Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697720368191.pdf (Canada)
MARCH 31.

1960 2669 The Budget-Han.

D. M. i'ieming Mr. Speaker informed the house that the Deputy Governor General had been pleased to give, the royal assent to the following bills: thtl relief of Janet McMlllan Sim in Her Majesty's name, An act for Sinclair Kerr.

An act for the relld of Jacqueline Joly Mazurelle.

An act the relief of Shirley Evtllyn Ellis Bertram.

for the relief of Sally Emden Rohr.

An act for An act for the rellet of Barbara Steinberg Sl'laplro.
the reUel of Olga May Hospadaruk An lIet for for the relief of Georgette Rosenberg Edwards.

An act ltorman.

An act An act for the relle!

of Mary Nisbet Clements.

respecting thfl' Canadian PUblic Hulth An act As$OClation.

tor the relief 01 Donald SnOwdon.

An Ilet respecting The Algoma Central and Hud- lIOn Bay Railway Company.

to amend Ihe Indian Act.

to amend the Canada Elections Act.

An act to amend the National Housln;!

Act.

19;;4.

An act An act An act to amfl'nd the National Enerey Board Act.
An act for granting to Her Majesty certain sums the financial the public service of 01 money for year ending the 31H March.

1951.

An act for grantlng to Her Majesty the public service of certain sums financial thfl' 01 money for year endlnt the 31st March.

1960. BUSINESS OF THE HOUSE Mr. Marlin (Essex Ealll: Is there change in the course of business today?
Mr. Churchill: There are four items avail able for discussion tomorrow-the resolution concerning the Federal~Provincial Tax-Shar ing Arrangements Act and the resolution con the Trans-Canada Highway Act cerning among the;n. If these should be completed, there are the two resolutions in the name of the Minister of Northern Affairs and National Resources dealing respectively with the Yu kon Act and the Northwest Territories Act.

Mr. Martin (Essex East); No change in the rest of the business lor today?
Mr. Churchill: No.

Tonight we continue with the budget debate.

At six o'clock the house took recess.

AFTER RECESS The house resumed at 8 p.m.

THE BUDGET "':;NUf.L na; l'INflNUAL STATl':M;;N1' or IV:lr..:!~tm: m- f·'KANer.

Hon.

Donald M. Fleming (Minisier of Finance) moved: That Mr. Speaker do now leave the chair for the house to go Into committee ot ways and means.

jfn'l·(j-j()(l He said: (Translation): Mr. Speaker, is my honour and privilege to prescnt to the house the annual budget.
for a third time it in In presenting my first budget on June 17, 1958, I drew attention to the fact that never since confederation had any portion of the budget speech been delivered in this house in expressed surprise the French tongue.

I that official two parliament with a languages enjoying complete equality every portio!'!

of the budget speech had always been delivered in English.
Within my acknowledged limitations I departed from that practice in 1958 and again in introducing my second budget a year ago.

Tonight I am going to take a step further and open my remarks in the French lan adorned so has guage which the proceedings of this house and holds a secure constitutional position in the Canadian parliament.
gracefully As on the two previous occasions, I shall begin with a review of economic conditlons over the past year and an indication of what I regard as the likely trends to be expected during the new fiscal year.

report to the house on the government accounts, on any dominion-provincial relations and on our debt then proceed to re management measures, view our financial pl~ns for the new fiscal year and the tax policy on which they al'e based.
Finaily 1 shall outline the tax pro posals which are embodied in the resolutions which I am introducing this evening.

I shall (Text) : ECONOMIC REVUE Twelve months ago when I fiscal and other introduced the last budget we were emerging from a reces related policies sion.

Our at that time were based upon nn expectation of continued and accelerating recovery.
In these circumst:mees we believed we should move in the direction of a balanced budget at a pace which would resist inflation and at the same time encourage a healthy rate of balanced growth.

Looking back over the fiscal year which ends tonight, I think we can take satisfaction in the results.

In spite 01 a period of credit strains and in spite of f,ome un stoppages industrial prolonged fortunately both at home and abroad Canada has had a good year.
A gratifying degree or price sta bility has been achieved, and cmployment, production, incomes and trade have al1 shown healthy increases.

We can lool~ fOl'wnrd opti mistically to another year of solid exp:msion and balanced growth.

I shall not attempt a detailed review of economic developments of the past year; the 2670 HOUSE OF COMMONS The Budget-Han, D. M. Fleming budget white paper tabled yesterday covers these fully.

Rather, touch on some of the highliihts and examine the prospects for 1960.
I shall Last year we emerged from a recession which had been caused by a number ot fac tors; capital expenditures by business, espe cially in industries producing raw materials for export, had declined; business investment in inventory holdings had fallen sharply from levels which had been high in relation to business sales; and export incomes, previously increasing, had levelled olt two years because or a reduction in demand in other parts at the world.
The government had fought this recession by measures to sustain consumer demand, by stimulating housing, by increasing government by augmenting transfer payments to other levels of government and by many other means.

investment, for The decline was reversed late in 1958 and gave way to expansion last year.

Capital expenditure by business, especially on ma chinery and equipment, increased throughout 1959 and in the last half of the year was running at a rate well above that of the the recession.
The survey ot low point of business intentions released by my colleague the Minister of Trade and Commerce a few weeks ago indicates that this upward trend will continue throughout 1960. first As business conditions improved, in the United States and later on in western Europe, our exports began to increase and toward the end of the year accelerated In 1959 we exported more than sharply.

$5 billion worth of goods for the first time in our history.
Exports to the United States in showed the greatest absolute gains, but the latter half of the year the most rapid increase took place in exports to rates of overseas countries, In the fourth quarter the rate of our total exports of goods, season ally adjusted, was 12 per cent above the rate in the first quarter of 1959.

With rising exports and greater business investment, Canadian incomes increased.
Con sumer expenditures continued to grow and outlays on housing were very close to the record rate of the previous year.

ExpendI tures by provincial and municipal govern ments on goods and services increased.

The federal government slightly reduced its own increased outlays on goods and services, but its transfer payments to the other levels of government.
improvement With the general In busi ness, there was no longer any liquidation of inventories, such as had taken place in 1958; instead businessmen added to their stocks to keep pace with rising sales.

In 1958 the liqui ::tation of business inventories had amounted [Mr. Flemln( {Egllntonl.1 to $323 million, while last year there was a net accumulation of $355 million, a rever&al which increased demand by a total of $678 million.
Reflecting all these and other influences, the gross national product in 1959, according to our present preliminary estimates, rose to $34.6 billion compared with the estimate of $34!

billion upon which I based last year's budget.

Accompanying this rise in produc_ tion was an Increase in employment of 2.7 per cent over 1958.

Hon.

members have seen the recently published February employment The number of persons with jobs figures.
than 116,000, or 2 per cent, higher was at the same date a year ago, but as the result of an unusual increase in the number of per sons estimated to be in the labour force, the jobs and estimate of seeking work was 18,000 higher than a year that employ ago.

ment will rise as the coming of spring opens up new job opportunities and as the economy continues its upward trend.
I am confident, however, the numbers without The past year was notable for a welcome absence of speculative excesses in production, demand and inventories.

I stress this because often in the past such excesses have provided a major cause of recession, Our economic growth has been orderly and balanced.

New investment in plant and equipment has been broadly based, Increases in consumer expen_ diture have moved in line with personal disposable incomes and personal saving was maintained at the 1958 level.
an increase of Average per capita wages and salaries of workers in trade and industry reached a new 4 per record of $3,773, cent over 1958 and of 10 per cent over 1956.

Since the consumer price index was only 1 per cent higher than iro 1958, there was a very satisfactory gain of 3 per cent in real income, The economic growth has contributed to price stability, and price to balanCed stability in turn, growth.
Like the consumer price index the wholesale price index for 1959 was about 1 per cent higher than in 1958. balanced nature of our In the financfal sector 1959 was marked by some disturbances which had subsided by the end of the year.

During the first eight months of the year there was an extraor· dinary increa:-.e in the demand for bank loans.

In order to meet their customers' demands the banks were heavy sellers of government levels of gov bonds.
At e..-nment net borrowers to :.ilthough demands for funds, especially by the federal government, were substantially the same time all continued be MARCH :on.

IlI6G 2671 The Budget-Hon.

D. M. Fleming lower.

As a result at all these forces, com~ bined with the effect on Canada at rising interest rates abroad, especially in the United States, bond prices declined and interest rates rose from January to August.
Since then short term rates have declined substantially and longer term rates remained steady until recently when they showed a downward trend.
and rates increasingly The general public, attracted by higher contident interest in the determination and ability of tbe iovernment to combat intiation, provided the savings necessary to meet large part of these and other demands for capitaL Private savings, both personal and corporate, totalled some $6.6 billion, $260 million higher than in 1958 and more than $500 million higher than in 1957.

"8.

The high level of Canadian savings has, however, been more than matched by the level of capital investment.
During 1959 the equivalent of one quarter of our gross na tional production went into investment.

This the highest among aU proportion is one of western countries.

inflow of foreign capital this inllow has come in part Our capital requirements in 1959, and over the past several years, have necessitated a substantial to sup· plement our domestic savings.
The initiative from our for own people who have borrowed abroad, and in part from foreign Investors attracted by the nature and the diversity at our resources.

This direct investment by foreign entre preneurs, not only from the United States but also from the United Kingdom and from Europe, is a reflection of strong confidence in our economic prospects and brings into Canada not only capital funds, but also tech nical know-how, and often also brings with told it an assurance of export markets.
All the net inflow amounted to $1,460 million In 1959, about $400 million higher than in 1956, and only slightly above the previous peak of 1957. the size of This increase in the inflow of capital was, interrelated with the increase in of course, our balance of payments deficit on current account.

I wish to comment on this subject.

Our current account can be divided into two parts; goods and services, and the movemcnts of these two parts are Quite different.
In the goods sector our deficit amounted to about the record deficit of 1956. half This improvemcnt rcflects the fact im POrts were more affected by the intervening recessiOn than werc exports, while the re COvery of 1959 saw sizeable increases in both.
In contradistinction, our deficit on ac COUnt of services has steadily Increased, re flecting higher divldcnd payments on success investments by non-residents in Dlmda, ful 711\lr,\·o--I6N that Putting goods and services together, higher interest payments, business fees of one kind and another, and increased travel and expenditure by Canadians abroad.

In 1959 this deticit exceeded one billion dollars."

they add up to the total at $1,460 million.


This deficit is reticcted by, and Is a reflection of substantial continuing imports of capital.

I do not mean to say that we use all of the money we borrow abroad to import ma chinery ,and other forms of capital equipment.

We produce domestically many of the goods and materials used in our investment pro gram, and the composition of our imports reveals only a partial picture of that program.
What Is the use we make of all our resources, including the product of our own labour and equipment, and what we obtain as a result of our foreign transactions.

What Is important is that a substantial por tion of these resources should be put into new capital investment, rather than Into con sumption, this new investment should be of a character that will promote the efficiency and productivity of our country.

these ob Broadly speaking, jectives are being attained.
I believe that is significant and that However, as my colleague the Minister at Trade and Commerce has said, we must not be complacent.

Basically our attention must be directed to our spending and Investing habits.

Our standard ot living has increased to a level undreamed of a generation ago.

Our people have demanded social security, services levels at government and facilities from all on an expanding scale.
Along with our In this scale of expenditures vestment program, has required a heavy ouUay of resources, both physical and financial.

In spite of a rate of saving which is higher than that of almost any other country in the western world, we have not been able to supply all these resources ourselves.

The Intiow of capi tal and the accompanying balance of pay ments deficit rellect this underlying situation.
raises questions as to ownership and control of Canadian industry and resources, and also the question of the servicing of debt.

As to ownership and con this government's position is clear.

We trol, welcome capital into Canada if, when here, it is willing to act as If it were Canadian and it were foreign.

During the past not as if two years there has been increasing evidence, in many Quarters, that foreign capital in this country Is becoming increasingly conscious of its Canadian responsibilities.
This Is a subject that has been vigorously brought to foreign investors by the the attention of Prime Minister and others.

It would be better the desired result were achieved by such persuasion than by legislation.

Any inflow of capital if 2672 HOUSE OF COMMONS to our national The Budget-Hon.
D. M. Fleming As to the servicing ot external debt, I have already explained that a very large pro portion of our national output consists ot stock at capital additions equipment which increases our total pro ductivity.

The inflow at capital has con tributcd to the growth ot our gross national product.
Over the years of our rustory eco· nomic growth has taken place at a faster rate than the additional net financial indebted ness to the outside world which has been in· curred in the course of achieving it, and our ability to service this foreign debt has cor· respondingly Improved.

From the mid-1920's to the outbreak of war in 1939 our net foreign indebtedness was equal to or exceed our gross national product.
During the war years and in the immediate post-war years we made very large loans, amounting In total to more than $2.5 billion, to our triends and allies overseas and to new international In the same years we had to deter much ot the main· tenance and most of the expansion of our social capital, while at the same time all levels of government in Canada were progressively paying off or buying back large amounts ot foreign-held debt.
As a result by 1950 our net to less than one quarter of our gross national product.

foreign indebtedness was equal institutions.

financial in and industries, augmenting Since 1950 we have been expanding very in second· rapidly in resource development, ary and modernlzinr our social capital, at rates con· siderably in excess of our domestic rate of saving.
In thIs period the rate of Increase in our net foreign Indebtedness has exceeded the growth In national output, and the ratio ot net foreign debt to gross national prod uct is currently about 45 per cent.

Thus in relation to our national product our net foreign indebtedness is today less than halt what It was betore the war and our ability is correspondingly goeater.
The to service It net cost of servicing our external debt in 1926-1930 represented more than 4 per cent of our gross national product; in 1950 it was just over 2 per cent, and in 1959 it was just under H per cent.

I do not anticipate that, i!


we manage our· affairs prudently and properly, Canada will indefinitely continue to rely on capital trom abroad as heavily as that our in the last need tor capital from abroad, while fluc tuating from year to year, will continue to decline in relation to our economic develop· ment and growth.

few years.
few years.

I expect Admittedly, if a situation were to arise in the climate deteriorated rapIdly and there would indeed be problems which the financial radically, environment or economic (Mr. F1emlna IEcUnlon).]

import capital in matters of of Individual circumstances.

What assoc.iated with past inflows, but happIly that is not the situation in Canada today.
• We have been following constructive and realistic policies trade and ftnance, policies appropriate to present and are the foreseeable alternatives to such policies?

A program of The imposition and government controls?

restrictions enforcement and quotas?

restraints upon Cana_ dians desiring to travel abroad and on the amount ot money they could take with them?
The creation of a centralizC'd capital issues to provinces, municipaLitics and to private busI_ terms and ness as to where, when, on what I have onl,.

how much they could borrow?

to list a few ot these questions to indicate the obvious reply.

They may be justifiable In peace in the midst of a national crisis.

in a tree society, and prosperity, they are Indeed, some ot them would not warranted.
be believe that some of these so-called remedies would actually cause the disease that they are sup_ posed to prevent or cure.

Government eon.

cause trols, by interfering with freedom, confldence to falter, initiative to freez~ and capital committee which would dictate unconstitutional.

Moreover, to take 8ight.

I Canadians can increase their own domes_ tic capital and make this country financially they are prepared to more seU-reliant practise productivity efficiency, and thrift.
This responsibility falls on all levels of government, private business and Individuals.

increased It We must place emphasis on greater pro.

ductivity and efficiency rather than on sheer size, on cost control rather than on price increases, on greater saving rather than on excessive consumption.
I have every hope that in the mood of renewed confidence In the soundness of our currency, and in the absence of shortages ot goods, both business and the public at large will be disposed to review more carefully their spending pro- grams.

It is the responsibility of In saying this I am fully aware of the ralls to the federal role of leadership that the government.

government to try to establish the condi· tions of financial balance within which the endeavours ot others can be carried out successfully.
Let me assure hon.

members that is discharging this responsibility.

the government In the post-war years, in this country as in others, there bas been a serious threat of inflation.

Some people were actually led to suppose that chronic price increases were inevitable; others even suggested that they less undesirable were desirable, or at least MARCH 31.

1960 2673 than some imaginary alternatives.

Let us give no quarter to such defeatist doctrines.

Inflation acts like a drug on the eeonomic system.


Even small doses breed a craving for more.

Onl!

of the most serious effects of infla tion is that, like other drugs, it erodes stamina and will power.

The will to save, to build lies carEfully and prudently for the future, at the heart of sound financial policy, whether it be the financial policy of the individual, the corporation or the government.
Saving -voluntary, purposeful, constructive saving in an economic system dedi- -is essential cated to freedom ·and progress.

Yet it is this insidi sort of saving that rise and sta ously undermines.

As prices bility disappears, inflation go not to the worker but to the speculator, not to the saver but to the spendthrift.

inflation most the prizes of To contain inflationary pressures the g(lV ernment has reduced its borrowing and has held a firm check on the expansion of govern ment expenditure.
The treasury board has painstakingly reviewed and revised spending programs.

As a result of careful scrutiny we are reducing substantially the demands of the federal government on the financial markets and, through them, on the savinJjts of the Canadian public.

If aU of us, working and saving together, increase the total amount of capital will in Canada, available for sound investment we can reduce our reliance on foreign re In short, we have at our disposal sources.
the means to achieve in a positive way, the objectives which negative courses of action cannot hope to accomplish.

There Is a related question upon which I should like to dwell for a moment.

This is the question of our exchange rate.

The ex ternal price of our Canadian dollar has been high for eight years now and is currently running about five per cent above the United States dollar.
This situation has been brought about mainly as a result of an inflow of for eign capital and reflects the confidence of outsiders in the soundness of the manage ment of our financial affairs.

Admi,t..nlv it lowers the prices received in Canadian dol lars by those exporters who have to sell in World markets at world prices.

It also means a lower price in Canadian dollars fOr many classes of Canadian imports.
On the other hand, imported raw materials and semi-finished goods used by aur manUfacturers, and it has helped to keep down our cost o!

living and cost of producing.

I have said on many occasions and I re Peat now that I would welcome the develop that wauld reduce Jnent af circumstances lowers the cost of it The Budget-Hon.

D. 111.
D. 111.

Fleming the external price of our dollar provided this was brought about by means other than an arbitrary and artificial attempt by the to work against basic economic govel'nment forces.

1 have seen some references to a demand that the government should deliberately "de.

value the doller".

This kind of talk might have been appropriate when Canada was on the gold standard, or even when it main tained a fixed exchange rate.
We have not been on the gold standard for half a century and we have not had a fixed exchange rate for a de<:ade.

An attempt by the government artificially to lower the external price of the Canadian dollar would involve borrowing or raising by taxes very large sums of money with which to buy up foreign exchange.

It might well be that the government could not reduce the in flow of imposing funds sufficiently without direct controls on capital movements and then on the movement of goods.
Apart from the economic objeetions to such policies it would be a very difficult'matter to work out effective technical means of control.

Even then the controls would not be effective unless the ob jective were one which commanded the broad public support which is necessary for general compliance.

In other words we would be embarking upon a gigantic ftnancial specula tion with no assurance of success.
The exchange value of the Canadian dollar is detennined by the free play of the fOrces of supply and demand.

These forces have pushed the rate up, and at some time in the future market forces could drive the rate down.

Many people would be happy aboul such a development, at least if it came about in an orderly manner.
However, those who undertake commitments in terms of United States dollars or other external currencies ex pose themselves to the risk of having to repay at a time when the exchange rate tor the Canadian donar may be quite different from what it is today.

This is a rIsk which the borrower, whether perJ:onal, corporate, pro· vincia1 or municipal must bear himself and is a danger which I clearly wish to stress.
I have referred to thE' improvement In our exports; we must look further ahead, however, and make every effort to preserve and im~ prove our access to world markets so that Canada's exports, which will remain one of the foundations of our prosperity, can con tinue to expand.

In recent years the western European econ omy hns been enjoying particularly rapid and substantial growth.

More than one quarter of our exports 10 to western Europe including the United Kingdom.
A prosperous, politically stable and expanding European economy will 2674 HOUSE OF COMMONS The Budget-Hon.

D. M. Fleming provide increasing opportunities for profitable Canadian trade.

We have been concerned.

however, with the possible political impliea.

tions of economic disagreements within west ern Europe.

We need also to take all practi cable steps to ensure that our trading position is not adversely affected.
of that trade seven association the two regional We have therefore been giving very close attention to the problems that are arising from the emergence of trading groups the European economic in Europe; community of six countries and the European coun free tries.

We have been anxious these arrangements should not lead to inward look ing and discriminatory practices and should not weaken the world wide trading system which has been built up so patiently and so successfully in recent years.
We are therefore seizing every opportunity to put forward the Canadian point of view at meetings with rep resentatives of these groups and with our other trading partners.

Moreover, we are partici~ pants with the European countries and the United States in discussions relating to, and ready to become have declared ourselves members of, a reconstituted organization for economic consultation, O.E.C.C.
; and further we will press that such organization shall subscribe not only to the institutions principles of governing trade and payments but also that members shall honour in these institutions.

In particular, we are con· tinuing to urge European countries to resist the growth of European tariff discrimination by extending their tariff reductions to other countries on a most favoured nation basis.
We have found that our views are shared by the world, many countries in other parts 01' and particularly by those in the common wealth.

The general tariff conference of the contracting parties to the GATT which is to be convened next September will provide an opportunity for a further reduction in world trade barriers and new opportunities tor Canadian exporters.
their obligations international co-operation and the I have dealt at some length on our external position because of the bearing which it has on our domestic situation.

So long as our access to foreign markets is unimpaired and we are able to keep the costs and the quality of our products and services thoroughly com petitive.

we need have no tears tor the fu ture.


The economic expansion which Canada is now experiencing is soundly based; in comes are rising and we have demonstrated a willingness to save; relative price stability confi seems reasonably assured; business is ex dence is high, and capital iuvestment I panding; our export prospects are bright.

[Mr. Fleming (EgUntonJ.)

expect that the forces of expansion will con.

the rates of in.
the rates of in.

tinue during 1960, and that crease we have experienced in 1959 should be maintained throughout the year.

Within this framework I am basing my forecast of 1960-61 revenues on an increase in the gross in 1960 of about 6 per national product cent, or to a record level between $36} and $37 billion dollars.
GOVERNMENT ACCOUNTS 1959-60 The government's accounts for the fiscal year that ends today are set out in detail in tabled yesterday afternoon the white paper and I propose to refer to them only very briefly now.

I should, however, remind han.

members that the figures I use tonight as well as those in the white paper are preliminary and subject to change.

The final figures will not be available until next July Of August the accounts tor the year have been after closed and audited.
The house will in my budget recall speech last April I budgeted for revenues of $5,267 million, expenditures of $5,660 million and a deficit of $393 million.

On the basis of figures in the white paper it Is now esti mated that our revenues for the fiscal year were $5,301 million, our expenditures $5,707 million and the deficit was $406 million.

that Revenues, expenditures and the total deficit all were very close to forecast.
Revenues were $34 million or two thirds of one per cent higher than last April's budget estimate; ex three penditures were up $47 million or fourths of one per cent more than forecast; and the deficit which was forecast at 7.5 per cent of revenues has turned out to be 7.7 per cent of revenues.
Defence expenditures were $175 million less than forecast but this was more than offset by increases of $87 million for higher charges for interest on the p'ublic debt, $50 million tor larger subsidy and tax sharing payments to provinces, and approxi mately $55 million for various payments in connection with our agricultural and fann assistance program.
Over and above these expenditures that are charged to the budgetary accounts we have lUlder authority of parliament dis~ bursed considerable sums for loans, advances and a number of other essential purposes.

These included loans of $325 million to Cen tral Mortgage and Housing Corporation, $233 million to the C.N.H.-which, however, repaid $489 million on account of these and earlier loans from the proceeds of public issues of government guaranteed C.N.R.
bonds-$30 million to the fann credit corporation, $23 million to the S1.

Lawrence seaway authority and $21 million to the Northern Canada power these commission.

During the fiscal year MARCH 31.

1960 2675 disbursements amounted in all to $945 mUlion.

To meet these outlays $942 million was avail able from the repayment of loans, net annuity insurance and pension receipts and other sources.

Thus a net amount of $3 mlllion wu required for all these non-budgetary trans actions.
This compares with a net cash re quirement 01 $664 million to ftnance our non budgetary transactions in the previous fiscal ,.ear.

The budgetary deficit of $406 million and the net amount ot $3 million required for non~budgetary transactions have been fi~ nanced by an increase of $333 million in the government's outstanding unmatured debt and by a decrease of $76 million in our cash balances.

Combining the net new issues of C.N.R.


guaranteed bonds, the net new Isaues of direct government of Canada bonds and the reduction in our year~end cash balances.

our total net cash requirements for the year have turned out to be $900 million.

OLD AGE SECURITY At this point I should like to report briefly on the old age security fund.

As hon.

members the Old Age Security Act provides a know, The Budget-Hon.

D. M. Fleming pension of $55 a month to every eligible person 70 years of age or over.
Prior to last year these payments were financed by con tributions of 2 per cent on corporate and incomes, with a maximum con personal tribution of $60 on personal incomes, and a 2 per cent sales tax.

Under last year's budget, these contributions were raised from 2 to 3 per cent to take effect January 1, 1959, for corporate incomes; July I, 1959, for personal incomes, with a maximum contribution of $90.

and April 10.

1959, for the tax on sales.

During 1959~60.


pension payments from the tund totalled $574 million and revenues credited to the fund amounted to $550 million.

The deficit of $24 million for the fiscal year was covered by a temporary loan.

May I insert in Hansard at this point, Mr. table I-showing the contributions the Old Age Speaker, and pension payments under Security Act for the last four years.

Mr. Speaker: Has the minister leave to have this table inserted at this time?

Some hon.

Members: Agreed.


[Editor's note: The table referred to is as followa:] TABLE 1 OLD AGE SECURITY FUND (ill milliODI of doHan) IPS6-Si 1957-58 1958-59 ",...... Cootribution_ Penonal iDcome w _ Corporate illcome tlU •.........••........••......• _.

Sale.

tax _.•.. _.•••..... _.•• , 125.0 67.3 179.3 135.0 60.7 175.8 146.4 55.3 173.6 185.6 91.3 273.0 -~_--=.=--~=-=-----=:.

:..- 371.

6 37l.

5 375.3 5411.9 Penlion paymentll Deficit _ _ _.

_ .

_.

379.1 473.9 659.3 S7•.


0 -:..::.:.".,.------=.=--~=-::.,..::.

:.,:::- 7.5(1) J02.4(1) 184.0(1) 24.1(1) (I) Charged to budgetary expenditure uader appropriation by Parliament.

(I) Temporary loan trom the Millister of Finance.

DOMINION-PROVINCIAL RELATIONS (Translation): in our created Mr. Fleming (Eglintonl: During the past there have been important develop year relations with the ments financial the provinces.
On July 6 and 7, 1959, newly dominion~provincial com mittee of ministers 01 finance and provincial treasurers met in ottawa to discuss a wide range of subjects connected with these finan cial arrangements and to make provision for their systematic study.

This committee met again in Ottawa on October 15 and 16 for fUrther discussions.
At the October meeting I the treasurers and provincial informed ministers of finance that it was the intention of the government to ask parliament at this session to approve legislation continuing for two years the increase from 10 a further to 13 per cent in the provindal per cent share of the yield from the personal income tax.

As hon.

members are aware, this legisla tion is at present before the house.
This measure also contains important provisions relating to university education and fedc- ral-provincial co-operation.

A solution has the been offered which takes into account 2676 HOUSE OF COMMONS The Budget-Hon.

D. M. Fleming the province of long-standing objection of Quebec to payment of' federal grants to the universities of that province.
The alternative provided in the measure will enable any province to replace the present federal grants to univen;ities by additional provincial grants without placing greater burdens on its tax payers and without increasing the cost to the federal treasury.
I of conference also stated that At the October meeting of the committee treas of ministers of finance and provincial urers, it would be the intention of this government to arrange for a dominion-provincial prime ministers and premiers in mid-1960 to discuss the financial federal-provincial period after the expiry of the present agree ments March 31, 1962.

As hon.
As hon.

members are the Prime Minister on March 24. aware, wrote to all the provincial premiers invit ing them to a plenary conference in Qt· tawa, July 25-27 of this year.

We hope that this meeting will make further major contribution to the achievement ot harmoni- relations for a ous fiscal relations between the dominion and the provinces.

(Text): tederal revenues.


From a budgetary standpoint our fiscal relations with the provinces are extremely important since the amounts paid to or for the provinces absorb nearly one quarter at I should like to our total place on record table 2 showing the cost to the federal treasury in recent years of our fiscal arrangements with the provinces.
This table includes unconditional payments and tax abatements as well as conditional grants and certain closely related payments, the grants to universities and the grants to munIc_ ipalities in lieu of taxes.

It will be seen that the total amounts paid or abated to the provinces have approximately doubled over the past four years.

Mr. Speaker: Has the minister have this table inserted in Hansard?

leave to Some bon.

Members: Agreed.


[Editor'$ note: The table referred to b aa follows:] TABLE 2 FEDERAL CONTRIBUTIONS TO THE PROVINCES fin millions of dollaCll) 195fh57 1957-58 1958-59 1959--60 (preliminary) 1960-61 (estimated) A. Uncondition:l.1 Paymlllltll I. Statutory subsidiea.

........... 2.

Tuabatements (eatimated) 3.

Tar rent.als .......................... 4.

EQu:>.lization (indudinsc stabilisation) 5.50 per cent shnre of income tax on .

.... 6.

Atlantic Provinces adjustment KTant 7.


Term 29 award (Newfoundland) power utilities.

.

... 22.8 157.4, 36.5.9{ •., 22.0 215.6 213.8 139.5 7.1 21.6 2;.~.

t 249.0 149.1 '.7 25.0 13.6 21.4 :!W.6 218.6 ISO.

; 9.0 25.0 7.3 Sub Total ... ~2.7 6.58.3 142.1 821.6 B. Conditiom'll Paymentll- 8.

Agriculture ..... 9.

Health.. 10.

Hospital in5\lrance.

11.

Welfare ........ 12.

Vocational training .. 13.

Highways and transportation.

14.

Resource development..... 15.


Other.... .. ........... ........... Sub Total.

........ C. Payments for the benefit of provincial inati- tution_ 16.

Univel'3ity grants, 17.

Grantll to municipalities in lieu of tllle-!l on federal government prall" erty Sub Total.

.. ........... TOTAL.

[Mr. Fleming (Eallnton).l .9 36.4 38.'

1.0 26.9 I., 2.'

111.0 1.0 34.6 48.1 4.2 "'.9 '.1 I.'

144.8 16.0 16.6 9.7 25.7 689.4 17.5 ,'-' 837.2 1.9 46.1 04.7 73.7 7.'
53.7 '.7 1.7 248.1 25.5 21.9 47.4 '.2 46.0 149.8 86.9 '.5 58.1 16.0 9.'

383.3 26.1 21.5 47.6 21.0 335.8 290.1 18Ui 9.0 25.0 7.7 870.1 I.'

40.2 167.0 00.3 9.'

53.'

12.4 15.9 389.0 19.0 22.8 4t.

8 1,037.6 1,252.5 1.300.9 MARCH 31.

1960 2677 The Budget-Hon.

D. M. Fleming debt a sound debt management policy could be developed and carried forward.

Public debt transactions during 1959-60 included the issue, refinancing and redemp tion of a large volume of government securi ties.
However, as a result of the success conversion loan operations undertaken ful during 1958 the volume of debt transactions in 1959-60 was considerably less than in the previous year.

the increased outstanding During the year now ending we have sold $1,048 million of new marketable bonds and of issues we treasury bills by $530 million.
In the same period we paid off $1,550 million of market issues so that the total volume of direct government of Canada marketable issues outstanding at the end of the year is only $28 million higher than at the beginning.

In addition we Canada savings bonds and paid off or re deemed $1,170 million of earlier Canada savings bonds.
sold $1,445 million of new· After taking into account the net decrease of $20 million in bonds held in our securities the investment and sinking fund accounts, unmatured direct debt held outside these government accounts was $333 million higher at the end of the fiscal year than it was at an the increase of $1,439 million during the previous year and is an indication of the progress we have made.

beginning.
beginning.

This compares with With the consent of the house, Mr. Speaker, may I insert here three tables showing the size, distribution, average term and total interest cost of our public debt over the past 10 years?

Mr. Speaker: Perhaps the house would give consent at this time to the insertion of such tables as the hon.

minister proposes to use Some hon.

Members: Agreed.
Members: Agreed.

[Editor's note: The tables referred to are as follows:] the cost to the federal Mr. Fleming (Eglinlon): The preliminary f1.gure for treasury of unconditional payments and tax abate ments to the provinces in 1959-60 Is $822 million, an increase of $80 million over the previous year and $163 million higher than there will It is estimated that in 1957-58. be a further for 1960-61 increase in cost of $48 million.
Of the estimated increase of over $200 million in unconditional pay ments and abatements between 1957-58 and the fiscal year 1960-61, more than one hal!

is the result of new payments or changes in the basis of payment or abatement.
The increase in the provincial share of the yield from the personal income tax from 10 per cent to 13 per cent, which has beneflted the provinces by $120 million in the past two years and it is estimated will mean a further $68 million to them in 1960-61, by itseU accounts for approximately one third ot the total increase.

Conditional provinces were also substantially higher in 1959-60, increasing by $135 million to a total of $383 Seventy per cent ot large million.
increase was the result of increased contribu tions under the Hospital Insurance and Diag nostic provinces particIpated in the scheme.

There were, how ever, also large increases in grants for wel fare and resource development.

It is esti mated that there will be a further increase of $6 million in conditional payments in 1960-61.
Services Act as more payments this the to DEBT MANA-CEMENT In reporting to -the house a year ago on the management of our public debt I pointed out that the large conversion operations under taken 1958 had removed a source of heavy pressure on the substantially bond market the average term of our lengthening out during the that by summer and of 79951.

(1-170 2678 HOUSE OF COMMONS The Budget-Hon.

D. M. Fleminll' TABLE 3 GOVERNMENT OF CANADA Gr068 and net direct debt March 31 19500..•.•.•..•.•.

1951.
1951.

1952.

11153 ....•....•.

111$4 '968.

IIIsa 1957.

1958.

111511 .. 1000.. .

.

Funded Debt Total Debt Net Debt ($ billion) ($ billion) ($ billion) 15.2 15.0 14.7 14.8 14.6 14.5 15.4 14.~ 14.2 15.6 15.9 16.8 16.9 11.3 17.9 17.9 18.0 19.1 18.3 18.4 20.'

21.0 11.6 11.4 11.

2 11.2 11.1 11.3 11.3 11.0 11.

0 11.7 12.1 TABLE 4 GOVERNMENT OF CANADA Interest Coot of GroM and Net Direct Debt Net Debt p" Capita , ."

81. m 75' 727 ... 717 '" 84.

88' 88' As lir eent .N.P.

of .,..

71.


3 52.8 ~6.5 44.4 ~5.3 4i.6 ".0 ,<.8 '.5.8 34.'

Year ending Mareh 31 Interest paid on tota.l debt Interest and other e..rnings from Investments Net Interelt C~I Net Interest .... p.e.

01 net debt (million!l) (millions) (millions) .

.

.

.

1950.......... li51 1%2.

1953 1954 1955.

19M.. 1957 ... 1958.

1959 1960 .

.

.

.. .

"'0 432 '" '" • 78 478 .93 '20 "l9 "" 738 '92 00 '18 117 IS' 13' ."

"" '" 22.

23' '34' '" '14 '34 32• '44 34.

'13 310 ."


'" '.00 2.9' ,... ,... ,... ,... ,.., '.92 2.85 '.30 4.13 TABLE 5 GQVERNMENT OF CANADA Maturity and Distribution of Direct and Guaranteed Debt December 31 Avera(C term of Debt- y~.

Amount of Debt held by Bank, Government AC(:ounts General Public ($ millioos) 1950.

1951.

.. 1\lS2.

1953, 1954.

19S5, 1956., .

1957 1958 .

19OW.•........•.

1960 (Mar.

23) .• 8.1 7.'

6.8 6.'

7.'

6.'


6.6 6.0 10.3 ,., ,.. 5,093 5.052 5.176 5,184 5,633 5.540 4,950 5.104 6.190 5,488 5,487 • Eu:ludill& Canada Saving!

BODds aDd Perpetuala.

847 ',009 1,102 1,314 ','" 1.491 1.518 1,367 1,258 92' 840 9,952 9,213 ',009 9.139 8.629 8,969 8,766 8,693 8,968 10,720 10,990 P.C.

held by Gen. Public 62.6 OS.7 ..., ".4 55.8 ".1 67.5 57.3 M,6 62.0 .3.5 MARCH 31, 1980 287.
Mr. Fleming (EgHntonh These tables show that at the end of the current fl.sc:a1 year our net debt is $12.1 billion, which is about $400 million higher than it was at the beginning of the year.

In per capita terms it was $849 ten years ago, $717 five years ago, and has now dropped to $681.
A$ a percentage of gross national product our net debt at 34.9 per cent now stands at a lower figure than for any previous year except 1958. tonight Last year I mentioned the decline in the holdings of Canada bonds by the general public that had been going on more or less steadily since the end of the war, but noted that since september 1958 there had been a sharp reversal of this trend.
1 am very pleased to report that during the past year the general public's holdings of Canada bonds have continued to increase and that they are now $1.5 billion more than at March 31, 1959, and $3 billion more than on September 30, 1958.

The latest figures show that the holdings of the general public are now 63.S per cent of the total outstanding lunded debt compared with 62.6 per cent at December 31, 1959, and 57.8 per cent at June 30, 1957.
Net Interest payments over the whole year amounted to 4.13 per cent of our net debt the year, as compared with at the end of 3.30 per cent in the preceding year.

This rather sharp Increase is largely due to the fact that the net debt mounted rapidly durin, the latter part of 1958-59, and interest on the increased debt was paid for only part of that year.

In HI59·60 interest on this in· creased debt was paid for a lull year.
The average interest rate on our total unmatured debt stands loda)' at 3.96 per cent compared with 3.54 per cent a year ago.

CQVJ:;RNMENT ACCOUNTS 1960-61 1 turn now to the budget prospects for the fiscal 1960·61.

The main estimates for year totalling $5,740 million were tabled early in February.

In addition there are bound as to be some supplementary estimates.

usual Provision will have to be made for the C.N.R.
this will deBcit for 1960, although I expect less than the 1959 deficit, and be somewhat I must assume that there will be some pay ments under the agriculture stabilization act ex· and penditures.

additional statutory some also Offsetting these there will be some lapsings in appropriations although these are likely to be less than in previous years because of the very careful and exacting scrutiny of departmenlal estimates made by the treasury board this year.
As I said on tabling the main estimates, although we have provided for sustaining and in some cases increasing 799514-1701 The Budget-Han.

D. M. Fleming the expenditures relating directly to naUonal development in such fields as atomic enercy, exploraUon, scienU.ll.c research, transportation and communication, controllable costs have been carefully scrutinized and sharply re strained.

There i5, however.
There i5, however.

one substantial addi· tional item of expenditure in prospect which I should report to the house and which re lates to the review of salaries in the public service.

When I announced on October 13, 1959 that the government was unable to assume, durlni: the 1959-60 fiscal year, the cost of carrying into effect the recommendations of the civil service in the for salaries of many classes of civil servants, J stated that: commission increases its The decision taken by the government.

in th.
in th.

light of tlnanclal position, will not preclude consideration beln, given to the special poaItion of certain categories of civil servants as the .ov ernment·.

tll'lancial clrcumlltal'lces permit.

re In conformity with this undertaldng, visions of the salaries of the nursing classe.

where obtained were conditions approved by the treasury board on October 15.

1959 and January 28, 1960. special Our public It is now nearly three years since there increase in civil service has been a general salaries.
The increase was general last authorized by the present government in July, 1957 and made retroactive to May I, 1957.

In July, 1958 the civil service commission reported that a general increase in salaries at that time was not warranted.

A year later, in June 1959, the commission made recom mendations to the government covering the great majority of classes in the civil service.

This report recommended widely varying in creases for several hundred classes of em ployees.
For reasons which I made public last October the government decided that it thost: recommendations.

could not Implement the widest range of jobs and posititns, irom unskilled labourers to research scientists.

The relative pattern ot wages and salaries for such di versified groups in a dynamic society changes with the passage of time and with shifts in the economic and social structure.

It ha.
It ha.

seemed to me that Instead of embarking upon periodic general wage and salary increases across the board, It would be a more sensible approoch to develop a continuous cycle 01 reviews and recommendations.
In this way the salaries of dit'lerent groups or clusters of related classes of employees can be re· viewed in successive months or quarters In the light of rates of pay prevailing in private employment and in the light of our dem onstrated capacity to recruit and retain the right number and quality of public servants.

contains service 2680 HOUSE OF COMMONS The Budget-Han.
D. M. Fleming I have discussed this approach with the chairman ot the civil service commission and r am given to understand that the commission agrees that there is merit in this suggestion.

We have an excellent public service in Canada.

In terms of ability and integrity it compares very f.:lvourably with those ot any other country.
Now that up to date intorma tion on the current levels ot salaries paid by private employers is becoming available in the form at preliminary reports by the pay research bureau, and as the budgetary situa tion now makes action possible, the govern ment will accelerate its program of imple~ menting recommendations civil service commission affecting 'a number of classes in the public service where the com parison with outside rates and the recruitment situation justify action.
from the that principally I am happy to report the treasury board, taking into consideration the degrees ot disparity between civil service salary rates and those at private employers and the ,prob lems ot recruitment and retention of qualifted employees, has now approved recommenda tions from the civil service commission in volving some 50,000 employees ot the public service, and in stenographic classes, but also including some of the protessional classes, such as meteor ologists and veterinarians, where recruitment the essential number ot and retention ot qualified officers have become increasingly difficult.
These revisions in salary ranges will be elTective from tomorrow, April I, 1960 and will involve an increase in expenditure during the fiscal year ot about $15 million.

Det.

:lils of these revisions will be made public as rapidly as possible ovcr the period of the next ten days or two weeks.

clerical the With the same principles as criteria, a review of all other classes in the public service will be carried out by the civil end of service commiSSIon forthwith and is expected.
the the to be completed before recommendations are received summer.

As from the civil service commission, they will be promptly cosidered by thc treasury board on a cl:iss by class basis.

After considering all the available data .

:Ind taking into account our unremitting efforts to effect further economics and ef ficiency in all government activities, I have concluded that our budgetary expenditures for the fiscal year ending March 31, 1961 will be approximately $5,880 million.

defcnce expenditures.


The other This is $173 million higher than our budg_ etary expenditures for the yror now ending.

this increase Is Approximately one third ot two in thirds part is in our non-defence expenditures and is due to higher public debt charges, higher civil social security and wel!are payments reflecting the increase in our population, and increased out lays under the government's programs de signed to promote national development.
service salaries, higher information, Revenue forecasting, as I have observed on previous occasions, always presents for_ midable difficulties.

However, on the basis ot a projected gross national product ot be tween $36& and $37 billion tor 1960 and in I have the light of our present concluded that our present tax structure, with no change in rates will yield $5,892 million in 1960-61.

This is $591 million more than our the convenience ot hon.
members, For this po;nt a may I insert in HanS!lrd at table showing my estimate ot the past year's revenues and what we may expect to receive in the ensuing year from the present tax structure.

revenues in the past year.

[Editor's note: The table referred co foEows:} TABLE 6 REVENUE FORECAST BEFORE TAX CHANGES (In millions of dollars) Prelimina.ry 1!J.~9-00 Foree.~st 19r.1)-61 Person"l income tnx C"rporILtion inoome tax.

No~-resident tax.

.


EIlta.tes tax .. CustOms duties !hlclOtlU Other dut;es Bnd tILxes .

.

.

.

.

.

Tot.1!

taxes.

Nun-tal revenue ... Total revenue .

(Mr. Fleming (Egllnlon).)

• l. 55.; 1,140 7.'

", 88 7.37 628 4,750 '51 5,301 • ,., 1.750 1,340 80 5RO 7!13 670 ti,300 '" 5,892 MARCH 31, 196D 2681 With revenues estimated at $5,892 million and expenditures at $5,880 million and as swning no change in our existing tax laws, I should expect a surplus of $12 million for the coming year.
During the coming year I expect the old age security fund to show a small surplus of revenue over expenditure for the first time since the fund was inaugurated on January I, 1951.

Between January I, 1951 and March 31, 1960, the old age security fund has ex perienced deficits totalling $630 million.

Of this amount over $500 million bas been tax revenues and paid of!

out of general about $100 million was charged in 1954 to our balance sheet against active assets.
There remains outstanding now a deficit incurred during the past 12 months of $24 million.

Revenues to the fund from the current 3-3-3 formula in 1960-61 will be about $630 million; pension payments after making provision for certain amendments torecast in the speech from the throne will exceed $590 million.

If these expectations are realized the prospective surplus will be sufficient to extinguish the presently remain ing deficit in tbe fund.
reserve Before proceeding to discuss the tax policy appropriate to our present and prospective circumstances, I should like to reler briefty to our non·budgetary transactions and our cash requirements for 1960-61.

In addition to the expenditures for administrative and other governmental services that are included in our budgetary accounts, we payout each year substantial amounts of cash as loans to or investments in a wide variety of es sential public undertakings.
These outlays are not considered as budgetary expendi tures as the principal is usually repaid, and, in almost every case, they earn interest or produce revenue for the government.

The Budget-Han.

D. M. Fleming the transactions in our various annuity, in surance and superannuation accounts.

Tbus the net cash required for all these non·budg etary t!

'ansactions, excluding the exchange fund requirements, which cannot be fore- cast, will be of the order of $225 million.
With a prospective budget surplus of $12 million, our net casb requirements, including UlOse of the CoN.R.

will be about $210 mU lion as compared with $900 million during the year just ended and $1,273 million in 1958-59. rAX POLICY As I said a year ago, and as I have repeated in this house and elsewhere on a number of subsequent occasions, sound budget policies must be flexible and adapted to changing eco nomic conditions.
The onset of the 1957 re cession called for taxes, higher ex~ lower penditures and heavier capital commitments in order to offset the downward trends in the private sector of the economy and the decline in the external demand for some of our basic products; and I put such pro posals before the house in December, 1957 and again in June, 1958.
The fiscal policies we followed during our first year influence in offlce had a major in reducing both the depth and the duratioo of the recession, and by the third quarter of 1958 the low point of the recession had been passed and the forces of expansion began to gather momentum.
By the spring of 1959 recovery was well on the way, and in my budget speech a year ago I recom mended to this house policies which were designed to bring us back to a position of budgetary balance as soon as the economy the recession had recovered the losses of and was moving flnnly forward and upward to new record achievements in production, employment and investment.

Against this, we receive each year large recorded as amounts of cash that are not bUdgetary revenue.
For the most part, these Consist of repayments of loans made in previ ous years and moneys received by the gov ernment as net premiums, contributions and in earnings in connection with annuities, surance or pension funds.

During 1960-61 we shall probably require about $290 million for housing loans, includ ing new and existing commitments, about ~150 million for C.N.R.

and T.eA.
and T.eA.

capital Investment and refunding, and perhaps as much as $100 million for other non-budgetary Purposes such as -the st. Lawrence seaway the aUthority, farm credit corporation and other crown companies.
Against this we shall probably have somewhat more than $300 million avail able from the repayment of loans and from the national harbours board, The position we have now reached, with its sound prospect of a fully balanced budget, represents the fruits of carefully designed policies carried forward over the past 18 months.

This is not something that has just happened.

It is the result of considered aims and efforts.


It began with the great conversion loan of the summer of 1958 which made pos_ sible a policy of sound debt management which in turn restored public confidence in government credit and in our determination inflation.

to control It was continued in the expenditure controls and the tax changes of 1959, and is reinforced in this year's program of reduced control lable expenditures balanced by the continued promotion of constructive national develop ment.
the powerful forces of I am happy to say that we have reached this goal of a balanced budget without the 2682 HOUSE OF COMMONS The Budget-Han.

D. M. Fleming necessity of recommending any further in creases in laxation, indeC!d at a level of taxa tion which in relation to gross national prod uct will be lower than in any year between 1950 and 1958.

Another fruit oC our policiC!s over the Pilst year and a halC is that during the coming year we shll11 be making very modest claims upon the capital market.
Our net nt!w bor· rowings, as I have a!r('ady indic::.ted, will be about $210 million.

This will greatly ease the problems oC provincial and municipal govern ments and also oC private industry in meeting their essential financial requirements in the domestic market.

If other levels of govern ment follow similar policies of prudenl [man· cial management they too should experience less difficulty than in any recent years in meeting their basic financial needs.
As I said in my opening review of economic conditions, we are anticipating a year of solid expansion and balanced growth.

The main inft.ation arc quiescent.

We still forces of have, however, some slack in certain sectors of our productive capacity, though I expect to see these diminish as the year progresses.
While I look forward to the day when we can undertake a measure of orderly reduction in our public debt, present circumstances do not, in my judgment, wOlrrant an increase in tax rates in order to expedite the retiremen t of debt.

In the light of all these facts and prospects I am proposing no major tax changes in any fields this year.
I shall, however, be recom mending to the house a number of technical amendments to our taxing statutes, all of them designed either to remedy certain anomalies that have developed or to close certain loop holes for tax avoidance that have been dis covered, or special circumstances.

to meet certain other INCOME TAX In the income tax field thcr~ will be quite I refer now only to those of general technical amendments but a number of shall interest.
I am proposing an increase in the maximum amount of medical expenses that can be de ducted in calculating taxable income.

The existing limits have remained unchanged for some years, at the levels of $1,500 for a tax payer of single status, $2,000 for a taxpayel' of married status, and $500 for each de pendant but not exceeding $2,000 in respect of these dependants.

Over a period of years in the costs of increases have taken placC!

medical care and in the accepted standards of medical care.
The maximum limits that were once considered appropriate are increasingly found to impose hardships upon people of [Mr. Flemlnl" (EgUntonl.J moderate means.

The new limits I am rp.com.

mending are $2,500 for a taxpayer who is taxpayer of married single, $3,000 for status, and 5750 for each dependant but not exceeding 53,000 in respect of dependants.
a I shall also bring forward an amendment to provide a deduction from certain items of income, such as superannuation, pension or death benetHs, on account of the estate tax that has been paid on the asset correspond_ ing to that income.

This measure is being introduced to alleviate a problem that some the times .. ffeets the financial widow and the children of a deceased tax payer.
The purpose is to provide relief in certain cases from the so-called double im_ pact ot estate tax and income tax, which may deplete unduly the resources of the sur_ viving family.

resources of about board.

Concern exists I am proposing to provide for the appoint_ ment of.an additional member of the tax ap peal delays encountered in connection with appeals.

The enlargement of the board will implement a proposal set forth in the report of May 8, 1959 by the standing committee on estimates.
I am also bringing forward an amendment associated to deal with the problems of corporations to which I drew attention last year.

At that time I said that perhaps it was becoming too easy to divide a corporation into a number of smaller components, each ot tax which may qualify for the low rate at on its first $25,000 of income.

indicated that consideration was being given to the possible necessity of introducing some ap propriate measure to deal with this method In the meantime turther of tax avoidance.
study has indicated an amendment of this kind to be necessary.

I There are two other highly complex issues relating to the income tax law to which much study has been devoted but in respect of which I am not yet ready to make specific: recommendations.

I am, however, proposing two separate courses of action.

In various parts at The first is the question of the application the income tax law to employees' profit of sharing plans.
the country increasing use is being made of plans by which employers share a portion of the annual profits with employees, thus provid ing a source of funds to assist the individual to plan for his eventual retirement.

Special tax rules for profit sharing plans have been in existence for These rules, however, do not permit employees to defer taxes on amounts contributed to these plans on their behalf.
Largely for this reason they have been criticized as being insufficient to allow the fulfilment of the potential social usefulness of profit sharing plans.

some time.

MARCH 31, 1960 2683 of .My intention in this matter is to follow the precedent established some years ago in connection with the Income Tax Act and more recently with the Estate Tax Act.
I propose to introduce toward the end of this session a separate bill which will incorporate a new approach to the taxation of the several components sharing employees' invite the house to give tilis plans.

bill first reading but to proceed no further at full op~ this portunity and organizations to study the bill and make their views known to the government.

Considera~ tion will then be given to the incorporation of this new approach into the Income Tax Act next year.
This will provide all interested citizens session.

I shall profit for The improved facilities to be made avail· able for employees' profit sharing plans will constitute an important piece of social legisla tion within the framework of the Income Tax In its distinctive way, this will supple Act.

ment social security the growing body of measures that have been sponsored by the It may be that the medium of government.
profit sharing will provide fresh opportunities for capital, labour and management to work out new forms of co~operation amongst them~ selves in various instances.

Neither expense nor obligation will be imposed.

however.

upon groups and organizations that do not choose to assume them.

The second complex question that requires fresh study and consideration pertains to the designation of surplus under section 28(2) of the act.

The central issue is the taxation.


as personal income or otherwise, of earnings that are distributed or are available for distribu tion in various forms by corporations.

We shall be undertaking a comprehensive study of these matters during the coming year.

I shall welcome considered expressions of view from all interested persons and organizations.

ESTATE TAX The new Estate Tax Act has been in force It has received general since January I, 1959. public approval.
At the same time expe rience has indicated a" number of points at which it can be improved, and I shall place before the house a number of amendments for this purpose.

Most of these will be of a technical nature and on balance they will benefit the taxpayer.

An amendment of general interest will provide for the reopening of the assessment of an estate within a fixed period of years and the refunding of estate tax when, tor example, a life annuity is terminated prema turely.
It sometimes haoppens that an imper.

tant asset in an estate is an annuity to the surviving widow.

This annuity may come to an end if she dies or if she marries again.

It The Budget-Han.

D. M. Fleming is nevertheless valued for purposes of estate tax on the basIs of the prescribed mortaHty tables.
The proposed amendment will provide that where certain classes of income rights are terminated or altered within four years the assessment of the death of the testator, may be reopened on request and appropriate adjusbnent made.

SALES AND EXCISE TAXU I am placing before the house a small number of amendments which will affect the application of the Excise Tax Act.
I am proposing that electric heating equip ment designed to be permanently installed as part of a building heating system should be exempt from sales tax.

The effect will be to permit this method of household heating to compete for the market on the same terms as other methods of heating.

unless such hardware schedule I am proposing that manufadurers of doors, windows and window frames should be re quired to pay sales tax on the hardware attached to or sold with doors.
windows and is window frames III of specifically exempt under the acL The standard items of hardware that are used with doors and windows are.

in fact.

listed in schedule III.

The purpose of the amendment is to remove some uncertainty that bas existed with respect to some special items of hardware.

The result will be that the whole group of manufacturers concerned will be more fairly and equitably treated as amongst themselves.
In order to avoid the possibility of mis understanding I shall mention a compara tively minor amendment intended to prevent private individuals who purchase yachts from avoiding the imposition of sales tax in re· spect of the materials that are included.

This will not shipyards, which will continue as before to purchase the construction of ships free materials for of sales tax under licence.

commercial affect the CUSTOMS TARIFF I turn now to matters relating to our to CUstoms Tariff.
place before the house and I shall also be mentioning some new references to the tariff board.

I have six resolutions Four resolutions relate to textiles and con tariff negotiations with tain the results of other countries designed to give effect to reports received from the tariff board.
The reports in question are those relating specifi~ cally to cotton and cotton products, to silk, man-made fibres and their products, to textile wastes, slivers, rovings and yarns, and also to wool fabrics other than those covered by tariff items 5Mb on which action has already been taken.

2684 HOUSE OF COMMONS The Budget-Han.


D. M. Fleming I should perhaps add that, as th~ house knows, I received from the lariff board a f~w weeks ago cne furlher report on textiles rclating to hosiery and knitted goods, and within the textile field the tariff board has to report on a misceUaneous group of still products including woollen clothing, hats and caps, coatcd fabrics, laces and embroideries.

Ncgotiation;; on these products will be under~ taken in due course.
Negotiations will also be undert:lkcn in relation to the tariff on record ch.an;ers on which I have also re· celvoo a report from the board recently.

The negotiations related to the textile tariff changes proposed tonight were undertaken with seven of the other contracting partics to the general agrecment on tariffs and trade, specifically the United Slates, the United Kingdom, France.

Italy, Benelux, Japan and Peru.

In addition.

consultations wHh other countries were required under GATT pro· cedures.
I am happy to be able to announce that all -the necessary negotiations and con· sultatIons with all of these countries have been successfully completed.

In our in the case of the proposed increases them.

However, As the house is already aware.

taritl' board recommendations often.

perhaps usually, in· clude proposals for both increases and de~ creases in rates of duty.
Sometimes it is found In the subsequent negotiations that the other countries concerned are ready to accept the proposed decreases as fuU compensation taritts for against the particular group of textile tariff items nego tiated on this occasion, it was found that the increases, of which the most important relates to coloured cotton fabrics, somewhat over balanced.

to conclude ncgotlations.

we found it necessary to reduce about a score of Canadian tariff rates on items outside the textile field.
The implication of this is that the canadian textile industry Is receiving some additional protec tion.

as proposed by the tariff board, but that this is being matched by some reductions of taritl's in other fields.

Some of these reduc tions were requested by Canadian industry white others involve quite sman reductions from relatively high rates of duty which should not damaie the industries affected.

the decreases.

Hence.


in order I mentioned earlier that there were four relating to textiles and textile resolutions important of negotiations.

Much the most textile these covers the substance of our negotiations including the additional items outside the textile field to which I have just referred.

A second contains changes that are form.

A third provides merely matters of for a much-needed definition of "man-made fibres"; this is a technical proposal put for ward by the tariff board.
A fourth resolution {Mr. Flcm{na: (EIUnton).]

amends an existing drawback item relating to textiles.

I should also add that, again in conformity wilh Ihe!

board's recommcndations, some!

temporary items established in past years by order in council arc being revoked forthwith, while others will be permitted to eApire O!l June 30 of this year.

that this year, Two further resolutions cover miscellaneous tariff changes, of which there arc 15.
This is an unusually small number and I should ex~ plain that in considering requeslll for tariff alterations.

we had vcry much in in the autumn an im mind the fact tariff negotiations under portant round of GATT will be initiated.

In a good many cases we decided that it would be imprudent to take action on the Canadian tariff in ad the vance of these negotiations.
Many of proposals that have been put to us during the past year for changes in tariff rates may find some place in the forthcoming negotia_ tions.

six The resolutions In these two resolutions covering miscella neous changes, the only alterations to which I might call attention are those relating to instant potatoes and seismograph bits.

Pro duction in Canada of both these items has only recently commenced, and it is proposed to provide for modest rates of duty.
together propose changes in 123 tariff items.

Of these changes 20 are purely formal; they simply involve the renumbering of existing items as a matter of convenience.

A further 49 involve changes in nomer.clature without alteration in the rates of duty.

Sixteen involve increases In the rates of duty that will be payable, while 38 involve decreases.
As on earlier occa sions, I should warn that these bare statistics are not very revealing or conclusive, but they do serve to indicate the general balance and moderation with which this government is approaching taritt matters.

important, As I said earlier, I am planning some new references to the tariff board.

In doing so it Is of course necessary to take into account the work which Is already before the board.
This Includes, in addition to a substantial the remaining parts of number or appeals, the textile reference, a reference respecting electronic items and, most the very substantial reference embracing vir tually the whole deld of chemicals.

Ob viously.

with such an agenda already berore It.

we cannot ask the board to take on much more.

However.
However.

there is one section of the tariff which, on the basis ot representations that have been made to me, I am convinced requires the attention of the board at a fairly early date.

This is a series made up of so·called end use items which provide special rates of duty for machinery and equipment MARCH 31.

1960 2685 The BlldQet-Re,ollltions rates, now act in certain specifted uses such as the mining industry and the oil and gas industries.
We bave here, mainly in items numbered from rates which flOa to 410z, a mixed bag of were intended, when they were introduced, to give concessions to the industries named but some of which, due to the change of other tarit'l in fact as obstacles.

Accordingly I shan be asking the t&rift board to review this particular group of tariff items.

In addition I shall also be assigning three tasks ot much smaller dimensions.

but of to the board.


some uriency and difficulty, One relates rates of special concern to the few firms in Canada which undertake the decoration of chinaware and glassware.

The Department of Finance has had substantial correspondence on this subject over several years and, since we have not been able to work out a solution that is acceptable to all parties, a reference wlll be directed to the board.
to a small group of Second, I am asking the board to review the tariff ltt:!ffiS under which plans, drawings and blueprints come into this country, some duty-free and others dutiable.

The standing committee on estimates last year drew atten tion to the problems involved and I now propose to refer the matter to the taritt' board.

Finally.

certain producers have drawn at tention to the substantial and rapidly ridnc imports of naih and to certain anomalies in the duties applicable to these imports.

Ac CO!
Ac CO!

'd.inIly, shall be asking the board to review and report on the tariff itemJ rclaUDc to this product.

I SUMMAJlY AND CO:SCLUSION loss of The net etreet of all the amendments I am proposing to our taxing statutes will be to make no measurable change in the estimate of total revenues for 1960-61, which I pre sented to the house earlier this evening.

The amount of tax relief accorded by some amendments will be approximately balanced by the increased revenues from others.
The revenue from the relieving total amendments could add up to as much as $2 million, and the increased revenues from blocked loopholes and clarified deftnlUoni!

are likely to be of about the same amount.

While total these changes on balance do not atreet revenues they nevertheless represent signifi cant improvements in the fairness of our tax structure.

(7'ramlation) : The past year has witnessed an extraordi nary resurCence in the economic strength of the western world.
Canada has shared cen· etausly in this remarkable progress.

Today she is stl'oRJ:er, more developed and more united than ever before.

The abiding goal of our fiscal policy is the maintenance of a sustalnable rate growth in terms of employment, development of resources, and a sound dollar.

This year's budget, devised to meet the conditions and needs of 1960, will I believe, effectively serve this goal.
It is my hope that this balanced budget will strengthen the economic and re· .linancial newed ronfidence to Canadians in their future, and give fresh impetus to the enterprise and initiative of our people.

With courage, self discipline and self-reliance canadians will meet the challenges of the new decade.

(Ten): structure of Canada, impart The past year bas witnessed an extraor dinary resurgence in the economic strength the western world.

Canada has shared of generously in this remarkable progress.
Today she is stronger, more developed and more united than ever hefore.

The abiding goal of our fiscal policy is the maintenance of a sustainable rate of growth in terms of employment, development of resources, and a sound dollar.

This year's the conditions and budget, devised to meet I believe, effectively needs of 1960, will, serve this goal.
It this balanced budget will strenethen the economie and .linancial structure of Canada, impart renewed conJldence to Canadians in their future, and give fresh impetus to the enter prise and initiative of our people.

With courage, self·d1scipline and self-reliance Ca· nadians will meet the ehalleoges of the new decade.
is my bope that RESOLUTIONS INCOME TAX ACT Resolved that it 1s expedient to introduce a measure to amend the Income Tax Act to make prov1sJon in respect of a new class of profit sharing plans under which (a) amounts allocated by the trustee shall not be included in the Income of an indi vidual who is a beneficiary under the plan until the year in which they are received, (b) no tax shall be payable by the trustee the plan on the taxable income of under the trust, (c) an employer may deduct in computing income for the yC!ar an amount which when added to his contribution, if any, under a registered pension tund or plan does not exceed $1,500 per employee.