Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1694824490657.pdf (Canada)
1206 HOUSE OF COMMONS Tile Budget-MT.

Abbott the act?

How much of the butter that has been purchaset!

is not up to the grade thai.

it was when it W:'IS put in storage?

Mr. Gardiner: We wiil get all that for rOll.

Mr. Charlton: Will the minister say he will answer those questions?

Mr. Gardiner: Yes, { will.

Section ;::agreed to.

Bill passed.

reported, read the third time and At six o'clock the house took recess.

AFTER RECESS The house resumed at eight o'clock.

THE BUDGET AKNUAL FIN.


"NCIAL STATEME",'T OF THE MINISTER OF Fl:'O'''NCE indicated last week, Hon.

Douslas Abbotl (Minister of Finance): Mr. Speaker, as I I hope I may have unanimous consent to move that the house go into committee of ways and means to consider certain resolutions, and for private bills be deferred that until I have to say and the customary brief remarks of my hon.

friend the financial critic oC the opposition.


the hou:- the completion of what Mr. Drew: I do not wish to raise any ques tion about the procedure, Mr. Speaker, but I suggesi.

the position simply be that by consent the mini:::ter proceed at this time.

that Mr. Abbotl: I am in the hands of the house, Mr. Speaker.

I move: That Mr. Speaker do IlOW leave the chair for the house to go illto commlttce of ways and mcallS.
In proposing this annu"l motion and in opening my budget for the year upon which we are about to enter I begin as is customary by reporting to the house on the general econ omic situation in which we are operating, and upon the economic prospects for the coming year.

The three )"e3rs 1946, 1947 and 1948 were years of active and expanding business and employment in almost every part of the world.
The work of physical, social and economic reconstruction not only created very high levels of employment and activity, but placed severe strains upon the available resources of manpower, equipment and materials in almost every country.

These determined efforts to do so much in so short a time resulted in widespread shortages of various kinds and in open or suppressed inflation of varying degrees of intensity.

IMr.

Charlton.]
IMr.

Charlton.]

The year 1949 saw a consider:lble change in this balance or demand upon resources, <Ind the improvements in output and in organ_ i7.ation have lessened some, though not aU of the economic difficulties with which the world is !

:lcd.

In looking throu~h the figures pub.


lishL'd by the United Nations I in those countries or Europe for which informa· tion is avail:lble the volume of production increased about 10 per cent during 1949, and that output as a whole is nearly 20 per cent above 1937. in 1949 was about two per cent above 1948, but more th:J.n 70 per cent above the 1937 level.

In passing, I may add that Canada's increase in production over pre-war levels is greater than that recorded for any other country.
In Canada industrial output find that These improvements In production have had their effect on price levels and inflation· ary pressures.

The December 1949 price levels in most countries of western Europe were less than five per cent above December it should be added that conditions of 1948. sllJPpressed inflation continue to be a dan'ger in some countries.

and in most countries the effects of the September devaluations had not been fully reflected in their price levels by the end of December.
Canadian wholesale price levels at the turn of the year were about two per cent below a year ago.

These increases in production have also resulted in a considerable improvement in the balance of payments position of western Europe as a whole.

Over the past three years :he current account deficits of ERP countries have been reduced from $7,~ billion to just under $4 billion, and their trading deficit with the dollar areas has been reduced from about 57 billion to 53·8 billion.
This improvement in their total deficit has been the result of a five per cent increase in total imports and a 40 per cent increase in total exports, though in respect of the dollar areas the deficit has been reduced by a drop of one-third in imports and an increase of one-quarter in exports.
Reduc tions in imports by European countries were made possible by their improvements in home production and hence their reduced need for .he abnormal volume of imports which was just after the war, but are also the essential result oC deliberate administra:ive measures designed to keep their imports within the dol lar resources that arc available to them.

Hon.
Hon.

members will realize, of course, that while these improvements are very consider able, Europe still has road to traverse before viability at a tolerable level can be reached.

Hon.

members will also realize that, While we stand to benefit very substantially in the longer run by the restora tion of a sound balance in world trade.

in the shorter run we shall have posed to us in Canada a number of difficult problems, and a difficult MARCH 28.
1950 1207 the adjustments that we may be required to make in our economy will not always be easy or entirely painless.

Canadian economic activity is heavily ioflu· enced by conditions throughout the world, but it is particularly influenced by economic conditions and prospects in the United States.

Economic activity in that country experi~ enced a moderate setback during the spring and carly summer of 1949, but recovered dur ing the second halt of the year.
The decline in United States industrial production during the first halt of the year amounted to about 16 per cent, and the later recovery regained about half of this lost ground.

While we can never escape the effects of sustained changes in United States business conditions, is evidence of the current strength of the Cana dian economy that we were so little affected by the United States recession.
Taking 1949 as a whole, United States industrial produc tion declined about eight per cent and Cana dian output advanced about two per cent.

it I turn now to a general review of our external trade.

the annual Exports from Canada to all countries have been sustained at a high level throughout 1949.

From a post-war low of about $2,300 mUllan at the end of 1946 exports increased rate steadily and rapidly until reached $3,000 million toward the end of 1948.
During the first eight months of 1949 there continued to be an upward trend and the peak of $3,120 figure million was reached in August.

Since that month there has been some falling off and the exports for the twelve months cnded February 28, 1950, were just under the $3 billion mark.

twelve-month There have, however, been some significant changes in the direction of our exports, and having regard to our exchange problem, these changes have been in a satisfactory direction.
Exports to the United States, which reached a post-war low of just under $900 million in 1946, climbed slowly through 1947 but very rapidly during 1948 to reach $li the end of that year.

They have billion at remained .at level, with only minor fluctuations, for the past fifteen months.
this This remarkable increase of $600 million in our exports to the United States in three years has been spread over all our principal indus tries, but the chicf contributors to the increase have been farm and livestock products, wood farm machinery and and paper products.

equipm~nt, and non-ferrous metals.


Exports to the United Kingdom were at an the end of they climbed to $780 million early in rate oC $600 million at annual 1946; The Budgct-M,.. Abbott 1948; dropped back to $650 million early in then recovered to about $700 million, 1949; and have been fluctuating narrowly about that figure for the past eight months.

There has been more variability in the pattern of our exports to the United Kingdom.
We have sold them more grains and more base metals less animal Produc~ but and less timber.

they have bought Exports to all other countries increased from $800 mUllon late in 1946 to about $1 the end of 1947.

Since then they billion at have declined in an irregular pattern and are now at a rate of about $750 million a year.

two years as a whole a fall in overseas exports of about $300 million has been more than offset by an increase of $500 million in our exports to the United States.
Taking the last ~n the import side, it would be agreed, I thmk, by all groups in this house that Canada should welcome increased imports from our overseas customers.

But such an increase, to be of a lasting nature, must be based upon supplying goods which we need and like at prices which are competitive with the sup plies available to us from our own producers: or from other countries.
Ever since the war, and more recently as a part of our policy of meeting our Own dollar problem, we have taken special measures to help our overseas suppliers to surmount the transitional diffi culties of the post-war period; but we cannot continue these indefinitely, nor should we convert temporary devices into permanent to be our It continues, however, policies.

policy to encourage as large an increase as possible in our overseas imports, within the framework of our international obligations.
As the house knows, imports into Canada increased rapidly from the $11 billion figure in 1946 to $2; billion at the end of 1947.

This increase of a billion dollars in imports was in part a reflection of world-wide price increases, in part a filling of the accumulated.

shortages of the war years, and in part the purchase of materials and equipment for incorporation in our heavy post-war capital investments.
Largely as a result of our emer gency import controls, imports were held at the $2i billion level throughout 1948, and as these controls were relaxed the rate or import climbed slowly during 1949 to about S21 bil lion.

There has been little change in the rate of import during the past six months, and such change as is discernible has been slightly downward.

As a result or our emergency import con trols our imports from the United States dur ing 1948 were held to a level about $200 million below 1947.
With the progressive relaxation at these controls our annual rate or United States imports has come back to 1208 HOUSE OF COMMONS Tlu?

Budget-Mr. Abbott within $25 million of their earlier peak.

Much of this increase has been in the field of capi tal goods and equipment which have been a necessary pal·t of the continued capital invest ment program of Canadian Industry.
Frankly we have \)cen a little disappointed inability of overseas coun in the apparent tries to resume their traditional share of our import market during the past year.

Late in 1946 our overseas imports were about $500 million; they rose steadily to $860 million they have early in 1949, but from that point been drifting downward and are now at about $800 million.
If our overse!<lS friends could get back their traditional share of our import market, they would be earning an additional $200 million a year with which to balance and eventually expand their consumption of Canadian products.

It is still too early for the world to have witnessed the full effect of the world·wide realignment of exchange rates which occurre:l last September.
The immediate arithmetical implications of these currency devaluations, so far ...s we are concerned, were to raise from the United the cost of our Imports Stales by 10 per cent, to reduce to the United States the cost of our exports by 9 per cent, to reduce the cost of our imports from most other countries by 24 per cent, Bnd to raise the cost of our exports to most other countries by 31 per the same time United Slates exports would cost most other countries 44 per cent more, and relative prices between most of these other countries would be unchanged.
cent.

At price Changes relationships of in this In motion all over magnitude naturnUy set the world a stream of price adjustments that is stln going on.

Some basic commodities traded In relatively free International mar kets, such as the base metals, were adjusted the United Stal(!s almost dollar price; many other prices have moved much more slowly, and some hardly at all.
effect, however, has b(!en to The general reduce very considerably the wide Inter national price disparities which had be<!n developing at an alarming rate during the thrce preceding years.

immediately to in a import controls, our The effect on Cnnndian trnde has already been notk:eable satisfactory and is direction.

Notwithstanding the relaxation or imports many of our from the!

United States have been declining four months, and our exports for the past have been increasing.
In the four months November to February inclusive, our exports increased by nearly to the United States $60 million as compared with same months a year ago, and our imports declined by about $25 million.

That is, for these fOUl the (Mr. Abbott.1 months an adverse balance of trade of nearly ~lOO million a year ago has been rc::luced to an adverse b31<.mce of only SIS million.
In the same four months our exports to the United Kingdom declined by $20 million, and our imports from the United Kingdom were down by $3 million.

Our overseas export:; as a whole, however, were down by morc than $100 million in these foul' months, and our overseas imports down by $12 million.
In a world where so many other factors are changing, one cannot isolate the effects of currency changes in any precise way, but I think that those which took place last fnll should pl3y a beneficial role in helpin~ to correct the unbalance in the trading relation_ ships between North America and the rest of the world.

1 should e'Tlphasize, however, that currency changes alone and of them selves are no cure for basic problems of They can do little mo~ maladjustment.
than give time in which the more funda mental measures can be put to work.

How_ ever, so far as Canada Is concerned, It already took in seems clear the conditions September trading presently prevailing, position.

last has, under the action we improved our that As the house is aware, exports of gold are not Included in our merchandise trade "gures.
Gold production, however, has recently been showing a steady and welcome increase each year, due to the combined stimulus of an improved the emergency assistance payments and more recently the devaluation of the Canadian dollar.

Last year total production amounted to $148 million and most of that served to increase our exchange reserves.

supply of suitable labour, into our from merchandise trade and gold Apart there are of course several other production.
international factors which enter balance of payments on current and capital including tourist expenditures here account, interest and dividend payments and abroad, and receipts, freight charges and earnings, and various types of capital Inflow and out It is the combined effect of alL these flow.

factors which account for the net change in our reserves of gold and United States dollars during the course of a year.
I do not wish to anticipate the report ot the roreign exchange control board for 1949, which will be avail able in the ..'ery near future and will contain a detailed analysis of our balance of payments during the past year and of the factors accounting for the chanie in our reserve post· tion.

AU I need say here is that our surplus on international current account according to preliminary estimates amounted to about $193 MARCH 28.
1950 1209 million in 1949, a decline from the $450 mil lion surplus reported in 1948; and that in the capital account the features of note were tctal advances of $120 million to the United Kin,gdom under the 1946 loan and a fairly sub from the United stantial States in connection with oil developments in western Canada.
The end result of both current and capital transactions was a net increase of $119 million in our exchange reserves, bringing them to a total of $1,117·1 million on Decem ber 31 last, as I reported early in January.
infl.ow of capital for investment, chiefly direct This represents a very substantial increase from the low point of $461 million to which they had fallen in December, 1947,-a point so far below a safe margin that we had to secure approval from parliament for special emergency powers to control imports.

These special measures were effective, and by the end of 1948 our reserves had recovered to $998 million.
In the light ot this improvement we were able to make extensive relaxations in our import restrictions, one result of which was that our rate of accumulation of reserves in 1949 was more moderate.

However, with the improvement of $119 million that did occur, I was able to announce early in Febru ary two further groups of relaxations to take effect April I and July 1 respectively.
When these are in effect I estimate that we will have covered about half the road toward com plete removal of the emergency import con· trols.

I I increase.
I I increase.

In the meantime our reserves have shown a further substantial shall be pUblishing the March 31 reserve figure some time next week, but as we are now so close to the end of the month, think I should depart from our usual practice of reporting the size of our reserves only after the end of each quarter and advise the house that at the close of business on Saturday last they had reached the figure of $1,204·2 million.

This represents an increase during the pres ent quarter of about $87 million.
I should add, however, that a considerable part of the recent increase is accounted for by a rise in Canadian balances held by other governments.

are To abnormally high and will be subscquently reduced it means that some of our exports in coming months will be paid for out of these balances and will not bring in new receipts of exchange.

To this extent our reserves at include the proceeds of some future earnings which have More~ in effect been received in advance.
the second quarter of the year is the over, season for heavy transfers of earnings on United States investments in Canada.

Hon.

members who have studied our monthly that last year our reserve figures will recall their current balances extent these level that the The BUdget-Mr. Abbott reserves dropped by $90 million during April and May.

Unless some unforeseen develop ments occur, I expect that our reserves may show a similar decline during the next two or three months.
However, I would not, ot course, venture to make any prediction in respect to the probable net change in our reserves for the new fiscal year as a whole.

As is customary on these occasions, I shall table at toe conclusion of my remarks and ask to have printed as an appendix to today's Hansard the usual white paper which puts the more important into convenient form all economic and financial statistics.

Accom· panying these tables will be found brief It is not explanatory notes and comments.
my intention to burden the house by reciting I shall try many of these facts and figures.

only to give a broad and general picture.

I do, however, urge hon.

members to study the white paper carefully.

cent above 1947.
cent above 1947.

The latest estimate published by the domin ion bureau of statistics over the week end shows Canadian farm cash income in 1949 to have been almost identical with the all·time record reached in 1948, which in turn was twenty-five per Lower returns on dairy products, poultry products and furs were offset by increased returns on Earlier estimates of grains and livestock.
net farm income for 1949, which are given in the white paper, show a moderate decline from 1948: The production of the fisheries was well maintained.

Despite export market ing difficulties for some types of fish, returns to satisfactory, domestic demand being particularly good In those lines of pro· throughout the year.

duction where our farmers and fishermen rely primarily on overseas markets the out look for 1950 is less certain, but I would like to remind hon.
members that our markets on this side of the Atlantic have increased greatly in recent years, and can, think, be still further developed, especially for high quality products.

1949 wcre fishermen in I Emplo;rment in Canada has continued at a high levcl.

The trend of industrial employ ment continued upward during 1949 until August or September; since then it has been moderately downward.
The latest available figures for industrial employment, which are for January, show a decline of one per cent from a year ago.

This, however, is a general average, and conceals a number of divergent trends in the components of the general index.

For example, employment in logging and in the agricultural implement industry is down much more than the average; but in mining, in construction work, and in the trade and service occupations it is considerably higher than a year ago.
1210 HOUSE OF COMMONS The Budget-MT.

Abbott tall Total labour income, in spite of the one per in employment, has continued to cent increase, and its monthly rate at the end or the year was about five per cent above the same months a year earlier.

Average weekly wages rose about three per cent during the year, while the cost or living advanced barely one per cent.
Total unemployment, even at While the decline in employment as a whole has been small, the increase In unemploy m nt has been greater, due, of course, to the fact that the total labour foree continues to grow.

The outlook for 1950 seems to be that the volume of employment will increase moderately, but it is possible that it may not catch up with growth in total labour supply.

Its seasonal judged.

by normal peak, has not been large, and usual conditions in this country.
It has, however, b"!en uneven in its regional incidence.

The largest single element in the past win ter's unemployment has been the sharp decline in woods operations associated with the policy of the principal pulp and paper companies In reducing their heavy pulpwood invC!ntories.

Other pools of unemployment have been export created markets.
particular d(.cline by of The marketing prospects for our pulp and paper Industry appear to be good, and if these are maintained I would expect the woods operations next winter to be at a nonnallevel.

We shall continue to give aU the help we can in finding markets for such other commodilies as may from lime to time find their markets upset.

I want to make it clear, however, that the central government cannot and should not attempt to assume responsibility for all these regional problems.
In my mind the proper role of the central government in our fC!deral state is fourfold.

First, through its fiscal and g neral policies it should endeavour to create a favourable climate for healthy economic expansion and development.

Second, it should regard in planning its own have careful timing and the best the best operations for ana developmental capital placing of expenditurC!s.
Third, it should recognize a special responsibility for the promotion and development of our basic primary industries and other industries of a national signiflcanct:!.

should be ready to co-opC!rate Fourth, actively with provincial governments, and through the provincial governments with municipalities, in meeting regionaf problems that threaten nation-wide economic reper cussions.
its it There have been times in the past when differences of view between the federal and provincial governments have received a kind (Mr.

Abbott.]

of publicity which has led the general public to overlook, or at least to underestimate, the very iarge amount or practical day-to-day co- operation between the two levels of govern_ ment.

There is a great deal of this working together, and we are ready, in all appropriate circumstances, to extend this friendly collabo.

ration.
ration.

With particular reference to the current situation I should remind the house that in preparing our estimates for construction pro- j~ts we have deliberately been severe in cutting down requests for new construction, because in most parts of Canada building labour is fully employed on private projects.

But where we have evidence that building labour will be available we have applied less severe tests to deparlmental requests for new construction.
The amendments to the Unemployment Insurance Act recenlly enacted will not only relieve distress but will sustain purchasing power, and thus the general level ot business activity, in many of the regions where diffi culties were encountered this winter.

The consensus of informed views about the outlook for 19:>0 is that employment, output and price levels In both Canada and the United States will show no great change from 1949.
The balance of probabilities for Canada indicates a moderate increase in the domestic and United States demand for our products, offset in part by a reduction in overseas demands, with prices tending slightly down ward, and employment slightly upward.

A minister of ftnance must always remind fore<:asts of this nature are the house that beset with uncertainties.
But under our parliamentary system, where both programs of expenditure and programs of revenue must be presented and approved in advance for a specified twelve months period, such estimates or the future have to be made.

To some extent expenditures, and to a much greater our extent our fluctuate with expanding or contracting business activit)' and with rising or falling prices.

revenues.

will However difficult, forecasts must be made.


My forecast and my fiscal program for 1950 51 are based on the expectation of sustained high levels of production and employment, and can be summed up simply in an estimJ\te the gross national product, which is in that fact the economic tax base, will be about one Or two per cent hiiher in 1950 than in 1949.
GOV"tRNMENT ACCOUNTS; 1949-50 In turning to revIew our revenue and expenditure for the ftscal year now closing and to for~ast revenue and expenditure for next year, may I again call the attention of MARCH 28.

1950 1211 non.

members to the detailed accounts pro to which I have vided in the white paper referred.

I $2,390 million expenditure of A year ago I forecast for the current fiscal year and revenue alter tax changes, of $2,477 million, leaving 'a prospective surplus of $87 million.
In re-introducing the budget measures on October 20 last revised the expenditure figure to $2,460 million, including in it in this case the Newfoundland debt we had taken over and I revised upwards the forecast of rev~ue, setting it at $2,545 million, alter taking into account the small additional tax changes then proposed.

This left practically unchanged my earlier forecast of the budget ary surplus.
We have not yet reached the end of our year, and on the expenditure side in particular it is always difficult to estimate the payments to be made during the closing It now appears, however, that actual weeks.

about expenditures $2,438 million-about one per cent less than our last forecast-and revenue about $2,549 million-just a shade more than our October estimate.

On thi5 basis our budgetary surplw should be about $111 million.
It is possible, the actual out-tum when all however, the accounts are closed may differ slightly from this, but not by very much.

In opera· tions of the magnitude and complexity of the government's activities, an error amounting to only about one per cent of our expenditure appears to me to relled exceed ingly accurate estimating.
the year will be financial that for On the revenue side, the notable feature is dill the remarkable buoyancy in our direct taxes, notwIthstanding the successive r~uc­ tlons In rates that have been made.

Direct taxes accounted for half our total revenue, taxes that and a large part of the indirect provide forty per cent of our revenue is levied upon things the purchase of which is USUally some evidence of ability, as well as willingness, 10 pay.

Our non-tax revenue continues high.


The post office is payLng Its way, when we include rates, the wartime increase made in letter and I hope that we can continue to cover the growing cost of postal services by charges for them.

It supplies some free services to other departments, of course, and service of some kinds below estimated cost, but on the other hand the post om~ Is not charged for its office accommodation nor for certain ser vices such as those of our accounting and disbursing officers.
In due course I would hope we can arrange that it will be charged with all proper expenses of its operations, that it will charge other departments for mail ser it will be able to show a vices, and that modest surplus on a commercial basis of accounting.

The Budget-M'I'.

Abbott We have continued this year to benefit from some abnormal post-war special receipts and credits, though now on a relatively modest the total of this category being about scale, $60 million.
The chief components of this figure are $18 million from the sale of surplus crown assets, $16 million recovered on war contract settlements, and about $9 million in payments by European governments In settle ment for supplies provided by the military authorities to the civil populations at the end of the war.

We can still expect some receipts next year under these headings, but on a diminishing scale.

social added materially the assumption of On the expenditure side, the most notabll!
: features have been the increased expenditurl!

:S security on the one hand and for national security on thl!

: other.

The Increase in social security---chiefty family allowances and old age pensions-was about $62 million; and the increase in national defen~ and defence research was $UO million.
New to our foundland, too, from the $li5 expenditures-as was evident million provided in special supplementary estimates to extend our services to Newfound land, and a non-recurring charge of $62 mU lion to cover the major portion of the former Newfoundland debt.

There was another largl!

: non-rl!


:currlng Hem in our expenditures represented by the net charge to our premium, discount and exchange account resulting from the revaluation ot cur· rencies and representing the decreased Cana dian dollar value of our sterling obligations, the increased Canadian dollar value of our United States dollar obligations, and the increased Canadian donar value of our hold ings of gold and United States dollar balances.
Offsetting these major increases In expendi tures that I have noted were a number of reductions in those items which arose out the war, notably certain types of non of continuing payments to veterans, payments of subsidies of various kinds, and various administrative costs for temporary post-war organizations.
representing, on In addition to these major changes in our expenditures this year as compared wllh pre vious years, there was a wide variety of minor increases the one hand, higher costs due to the rise in salary, wage and price levels, and, on the other, expansion In various government services.

I will not attempt at this stage to comment In any detail upon these, but the combined effect of these factors can be noted in the detailed statements of expenditures given in the white paper.
I should call the attention of the house not only to our budgetary surplus in our the non-cash but As usual, items also to 1212 HOUSE OF COMMONS The Budgel-Mr. Abbott revenue and expenditure and to the non im:ome or extra-budgetary receipts and dis bursements, ap:lrt from security transactions, Ihat must be taken into account in order to appraise our over-all cash position.
In the past year we have had more than the usual amount of budgetary charges which did not involve cash ex~nditures, and conscquenUy when we adjust our budgetary surplus for purely accounlin~ ilems-such 3S Ihe assump· tion of the Newfoundland debt, the revalua· tion of our assets and liabilities which are expressed in other currencies and the addi tion to our Keneral reserve against active assets-we find that we have a cash gurplus of $287 million as compared with the budget· ary surplus of $111 million.
To this we should add other receipts that do not con stitute revenue, such 3'S the increases in the trust accounts for the payment of annuities and pensions, and the increases in various other accounts on our books that we cannot treat as revenue.

We must also take into account the repayments of loans and advances that have previously been made.

These various receipts have added another $200 million to our cash.
On the other hand, we take into account heavy disbursements must this year that do not appear an our books as expenditures.

The largest af these has bren the advances to the foreign exchange control baard to acquire gold or United States dollars, which have amounted to $160 miillon.

We have also disbursed $104 million in loans to the United Kingdom and other governments abroad, arter taking into account repa}'ments that we have received from such governments on other loans.
We have also made substantial loans to the Central Mort gage and Housing Corporation and under the Veterans Land Act for housing and settle ment purposes.

Adding these and various small additional items of a similar character, we get a total of cash disbursements other Ihan budgetary expenditures of $420 million.

This leaves a cash surplus of $67 million, apart from security transactions.
This year the net sales of securitles out of our securities through investment which we employ our surplus cash balances, have totalled $430 million.

Adding this 10 the $61 million cash surpius that I have just mentioned, we have a total of 5497 million available ta reduce outstanding public debt.

Actually we used $486 million for this pur the remaining $11 million beini our pose, estimated increase in cash balances at the end of the year.

account, aeeount the l'l!


'l"AN'CI:llG OPDlAnONS In my budget address of October 20 last I outlined mast of the major transactions in ....hat has been a notable record at ftnancing [)'lr.

Abbott.l At thc sale of during the present fiscal year, and here I need only finish that outline and summarize the the year as a whole.

results for time 1 referred to the campaign that the fourth just bc-ginning for series of Canada savin IS bands.
That cam_ paign to date approximately one millian bu~·ers have pur· chased a tatal of $304 millian of this fourth series.

1 wish again to pay my tribute to the splendid work which has been done bath by voluntary and professional workers in pramoling the sale of these bands.

successful; proved highly On March 1 this year three separate trans_ actions took place.
An issue of $550 million of i per cent six months treasury notes was sold at par to the Bank or Canada to refund a similar issue maturing on that date.

On the same date a $325 million issue sold in 1948 and held very largely by the banking system became due and was refunded by an issue of $325 million 3-year Ii per cent bonds sold at 99·30 to yield 1·74 per cent per annum.
Also on March 1 a new issue of $100 million a{ six months deposit certiftcates i of one per cent per bearing interest at annum was sold to the chartered banks at pa,.

The results of our ftnancial operations and of certain other factors on our funded debt for the fiscal year as a whole may be sum· marized as fallows: 1.
Our funded debt payable in sterling increased during the year by a net amount of $52·6 million as a result of the assumptian of certain Newfaundland sterling indebtedneu in accordance with the terms of union offset in part by the effect of the revaluation of sterling.

by funds increased government of Canada-a 2.

Our direct funded debt payable in United States $100 million because of the sale of a new issue in New York to retire C.N.R.
and national harbaurs baard obligations which were guaranteed by the flotation incidentally, which, as hon.

members will recall, set a new record for Canada's credit in the United States market.

The Canadian dollar equivalent of our funded debt payable in United States funds increased a further $39·8 million due to the revaluation of the Canadian dollar.

3.
3.

Finally, in reKard to our funded debt the amount of our obU· payable in Canada, gaHons, Including refundable taxes, which matured or were called during the year was na less than $3,137'4 million.

We met $2,213'3 million of this amount by refunding or conversion into new issues, $338·2 millian from the proceeds of new borrowing in the fonn of Canada savings bonds and deposit MARCH 28.

1950 1213 :ertificates, and $430 million from the pro ceeds of sales ot securities trom securities investment account.
Another $100 million in Canadian funds, not included.

in the cash sur plus referred.

to above, was available from the proceeds of our issue in New York.

The remaining cash required, $55' 9 million, came from our cash surplus.

While I am on this subject, perhaps I may be permitted to deal with our probable financ ing requirements for the new fiscal year.
As will be apparent from what I have to say later, I expect that we shall be able again next year to make some modest reduction in our funded debt from available cash resources this reduction will certainly be much but smaller than that effected this year.

How ever, during the year there will become due In the or payable in Canada funded debt aggregate $2,414'1 million.
principal amount of Yesterday I made a public announcement to the effect that the government proposed to call for prior redemption on June 15, 1950, the first victory loan 3 per cent bonds which mature on June 15, 1951, and also on June 1, 1950, an issue ot 3 per cent bonds sold in 1935 which mature on June 1, 1955.

The amount required to payoff these called issues Is approximately $745 million, and our cash resources will not, of course, be adequate for that purpose without a refunding loan.
For that reason a new issue will be announced shortly before the time for payment of the the new called issues.

issue will term bonds include some longer suitable for general public investment as well as a substantial amount of short term bonds.

This operation will result in a further reduc tion in the cost of interest on the public debt.
Perhaps I should not this occasion pass without again reminding all those who bought bonds during the war in such large numbers to examine their holdings and if they f1.nd they have any first victory loan bonds, make Sure to turn them in on the call date, June 15 next, and thereby avoid any loss of interest.
It is expected that let FORECAST OF REVENUE AND EXPENDITURE, 1950-51 My forecast of our prospective revenue and expenditure for the new fiscal year is based on the expectations I noted earlier-that in general our national employment and income will be sustained at approximately the present level and that in average prices, more than offset by a slight increase in the volume ot our production.
ShOUld conditions be better than this-as they could be if everything goes well-my fore cast will be more Should they economic than realized.

deteriorate.

there will be a slight fall conditions as The Budget-Mr. Abbott revenue will fall off and our could, our expenditure increase, as compared with the figures I am now putting forward.
In the light of what I have said, I expect that our present tax laws and other sources ot revenue would produce in the next fiscal year a total revenue of about $2,430 million.

For the convenience of hon.

members and others, I have had prepared the usual table, comparing present forecasts with the figure tor the year just closing, and I ask leave that this table be printed in Hansard at this point.
For~cast of R~v~nu~ (B~fore tax changes) Fiscal year Fiscal y~u 1950-51 (For~ca5t) 194.9-50 (Actual preliminary) (In millions of doll an) _ Customs Import duties Excls~ dutles Sales tax~s (n~t) Other exelae taxes lncom~ tax~s Individuals Corporatlons Interelt, dividends.

etc .

Exce" profits taxes Succession duties Miscellaneous taxes .... _.

.. .

__ .. __ .

_.


__ ... $22:1' 0 213·0 400·0 153'0 :I~'O ""·0 46'0 "·0 .., $229-0 21:;·:; 404·1 163·11 611':1 :186':1 ':1-5 -2':1 "., '0 TaUI til" revenue 2180-0 2286·0 Non-tax revenue ... 200·0 203'0 Total ordlnary revenue __ .
receipts and credits Special Grand total revenue """·0 "'·0 2430'0 2489'0 :111·11 2~8'6 I should like to emphasize that our tax structure now is such that it is very sensitive to changes in employment and incomes, and relatively modest changes in these can have a more than proportionate effect upon our revenue.
aware became The government severlll months ago of these revenue prospects and of the desirability of keeping our expenditures this next year within the total revenue that we could foresee in the economic conditions I have described.

We decided that we should plan to do this, and that, except in the event of a deterioration of economic conditions or an unexpected emergency.

we should hold our expenditure in the coming year down to approximately $2,400 million.
Consequently the treasury board, at the cabinet's direction, made substantial reductions in the estimates submitted by various departments, particu the larly those exp<lnsion of activities not of an urgent 01 highly productive nature.

As a result.

the main estimates, laid before the house on Feb ruary 24 were held down to a total of about $2.309 million.
d.espit~ the Int'rease in costs nf involving construction or 1Z14 HOUSE OF COMMONS for deficits a m<ljor change Railways In amounts Canadian The Budget-Mr. Abbott social security and defence and the expendi tures required (or Ceder;)l services in New IlJundland.

Moreover.

we propose to continue this same policy in considerir.g supplementary estim<.Jtes, unless in the economic outlook occurs.
However, we must anticipate some supplementary and further including substan supplement<lry eslim;lles, of tial 1950 the and the National Trans-C<lnada Air Lines.

I would expect to make some provision in our <lccounts for reserves against our active assets and for contingent benefits under the Vet erans Land Act.
On the other hand we may expect some short-fall of expenditures below the limits provided in appropriation votes, but this is likely to be lower than in recent years, due to the outlook for more stable economic conditions and to the pressure put on the departments to keep estimates down in to the minimum practicable amounts.

All all, I think we can reasonably expect to keep our expenditures in this new fiscal year to a total of about $2,410 million.
On this basis our budget surplus should amount to around $20 million.

addition, .

In so far as our prospective cash position Is concerned.

we must take into account non cash items in revenue and expenditure and other cash receipts and disbursements.

Arter adjusting our probable revenue and expendi· ture for non-cash items I believe we can expect a cash surplus somewhat higher than the budgetary surplus.
To this we should add cash receipts in annuity, pension, and similar trust funds, and various deferred credits and these items suspense accounts.

Taking all together we should have something in excess of $200 million dollars in cash over and above that required for cash expenditures.

than budgetary expenditure Against this we must set our disbursements and other redemption of our own securities.
We shall probably require something over $100 mil lion lor housing loans and investments, includ ing the married quarters program for the armed services, and nearly $30 million for Veterans Land Act loans.

There will, I expect, be other minor loans and investments.

There remains to be drawn $85 million under the United Kingdom loan agreement, but draw ings on this loan will be offset in part by repayments on loans previously made to the United Kingdom and governments abroad.
On the whole, I would expect th;lt our total cash disbursements would about balance with our total cash requirements for all purposes-apart from the sale, purchase, redemption of our own securities, and or apart tram possible advances to or repay ments by the foreign exchange control board because of changes in the size of our exchange other {Mr.

Abbott.]

it is reserves.


As I have alre<ldy indicated, impossible to Corecast with any assurance whether our exchenge reserves will increase or decrease by a si;nifle<lnt amount and therefore whether we shall need to advance further Canadian lunds to buy ·exch<lnge.

or c;ln expect repayments on ajvanc~s outstand_ in;.

On the whole I would not expect at present a movement in either direction larg-e enough to affect our cash requirements to any important degree.
CONTINurJ<;G LEVEL OF EXPENDITunE for resources.

the social Our efforts to hold expenditures this coming year to the level I have described, despite the increases necessary for security legislation of last year and for defence, have caused me to realize that we must now expect for some time to have budgets as large as this one-that we must cope somehow with a con tinuing level of expenditure of $2,400 million, even in the absence ot large scale economic difficulties or widespread unemployment.
Our special post-war derr.
:-bilization and transi_ tional expenditures all:" now almost all behind us; we can expect a tapering off of some of the remaining payments the veterans program and some of the other items which we have labelled "Terminable Services" in the estimates, but these we must expect to be offset by increases in other services required times, particularly those on the in normal development of natural In years when economic conditions are adverse, we must expect not only lower revenues but higher expenditures to assist in overcoming these economic difficulties and to maintain satisfactory levels of employment and income.
In good years we carl> hope to avoid such special expenditures and have buoyant rev enues-but I doubt if the public or this House of Commons will really wish government services or activities to be reduced in years of prosperity to the degree necessary to get our expenditures much below this level ot substantial $2,400 million.
improvement situation we may expect a rwudion· in delence costs that will materially lighten the burden on the budget, but it would be a bold man who would predict this with any confidence now.

Our union with Newfoundland has been warmly welcomed in the country, and I am confident that the mutual advantages ot this union will be demonstrated with increasing force as each year passes.
But I think it is fair to remind the house that during the past year and over the next few years to Canada has imposed and will continue to impose a coooiderable net burden on the federal treasury.

We share with our fellow citizens in Newfoundland a great confidence In their future, but in the meantime the social If we get in the international o( Newfoundland every part of accession the a MARCH 28.
1950 1215 and developmental costs to be borne or shared by the central government wlll involve large net financial outlays.

Paymen-ts to provinces for statutory sub· sidles and compensation under the tax rental agreements totalled $104 mUlion in the cur rent fiscal }'ear, and for the remaining term of these agreements the annual payments to the provinces concerned will be even larger than this )'ear, whether or not any d.ownturn in economic activity should occur in the next year or two.
As already announced, there will be another conference with the provinces this fall, and whatever may be the eventual outcome of that conference, I think It is fair to assume that Its decisions will not result in a lessening of the net burden on the federal budget.

Naturally we hope to reduce expenditures by improvC!d efficiency in operation and by economies in administration.

We have been In this direction in making good progress recent )'ears in many of our departments- quietly but effectively.
Since it has been accompanied in many cases by an expansion in the work of the department or unit con cerned, it is frequently not evident from the figures.

We are pressing ahead further with this work, and building up a corps of efficient operating and administrative officers.

But we should not delude ourselves with the belief that we can significantly alter the scale of the budget In this way.
Our civilian payroll is only about $310 million a year out of total expenditures of $2,400 million, or about 12 cents out of every dollar spent.

The other 88 cents goes either for transfer payments or It is is paid for goods and outside services.

only by reducing government activities or social that any major reductions can be made.

security payments RE"SONS FOR EXPENDITURES This Is an important and serious conclusion.

We should rcaJi:e how this situation has come about.
Mainly it has been by reason of war and the danger of future war.

Our huge debt service is almDst entirely a legacy of war.

We have a heavy continuing charge for pensions nnd other provision for war vet erans, llnd expenditures on defence now total $425 million.

All told, then, we must provide something over a year because of past wars or the need to prevent future war.
This huge outlay from which we get no tangible return Is unfortunate-but let in addition to the Us this, blOOd and treasure expended in the past, is the price.

we pay for the personal freedom, the civil liberties, the democratic politics and the economic prosperity that we enjoy as part of the western world.
a billion dollars remember that The second major category of expenditure that has brought us to budgets of this size is The Budget-MT, Abbott social security payments-old age pensions, family allowances, and unemployment insur ance, as well as other smaller items.

For these three huge programs we are having to provide $457 million next year.
I need hardly point out that this house and those parties to which its members belong stoutly uphold the need for old age pensions on at least the present scale and we must, of course, make adequate pro vi -ion for the unemplo)·ed.

Our family though costly allowances, because of the huge numbers Involved, are among the most constructive forms of social security; for they provide Improved opportun ities for heaith and education for the children of our country.
We can expect in future years to gain material benefits from the better citi zens this program makes possible.

Apart from these costs of defence and social security, there is a great variety of services provided to business and the public, on which we spend hundrC!ds of millions each year but which are demanded just as are the services of business itself-the post office, the canals.

the airports and airways, the wharves and harbours and river works.
the aids to naviga tion, the technical services to a&rlculture and the fisheries, to assist our exporters and importers, the statisti cal service, and the employment others of a like character.

Money spent on these provides services which the public use every day, whether they pay for them directly, as in the case of the post office, or indirectly, as in the case of most others.
the foreign trade St!rvices, services, I is for Finally, think it important the house to realize how much is being done to in the improve our productive resources future.

Our health program, lor example, for which wc provide now over $40 mil1ion a year, is not only improving significantly the treatment of the sick, but making real strides in helping 0 reduce the amount of disease and illness.

That will reflect Itsel!

in due course in our national p:-oduction.


We aTe now spend· In disco~erlng, developing, ing large sums improving natural and resources-through such departments as Agri culture, Fisheries, Mines and Technical Sur veys and Resources and Development This is valuable, sensible work that will increase our national income just as surely and effectively as much private business expenditure wil1.
The same is true also of the extensive work in the field of scientific research, which has been greatly increased in scale and of which we ma)', I think, be justly proud.

conserving our I shall not try to enumerate!

all the classes of activities.

I have said nothing, for exam ple, of such an important one as our housing program.
The point I wish to emphasi:e is responsible political that the public, the 1216 HOUSE OF COMMONS Tile Budget-Mr. Abbott is here in the budget parties, ;lnd this pa,rliament h;lve all willed the ends to which these efforts arc directed, and it that we must provide the means.

Unless we arc prepared to reduce the scope or scale of government activities, WC!

must now expC!ct $2.400 million bud~ets in future years.

a Nor can we escape the lax implications tax conclusion.
We must have oC this least balance the budget system that will at in those times when private in good years, sustain our eXI)enditures and exports will employment and incomes at high levels; for otherwise we should slide quickly into infla tion at such times and pile up our national the debt more quickly than we add to economic and financial capacity or the nation to carry it.
In the finance The conclusion then which I reach is that no minister of foreseeable future will have an easier task than I have, namely, that of covering about $2,400 million of expenditure.

In considering proposals for further major increases in our expenditures of a continuing nature, we must be ready to balance them with increased taxes.
We can lfford some modest increases in expenditures to year, or alternatively modest [rom year reductions in taxation, as our productivity and national Income grow, but this dividend in size in of progress is gradual and modest relation to the ambitious plans that are so much in the air these days.

What is import is that we should now realize ant, I believe.

clearly that there is no prospective surplus from which proposed new programs of expen diture can be met.
the expenditure is If worthwhile, it should be provided for by new or increased taxes or charges or by reducing some other services or activities of lower priority.

TAX POI.ICY AND TAX CflANCES Given the conditions I have outlined, of continuing prosperity in which the positive and negative factors are rather evenly ba1 -:lnced, the wise and prudent fiscal policy calls for a balanced budget, or a budget which pro vides for no more than a modest surplus for the retirement of debt.
Last year I budgeted for a surplus of $87 million, and it now appears that we shall have a surplus of about SUI million.

the coming year I have already estimated expen.

ditures at $2,410 million and revenues at existing tax rates of $2,430 million.

That would leave us with a prospective surplus before tax changes of only $20 miliion.

This leads me to For [Mr. Abbo\l.J condudc that no major changes in taxation would be wise this year.
I am, therefore, pro_ posing no important changes, but, as occurs each year.

experience or changing circum_ stances require us to make a number of minor or to remove anomalies, to secure greater equity, to clarify obscure points, or to m~t special circumstances.

In only two or three instances will there by any significant revenue impli_ cations in my proposals.

technical changes tax laws, in the First, witti regard to taxes on commodi.

that purchases by certain I propose lies.


classes caring for of institutions defined the aged and the incapacitated be orphans, exempt from the sales tax effective July 1, 1950.

The loss of revenue resulting from this the saving in change wiB not be large, but costs to these institutions will.
I believe, be welcomed by those responsible for maintain_ ing them, We have for many years exempted hospitals from the sales tax, and the insti· tutions I have referred to are in m:lrly respects analogous to hospitals.

For There is at present an extra five per cent reasons which I tax on toilet soaps.
shall not elaborate, chiet among them the difficulty of drawing a clear line between toilet and laundry soaps, this tax has been very difficult to administer, and I am propos ing that it be repealed effective midnight tonight.

The Joss of revenue will be about $600,000 in a full year.

The only other commodity tax change that I propose is the removal, effective midnight tonight, of the sales tax on ice cream, on drinks prepared from fresh milk and on pre pared whipping cream.
We have received strong representations from the dairy inter this tax will give ests that encouragement ice cream and dairy drinks at a time when sales of certain other milk products are declining.

The loss of revenue in this item will be about $2 mUlion in a full year.

to the consumption of the removal of The bill amending the Excise Tax Act giv ing effect to the above proposals will contain a number of other unimportant technical changes in the law.
As usual I wish to give public notice that no claims for the excise refund arising out of tax changes in respect of goods on which tax has been paid or is payable will be entertained by my colleague the Minister of NaHonal Revenue.

With regard to the Income Tax Act, no changes are being recommended in the rate MARCH 28.

1950 1217 structure.

However, I am proposing certain amendments which will be of specialized but fairly widespread interest.

rate.
rate.

At to secure is controlled by another, or to common control.

Last year we made some changes in the including a reduc corporate tax structure, tion to 10 per cent in the tax on the first $10,000 of profit o[ corporations.

This tax abatement was intended to allow the small businessman to retain a larger proportion of his profits for growth.
It was necessary, in order to confine the benefits to those who were intended to receive it, to allow only one related corpora corporation in a group of the lower the tions time of I have the last budget and since, received many representatlons on this point, and I have gh'en careful study to the sugges tions which have been made for a less rigid limitation.
Under the law as introduced last year companies are related if one controls another or it they are subject It is proposed that these provisIons be relaxed in order to reli~ve particularly the cases where there is a substantial minority interest in the corporation.

Under the new proposal, mere control will not be the criterion.

I think it will achieve our original intention if some higher percentage of ownership is adopted in defining what we mean by related companies.
It is proposed that companies shall not be deemed to be related companies unless there is related ownership of common stock to the extent of 70 per cent or more.

This, I believe, will allow a wider group to obtain the pre [erred rate on the first $10,000 of profit, and will take care of most of the reasonable com plaints against the law as passed last year, Last year parllament approved a new sys Following tem for depredation allowances.
considerable discussion in the house it was agreed 10 allow farmers and fishermen to con I expressed the tinue under the old system.

opinion at farmers would that that probably be better off under the new system than under the old.

Apparently after having studied the new system many farmers are now inclined to agree with that view.

Accord ingly it is proposed to give farmers and fish ermen the option of adopting the new system.
It will, of course, have to be provided that once a taxpayer elects the new system it win not be permissible to revert to the old system.

to adopt lime The special write-off privilege for explora tion and prospecting expenses In the oil and mining industries should, we suggest, be extended by adding a lurther year to the It is present periods provided in the law.
The Budget-Mr. Abbott also proposed to repeal the provision in our law which imposes a corporation tax on the income received by a trustee lor holders of oil royalties, During the past year there has been con siderable uncertainty in the mining industry with regard to the position of prospectors and those who are engaged In developing our resources.
mineral From the early forties onward, it has been the practice to interpret the law as not subjecting to tax gains made by bona fide prospectors and developers in discovering and proving up mining properties.

As the house knows, our Income Tax Act was completely rewritten, and the new act has been in force ,;:ince the beginning of 1949.

The new act contains no clear-cut authority for the practice which h"s been followed during the past decade.
The position under the law of these Important groups should be clarified, and we are proposing this year to Introduce an amendment which should aHay the fears of many who have In recent months been con cerned about this matter.

it is not to assure the house that Perhaps I might also take this opportunity, in view of recent public interest in the ques tion, the policy of the government to tax capital gains.
Under any income tax law there is always a line very difficult problem in drawing a between gains which are profits from carry ing on a trade or business and those which are not.

To my knowledge no tax legislation has ever been passed in any country that has removed aU doubts on this score.

In England, where our basis of income tax had its origin, the matter has been settled almost entirely by.

the courts, the facts in each individual case.


Much as I would like to introduce greater certainty, I do not believe that it can be done satisfactorily by legisla tion.

We now have a readily l<vailable Income tax appeal board that has been set up to determine questions of thIs sort.
I might add to facilitate the appeal pro that, cedure, it is now proposed to allow members o[ the board to hear cases individually, and if he wishes, ~o also to allow the taxpay",r, instead of go direct to the tax being required to proceed first appeal board.

to the exchequer court taking into account In order In the budget o[ last March I announcecl that I had been considering further legislll tion to deal with the position of closely-he:.!

been companies where financed out of retained profits.
I now have definite proposals which will be placed beforl the house for consideration.

The new section.

are bound to be complicated, and I hesitate their growth had 1218 HOUSE OF COMMONS The Budget-Mr. Abbott to attempt to summarize them.

I should, how the main features, ever, mention a few of with the warning that what I say cannot cover all the provisions which will have to be in the law.
Generally speaking, I propose to deal with the surpluses accumulated up to the end of 19~9 in much the same way as surpluses up to the end of 1939 were dealt with in accord ance with the recommendations of the Ives rommission.
This earlier legislation provided for a tax payable by the corporation, gradu ated, however, according to amounts receiv able by individual In the legislation now proposed, closely-held COr to pay a tax on undis porations may elect rate of tributed income on hand at a fiat 15 per cent.

This change will remove many of encountered under the earlier le;;::lslation.

troublesome problems shareholders.


the It the proposed legislation did no more than take care ot past surpluses, a new to the future would problem with respect think it I immediately start developing.

desirable, therefore, the present legisla that tion should provide a comprehensive solu tion to the problem as a whole rather than merely deal in ad hoc fashion with the past.
The Ives commission made a recommenda tion in respect of surpluses accruing alter 1939 under whIch a proportion of annual profits might be ret3ined by closely-held com panies and be entirely free from personal income tax upon subsequent distribution.

We have been giving a great deal of thought to this proposal but we feel that we cannot go Quite as far as that recommendation.
Under the proposals which we are recommending, a closely-held company may, to the extent that it pays out earninas In dividends, earn to capitalize an equivalent amount the right tax ot 15 per upon payment of a special It appeals to me as sensible to enCOUr cent.

age these family corporations to pay reason· able dividends while at the same time making it possible for them to retain profits essen tial for growth and exp3nslon without impos ing on shareholders Impossible potential tax burden.
an almost There will be proposed a number ot other amendments ot a technical character, but I need not burden the house with an attempt to explain them at this stage.

TARIFF PROPOS.\LS When I presC!nled the budget last October, I said that ",lans wC!re under way for another se: of multilateral trade negotiations under the general agreement on tariffs and trade.

The concluding work on lhese plans is at present (Mr.

Abbott.!
Abbott.!

flow of international nearing completion in Geneva, where the cO'lOtries participating in the general agrC!C_ ment arc holding their fourth session.

Il has now been decided to hold the third round of tariff negotiations in Torquay, England, begin.

ning September 28 of this year, and it is anti.

take cipated that some forty countries will part.


The proposed Torquay negotiations are a further step in the post-war program of international co-operation to reduce taritJs and remove other barriers which sland in the trade.

w3y of a freer The original Geneva agreement of 1947 was widened last year at the Annecy conference to include ten additional countries.
The main purpose of the Torquay conference will be to increase the value of the gC!neral agreement by to expanding it cover a broader range of commodities, and, In addition, to provide further tariff concessions on products previously negotiated.

is intended that at the conclusion of the Torquay conference all the tariff concessions resulting from the new negotiations, together with the original Geneva and Annecy 'tariff conces· sions, will be incorporated in a new set of tarit!
schedules which will run until January, 1954. to include more countries, It in tariff further the Geneva Canada will have an opportunity at Tor· reduc· quay to negotiate for the other tlons with the Uni-ted States, participants' and Annecy agreements, and also with a number of new countries.
While the United States will, on this occasion, still be governed by the Reci procal Trade Agreements Act which empow ers the president to reduce tarifl's by not the 1945 rates, more than 50 per cent of there is a considerable number of Important Items on which further concessions may be made.

I believe that tariR reductions, trading world.

WC!

in the ,present conditions at unbalanced world trade, the success of the Torquay conference will depend largely on the leadership given by the United S~ates.
the United States is prepared to make If I am confident significant tha1 these coming trade talks will make an important contribution to the restoration ot a saner In Canada are not unmindful or our own responsibility, and take this opportunity I can say that we will to consider appropriate adjustmC!nts in our customs tariff which should contribute to a bC!tter balance In our trade with the United States, the sterling area and western Europe.
tariff negotia the important tions which ace scheduled to commence in a few months' resolutions relating to the Customs Tariff which I am In view of '!.he budget time, MARCH 28.
1950 1219 for tabling contain very few changes in so far as customs duties are concerned, but in order 10 facilitate the compilation of a new consolidation of the Cus10ms Tariff, several hundred items have been renumbered and rearranged covering products in respect of which changes have been made in recent tariff negotiations at years as a result of Geneva and Annecy.
These items which are rates of shown in resolution 3 continue several duty that have been in effect years, except tin plate, on in the case of which the British preferential tariff is being increased from free to 15 per cent ad valo rem.
During the negotiations at Geneva in this British pref 1947 the elimination of erence, reduction in the coupled with a to 15 most·favoured-natlon rate from 17' per cent, was agreed to by the British and ourselves as an essential .part of the bargain by which we obtained very important con cessions in the United States taritf, and at time Canada gave an undertaking to that make this increase effective as soon as the necessary legislation could be enacted.
It Is proposed that resolution 3 go into effect on June 1, 1950. similar and the antibiotics were dutiable My other.

tariff proposals, which for the reason mentioned are of only minor signifi cance, are included in resolution 2.

The tariff is being reduced on dates for packaging and on compounds imported mainly from the the manufacture of United Kingdom for phonograph records.

The other changes are mainly for the purpose ot facilitating admin istration elimination of obsolete 'Phraseology.
Somewhat related to this latter category is an amendment being proposed in connection with the tariff Item covering bio logical products.

For some years the admin istrative authorities have held that penicillin as and chemicals.

An importer appealed this ruling and his appeal was allowed by the laTift' board.

The decision of that board is now before the exchequer court.
The whole field is one in which there have been important technological and industrial developments in recent years, and there is a need for investi gation of all the pertinent facts and, clarifica tion of the tariff situation.

What we are now proposing therefore is to insert In the tariff an appropriate defmitlon of biological prod ucts to maintain the existing practice, and then refer the whole question at biological thorough to the tariff board for products investigation and considered recommendation.
The tariff changes in resolution 2 which cover about twenty-five items will go into effect tomorrow.

The Budget-Mr. Abbott I should add that the amendments being made to the Customs Tariff in these budget in any way the resolutions will not affect carrying out of the provisions and inlent of the Emergency Exchanll:e Conservation Act.

REVISED ESTIMATES AFTER TAX CHANCES I may now summarize the effects of the proposed tax changes on the balance at revenues and expenditures.
The various tax reductions which I have proposed should not in all involve a loss of revenue of more than $3 million.

The revenue from the new tax available to closely-held companies In respect of accumulated earnings cannot be predicted, because we cannot these companies will elect to take advantage at the new provisions in the next fiscal year.

The 1 revenue we receive could be quite large.

believe that to least be sufficient it will at offset the reductions ·just mentioned.
tell how many of This, then, leaves our expected expendi tures at $2,410 million, our expected revenu~ at $2,430 million, and our expected surplus for the coming year at $20 million.

CONCLUSION My han.

There is little th'!t I need add, Mr. Speaker, b)' way of conclusion.

Canada is in a pros perous state at economic health.

There are difficulties and uncertainties ahead ot us; bul when in our history have we been without the difficulties and uncertainties?
Durinl past year Canada the has demonstrated soundness and the resilience of her economy.

friends opposite have been dis CGvering imminent crises and catastrophes almost every month tor the past two years or more, and almost every month our trade has increased, our employment has increased, and new resources are discovered or devel that our oped.
We all know, of course, geography and the nature of many ot our basic resources make us vulnerable to sudden economic changes in the countries with which we do the greater part at our trade.

But I to all my hon.

friends opposite that suggest the calamities they fear are not imminent, and that if at some future time we have to face serious difficulties we shall find that we have never been better equipped and pre pared to resolve them.
I wish now to table the budget resolutions: INCOME TAX ACT Reoolv~ that it i, expedient to :Imend the Income Tax Act and to provide, .monpt other thln,s: I.

That for the 1949 and subsequent taxation yean.

tax rate J corporation !he provision under Which the 10 per cent on the fiT$t $lD.OIIO of income of