

But for those charged with responsibility ot direct· ing the affain of the nation as a whole, tJ.te case is very much stronger.

What we do Will the fortunes of our citiaena and their affect If we diverted our prospective cost of living.
surplus into a reduction of taxes now, it would add hundreds of millions of dollan a year to the already intense demands of Canadians for goods and servicea--but it would add nothing to the \'olume of Canadian goods and services available for ale.

People would try to buy more, but there would not be more to buy.

it resulted in more unless the effort imporla that we cannot afford and which "e would have to abut out somehow or ather.

Prices would be lUre to ri8e.


Some people to get 5M8-258 would profit., but others would lose out to the higher cost of living, The apparent benefita of tax ffiiuction would prove to be a mirage except fortunate groupe which can profit more than they suffer by hiaher prices.

to those strong or There is another upect' to it.


A3 a nation "e are struggling: now to liTe within our meana 10 far .. foreign exchange is concemed, and to get enough reserves to enable ua to be ml8ten ot our own affairs and not dependent on what we can earo from month to month or on help from others.

In thie emergency we are having to use restrictive sovernment con· trola that mnst of ue dislike and that are alien to our whole way of doing business, We wan' to get rid of them a.a BOOn as we can.

If.
If.

we do not, they will not only etay but spread Into other fields.

To get rid of these controls, we mUJIt build up an export surplua-we must try to export more or impert le8ll, or both.

We cannot do that if we are trying at the same time to increase 8ubstantially our purchasetl of goods and services in Canada--because we are already producing flnd aeUing practical1y aU that our resources of labour and material make poMible.
Therefore, it would not be sensible to make any general reduction in our tues now and thereby increase the amount that people and bwinesses can !pend on goods and services.

To alash aur tues now would faslen controls more securely on our national life.

I the government accountll I beLie\'e that all parties in thie parliament and most Canadians abare the view that.

the national budget.

is no longer merely a matter that should be of balanced every twelve montha tID some finan cial rule af thumb.
We view the national budget now as an integral part.

of the.

nation's influenced by and havlDg a.n influence busines!l upon the state of employment, inco~ ~d prices.

think we would aU agree ~at 10 times of widespread unemployment and lIl5uffi· cient demand for goods and aervicea our expenditures should be increased in order to suppert employment and incomes, and that they could and should exceed our revenues under :such conditioDlii.

Now we are at the oppoaite extreme and we ahou!d follow th.
opposite COUI'8I!.

We should dehberately bud get, .. a matter of policy, for substantial IUf'o pluses in times like these.

Only that way can we hold inflationary forces in cb~k.

Only that way, over the course of many years, c~ we make up at leut in part for the deficlta we chall have in less favourable yean and prevent.

~n indefinite apiralling up of aur national debt already at.

a very high level I I -the sequel to t;'o wan.


Now is the time to lay the - COMMON8 foundation for employmu\ ~~ ill fuLure, 'While ficbtiDc idatioll at prwIeat.

or to he .-d UDder in \he fuwre.

Some lriel1dt have .....ted to me, teem, LhiI wrpkui in prwpecL, that.

I Ibould adopt &he device of bUlYiD&: part of it In ~me IOrt of raerYe for future expenditure 0110 aatiOD&l *»Cia!

4denu, utimW ·development, .-curlt)'.

Such aD ~lPeDL, they laY.

would make .ua.


aurpllll 1_ ...iaibJre and l_ ot .. tempt&uon to tho.

who, for ODe rea.aD • uoLher, feel .that 4&Ra IIboul6 be reduced .. -P-diturM ~ DOtwithataDdiDc Llae wiadom of actme o~.

ThiI could be doDe.

We eoukl &al:IOUIIoe, with .ppro priate fulare.


&be ~tiOll of .. ut.ion&1 denlopmul ·Iud 01' .. aMioDal weHa.re fUDd ~ pllt iot.o it .....-.J hlllldJoeda of milliooa ., thiI ,..,... re't'eDUM ud ptO.,ide that the lOme lPetiIed fad '1'bja would, of eirmm «JUlIe; be ·.mply "booklr:eepiJlc; it would aft« aot.hina i.D.

NAlit.y; 'it would limply IIituatiOQ diat eomplieate .. ia more eL!ily UDderatood as it ia DO.. Bookkeepiq fundi' for mH!til1& future liabilities have their place think.
(or meet.Ulc cootraetual ~u" only, I 1iabi1i~eJ iDcurred ao"" to be paid in the lib iDMlrance or peDliOD ar annuity futme, UabiJitiee.

,... metm for tranaferriac reven ue.

-from one ,.,.

to meet.

~itura ill. if parliament another and the public eta .pp~.te tile relatively ample reuo!U for budletiq for IUJ'I)kaea in Fad yean and for deficit.

; in poor yM1"ll.

I believe the .limple and Itraichtforwaro pry.. entation 01 the budtet problem it the belt thil hou!e one, aDd that hon.
members of and others outaide will auppori the policy I propose on ita: merit.

without the llUpport.

of artllicial devices. '

The aJ"IUfDentfl '01 'ceneral p~licy are rein to foreed by' specific circumstances applyina: ]n the cue 01 \he important types of tax.
tile .pef80nal income t&J:, we have already had reductiOD8 ,iuee the end of three rnblitAntial ie now, by and the war, and ours, I believe, large or for the majority 01 people, the lowelt tax in the Enclith-spealcing world, iDoome with the highest ezemptioDa.

It bas been reduced to levelt which, under present circum· i!ltaneea, offer no .erioa.

impediment to work or that could be leut: nODe removed by any further r'ellOD&ble reduction.
It.. detailJl have been improved-..nd we will Ita adminiItra ~nLinue to improve them.

lion h.. been lTeatly ItrengtheDed aDd, .. tile l&tIer 8tI.ft' overtakea accumullted anun, it will continue to lain in efficieocy, Ilmootb .~ and f&irneN.

[llr.

Abbott.)

tllt'y are WI:Ileee_ry, initiative-at than that In the cue of corporatioIll our tall:.

toret.her with provincial lu, ill IUbetantW but llightly lower in t.be UlUted 8tat81, and corporatiollll in both countri.. are thrivinc at preeent, to My the lean.
Then appeal'll no need to reduoe our 00lp0f&ti04 Lu.

either on lTOunda of incentive or to releue more cor· porate profit.. for eapital ezpe.ndituree or for too, &here have in dividende.

recent yeanl been considerable lmprovementl that make the tax more equitable ill detail and Ie.

burdeuome in apecial and UDusual In Lhis field, ......

In the field of commodity t&ue, we have aiD retained in many cue.

the hiper raul iDtroduced durin« the Wlol', u well u the buic rate of alee tu adopted before the war.
We the "..r ucha.nee have dropped, of OOUrell, tu, beeauee it w.. diaerimiaatory and beaUIle it was addlnl wbetantiaDy.

to COlt.

of pro duction.

We have &lao remond our Mlee Lu (rom equipment aDd maclUnery, URd in to help keep coeta down and im production, prove ·our competitive pOOtion.

We have reduted our tarift'IJ u a part of & deliberate plan to eDeourace and develop trade.
We have relinQuiahed the importanl field of pao line tuel: wholly to thll provincu_ We have repealed the tu: on naar and lowered the duties on tea and eoft'ee \0 help keep the price do1rIl.

We have repesJed lbe -.I~ tu 00 the domeatic WIe of electrie.ity.

We have made to meet apecific other more apecific chancel problema or for &pedal rcuo...
But we have reduced the heavy wvtime tuee on not liquor and other beverqee or Lobaceo, the tues on a wide ranee of thOR te88 essential goode or .services conaidered proper meana of raiainl the additional renoue required for war and reconversion needs.

The pruent circum etancea are not appropriate (or far-reaching reductions in theee indirect tans.
Demande are eo exc_ve in relalion to IUPply that we cannot rely upon competition or other market f<lreea Lo eniure that the cODlUmer would let the benefit of any general or widespread r~ ductions we milht make.

Producera or di~ tributora are in & favourable pOlition to pin wbatever the treuury liv.. up, and they could probably find plausible reuona f~r doing 10, notwithetanding the high levels of profit.. at present.
In regard to posaible reductione; in the income tax, there is another consideration which I lui I would uplain at Ifeattr le.uctb, and that is Lhe eomparison between our levela of income t.u and those in the United 8tat~ com parilJon whicb appears to be ruarded AI OIle f- mutt.

conlnl of eonsiderable importance.

that I am repeatedly w.rpriaed that.

from tbie MAY 18, 1918 4065 The B1Idget-Mr. Abbott conclusions comparison aJwa:r drawn unJavourable to Canada, despite very .trang evidence to the contrary.
almost are to set In order forth the facts lUI clearly as p036ible, I would like now with the consent of the house to pla.ce on Ha1l4tJrd t.ables com paring the Canadian and Ameriean tOe!

at various levels of income: Comparison of Penonal Iurome Tax in Canada and United States for 19-18 These comparisons are made up on the following assumption.

Canadian Tn 1.

Ko allowance made for medical expenses, pension contributions, charitable donations, or other luch deductions would pay \.en tax than shown.
deductions.

Tupanr.

claiming 2.

All income over $30,000 8Sl1umed to be in vestment income and subjeet to additional' per cent tax.

3.

Family allowances for children taken into aCCGunt as heing in lieu of income tax relief for children.

United States Tax 1.

Deduction of 10 per cent of in(:orne up to a maximum of $1,000 claimable hy e,"er)- ta:x· paJer in lieu of ded·uctiona for medical expenses, charita hIe donations.

atate taxes, etc.

2.


All taxpayers Assumed to takl:' fnll Adv"n for splitting in<:comes be tar.e of the pl'ovisiGIl tweet) hushand aud wife.

3.

Xew York State illwme lax included in calculation.

Single Taxpa)'er-Xo DepE'ndents Amount b)' which U.S.A. Ta:x Canadian including State Tax U.S.A. Tax tax ex- ceeds , 20 35 50 65'I97 113 120 li7 2.9 249 200 332 376 47150. ;tI<l 1,342 2,OM 6.250 8.018 I1,iG2 23,893 41.025 59.697 140,310 3 II 21 3.
3S..4' "123 2Hl"597 Income ;00 "'0 '00 1,00(} 1.100 l.2()O 1.300 1,400 1.500 1,500 2.000 2,250 2.500 2,750 3,000 3.500 4.000 5.000 7,500 10.000 20,000 25,000 30.000 50.000 75.000 100.000 200,000 5S';9-2JS!

Cnnadiall Tux , '"..61 16 SO 100 120 ISO 2", 2iO 32(} 3jO 42Q 52.
626 83' 1,46'5 2,253 6.515 9,015 11.i28 23,.156 39.418 56,631 133.056 )Iarried tupayer-No children Canarlian tax I U.S.A. tall: including state tax " Amount hy which Canadian tax exceeda U.S.A. tax, 10 25 4G 55 jO 100 137 114 212 2-51 332 412 578 1,048 1,536 4.512 8,366 18,Oi8 32.245 H ,841 119,n9 10 22 36 iO 120 liO 220 270 3iO 4iO OjO 1,~60 UJOO C..14!)
11.313 :!3.043 38,968 50,143 132,493 8 19 38 58 92 212 434 1.628 2,9"9 4.965 6.723 8,302 13.064 Income , 1400 1,500 HOD 1.700 1.800 2,000 2.2M 2.500 2.j50 3.000 3.500 4.000 5.000 i.500 10.000 20.000 30.000 50,000 75.000 100.000 ::00.000 ::\bnie,l Tax[lIl.~·E'r-Two ChiMrell of Family Allowance A~e :Set Jlo~ition of Canael-ian t:JxPflYcr after n'eei\"in~ a,'ernjle family allowancE' l'al'mems I AmO\IIl,t hy which Clllla dian net tax position exceedM U.S.A. tax , U.S.A. tax incluJing State tax I Cati",Ii,,1l tax $ IllCOllle $ 1.SOO 1.000 2.000 2,250 2.!lOO 2.;;;0 3.000 3.500 -4.00n J.OOO j ..'iOO 1O.01l0 20.000 30.000 50.000 i5.000 100.000 200.000 10 + 22 + 36 + 80 -I- 130 + 180 ~:l0 330 -130 6~1) 1.~lHI 1.930 6,ij-l0 11.2U5 22,n33 3f!,,~48 56.013 132,3-t3 13-1 122 lOS 64 J.I 30 ~6 ISG 28(; 4~n 1.01.\-t 1,786 5.89G 11,061 22.j80 3~.i04 55.1'169 J32.ID9 12 50 125 203 30-t 797 1.299 4,120 7,878 17,439 31,544 47,068 Il8.502 24 36 61 83 122 207 487 J,776 3,183 5.350 7,160 8.801 13.697 The figures which :ue included in this t~ble to the for recent rcduction3 enacted by congress, includ ing the option of splitting the income of mar- l'ied pl;rsons betwcen 11lIsbnnd and wife.
They too, of the ~l.andard deduction t::I.ke ;l('count, t.he United St:ltcs gi\'e full effect """ The Budget-Mr. Abbott COMMONS iO\'elltment of 10 per cent of income in lieu of otber deductionll, which I undemand ill claiIned by 8S per cent to 90 per cent of American tax the Canadian payers.

On the other band, figures represent Lhe maximum poaible t&:l that would be paid in Canada, with no deduc tions counted fOl' contributiona to charity or pension funda, and no deductiona for medical e:rpell.!e9.
They are baaed aa well on the assumption that all income in exceE of 130,000 is to the addi income, subject tional 4 per cent tn.

In the cue of tnpayel'll with children, family allow the receipt of ancet ill taken into account in the comparilOn, lIince thelle are clearly undel"8tood to be in lieu of additional income tu exemption for to income tn.

The United persons 8ubject States.

of course, 'has no cOlTHPondi.nc allow ancell.


The American ficurea include tu:ee payable in New York sta.te u typical of the tues now levied by more than half the ltatee.

Any lack of comparability in these figures ill mch all to make the Canadian tax appear high by comparison.

it Despite the common conception of lower taxe!

in the United State8, ill clear from thill table that at many points the Canadian tax ill lower.
Indeed, taking into account the number of taxpayers at varioUl income levela, I am able to make what is to me the Itrik.i.ng statement that three out of every four Cana diana would ply more income laJ: on their income if puaent they lived in the United States rather than in Canada.
As these tables it » mainly in the fairly well-to-do ,how, c1&l'1fJ of malTied tupayen that American laJ:es are appreciably lower, and that result ill now achieved principally by the unique feature, recently adopted in the United Statell.
of allowing the splitting of income between hus tax pUrpose&-& feature band and wife for which wu extended to the whole of that country when there appeared no other means of achieving equity lUI between those states where this privilege existed through local lawa and th06e states where it did not.

Were thi.

the American law, pn:Jvision not a part of there would be only a moderate difference in the amount of tax payable, even at theee high I know lenls of income for married persons.
it will be difficult to dissipate the general mis conception that ieems to prevail regarding the respective levels of perilOnal income tn in the two countries.

but I venture to think that any thoughtful person who takes the trouble to eumine the figures carefully will conclude that moat statements made in this connection, if least considerably not entirely wrong, are at exaueraled.

(Mr.

Abbott.]
(Mr.

Abbott.]

T"' ............ After considering all these maUcrtl, I have come to the conclusion that tbil tbe budget t.n changes.

year ahouJd contain no general There are a number of specific changes which should be made to improve our tax llYstem and which I think can be made for that purpoSe, without seriously wOl'1lening the inflationary dalll'er or seriously oflending againat the prin ciples which we should follow in general.

These I shan now prOpolle and explain.


They will involve reductiona in taxes of types and in places where reductions will be moat helpful.

they ere to be reprded as exceptions But rather than the mIe.

The general policy for this year should be to we our surplus to reduce our debt and thereby to fight infI.ation in the manner most mited to our type of government and our way of life.
In the field of personal income tnes, I am proposing ooe change of aignificance which will, I believe, be accepted with commendation on all aides of the house.

Having in mind the large: number of elderly people living on emall fixed mcomea, and out of cOD.8ideration for the tria.ls and increued expendituree particular that U8Ually come with advancing yeartl, I am proposing that an additional exemption of 1600 be granted to a tupayer of aixty-five yeam of age or over.
Many of the&e elderly people liv ing on lIIDall peMons or other forma of fi.J:ed income with no opportunity to participate in the increued wagee, salaries or profite enjoyed by other IleCtiona of the community.

are par ticularly hard hit by the higher coete of Jiving which pruent boom conditions have brought about.

This group of our citizena is entitled, I think, to special consideration at this time.
This special exemption followtl a precedent established both in England and in the United Statee and its efleet in Canada will be that no taxpa;er of lIu:ty-five or over will pay tax until iocome exceeds '1,260 if he is single, or bill $2,000 if he ill married.

Thill change will apply for 19(8 and will COlt about IS million in revenue for a full year.
In order to encourage the continued aearcb for new 1I0urcta of minerala, oil and gas in the interest of developiog our natural resources and conaerving United States doUars, I am also proposing to extend for another year the allow ances and lAx credits now granted the mining, oil and gas industries in respect of exploration and ofl·property drilling expenses.

It is also proposed to increaae the penalty rates applying to unpaid taxee from the pre&eot 4 per cent and 7 per cent.
to 8 per cent and 8 per cent respectively.

These higller penaltiee MAY 18, 1948 The Budf1et-Mr. Abbott 4067 will provide an additional 'Pur to the payment of the proper amount of tax on the due date and contribute to greater equity as between individual taxpayers.

At the same time, I feel that it will also be appropriate to make pro vi.sion for the payment of interes~ by the government on taxes overpaid by the tupayer.
I am therefore proposing that interest of 2 per cent per annum be paid where the amount of overpayment less, and onf-half of 1 per cent on the excess over $5,000.

is 15,000 or the and public han.

members Some han.

MEMBERS: Dh, oh.

Mr. ABBOTT: I do not wish to encourage the lending of money to the government at high rates of interest, and the rate of two per cent is the rate which was paid on compulsory savings.
As at large will recall, I introduced at the 1947 ses sion of parliament a re,'ision of the Income War Tax Act which has become known gen~ Ii erally among those interested as Bill 454. will be remembered that this bill reeeived only first reading at that time, and was allowed to stand over for study by memben of parlia laW)'ers, accountants, businessmen and ment, taxpayers generally throughout the country in order that we might have the adv-antage of the broadest poasible consideration of thill important measure.
I may Bay that the oppor tunity thus afforded to study the bill has resulted In a very thorough examination of its provillions nnd the varioUB individuals and organizations which bave I5\lbmitted briefs are to be congratulated on the cODlltructive nature of their suggfstions.

These have been of great assistance to myself and the officials engaged in redrafting tbe bill.
In keeping with the intention I announced last year, I plan to reintroduce the revised bill as 1lO0n as the budget re80lutiona have been disposed of in the expectation that the new measure will be enacted this year.

How~ ever, because ita final passage may no~ come until towards the middle of the year, I am now propoaing that its effective date be po!tponed until the beginning of 1949, rather than have i~ apply retroactively to the beginlling of the present year, as I had earlier planned to recommend.
Anticipating the adoption of this proposal by parliament, I will introduce some minor amendments to the prellent Income War Tax Act applicable to 1948 which will antici pate certain features of the new bill that it ill felt desirable ehould be broucht into effect for the present year.

Theee amendments sre of relatively minor importance and will be dealt with fully when we are discusing the 1948 amendments to tbe Income War Tax Act.
the guvel1lment's general In the field of commodity lues, I have felt it ne~saary to frame my proposala in the ligbl fiscal program, of 3nd am, therefore, not proposing any sweep I have ing or drastic reductions in tftll rates.

considered, however, whether anything might be done by way of :l direct contribution toward li'ducing the cost of living at one of those points where it has been felt most acutely, that in the cost of food, and where it would is, inflationary pressure.
create little additional As a positive step in this direction I have decided to propose to parliament that substan tially all of the items of food.

not now ezempt from the sales tn be put on the nempt lilt from tomoITOW onward.
As I have said before in this bouse, most of the standard food items such as bread, butter, milk, cheese, eggs, !alt, sugar, fresh fruit and vegetables, and fresh meats are now exempt from ealea tn:, and the items tamble at the present time are comprised largely of canned, packaged, pre cessed or otherwise prepared foods.

Under the in proposed change practically all tbe iteIIUI this latter group will be nempt from tax.
In general the new exemptions will include fruita and vegetables, whether eanned, frozen or dehydrated, including jams, jellies and manna lnde; fruit and vegetable juices; prepared meats and poultry, whether canned, smoked, cooked, frozen or dried; canned soups; canned fish; prepared cereal breakfaat foods exclud ing beveragea; biscuits /lnd cookies; yeast and ready mind Bour preparations; spaghetti and macaroni and one or two other items of lesser involved in importance.
The reveuue loes granting these e:remptiona will be of the order of 120 million in a whole year.

n is my hope tbat the removal of the 8 per cent tax from this long list of iteml will result iD.

a reduction in prices lUI !OOD as the reduc tions can be p&S8Cd along to conl!Umel'l', I appreciate that thill tu: is imposed at the point o£ manufacture or wholesale distribution, and has: already been paid, therefore, on loads no" in atock in retailers' hands.
At the same time, r wish to make the position clear that there will be no refunds or credits of taJ: to manu facturers or "holealers in CUN where they &Ccept tbe retum of goods previoualy delivered m. respect of which tues are repealed by thill budpt.
Again havinl in mind the Jleeds of the aver age bousehold, I am propoli.ng tba\ the 25 per '0lIll The Budget-Mr. Abbott COMMONS cent retail purehaae tax be lilted tomorrow from lilver.plated kaivee, forb and 'P00Dl and from alarm c10ela of a retail 'VAlue of '10 or less.

Thie ebange will nmove from the eeope of the retail .lea LU item.

of co~mon uee in the home.

I am .Iso propoaing .. a meaaure of allev.iation to the blind Lb.t Braille watehes be e:zempt from the tax.
The revenue redue· tion involved in these chaIlgea will amount to about 1600.000 for a full year.

Hon.

members "ill recall that a. year ago the dominiOD government witbdn" itllls:uoline tax on the ground that this field was oDe tha.t had been traditionally oceupied by proviocial gov ernments a.nd had heen entered by the domio ioo uDder the emeraeney conditiolll of "a.r It will be reea.lled.

too, tha.t on eenra.!

time.


oeeuiOlll it haa been represented to the federal government by provineia.l,ovenuJlentl; that the dominion ahould a.lao withdra... from the other in which the provinee- ha.ve heeD nor field.

mally reprded .. huml a partieulu interest.

These included principa.lJy the dominion tu: on the consumption of electricity, which .... with· drawn Iut November, a.nd the dominion tu: on amuaementa a.nd pari-mutuel beu.

In regard to thelM!

latter t"o field.


I am propoainl that the dominion tues ceue to be imposed from tomorro" onward.

Thie amendment ..ill apply to the 20 per cent tu on admilaiolll to theatres a.nd the like, the 26 per cent tax on expenditure.

in other pl&cel of entertainment and the 6 per cent tax on pari-mutuel bell.

Our revenue will be reduced by an Ntimated amount of 123,500,000 a ye.r .. a result 01 droppinl these taxeB.
May I be permitted bere to npress the hope that in these cues "bere the dominion government removes taxes of this kind and the taxpayers of withdraws from the field, Canada will receive the benefit of IUch action a.nd that, eo far .. poMible, provincial taxing authoritiea will relrain {rom stepping in1 In aIlother field I am proposing that the 3 per cent exc.L$e tax ..00. imports from genel'1.1 tariff countries be repealed.

The tax in ita present form it a veeti,e of a levy first impoaed in.
1932 which applied originally to importa from all countries.

III tcope of application ... been aradualb- Darrowed until at the pretent lime it eervea only .. a needlllll8 en.cumbra.oce to trade with a relatively limited number of countries.

The revenue from this aource lut year Wle about 12,100.000.

Severa.!

other misce-llsneous changes of a minor character are also propoud.

The tas of (~.

Abbott.]

!ixty centa a gallon Oil !pirita used in making ,-inepr will be remo,·ed.
This tax was intended 10 encoursge the production of cider vinegar hut I understand' has not had thi.s effect, a.nd at the preeent time only increuea the conaumer co.st of a food item in wideapread use.

A minor chlnge will be made in the tax on matches by adding an extra bracket in the rate schedule to apply.

to books or packages containing a very 'mall number of matches.

Aa a result of repre sentations I have received.


from religious and educational leaders to the effect that the 25 per cellt tax imposed on l~millimetre pr"jecto.... for films and slides is discouragi~ the further UIe of such projectors in Ichoola, churches and other instilutioD.5, the tax will be removed from l&-millimelre projedor!.

Wheel chairs for the use of invalids will be exempt from the .Ie.
I:lX, and other minor amendments affecting ha:r biDders and presses and rope tLeed by fishermen "'ilI also be made in the salea tax.

jWJt discuased., Turning to a. field 8Ome"'bat removed lrom that I wish to outline t'lll"O signilica.nt changes that I will propo&e io the field of aucceaaion duuea.

The hou.se will reca.1!

the dominion entered this field for the that first time in 1941.
We entered it not &5 a temporary lI'"B.rtime measure but as a perman· eDt step in a direction which we lelt might eventually ·Iead to a national uniform a)'item of death duties.

This eod was further promoted by the witbdr:s.wa.l of the death duties imposed by the seven pro"inoes which entered into the tax rental agreements.
It dominion.provincial i~, therefore, a fact that the measure of relief to prop08e is polll!ible to a large I am about ('xtent berowe of the assurance I have that as a result of the provincial agreements it will be fully effecth'e in at lellt seven of the provinces.

The me&.!

!ure that I have particularly in mind in this conneetion ill that where&.!!
in the Pl6t the smallest size of estate rrubject to dominion dut), has been 15,000, I am proposing that no estate of a person dying on or after January 1 of this )"ear will be ..ubject to duty unlese it In effect, thia means that the exceeds $50,000.

dominion government is withdrawing com pletely from the field of auooession duties as this affects the smaUer eatatel.
The aignific:ance of this change will be realized when it ie con sidered that about 90 per cent of the estates 01 deoeased persons in Canada will henceforth be completely free of dominion duties.
This relief in the ad~ will result in • great ..villi trative burden of handling a great volume of small estates, will expedite the aettJ.ement of MAY 18, 19f8 The Budget-Mr. Abbott '069 the affairs of many deceased persons and., above all, will relieve the beneficillries of theae limaU estates of any dominion duty on tbe beqUelIta tbey receive.

It is estimated in this connection that at time in a full year.

the revenue loss invoh·ed in !.his change will be in the neighbourhood of s.; million.
the preaent ch.1ritable encouragement.

I am suggesting another change as a measure of bequeats.

to Wheress, under the present law, up to one-half of an est.-te may be left for charit&ble or edu cational purpose!

exempt from succession duty, ,rill be removed aDd.

in the future this limit any amount of tbe estate may be given to charity free of succession duty.

This measure h3s been urged on me for some time by reli gious aDd eduC3tional leaders, and in a society where our great.
public institutiona Itill depend to a lnge extent on private support I feel that.

a mCll.SUre of this sort is justified in tbe general publie interest.

There .-;ill Also be Rveral other minor changes of 4 technical character in.

the IUCCes.

sion duties act of which the principal will be to define the basis of abare situs in the case of companies as the pl:lce of incorporation of the comp3ny, the b:a.si.s now generally adopted in our other countries.

All to the Dominion.


Succession Duty Act will be effective SlI from the first of thill calendar year.

these amendments treaties with succession duty TARI" PaoP08.AL8 When I presented the budget.

lut year, I referred to the tariff negotiations which were then taking place at- Ceneva under the spon sorship ·of the economic and social council of the united DAt.ions.

These negotiations were succeB6fully concluded in October.

The result.a are embodied in the general agreement.
on tariff!l nnd trade which was made public on November 18.

The successful outcome of lhe&e negotiations hall been a most encouraging in the international effort.a that development have been undertaken since the end of the to establish better economic relations wa.r bet.ween D3tioos.

Th~ geccl'nl is the most comprehensive international agree ment ever concluded for the reduction of bar to trade, ha\'ing regard both to the riers volume of world trade affeeted and to the scope of the undertakings.
The reductions and concessions in tariffs which each of the twenty three participating countriea and aeparate co- :l.grcement toms territories represented at Geneva agreed to grant.

one another apply to approximatel,.

one-half of total world imports.

At the concluaion of the Geneva conference, eight.

of the participat.ing countries inc1udinc the United States, the Unibed Kin'.dom and Canada, agreed to make these reductioDt ellee.

live provisionally u from January 1, 1948.


Since that date, four additional countriee either have brought their conceseiODl into provisional effect or have indicated their asreement.

to do 80 in the near futun.

ConaequenU" C&nada is at.

present the Geneva reductions on a very larKe part.

of ber Similarly, Canada hu total export gr:a.nted the Ceneva eoncesions in the Cana dian tariff to the other liguatoriee since the begin.n.inl of the year.

receivinc the benefit.l of trade.


The Canadian conceMions were exteDded provisionally by order in council under the authorit:r granted to the governor in couueil in the Customs Act.

The Canadian concessioDJ n~otiated at Geneva will be brought into effect finally, and the general aCreemen.t.

will be ratified, only alter the approval of parlia ment haa been seeured.

The agreement.

waa submitted to parliament at tbe opening of thia session, and is now befon!
the lItAnding com mittee on banking and commerce where it is being examined in detail.

The further legisla tion necessary for the implementation of the agreement will not be proposed until after the committee's report has been received.

The budget resolutioDIJ concerning tariffs and customs which I am introducing at.

this time It is proposed to are confined to two mattera.

make a number of adjustment.

in the ezistiog tariff to bring it into line with present nceda and conditions.
further proposed to is make a number of changes designed to facili tate the importation from the United Kingdom of important Eupplies which we need in Canada and in respect to which the United Kingdom hll8 been experiencing particular difficulties in her efforts to re-establish her pre-war posi.

t.ion in this market It The adjustment.a in the tariff which I am proposing are all downward adjustments.

No increases are proposed.


Some of the reductiODJ are designed to take account of technological changes which have occurred in the lut.

few years; some would effect.

reduetions in COl!lIlJ of production; some would remove complexitiea and facilitate administration, and a number - "A, ·...."d.......JlI'.

"tOktt , .

• ,arieIIl fro-.

InNAId omhodY .~.li<>u o/....u-aod.

b, ~ ja.

oou.oeiI, ia.~ &0 iauDed:I4tt eu-.

etUIlM:ancM tht!

'~'" time ,&c In ...If&l.


/lie 010..... propooed ....Id lim.. "ec~ tQDl~ l'ethtc~ ill, oo.ItI 01.'

operaliqn in ~_~lI~~::~~~t ~~ iDc!udiD& the tbebuiIdjDI iDduatO'.

and IQ.iaioc" il¥aUltry, "l'rrtom.Ww.

or t,be.dai>'1 produ."

indum>.

",Am... .abe ~tioDI ,which J am.

intm ""'"" ~, lWo it •p_.........d "~lbe 1Iriliob p..lenoliol <IoU_ on PR~~ aDd ~OI!

pieee~.

.~ ~OD.

lIlem ben Io>..... lbe ·UniUd.KinlPlom .... r.. DW\1 ~ .qapD.4 ~ ,iJppo~ wt w our nqu~1B ~ ,~f'!I' IIOmmoditiet.
:p.~ the ''',li1ohe ,Vo,it<d l'joId"", .... uubIo \0 .... au ~ .~.

oqr IA-*et.

Siaee -toM mel.

of hoetilitie.. continued ~ ~ve .blp_ .~de f<>- til, prod••1ioo and ........ a!.\IUo pat .~Je oJ .BritJ-ll trade.

However, ~e il>ip"'e't" ...hi,h .IIi.

Umted KioIdom ..... ~ )~.

(e ,~o '~~, '0' .~" ~ve Dot r&Rldly II!

we had hoped b.oth JP.1:ftUe.d &I from the .t.tndpoint of ,m.,t our tQIlIUIIl,en ~Hd U!4 ,(rom the .t.aOdpoint of out desire .W_rtduce the larp pp in our ba1aDee of PVm~n~ with thI.\ .eountly.
At Pl'MeD.t, Brit ~ ~porterl of coUon and rayon piece iOoda are mcoUllteriDa difficu1tie1 in their 'efforl, to eIPUut alee to e.uda becauMI their laii:l-down, prieM in uu.

eounUy, alter ~,.­ ment of duty.

are hiaher than our oonverters and "OQDJUInera caD &lord Lo pay.

The pro posal,to IUIP'lIld the dug.

temporarily would I hetp to 'n!Jdnee 'the i:lb8t:aCle I.riIi.nc out of the price .tuation, received ~CM from lbe " We have JJnited.

Xiqdom.
Xiqdom.

that the redqetion in 1aDded priC18 made ~le by any remoV&1 of dutiCi would ~ pueed on to C·nadian buyertl, We ~ve been, ~ .reo that the United KhIc· i:l:om ,ovenurient trill ta:e all pMlille .tepa t.o .

.

UW ~ Wpt which b.u been _ for to 'Culada of' 80 million jVdI of IlUpment Cotton piece coodl'in INS will be met.
With the NIpeDIion of duties tbeee moujd .make it poIIoible for Canadian con !lWnertl to 'ob~ .-ntial MlPPIiM of eotton and rayon piece iood- at lo,rer priOCl IDd in Iarpr quanlitieo \baa .....d ouboIantiall, otbenrite have bHn the _ .

I. IJD ~relore,pl'ClpQli:q tlaat u.. Brit1lb Ilrelvectial duti.el on .cotton aDd rqoa pi.ee ..,.do be ~od unli1l.- 10.

1149.

Tboro -..uraDC8S, .wiD b!!!

an opportunity to r.v~w.t.hiI wbole t.he .

.

of the reMlit.

aahieved 'IIIatl.e'r <Ill before tha& d.te.


In IoOGOJ'duee with our com.

in the Geaeva -creement, under mitmea.lI pref.....tial m..,.m.

may Rot be ·which the propcal to mIp8Ild the BritWh widened, preferential rat.elJ CIa eotton and rayon piece .~ includea a 'reduction in the mOBt-fav ,ound.....tion rate.

on thMe itelWl by the eame the _mont ·until.

.Jne 10, importl of ~ien aad rayOD pieee pod!

from dedtftd oowrtriee are limited by the qaota \lllder the Emergency EJ:chanee Conllet'Vation Act.

t9d.
t9d.

However, ' .. Findy, amoq Uie resolutions pert&inin&: to .wilt and cqatOma matters, ~ am inelud.inc ... propouJ .hkh would enable $he lov8rnor in oouncll ~ relieve ~ pods or c1aIIea of ~ from 'I*ia.I dwnpiq du.ty.

Uwier thiI prop~ IUch relief could be &ranted in euelI .

"here tl:Le, lovernor in council determinee: that the importation of tpe cood.

ill neceYary to in Canada or reqwremenlll meet eaeeatial ~ld be uaed to advantqe in Canada with out C&USln& hardahip to Canadian produceI'$.

Ii!
Ii!

view of ClODtinuina scarcities, it ill clearly desirable that "t be pouible to lI"&nt relief trom dumpin«: duty in weh circumatances.

It • stimated that theee reducUona in wil dutielwill rewttm.a reduction in revenue of lOme twelve to fourteen million dollars in the current year.

OO1'fc:LVIlOJ.

'I( n .iI .timated &ha~ taken attoeetber, Lbe tal: ehucee ud Wi!

Nduou.. which I bye JfOPOIled will reduce eu.r NTeDUee in a full yeu b,.
ClTv 170 million ad iD the NIIlainder IIy ~etbiDc over teo of \hia fi-.I "ear millioa.

Declu.etiq thillatter &cure from my foreeNt .f nyeDUee before tax chance- will lean UI with LOtieipated rnenuetl the etirrent year of Ippronm.tely t2,IJM million.

On thiI buMI the &Iltici~tedbudptary wrplus for the year will be reduced to .

.

million.

We IhalI haye of eOW'R additional reeeipte of cub from repaTDlrnti of lou.

and from lbe accumulation of LODuit7.


p.OIl and iuuranee funda, but tb_, it .. beliend....ill be tub 1taIltiallJ: '1_ thaD.

Jut )'ear: beQue w. are ,ot Ub1,r to be~ repa,meDta from the for.

lJ'hup oootrol beud DOt uarIy u 1&Ip & NPAJlDlDt of tit nailed KiDcdom for MAY 18, 1948 The Budoet-Mr. Abbott 4071 1942 loan.
Wh~n we have made the loant and inveatments which the year's operatiou will require and have paid back the refundable t.u:es {or 1M3 and 1944 which of course is a form of debt retirement, we shall find that our remain ing cash surplu8 will not in fact be a large one.

Moreover, we could not allow our budgetary surplu8 to be reduCi!d much further without the running the risk that government'8 financial operatiotlSl thia year might ha\'e an inflationary, rather than.

anti iDJlationary, effect.


the 8um total of in that It may be of interest to note that if we iollowed the budgetary practices of the United States government, under which theY' include on the one side all receipts except borrowings, and on the other side all disbutgemenls except red~mption or debt, we should hne a small .I:lurplus in this coming year.
The practicee that we follow are better, I believe, they pregent a truer accounting picture of our differ ~nt t:ypes of transactions and show more clearly the change8 in our net debt and fllIIfts, but the American.

practice has certain advantages in t.imes like these when it is desirable to take an over-all view of the government'a financial ia the proper operations in.

deciding what budget policy from the point of view of the dfects upon.

the national economy.


A sub&tantial portion of the requirements for Ihis sear which I have deseribed arille directly out of the wnr; this is true of a portion of our expenditures, particularly on veteraD.!

benefits, housing nnd subsidies.

It is all!lO true of 80me of our loans and investments, and, of course, the refundable taxes arose from wartime opera tions and will be mostly repaid by the end of If no new typea of expenditure are this :rear.
undertaken, and if economic conditiolll'l remain favourable, we can expect a decline in our requirements in future y8111, but even in.

.

!lIch circumstances we could not expect a draatic decline.

The effects of two world wata on.

our public escaped, however severely we may economise.

The warIJ have also left us a heritage of pension bille.

The new international llituation and the daneel1l of total war have broueht ue continuioc high COlts for national defence.

-But these are not '_he only {adol1l.


The activitie8 and llCope of lovernment in Canada have been estended by popular indeed, by popular demand.

Parliament and the sovernment have re!ponsibility than before the war, a wider cannot be cooaent debt aDd, responsibHities With these wider re8ponsibilitit'S and ·particularly in the field of economic affair!.

Our exptlnditurf9 inevitably reSect this exten sion.
Social security is an expeneive under taking, and we have moved eubltantially into this field since before the war and are now spending hundreds of millioll8 of dollal1l each year upon it.

We are already undertaking much more in national development, trade promotion and the support of pricea of prim ary products.

All political parties and the public generallY' take it for granted DOW that governments must bear some responsibility for maintaining emplorme.nt when large-scale un employment threatell8.
That is bound to be a very expensive responsibility if economic cir cumstances outside of Canada become adverse.

J.lready Il~SUllled and i!l contemplation, with the public demand there is todsy for addition&!

gO\'ern in ment many fields.

we must anticipate large bud lightly· reduce geb in future, and we cannot taxation in anr field.

Those who advocate incressed expenditure should bear in mind the weight of our budgetary problems in ,the There is no inexhaustible source of fut.ur€.
re\'eDue that we csn ·tap.

There are limits to what we can spend without raising addi tioDaI revenue8, if we are to prevent in-Elation I and the hidden burdens which is imposes.

wish to sweal psrticularly to hon.

members thoughtfully in mind at problems when con our 8idering government acth·it:r, socinl security, or other expenditures.

In the world of today we muat be prepsred to undertake much that is new, much that is is bie.
We mu.st alao be daring, much lhs.t to pay the price, and it prepared, howe\'er, is in our budgets that ,tha.t price is brought borne to us.

this ·time -to bear budgetsry new .proposals expenditures future for responsible 1 think we (l&n well take pride in the and effective way in prudent, which the financial and economic affairs of this country ha\'e been managed both during the war and since the war bu ended.
I hope I am not one gi\'en -to oVer&tatement, but I doubt whether any nation in the world has a better reeord in this field.

CaMdiall8 I think are reaJilIt8.

We do not to let somethioc for nothing.

We expect know -that thinc3 have their price.

We are proud of.

the lld\"anCeJ which we bave be€n OOWWONB .bIe 1.0 make in Itle field of .acial oIecurity,' aDd in uBtmnsloO OUt' people a better and a fuller life.
We bow __ t to attain theN &f@&t purpoees, we muat lrr.me our policilllJ and airect our eftON to....rda atilievinc and me.l.n ~ • hila elf ftpandinc level of employ ment ud income.

That is what we have done, and that is wtt.t we are continui!lC to do.

The record IpeaD for itael!.

Canada today enjOYll a level of employment, proI perity and national income, and a IllaDdard of bvq and of leeurity never achieved before in the hiatory of our country.

That.

that.
That.

that.

iI 10, Mr. Bpe&ker, iI due in large the vision, and the meuu.rt ttatemaDllhip ~d IUpreme quaJitiel of by a man.

who for more than twenty yeal"ll 91 the Iut quarter century hu been the h.ead of Ule the preeent Prime MiniBter of Caud& (Mr. Mackeqlie KiOl).

cove.rnment of our t.o lb.

wildom.

country, IOcial !

'elLl I want to table DOW' the bud~t reeolutioUi.

1500..': w.u 'l'U ~ it it expedient tbat RHOlved.

to intrpduce a ml'UUTe -ta amend the Income Wu TaJ: Act Iud to provide: 1.
Tht, ~eduction from income for in addition to other deductions, a the lH8 t.:ution ,ear of '500 'be &llowed ,to an individual who lU attained the age of eli yearl prior to tilt ,nd of the year; 2.

That, for the lHoB -tuation year, interelt be allowed.
.at -the rabe of 2 per cent per annum on overpaymentl of tu: to the extent of lli,OOO and i per eent per aMum 011 overpa)'1Jlenta in eD:eM of t5,OO() (no interw 1... than U to be pay.able); and ,that the raUli payable on over from '- per cent aDd due toes be iocreued.

7 pn cent .00 8 per cent, re.pectively; to & per cent 3.

That apedal deductiou.

from income or tUM be aImed -to t.axp.,.-en elli&led in explor 101 or drilling for natural gal, oil or mineral.
io retlPC'C"t of ez:penllea incurred in l~oW opera tion.

OD the deductiona allowed in reapect of !ili8 operatio,",; the ...me baai.

.. for {.

That, in reapect of tJ1e 19{8 tu::ation year, no n penael the earnilll of wagell or •alary may be deducted euept whe", a tax pafer i. an employee of a pereon whOle prin cipal bu.inetlll i. transport And hia duties require him to be abient from hi.

borne retralady, in which cue npen.u for board and lodcing ma, be deducted.
and where a -hxpayer ia employed to llell property or negotia,te contra.et., i. re quired to pay bit O'fn expelWM and perform.

from hia employer'a place of in which cue expe_ may be dE' bmlinl!lll, ducted from eonuni.ioDl or other -fees: and hi.

duties "11'.'

I.

That the Iii per cent income tu on Don resident perlOllS be extended ,to apply 10 patron· age dividend.

paid on or after May 19, l'i8.

[Mr.

Abbott.]


1tOIIIK1Olf aUac.I8IDK Burr "'01' ReIOlved, that it i. opedl_ to iDtroduee a meuure to emeDd the Dominion 8D~ Duty Act and to provide, effective with r"pect to any sucoeseion upon the death of a perean on or after JanuaT1 1, Ulf.8: 1.

That tM seneraI ex~tion of "tate.

not fli,OOO be elttended to "tates not over over '50,000; 2.

Tha,t the limit on unptione for lift.

to cent be liO per charitable oflanilatioml of removed; and 3.
That far the P1lr1H*A of the ut, narea of tOmpaniM incorporated in Canada .baU be deemed to be situated in Canada.

TIlE GClU 'UX Am Retolved, that it i, expedient to introduce a meuure to amend th!l Hittite Tax Act ud tG provide, ..recti.,..

ou and after Ma, Ill, 1m: 1. nat the aJee talt on the fallowini list of articlell be repealed: (11.)

,eut; putry, similar al1icla; thorteniD&; M)UPI; rice; pee,uut butter; lOprt; bilCuita, barley; ~Iit peu; (·ookie.

and cake, bilCuit and simi!.r mlu.


; eereaJ breakfut foods prepared foodl not i..eludi.Dg Mver.... ; and IOld uciusiveJ7 for feeding infant.

: fruit, canned, frOlen, dried or .,.aporded; fruit ;uicel which c:onaillt of at l...t ninet,-4:Ive per cent of ielliefl, marma pure Juice of ladea awl preeerVeI: corn Q"rup, table ayrup.
and mol...ea; meata and poultr}", cooked, can Ded, holeD, canned flab; ImOked er dried; lI'.,hetti, macaroni and vermicelli; vegetabl.., caoned, frozen or dehydrated, but not including pickl.., an,J relisb.., eat.up, aimilar 8OQd.

; veietable jllicell; and the lruit; olin-.. j&UUl, laUCte.

or by for into agricultural combustion enginel (b) hay preeae' and complete parta thereof; incol" auxiliary internal implement.
or agri pont..-l cultural machinery, and complete pa1'l.l thereof; im crushed atooe or ern.hed arat'eI; articlell ported public libraries, unive",itiee, eolleaee or ICbeolli, and which are to be placed in such iqatitutions ill partJl chain and t'1hibitaj wheel of deaiilled thereof invalid.

; :!.

That the price of admi.ion to plac.. of amuaement be repealed; the e1cite tax on chaflie.

made io the ucite hit 00 public mueeuml, complete the apeci8illy 3.

That uae for placfll of entertainment be repealed: i.
That the euiae tax (lU bet.

on horae racing be repealed·; Ii.

That the l'etail pn-rchue tu on 'Il'atche• specially designed for Ule of the blind, alarm clocke selling to ,the !Wer at nl>t more than ten dollan each, ud plated table knives, forks and SpoaDl, be repealed; 6.

That the special excite t.x of three per ceot on ~ imported into Canada from geo tral tarilf countriee be TepeaJed; 7.
That the ntel of excite ta1 00 matchea be amended ,to provide for a proportion-ate rate of tu: on ,packages of Daller mill; and 8.

That the 81cilN!

2"6 per cent be repealed on 16 rom projeeton for a1idet, film.

the ta1 be uteoded to or pictures, aDd that 40&:1 of