1936-05-15

Mr. SPEAKER:: I have the honour to inform the house that I have received a communication from two members notifying me that the following vacancy has occurred in the representation, viz.: of D'Arcy Britton Plunkett, Esquire, member for the electoral district of Victoria, B.C., by decease.
I accordingly issued my warrant to the chief electoral officer to make out a new writ of election for the said electoral district.



BUSINESS OF THE HOUSE


[Stage Direction]
On the order for motions:
Right Hon. W. L. MACKENZIE KING (Prime Minister):: Mr. Speaker, I have given notice of a motion for Monday with reference to adjournment of the house over Ascension day and the Monday following, Victoria day. It might be well for me to say a word at this moment as to the view of the government in the matter. We are anxious to suit the convenience and further the wishes of hon. members. The motion is to the effect that the house adjourn over Ascension day and also over the Monday following, Victoria day, but if it should appear after consultation between the whips that it is the wish of hon. members that the house should sit on either of those days, or on both, so far as the government is

B.N.A. Act-Mr. Bennett
concerned we shall be glad to be governed accordingly. I have been speaking to the assistant government whip and he informs me, after some consultation with members of the house on all sides that it would1 appear as though the general wish were to adjourn over each of these days, but if the general desire should be to the contrary the government will be glad in the interim between now and Monday to consider any other view.


Right Hon. R. B. BENNETT (Leader of the Opposition):: Mr. Speaker, I think the opportunity afforded by allowing the motion to stand until Monday will enable us to ascertain what action is most convenient having regard to all the circumstances, and I shall communicate with the right hon. gentleman accordingly.



PENITENTIARIES COMMISSION

[Stage Direction]
On the orders of the day:
Miss AGNES C. MACPHAIL (Grey-Bruce): Mr. Speaker, may I ask the Minister of Justice (Mr. Lapointe) when he expects to be able to name the commissioner on the royal commission for the investigation of penitentiaries to fill the vacancy caused by the deeply regretted death of Harry W. Anderson?
Hon. ERNEST LAPOINTE (Minister of Justice):: Mr. Speaker, the new appointment will be made at as early a day as possible, andi that means pretty soon.



BRITISH NORTH AMERICA ACT


[Stage Direction]
The house resumed from Thursday, May 14, consideration of the motion of the Minister of Justice (Mr. Lapointe) for an address to His Majesty the King praying that a measure be submitted to the parliament of Great Britain and Ireland to amend the British North America Act with respect to taxation and guarantee of provincial debts.
Richard Bedford Bennett: Mr. Speaker, when we
rose yesterday I was pointing out to the house that there was no necessity for having any legislation passed by the imperial parliament with respect to the second branch of this resolution. I need hardly point out that section 2 of the resolution contemplates the parliament of Canada passing an act to guarantee the payment of principal and interest and sinking fund of securities of the various provinces which may desire to have this action taken after arrangement with the federal power.
Yesterday it was suggested that we had never guaranteed the securities of provinces. On the contrary, under the provisions of the Relief Act enacted by this parliament, the government in the exercise of the power thus conferred upon it has given guarantees with respect to provincial obligations, the legality of which has never 'been questioned, nor has it ever been called in question by anybody representing the banks or others. I do not think I need do more than point out that when this parliament has enacted legislation empowering the executive to guarantee the securities of the province, that action has always been taken without question as to either its legality or its validity. Therefore the first paragraph of the second part of the resolution is wholly unnecessary and not at all required for our .purposes. I could go into the matter in greater detail but I do not .think it is necessary as it is so axiomatic. I do not think any counsel would for one moment suggest that this parliament has not the power to give any guarantee that in its, wisdom it may deem it desirable to give*
The next paragraph reads:
The legislature of any province of Canada may, with reference to the principal, interest and sinking fund of securities which the province may from time to time make or issue, authorize the government of the said province to enter into an arrangement with the government of Canada whereby the government of Canada shall guarantee the payment of the principal, interest and sinking fund of such securities.
That requires no legislation. That power now exists and is as complete and amply possessed iby every province of this confederation as was possible for the imperial parliament in the plenitude of its powers to confer. Therefore that section is wholly unnecessary.
We come now to the fourth paragraph, which reads:
(1) For the purpose of securing Canada against loss resulting from the giving of a guarantee under the authority of this act, the government of Canada, whenever in its opinion any default has occurred in respect of any payment on account of principal, interest or sinking fund of the guaranteed securities, may:
(a)	withhold any payment to the province on account of any grant payable by the government of Canada to the province for its local purposes or for the support of its government and legislature or on account of interest in respect of its public debt or in lieu of public lands or on any other account whatsoever;
(b)	effect payment in whole or in part of any such grant by payment direct to a creditor of the province of any amount owing to such creditor on account of the guaranteed securities. In this and the next succeeding paragraph "creditor" shall include a trustee of a sinking fund;
B.N.A.Act-Mr. Bennett

(c)	out of any revenue received or collected by the government of Canada or any department or officer thereof for or on behalf of the province, make payment direct to a creditor of the province of any amount owing to such creditor on account of the guaranteed securities.
I need hardly point out that we have done that quite frequently. We paid the obligations of the Montreal harbour board direct to .the holders of the coupons under an arrangement with the commissioners. We have paid and are continuing to pay sums in respect of the guarantees given by the provinces of ALberta, Saskatchewan, British Columbia and Manitoba to the railways. We are to-day meeting the guarantees given by the province of Nova Scotia to the Halifax and Southwestern Railway, which if paid by the province would result in its practical bankruptcy. We have paid all these sums. Therefore, so far as this matter is concerned, it requires no legislation on the part of the imperial parliament to authorize us to do so,
Let us proceed. The next and only question is whether or not this paragraph is competent for us to withhold from a province the [DOT]payment of moneys which under various statutes it is entitled to receive, in the event of its making default in the payment of its guarantee or its obligation under an agreement made between the dominion and the province. In my judgment there is no doubt as to that power. I desire only to point out, first, that when the dominion has undertaken to guarantee the securities of a province, in pursuance of competent legislation, the province then enacts such legislation as it may think necessary for the purpose of enabling an agreement to be arrived at between the dominion and the province.
Last evening I read certain extracts to this house-I regret having had to take up so much time in doing so-to show that the province was an entity clothed with all the powers that the imperial parliament in the plenitude of its powers could confer upon it. It is the right of a province to borrow; it is one of the incidents of its being thus created. True, the power to borrow is set out in terms in the statute; but it is one of the implied powers that arises by reason of the creation of the entity called a province. Therefore, inasmuch as the power to borrow is incidental to these powers-it was pointed out in the harbour commissioners case-


Mr. DUNNING:: It is expressed as a power in the British North America Act.


Richard Bedford Bennett: Surely, but I say it is
part of the incidental power that arises in the creation of the entity; it is part of the powers that could be exercised by such an entity as a province. The province can do anything within the provisions of section 92, that is, within its legal competence. Every power thus granted may be exercised in any manner-that is within the discretion of the legislatures of the provinces. This discretion is exercised in various ways. At times provinces exercise their discretion in certain, and what are thought to be undesirable, ways. For instance, the legislature of one province may repudiate a contract which the legislature of another province would not think it desirable so to deal with. The legislature of one province may declare for publicly owned utilities, which another province may think undesirable, and so on in connection with all these matters.
So far as the borrowing of money is concerned, it is one of the powers given to the province under section 92, and one of the powers given to the dominion under section 91. Whether it be the dominion or the province, in the exercise of these powers they may make such arrangements as they think desirable in the interests of their respective communities. That is, the dominion may make any agreement it thinks desirable, and the province may make any agreement it thinks desirable, the governments of the day being chargeable with responsibility as to what they consider to be the best interests of their respective communities.
If one will observe the language of paragraph 4 of this resolution and then read the words of the judicial committee to which I referred yesterday, he will realize that all the power that is sought under section 4 now exists except with respect to possibly one matter, to which I now purpose to address myself. Has the province through its legislature the power to agree that sums of money payable to it by the dominion may be withheld for the purpose of satisfying debts due by the province to the dominion under an arrangement that may be arrived at? My answer is in the affirmative. At first I had some doubt about it, but if you look at section 118 of the British North America Act you will find these words:
The following sums shall be paid yearly by Canada to the several provinces for the support of their governments and legislatures:
Ontario	 $80,000
Quebec	 70,000
Nova Scotia	 60,000
New Brunswick	 50,000

B.N.A. Act-Mr. Bennett
Two hundred and sixty thousand; and an annual grant in aid of each province shall be made, equal to eighty cents per head of the population as ascertained by the census of one thousand eight hundred and sixty-one, and in the case of Nova Scotia and New Brunswick, by each subsequent decennial census until the population of each of those two provinces amounts to four hundred thousand souls, at which rate such grant shall thereafter remain. Such grants shall be in full settlement of all future demands on Canada, and shall be paid half-yearly in advance to each province; but the government of Canada shall deduct from such grants, as against any province, all sums chargeable as interest on the public debt of that province in excess of the several amounts stipulated in this act.
That is, with respect to guarantees that have been given and amounts that have been lent by the dominion to the provinces, even during recent years, we have the right to deduct from the sums which we have obligated ourselves to pay, the amount that may be necessary for the purpose of the payment of the interest that is due in excess of the sums mentioned in the statute. That does not arise at the moment. The sole question is whether or not there is such power in the provincial legislature as will enable that legislature to authorize an agreement to be made with respect to the portion of its revenues derived from the federal power so that they may be utilized for the purpose of discharging the debts and obligations of the province to the central authority or power. In the very nature of things it seems to me that that is elementary. Why? Because this parliament has authorized the payments that are being made under the British North America Act. In the opinion of some, and it is an opinion that does prevail in some quarters, there should be an imperial statute. Subsidies were in a sense sacred as distinguished from other forms of payments which might be made, and could not be retained or dealt with by the federal power. The answer is this, that section 118 of that statute as it stood in 1867 has been entirely modified and amended so that we have paid increasing sums, to which I shall presently refer, to all the provinces. And as those moneys are voted by this parliament to a province and the province receives them as part of its revenue, it follows that if the legislature of a province authorizes the dominion to withhold a portion of that money for the purpose of interest or sinking fund, the payment of principal or otherwise that may be due by the province to the dominion, there can be no question as to the validity of such action.


Charles Avery Dunning: Has the right hon. gentleman considered it in the light of sections 113, 114 and 115, respectively?


Richard Bedford Bennett: Yes, surely. The sections referred to are as follows:
113.	The assets enumerated in the fourth schedule to this act belonging at the union to the province of Canada shall be the property of Ontario and Quebec conjointly.
114.	Nova Scotia shall be liable to Canada for the amount (if any) by which its public debt exceeds at the union eight million dollars, and shall be charged with interest at the rate of five per centum per annum thereon.
115.	New Brunswick shall be liable to Canada for the amount (if any) by which its public debt exceeds at the union seven million dollars, and shall be charged with interest at the rate of five per centum per annum thereon.
That has been modified; the whole financial position has been changed. The right of the provinces, for instance, to receive part of the money in the possession of the federal government in trust has been made abundantly clear, and they have absolutely taken from the public exchequer, under the terms and conditions of the statute in that behalf, sums of money that were receiving interest from the dominion, and which provided a portion of their revenues until they were expended for purposes mentioned in the act.
It will be recalled that we had one case of that kind not many years ago. During his premiership of New Brunswick, the late Mr. Blair thought it desirable to use money to greater advantage than leaving it on interest with the federal government, and he withdrew portions for the purpose of increasing the revenues of the province and enabling certain public undertakings to be proceeded with. If there were any doubts about the matter it would seem to me that it could easily be resolved by making a simple test.
This parliament had control of the money that it voted to the provinces; the British North America Act had nothing to do with that. It was done by act of this parliament. It was not under the British North America Act, but by arrangement made between the provinces and the dominion. And I shall presently show that during recent years certain steps were taken in connection with the western provinces that indicated an entire departure from the principle of finance which governed in days gone by.
Leaving that for the moment, it must be apparent even to laymen that it would be a very peculiar thing if the provinces and the dominion could not make arrangements without getting further power from Westminster to provide that the provinces and the dominion may arrive at an arrangement by which the money due to the one shall not be paid if that one owes money to the dominion. That is the whole story. There cannot be anything more to it than that.
BN.A. Act-Mr. Bennett


Mr. THORSON:: Has the right hon. gentleman given consideration to the words used in section 118, respecting the provincial legislatures, and the question whether these words might not constitute a trust binding both upon the dominion and upon the provinces?


Richard Bedford Bennett: I certainly can answer
that question. Section 118 states:
The following sums shall be paid yearly by Canada to the several provinces for the support of their governments and legislatures.
That money becomes subject to the appropriations of the legislatures of the provinces-by statute; the supply bill. Therefore if a legislature in the exercise of its discretion indicates that for that province and for that legislature it is desirable to secure a dominion guarantee, and that the moneys made available shall be utilized for the purpose of making good obligations created, they have it within their power. These moneys enter into general revenue funds and become subject to the appropriation bill, the supply bill, such as you see from year to year in the statutes of the various provinces.


Joseph Thorarinn Thorson: But the question which occurred to me was whether those moneys might not first have to go to the provincial legislatures and governments.


Richard Bedford Bennett: I remember that point being raised on one occasion. Is not the answer to it, and is it not a fairly conclusive one, that if the legislatures deal with the money as being in their hands, by antecedent action of the legislature, that answers the question? I quite agree with what the hon. member has said, namely, that you might say that a legislature must have supreme and complete control over the subsidy money, but that power is complete if the legislature acts upon the matter in the way I suggest. In other words, if the statute is passed by the legislature by which it provides that moneys that are under its control shall be utilized for a given purpose, then it has constitutionally exercised its powers.


Charles Avery Dunning: Even on	a future
oocasion?


Richard Bedford Bennett: Yes, certainly. Obviously the power can be exercised antecedently to the time when the money has actually been placed there. The reason is this-


Joseph Thorarinn Thorson: There may be serious doubt.


Richard Bedford Bennett: There may be doubt about it, but this resolution is not drawn on that basis, and in my own judgment I certainly would have no difficulty in arguing as to the

validity of any action which might be taken as to an agreement supported by statute of any province in this dominion and that of the parliament of Canada, in the first instance. And I do not think any person would seriously question it if they took time to investigate the whole matter from its fundamental foundation, onward. Why? Because section 118, in its terms says that this is a complete settlement. But it was not a complete settlement; it has not been. There have been changes from year to year; there have been increased subsidies. Who varied that settlement? This parliament varied it, by arrangement with the provinces. Having made arrangements or agreements with the various provinces, this parliament took action to increase the sums of money provided for in section 118.


Charles Avery Dunning: Always by reference to the imperial parliament.


Richard Bedford Bennett: I will come to that; I am perfectly familiar with that phase of the matter. The late Sir Richard McBride went over to argue before the imperial parliament that such arrangements should not be final, and the imperial parliament said that the statute came from the Dominion of Canada, and coming from the Dominion of Canada it must be taken that they were exercising their power of amending our statute, pursuant to the request it had received. It will be recalled that that involved an increase of subsidy.
But there has been no ratification by the imperial parliament. There was no ratification in the sense that it was required. If hon. members will read the debates of that time and the words of Sir Wilfrid Laurier made at the time these increases were being granted, he dealt with them as being finally-


Mr. MACKENZIE (Vancouver):: The words are "finally and unalterably."


Richard Bedford Bennett: The word "unalterably"' had escaped me, but no doubt "finally and unalterably" are the words. It was those words Sir Richard McBride protested against. The point I wish to make is that successive governments of this country have endeavoured to secure finality and unalterability by taking that method. But so far as we are concerned, does anyone suggest that we require an amendment from Westminster to enable the legislature of the province of Alberta to make provision as to what it shall do with its moneys, to make an agreement as to the application of the revenues it derives? Does any one suggest for a moment that this parliament requires additional powers from West-

B.N.A.Act-Mr. Bennett
minster to enable us to guarantee securities of the province of Alberta? Can that be suggested? I think not. The very discussion that is now taking place indicates that this resolution should have been drawn in different terms. If it is to quiet doubts, one can understand it, but if it is a claim that the power does not exist, I am opposed to it. This parliament has the power, upon the broad general principles that in recent years have governed the construction of the British North America Act, to guarantee anything that it desires to guarantee as far as payment of money is concerned; and the legislature of each province has supreme and complete control over its own revenues. To say less is to indicate that the legislatures are subordinate to some body; and how can they be subordinate when the privy council has declared that each legislature is supreme within its jurisdiction, and has all the powers that the imperial parliament in the plenitude of its power can confer upon it? In other words, in the language of the Lord Chancellor which I read yesterday, they have exhausted the grant of their powers; they have given everything that can be given. If the purpose is to quiet doubts, I can understand it, but to ask for fresh powers is to imply that the province of Quebec, the province of Ontario, and the other provinces of this confederation have not been clothed with all the power that the imperial parliament can confer upon them. But the privy council, the court of last resort, has made it abundantly clear that the imperial parliament has conferred upon the legislature of every province of Canada all the powers it possessed with respect to such matters.
Further, it must be abundantly clear that there is no such thing in this regard as subordination to any parliament. This parliament is not subordinate to the imperial parliament, nor is the legislature of any province subordinate to this or any other parliament. That point was dealt with in these words by the privy council:
Their lordships do not think it necessary to examine, in minute detail, the provisions of the act of 1867, which nowhere profess to curtail in any respect the rights and privileges of the crown, or to disturb the relations then subsisting between the sovereign and the provinces. The object of the act was neither to weld the provinces into one, nor to subordinate provincial governments to a central authority, but to create a federal government in which they should all be represented, entrusted with the exclusive administration of affairs in which they had a common interest, each province retaining its independence and autonomy. That object was accomplished by distributing, between the dominion and the provinces, all powers executive and legislative, and all public property and revenues which had previously
belonged to the provinces; so that the dominion government should be vested with such of these powers, property, and revenues as were necessary for the due performance of its constitutional functions, and that the remainder should be retained by the provinces for the purposes of provincial government. But, in so far as regards those matters which, by section 92, are specially reserved for provincial legislation, the legislation of each province continues to be free from the control of the dominion, and as supreme as it was before the passing of the act.
The statement I have just read arose out of a case in which a province claimed priority in the right of the crown in winding up proceedings, and did so successfully. Likewise in the case which involved the granting of a patent for what was then queen's counsel. These cases established that within the ambit of the powers conferred upon it by section 92, the province is as supreme an entity as this dominion is, which possesses all the powers that it is possible for a selfgoverning country to possess. The construction placed upon section 92 makes it abundantly clear that the imperial parliament has conferred all the powers within its jurisdiction or power to confer.


Joseph Thorarinn Thorson: I do not wish to interrupt-


Richard Bedford Bennett: It is quite all right. As a matter of fact I should rather welcome it.


Joseph Thorarinn Thorson: Before the right hon. gentleman proceeds to his next point, may there not be some doubt as to the power of a province to divest itself by agreement of its constitutional right to receive money? A province cannot delegate its powers. Can it divest itself of such constitutional rights as it possesses?


Richard Bedford Bennett: One expression the hon. gentleman has just used, "the province cannot delegate," is not quite accurate. Delegatus non potest delegare does not apply with respect to a province, because-


Joseph Thorarinn Thorson: I meant the constitutional power of legislating.


Richard Bedford Bennett: The creation of municipal institutions implies a delegation of powers, looking at it from one angle, but the privy council has said that that is not a delegation in the sense in which that word is normally used. My hon. friend from Selkirk (Mr. Thorson) and myself will be in agreement that it is not competent for a province to divest itself of its constitutional powers- if that is what he means. For instance, that was settled in the referendum case from
B.N.A. Act-Mr. Bennett

Manitoba, in which it was held that you could not, by the initiative and referendum, enact legislation in which only the legislature and the people had to do, without the intervention of the crown, because it was not legislation within the purview of section 92.


Joseph Thorarinn Thorson: I was not referring to that point.


Richard Bedford Bennett: No, but that illustrates the point that it cannot divest itself of its legislative authority. The initiative and referendum case made it perfectly clear that a province could not divest itself of its legislative authority in the manner that it was there sought to do.


Mr. CAHAN:: But it can exercise its legislative authority.


Richard Bedford Bennett: Exactly, it can exercise its legislative authority.


Ernest Lapointe: That is a very different question.


Richard Bedford Bennett: I wish to answer the
point raised by my hon. friend from Selkirk (Mr. Thorson), because it is one of some importance. The legislature in the exercise of its powers is not subject to the control of this parliament or the judges of the country; it is subject only to the control of the people. That has been declared so often as not to require restatement. Recently, in a leading case, the court said, "It is not for us to say whether or not the legislature has been wise or unwise. We are here to determine a pure question of law, and the question of law is whether or not there is jurisdiction to exercise the power." That is the general principle,
I think, which governs. In the exercise of that power the legislature of Alberta, if it were in session to-day, might authorize the executive to enter into an agreement with the government of Canada for the purpose of guaranteeing its bonds. That is obvious. I think no lawyer would question that it could enter into that agreement-my hon. friend nods his head-with the Dominion of Canada whereby the dominion would guarantee the bonds of the province of Alberta. The next stop in the proceedings is this: Is it competent for that legislature at the same time to provide that, for the purpose of securing the dominion against loss by reason of the guarantee, it shall have a first charge, lien or claim against any moneys due, present or future, by the Dominion of Canada to that province? That is the question at issue. My hon. friend says that there may be some doubt about that, as it is a matter that has not been determined by the courts. I would not be prepared to 
say that there is no doubt about every question. There once stood in this house a solicitor general who boasted that the decisions of the courts amply warranted an opinion which he gave, that the decisions were all in favour of the attitude which he .had taken. Within a few weeks afterwards the privy council spoke, and decided adversely to the view he had expressed. That was the case of the Calgary and Edmonton mineral rights.


Ernest Lapointe: It may
happen again.


Richard Bedford Bennett: That is what I am saying; it may happen any time you are dealing with problems of that kind. But it is one thing to remove doubts; it is another question to declare, in terms such as are used here, that the power does not exist. I protest against the provinces being thus treated. I protest against this parliament being thus treated. For surely it does not require a parliament at Westminster to pass a statute to confer upon this parliament the jurisdiction to deal with its own revenues, nor does it require any legislation to enable a province, having had conferred upon it the powers I mentioned yesterday, to enter into an agreement- with respect .to its own bonds and its own securities. It might well be that there is doubt as to how far that would arise with respect to moneys that were covered by the original act, but not the subsequent acts, as I shall presently point out, because with respect to subsequent acts you have an entirely different set of considerations. You have confederation an accomplished fact; you have the dominion voting, through its representatives, that certain moneys collected from the people shall be utilized as the legislature of a province may think desirable or necessary. If they see fit to deal with those moneys in that way, that is all that can be said about it. There is no doubt,, I submit, as to the powers existing with respect to all moneys other than those covered by original section 118, that is, all subsequent payments, whatever may be said as to section 118, and I leave it at that.
The next section of this resolution provides :
The legislature of any province may charge the pricipal, interest or sinking fund of the guaranteed securities on any revenue of the province, upon terms that such revenue shall, if the government of Canada so requires, be disbursed exclusively in payment of such principal, interest or sinking fund and may, if the government of Canada so requires, provide for the depositing of all funds from the revenue so charged in a trust account in an bank or banks for the purpose of implementing the said charge.

B.N.A. Act-Mr. Bennett
That means that if the province of Alberta, we will say, desired to do so it could pass a statute providing that all moneys received from royalties on coal and oil and gasoline should be placed in the bank in a special fund and utilized for the purpose of making good any payments that might be. payable or had been made by the dominion under its guarantee of provincial securities. That is a contract. If one looks at this provision carefully it merely says:
The legislature of any province may charge the principal, interest or sinking fund of the guaranteed securities on any revenue of the province-
Does that power not now exist? Can it be successfully denied that it exists? Does anyone seriously question that it does not exist? Let me give an illustration. In Newfoundland they charged the gasoline tax for .the purpose of .making good the interest on securities, having conferred a monopoly upon an oil company that undertook to lend and did lend them, certain moneys. Newfoundland had no larger powers with respect to this matter than has the province, under the decisions of the privy council. The province has supreme and exclusive control over property and civil rights. The province has supreme and complete control over the question of what it shall do with its revenues, unless indeed with respect to school funds where there is the limitation that they must be used for certain specific purposes. But eliminating that, they have freedom of action, and in the exercise of that freedom of action it is now said that they must go to Westminster and secure a statute saying that they may enter into a contract for the purpose of passing a statute that will enable them to charge a given fund with the payment of any moneys that the dominion may have to pay for the purpose of making good its guarantee on any bonds or securities that may have been guaranteed.
I think the mere statement of .the proposition completely refutes the necessity for any such legislation. It places the provinces, each of them, in a subordinate position and denies them the powers which over and over again .the courts have said they possess, that is, the .power to make contracts of any kind, nature, form or description whatsoever, within the ambit of their powers, when once authorized by the legislature. Section 92 certainly would enable .them to do anything they pleased with their revenues regardless of whether we thought it wise or unwise. Some of us may have thought that certain expenditures made by provincial legislatures were very unwisely made, yet we have no
control over .them. Certain provincial legislatures may have thought that expenditures made ,by us in this parliament were very unwise, yet they have no control over us except to the extent that they may be electors and thus able ultimately to express their opinions through the ballot box. Certainly there is no legal or constitutional authority to which reference can be had which deprives any province of the fullest possible power to make a contract on any terms or conditions it pleases within its jurisdiction.
That is the position I take with respect to this resolution. I do not do that for the purpose of opposing the resolution; I do it for another purpose. I do it for the purpose of trying to assert in my poor way the right of legislatures created under the British North America Act, and of this parliament, not to go to Westminster to seek fresh powers when powers already exist, for I believe the language used by the privy council in connection with our constitution makes it abundantly clear that there is nothing that could be done by that parliament that has not been done to clothe our legislatures with all the powers a province could possess under the constitution, and the dominion with all the powers a free nation could possess, subject of course to the question of our amending our own constitution and dealing with the rights of the crown.
The last paragraph deals only with the title to be given to the statute. Now I think I have concluded all I desire to say with respect to these various branches of the case. May I say to my learned friend the Minister of Justice (Mr. Lapointe) that I direct [DOT] my arguments to him not as a partisan or as a political opponent but as a student of the constitution, and not a very close student now, for I have not the time to follow it with the care I once did. I speak, however, as one who has, as I believe the minister has, a realization that we must not seem to be clothed with less powers than we have. To admit that is to deny for the future-a position which I think would be something undesirable-that the provinces possess all the powers that the imperial parliament, in the plenitude of its powers, could confer upon them and that this dominion parliament has all the powers that any nation could have, with ithe limitations that I have mentioned.
Now let me go one step further. Yesterday the minister made some reference to observations that had been made by the late Sir Wilfrid Laurier with respect to the financial relations between the provinces and the dominion. No question has more closely engaged the attention of students of our constitution than that, and it will be remembered
B.N.A. Act-Mr. Bennett

that the hon, member for Winnipeg North Centre (Mr. Woodsworth) made some observations with respect to the attitude of the Minister of Labour (Mr. Rogers) regarding these matters. In a very excellent paper contributed to the Canadian Forum of December, 1934, the Minister of Labour dealt with the situation. Even the most backward school boy knows that a fundamental tenet of British government is that it calls for drastic revision. The minister said:
Subsidy readjustments of past years have revealed a lamentable lack of allegiance to principle and a deposition to reach short term solutions under the pressure of political expediency. As a result of the haphazard methods of previous settlements the financial relationships of the Canadian federation have reached a condition of chronic instability. This has made for misunderstanding and friction in a field of government where the desideratum is harmony and cooperation.
This quotation is important, because it represents the considered judgment of a student of the situation as it has heretofore existed. The late Sir Wilfrid Laurier pointed out that it is a general axiom of government that those responsible for spending money should be responsible also for raising it, a view which is as old as the veiy first discussions that took place in connection with democratic institutions. But the British North America Act was founded upon the assumption that subsidies were to be paid to the provinces. The reason is obvious; the provinces gave up their rights of indirect taxation. The provinces of Nova Scotia, New Brunswick, Ontario and Quebec gave up the right to raise revenues by customs duties and excise taxes and other methods, in connection with post offices and matters of the kind, and in giving these up they stipulated for subsidies in lieu thereof. Hence was introduced into our constitutional statute a provision that the provinces were to receive subsidies. Now, the word "subsidy" is offensive to many minds. It is associated with ventures in past centuries by which it came to be a word of ill omen. Having once determined that we were to have subsidies, all the resultant evils to which Sir Wilfrid Laurier and the Minister of Labour referred at once followed. There has been a constant effort ever since to increase the subsidies payable by the central power to the provinces for their purposes. Therefore I do not think it serves any useful purpose to deprecate the action involved in the payment of subsidies. We commenced housekeeping with them in 1867 and have continued with them ever since. The only question is whether or not some arrangement can be arrived at which will place them upon 
a more scientific basis than that which now prevails. The late Sir George Foster suggested that the difficulty could be met by paying a fixed percentage of the customs revenues to each of the provinces in terms of their population. Many of the provinces were greatly in favour of such a scheme; others were not. It will be recalled that we made a special grant to the province of Prince Edward Island because of its geographical position and its relation to confederation, and only last year, for reasons which I shall presently point out, we made a special grant to British Columbia; for one had only to compare the amount received by that province from the dominion with the amounts payable to the other three western provinces to realize that even the $750,000 paid did not put them on a basis of equality.
But I am going to point out to the Minister of Justice three matters that are not to be lightly overlooked when he discusses a question of this kind. In 1905 we created two provinces in western Canada, Alberta and Saskatchewan. At that time the public domain was in the possession of the crown in the right of the dominion. After providing for subsidies to these new provinces, section 20 of 'the Alberta Act-and a similar section is found in the Saskatchewan Act-provided :
Inasmuch as the said province will not have the public land as a source of revenue, there shall be paid by Canada to the province by half-yearly payments, in advance, an annual sum based upon the population of the province as from time to time ascertained by the quinquennial census thereof, as follows:-
The population of the said province being assumed to be at present two hundred and fifty thousand, the sum payable until such population reaches four hundred thousand, shall be $375,000;
Thereafter, until such population reaches eight hundred thousand, the sum payable shall be $562,500;
Thereafter, until such population reaches one million two hundred thousand, the sum payable shall be $750,000;
And thereafter, the sum payable shall be $1,125,000.
2. As an additional allowance in lieu of public lands, there shall be paid by Canada to the province annually by half-yearly payments, in advance, for five years from the time this act comes into force, to provide for the construction of necessary public buildings, the sum of $93,750.
The Saskatchewan Act is in the same terms except as to the amounts payable. Remember that in 1905, when these provinces came into being, they had no public lands, and it was provided by statute that we should pay them annually a sum rising to $1,125,000 in lieu of lands. But in 1930, just before an election the government of that day, much

to the surprise of everyone agreed not only to give them the public lands but to continue to make the payments to them which were granted in lieu of such lands. Of course that in itself created a situation of unfairness to the other provinces, unfairness to Manitoba, unfairness to British Columbia. And in chapter 41 of the statutes of 1930 it is provided by section 21:
In lieu of the provision made by subsection 1 of section 20 of the Saskatchewan Act, Canada will, from and after the date of the coming into force of this agreement, pay to the province by half-yearly payments in advance, on the first days of January and July in each year, an annual sum based upon the population of the province as from time to time ascertained by the quinquennial census thereof, as follows:	_
The sum payable until such population reaches one million two hundred thousand shall be $750,000;
And thereafter the sum payable shall be $1,125,000.
So that by reason of the action then taken they received not only their public domain but also the subsidy that in 1905 was provided for them in lieu of land. Some of us who did not profess the same political faith as hon. gentlemen opposite ventured to point out what would inevitably result. But I can recall that in 1905 it was pointed out how much better it was to have the money than the land. I remember these cries, and some of us stated that the time would come when the very party which made that arrangement with those provinces would have to agree that they must have their public lands-very few ever expected to get both lands and money. They received their lands in 1930, and then were given the money as well.
Mr. DUNNING; No.


Richard Bedford Bennett: Does my hon. friend deny it? Did not my hon. friend say the subsidy is not to be changed?


Charles Avery Dunning: Not at all.


Richard Bedford Bennett: Then all I can say is I will read it again.


Charles Avery Dunning: There is no need to; I know it very well.


Mr. TUCKER:: The lands were already substantially alienated before the province got them back.


Richard Bedford Bennett: Not at all. I read the provisions of section 20. Let us have no doubt about that phase of it. I took Alberta in the former case; this is the statute with respect to Saskatchewan. There is a little difference in some respects, but not in article 21 of the agreement.
B.N.A. Act-Mr. Bennett


Charles Avery Dunning: If my right hon. friend will permit-


Richard Bedford Bennett: Yes.


Charles Avery Dunning: My point of disagreement was with the statement that the provinces received both the land1 and the subsidy.


Richard Bedford Bennett: They did, undoubtedly.


Charles Avery Dunning: My right hon. friend had a royal commission to find how much more money they ought to get in lieu of lands already disposed of.


Richard Bedford Bennett: Is not that amazing! Does not the hon. gentleman know it was his government that provided that? Does he not know that I had to set up the commission because he agreed to it? One of the most infamous things ever done in the history of parliament, for purely political purposes.


Ernest Lapointe: What has this to do with the resolution?


Charles Avery Dunning: My right hon, friend's own commission said they ought to get more money.


Richard Bedford Bennett: But wait until I read the terms of the agreement.


Ernest Lapointe: Let us get back to the resolution.


Richard Bedford Bennett: Quite right. I would not have dealt with this but for the speech made by my hon. friend yesterday about subsidies.


Ernest Lapointe: My three minutes on it did not invite my right hon friend's long speech.


Richard Bedford Bennett: A pinprick may involve death, and my hon. friend's three minutes may necessitate dealing with a matter in its entirety. Let us see what the agreement was.
I' have pointed out that they received not only the lands but the subsidy as well. Then section 23 of the agreement provides that certain questions shall be submitted to the supreme court. They went to the privy council and were answered adversely to the contention of Saskatchewan. Then, mark this:
As soon as final answers to the questions submitted under the last preceding paragraph have been given, the government of Canada will appoint three persons to be agreed upon to be commissioners under part I of the Inquiries Act, to inquire and report whether any, and if any, what consideration, in addition to the sums provided in paragraph twenty-one hereof, shall be paid to the province in order that the province may be placed in a position of equality with the other provinces of confederation with respect to the administration and control of its natural resources either as from the first day of September, 1905, or as from such earlier date.
B.N.A. Act-Mr. Bennett

1 f any, as may appear to be proper, having regard to the answers to the questions submitted as aforesaid; such commissioners to be empowered to decide what financial or other considerations are relevant to the inquiry and the report to be submitted to the parliament of Canada and to the legislature of Saskatchewan; if by the said report, the payment of any additional consideration is recommended, then, upon agreement between the governments of Canada and of the province following the submission of such report, the said governments will respectively introduce the legislation necessary to give effect to such agreement.
In pursuance of that agreement made by the government led by the now Prime Minister, and of which the present Minister of Finance was then Minister of Finance-
Mr. DUNNING; And which you described as infamous.


Richard Bedford Bennett: I certainly said that not only did they get the lands themselves-


Charles Avery Dunning: No.


Richard Bedford Bennett: They did get the lands under the agreement.


Charles Avery Dunning: The lands were gone, alienated.


Richard Bedford Bennett: They were not any more alienated in 1930 than in 1905, except to the extent that compensation was provided for them. That is the whole point. In 1905 they agreed to take in lieu of lands the sum mentioned in the two acts I have read. In 1930 they agreed to take back their lands, and the government agreed to leave them with the subsidy they got in lieu of lands. It was not that they were without lands, but that they are going to continue to be. The hon. gentleman has not read it. They were to get this money, and they got it in lieu of not taking lands as a source of revenue. Then comes the agreement giving them the lands that were left, and giving them money which they got in lieu of the lands which then they did not have; they were to be compensated for the lands alienated from 1905 to 1930-or 1930 odd, whatever date it was-and they got the sum which was awarded to them by the commissioners. Manitoba got $4,000,000 odd, and it was referred to by the right hon. gentleman at the opening of the campaign in the west. He pointed out that a cheque had been delivered to the province of Manitoba for the sum of $4,000,000 under an arbitration, of which arbitration board the Minister of the Interior was a member. That is the position, and because Manitoba got the $4,000,000-


Charles Avery Dunning: He did not promise it in the election.


Richard Bedford Bennett: What he did was to say that the cheque had been paid-


Charles Avery Dunning: That is right; it had.


Richard Bedford Bennett: -under the agreement that had been entered into a few weeks before for the purpose of determining what Manitoba should receive, and when Maintoba received that money Saskatchewan and Alberta claimed to be put on an equality with the other provinces of confederation. In pursuance of that agreement the award was made to which the Minister of Finance refers. I quote that in view of what the Minister of Labour said in his article in 1934, not then I suppose expecting to be a colleague of the minister. He said:
Subsidy readjustments of past years have revealed a lamentable lack of allegiance to principle and a disposition to reach short term solutions under the pressure of political expediency.
Those were the words of the Minister of Labour with respect to these very transactions. That was what he was dealing with; they were the only ones that had taken place. That is what he said in 1934, only a year and a half ago.


Charles Avery Dunning: In 1934?


Richard Bedford Bennett: That is what he said in December, 1934.


Charles Avery Dunning: He might have meant something else.


Richard Bedford Bennett: 
William Lyon Mackenzie King: What is the view of the great leader of the Tory party?


Richard Bedford Bennett: The observation of the
Prime Minister does not advance it any. He has at least views which are coherent, and will express them; they will be founded upon his appreciation of the difficulties of the situation which confronts us, and questions such as that which he has just asked will not solve any problem connected with public finance. I have the right to express my views and I propose to do it. They may not be acceptable to the government; I regret it if they are not, but that will not deter me from expressing them. I am dealing only with the first branch.


William Lyon Mackenzie King: The leader of each party has a right to express his views, and I think a like respect is due to the position of each.


Richard Bedford Bennett: If the right hon. gentleman would just practise that there would be no difficulty at all. I commend him to a reading of his own words, and if he puts them into practice he will find it much easier to get along.


Ernest Lapointe: Let us
have reciprocity.


Richard Bedford Bennett: Exactly; that is what I
said. One would expect that courteous answer from the Minister of Justice.
I was proceeding with the first branch of the case and pointing out that there are two reasons why I direct attention to these matters. One is that the whole problem of public finance to which the Minister of Labour refers in this article is one of the gravest character and affects this country in a way that he indicates; I commend a reading of that article as indicating the seriousness of the problem. Is it desirable now to take this step as an effort towards a solution of the problem? This step is going to do what? Clothe the province with the power to impose taxation by indirect methods on retail sales, and having regard to our constitutional position to confer such rights with such limitations as may be desirable upon municipalities. Is that a step forward? Does it ease the problem? Can it possibly be a solution of it? Does it in any sense assist us in its ultimate solution?
I think not. Differences of opinion may arise as to that. The Minister of Justice may have one opinion, the Minister of Finance may have another, but I do submit that you cannot deal with this problem of public finance and of the relations between the province and the dominion in connection with public finance by simply nibbling at it as we are doing in this resolution. It is not possible to arrive at a solution of the problem by this process. It means that you confer upon the province the right to impose indirect taxation with respect to retail sales, with limitations. That is all. Therefore, I submit that a resolution of this kind is not calculated to assist in a solution of the problem, and that the government, rather than proceeding with this resolution and asking the imperial parliament to pass such legislation should, in the words of the Minister of Labour, institute steps to ascertain just how the problem may be dealt with, if possible, and then proceed to deal with it in a way that will commend itself, not only to a particular class in the community but to the provinces and the dominion as well.
With respect to the second branch of the resolution. I can only repeat that I protest against this assumption of inferiority on the part of either the dominion parliament or the provincial legislatures in asking for a grant of powers when powers are being exercised from day to day and from month to month of the quality and kind for which authority is now being sought. This is not only unsound, but I submit it is quite unfair to the imperial parliament itself. That parliament is bound to enact this legislation, coming from Canada as it does by way of resolution of this parliament, and we put them in a very false position if we ask them to confer powers upon us which we say we do not possess but which we have been using for many years. I think that is a fair statement.
I summarize the position which I submit to the Minister of Justice. I submit it to the Minister of Justice as though he were a judge sitting upon the bench listening to the pleas of counsel and determining in his own judgment how they should be acted upon. I have no purpose to serve save an earnest desire that in dealing with our constitution we should deal with it in accordance with settled precedents. I believe that the difficulty in the framing of this resolution has arisen because of a belief that there was an analogy
2S54
B.N.A. Act-Mr. Bennett

between our situation and that of Australia. It does occur to me that whoever was dealing with this forgot that the distribution of legislative powers in Australia is entirely different from the distribution in this dominion. In 1029 the commonwealth was faced with difficulties and it became essential to utilize the collective credit of the people by guaranteeing the securities of the various states. Amendments to the constitution were sought in accordance with the provisions of the Australian constitution. It does occur to me, from looking at what was done there and at the language of this resolution, that it was thought that the action taken in the one instance should be taken in the other. I submit that such is not sound.
May I repeat what I have said already? The position of the provinces and their powers have been clearly defined by judicial decisions. No one will question the power of the dominion to guarantee securities or deal with any problem that lies within our legislative jurisdiction. I submit to the Minister of Justice in all sincerity that the legislation should be clarified so as to remove what I consider to be certain anomalies. I may be putting it too strongly, but I cannot help thinking that if the minister will give the wording of the resolution careful consideration he will realize that it leaves much to 'be desired. To put a section such as the proposed section 2A in a constitutional document is not in accordance with the best principles of draftsmanship as laid down by Lord Thring, who drafted the British North America Act, or by the draftsman to whom the Prime Minister referred the other day when we were dealing with the preamble of a bill-I believe it was to Sir Courtenay Ilbert.
Second, I believe it is undesirable to extend the taxing powers of the provinces by conferring upon them the right to raise revenue by indirect taxation on retail sales. Under the interpretation of their powers in the later decisions of the privy council, all the power that is necessary to enable them to impose sales taxes and other forms of taxation usual for domestic purposes has been established. Third, the retroactive provisions of the statute should disappear, for to ask the imperial parliament to give validity and legality to acts declared to be invalid and illegal is to dishonour to that extent our conception of what is right and just, especially when we realize that in most countries, notably the United States, they have a constitutional provision that prevents such legislation being enacted.
Four, that part of the resolution dealing with the financial arrangements between the

provinces and the dominion because (a) the dominion now possesses all the powers sought to be conferred upon it by imperial statute; (b) because the provinces now possess all the powers necessary to enable them to enter into any agreement or arrangement that may be thought desirable for the purpose of effecting the purposes indicated in the resolution; and (c) in any event the resolution, if it desires to deal with questions of doubt, should be in entirely different terms, even assuming, as the minister may, that there is	some	doubt	with	respect to the
right to charge or otherwise deal with subsidy moneys payable to the provinces.
I repeat that I protest, so far as it is possible for	me to	protest	as a	member, against[DOT]the assumption	that	this	parliament doesnot possess all the powers necessary to enable it to deal with every phase of the matter mentioned in the resolution, or that the provinces do not possess all the powers necessary to	enable	them	to deal with every
matter sought to be dealt with by the resolution, with the possible exception of the subsidies payable under the provisions of section 118, and with respect to that, to contend that they have not the power to limit the right of the legislature to deal with the revenues of the province in any manner the legislature may so determine. The issue really is -whether or not we should seek from the imperial parliament a fresh grant of powers when a grant has already been made as full and as ample as that parliament in the exercise of its plenary powers could grant or confer.
For these reasons I oppose the resolution. I realize, however, how futile it is to raise one's voice in apposition to it. It is one of the misfortunes, perhaps, of a new country that once having adopted a line of action, no government is prepared to admit that by any possibility it has made an error. That being so, it means that the government, with its majority, must impose this resolution upon this house and carry it through to the end. I can only say I believe that with respect to the first part it will not do other than bring many difficulties to the federal government, and with respect to the latter, it raises an issue which I prefer should not have been raised and which I believe in time will recoil against ourselves. For, possessing powers and not exercising them, and seeking a fresh grant of powers when all the powers the parliament at Westminster possesses have been granted, is but to admit a subservience which does not exist and a dominance which has never been exercised.

B.N.A. Act-Mr. Dunning
Hon. CHARLES A. DUNNING (Minister of Finance): Mr. Speaker, I hasten to assure the leader of the opposition (Mr. Bennett) that it would be presumptuous for me, a layman, to enter into the legal and constitutional discussion initiated by him with regard to the resolution. Naturally the government takes its legal advice from the Minister of Justice (Mr. Lapointe) who will, I am sure, in due course deal with the legal and constitutional phases to which my right hon. friend has been referring.
Firom the purely practical rather than the legal point of view, the resolution doe3 point to certain facts which are inseparable from a federal system of government which has been passing through a testing time such as the last five years. The federal constitution involves a division of taxing powers. That division was made at confederation, and so far as the law is concerned I think I am correct in stating that it has not been altered since. During intervening years the necessities of governments, both federal and provincial, have changed and broadened in many respects. For many years past it was the consistent complaint of the provinces that their basis of taxation was not sufficiently broad to enable them properly to meet the obligations placed upon them by changed conditions, and particularly those obligations in connection with expenditures for social welfare, and activities of that kind.
In the capacity of a provincial minister and later of a provincial premier, I have attended interprovincial conferences as long ago as the years 1916 and 1917, and I do not recollect any conference at which the question of the powers of taxation of the provinces was not to the fore and presented vigorously by provincial representatives. During the past five years it has become more than ever apparent that the provinces have been unable within the ambit of taxation powers allotted to them to raise the sums of money necessary to enable them to carry out the obligations they have assumed towards their people. That condition became apparent, particularly with respect to the four western provinces, to a degree never before known during the period my right hon. friend opposite was Prime Minister. Finding it necessary to meet the situation in some way, his government commenced to do what had never been done before, namely, to loan money to the provinces from the federal treasury. I am not now criticizing the right hon. gentleman, but I am stating the fact as an indication of the condition which has arisen during the difficult years through which we have just been passing.
Surely it is evident to all of us that the revenues of at least the four western prov-12739-182
inces, and, in some measure, of all provinces, have been unequal to necessities. The older and wealthier provinces, having better credit, have been able to weather the storm of recurring deficits. As is well known the four western provinces were assisted from the federal treasury to the extent of about $115,000,000. That is the amount up to date. Surely these are conditions which cause us to think seriously as to where we are going.
Undoubtedly at confederation it was intended that the provinces should discharge their sovereign functions and with respect to the discharge of them should be under no obligation to the federal authorities. No doubt it was intended that the provinces should be as free in their sphere as is the federal authority in its sphere. May I point out that if we continue along the road we have been travelling we shall soon reach a point at which, in connection with several of the provinces, the dominion will be the principal creditor. Indeed, continuing at the rate at which we have been accumulating obligations of this kind, we may be sure that we have not far to go until we reach the stage where the dominion might be the majority creditor of a province. Is that a desirable condition into which to drift? We have only to continue drifting along the lines followed in the past five years to reach that situation within a measurable time.
It is true that at confederation the principle of subsidy was adopted, but there is ample evidence of the fact that the fathers of confederation were conscious of the principle which has been mentioned in this debate, namely, that those public bodies responsible for the spending of money should be responsible for levying the taxation to raise it. The debates with respect to confederation revealed that if the subsidies from the federal parliament were so large as to infringe upon that sense of responsibility which ought to be present in the minds of public bodies spending money, the outcome could not be good so far as Canada was concerned.
As the years have gone by the amount of dominion subsidies in each case has been so relatively small, when compared with the total revenues of the respective provinces, that I believe we may say no evil results have accrued from the adoption of the principle of subsidies to the extent to which it has been adopted. But do we desire to go further in the direction of having one tax-levying body levy taxes upon the whole of the people of Canada, and handing over a substantial part of the proceeds to another

B.NA.Act-Mr. Dunning

public body which would have an opportunity of making expenditures without assuming any responsibility for raising the money?
I have always believed, critics to the contrary notwithstanding, that in this country the most efficient governing bodies we have are the small ones such as township councils and local school districts. And why? Because they are close to the people who are being taxed. The people who are being taxed have in eye on the expenditure of every dollar. It is not filtered through as it is in connection vith the larger municipalities, with the provinces, and with the dominion. I do not regard as an extravagant waste our multiplicity of small governing bodies. When I see figures quoted about the number of governments we have in Canada, I always bear in mind that by far the greater number of them consist of these smaller governmental units, small school district units, small township councils, which are most efficient in the expenditure of the taxpayers' money, yes, more efficient than this parliament is in its control of expenditures, because, as I have said, the individual taxpayer is in very close touch with his local governing body and sees where every cent goes; the expenditure is a matter of public discussion throughout the whole community; everybody knows about it; and that is the way to get economy in the expenditure of public funds.
I regard the maintenance of the principle to which I have just referred, that a public body spending money should be responsible for imposing the taxes to raise that money, as one of the most important principles of public finance. I said a while ago that the provinces have been insistent upon a broadening of their taxation power. At the recent dominion-provincial conference, after very lengthy discussion, the provinces were unanimous in requesting the amendment to the constitution covered by section 1 of the resolution now before the house. With all due deference to the leader of the opposition as a great lawyer, the government must take from the Minister of Justice (Mr. Lapointe) its advice, as to the way, legally speaking, to do things. But may I buttress the Minister of Justice by reminding the house that there are nine provincial attorneys general; these nine gentlemen were present at the dominion-provincial conference, and there is no doubt as to their view that, in order to effectuate what they desire in the way of a sales tax within the province, this legislation is absolutely necessary.


Charles Hazlitt Cahan: There is another question,
as to whether it is expedient or not.


Charles Avery Dunning: As to whether it is
expedient or not-I will try to discuss that.


Charles Hazlitt Cahan: Or as to whether it gives
the provinces access in this way to more revenues than they have by their present powers of direct taxation.


Charles Avery Dunning: The first point has been
subject to criticism. I know, of course, that in argument in court it is customary to say: Well, I make this point; if I do not succeed on this point I make the next point, and if I do not succeed on that I make a third point. And so on u.p to the umpteenth point, and the fourth point may be a flat contradiction of point number three. I am not capable of following that kind of argument.


Charles Hazlitt Cahan: Oh, quite, and quite capable of asserting it.


Charles Avery Dunning: I can say this to my
hon. friend, that there is no doubt that each province in Canada has been endeavouring to collect what are in reality retail sales taxes. The provinces have been assisted by legal minds to devise ways and means whereby an apparent prohibition is in some manner evaded; legally evaded, of course. Those things must be done legally. So we have at the present time a variety of what I might call pseudo-indirect taxes-


Richard Bedford Bennett: What are they?


Charles Avery Dunning: -in the provinces of Canada, and, in some cases, in the municipalities.


Richard Bedford Bennett: Such as?


Charles Avery Dunning: Gasoline tax, the fuel oil tax, the meals' tax. I know my right hon. friend draws a distinction. He says that it is quite competent for the provinces to levy a tax provided they make the man who buys pay the tax in the form of a couple of coppers, but if on the other hand they say to the merchant selling the goods that he must pay them the equivalent of two cents, that is illegal. I understand that is the distinction; and as a consequence of it the people are inconvenienced, the stores are inconvenienced, the provinces are inconvenienced, by a very cumbersome system of tax collection. They all complain about it, and the public complain about it. From my point of view it has only one merit, and that is that the people never have any doubt that they are paying a tax when they pay out the two coppers, or the five coppers, as the case may be, under the various tax laws of the provinces as those laws now exist.


Richard Bedford Bennett: And there was no trouble in collecting the gasoline tax.

B.N.A.Act-Mr. Dunning


Charles Avery Dunning: In that case, I believe I am correct in stating that the gasoline vendor is made by statute a tax collector for the government.


Richard Bedford Bennett: Quite so.


Charles Hazlitt Cahan: And that is what you are also doing by this process.


Charles Avery Dunning: Is that direct or indirect?


Richard Bedford Bennett: That is direct.


Charles Avery Dunning: I admit at once that this has been a fruitful subject for litigation, and, as lawyers sometimes say, the privy council has the last guess. The Minister of Justice says what I, of course, could not say without disrespect, that the privy council sometimes changes its guess. Be that as it may, surely it will be admitted that probably section 1 of the resolution now before the house will limit, if not eliminate altogether, lawsuits of the kind to which I have referred.


Charles Hazlitt Cahan: Oh, no; it will largely extend the field for guessing.


Charles Avery Dunning: Well, I am sure that the legal profession, which has been having a hard time in the last five years, will welcome any extension of the field of litigation.


Charles Hazlitt Cahan: I have no doubt, but we are not legislating for them at present.


Charles Avery Dunning: With respect to the other matter, I cannot of course discuss whether the amendments contained in sections 2, 3 and 4 of the resolution are constitutional and necessary; I shall leave that to the Minister of Justice. They constitute, however, the expression of a desire on the part of the government of Canada to get away from the drifting policy of the last five years, and have a relationship with our provinces which is not capable of any misunderstanding or any doubt or litigation with respect to the intent and meaning of the arrangement made. That is our desire, and that desire is based upon a very simple principle. Here I come to an observation made by my hon. friend from Lethbridge (Mr. Blackmore). He disagrees with the terms of section 2 with respect particularly to the words in the fifth line. I will read the first part of the section:
The parliament of Canada may authorize the government of Canada to guarantee the payment of the principal, interest and sinking fund of any securities (hereinafter called "guaranteed securities") which any province of Canada may from time to time make or issue, and, subject to the provisions of this act may prescribe the terms and conditions upon which any guarantee so authorized shall be given.
The last words that I have read are those to which my hon. friend from Lethbridge
takes serious exception, namely the fact that the parliament of Canada, extending the guarantee of the whole of the people of Canada to the people of one province, shall have the right to lay down the terms and conditions under which that guarantee shall be given. The hon. member and others associated with him object to that. I rest my case, in that connection, not upon any legal or constitutional ground, but upon grounds of simple right. The people of any province have the right to borrow money, to use their credit. They have the right to tax themselves. By and by they reach the limit of their spending ability; they reach the limit of their immediate taxing power, and they come to this parliament, representing the whole of the people of Canada, and say in effect: We, the people of one province of Canada, desire the people of the whole of Canada to agree to tax themselves to help us. In simple terms that is what the guarantee means: We, the people of one province of Canada, needing assistance from the people of the whole of Canada, ask the people of the whole of Canada to agree to tax themselves on our behalf.


Richard Bedford Bennett: Oh, no. They pay the money back out of the moneys to which they are entitled.


Charles Avery Dunning: The giving of the guarantee implies beyond all question the use, if necessary, of the taxing power of this parliament to raise the money with which to pay the obligation. The fact that there is a margin of security, which_ my right hon. friend well knows would be inadequate in most cases-


Richard Bedford Bennett: No.


Charles Avery Dunning: One only requires to examine the figures.


Richard Bedford Bennett: They could pay the
interest.


Charles Avery Dunning: If my right hon. friend had studied the figures as to the relationship of provincial subsidies to the amounts of interest involved, even at a scaled down rate, I am quite sure he would not regard the provincial subsidies as very adequate security for the guarantees. In some cases the subsidies are already pledged.


Richard Bedford Bennett: Then, if they are already pledged, that answers the constitutional argument.


Charles Avery Dunning: There might be some doubt as to the constitutionality of the pledge, but that they are pledged in some cases is unquestioned, as my right hon. friend, I think, knows. At any rate, on the question of principle I say this, that when the people of
B.N.A.Act-Mr. Dunning

one province-any one province-make such a request of the people of the whole of Canada they have a right to expect that the people of the whole of Canada, through their parliament, will make conditions with respect to the assumption of that liability. I do not think there is any escape from that position, and there is no need to read into it a sinister meaning, as my hon. friend from Lethbridge did, implying that all of us sitting in this parliament were puppets of some indefinite outside influence which he describes as the money power. Well, I doubt whether he would find half a dozen, no, he would not find one, of the 245 members here who would agree for a moment that this parliament was or could be subject to any sinister influence such as he imagines, trying to support his contention by reading anonymous communications.
That sort of thing, Mr. Speaker, does not get us anywhere in wrestling with these problems. The government of Canada is keenly desirous of cooperating with the provinces in effecting some regularized way out of the morass into which some of them have drifted.
I do not join with those who blame the people of those provinces for the condition in which they find themselves. I know too well the economic and climatic conditions which have prevailed in some of those provinces, and which were largely responsible for their present plight. Of course, having taken some pride during ten years as treasurer of a province in holding its debt down to $50,000,000, which was as far as I thought it ought to go, I think I may be forgiven the horror which I experienced when I found that four years of another [DOT] kind of government had trebled the debt. But the people of Saskatchewan maintained that government in power for four years, and as the right hon. leader of the opposition has well said, the people of a province have a right to whatever government they themselves vote for. That, was a pretty expensive lesson, but I am quite sure the people of Saskatchewan have learned it. In the main, however, those western provinces, with which of course this resolution will chiefly deal, at. least during the early years of the operation of any legislation which may be introduced under it, have had difficulties in an economic sense far greater than those affecting the older and wealthier provinces in central Canada and the maritimes.
I do not think I need go further with respect to the broad principle now under discussion. It is not intended to rob any province of its right of self-government, of its autonomy, but neither is it contemplated to do what my hon. friend from Lethbridge would have us do, that is, abdicate the authority of this parliament with respect to the control of the credit of the whole of the country. If the credit of

the whole of Canada is extended to any province or provinces this parliament at all times must retain control of the extent to which and the terms upon which that credit is extended.


Mr. R. A. PELLETIER (Peace River):: Mr. Speaker, I rise to speak to this motion with a great deal of uneasiness. I am not a constitutional authority, nor am I even a member of the legal profession. But I recall the words of the hon. member for Kootenay East (Mr. Stevens), in his first speech this session, when he said that this was the House of Commons and, therefore, the house of the common people. It seems to me that any resolution brought before us necessarily must affect the common people, and I like to identify myself with the defence of the common people, using that term in its proper sense.
After listening to the speeches on this resolution it seems to me that its importance cannot be minimized. For example, I have before me the words of the hon. member for St. Lawrence-St. George (Mr. Cahan), when he gave us a picture of the depth of feeling that existed at the time the British North America Act was drawn up. He said:
The germs of the confederation idea came from the sixty thousand men of the French race and of the Catholic religion who were left practically deserted when the naval and military and civil authorities of France evacuated Quebec and Montreal, and left those people under the guidance of their clergy to work out their own destiny on the banks of the St. Lawrence river. The germs of the confederation idea were in the minds of the tens of thousands of men who left the New England states, and especially the state of New York, and came down and settled in western Nova Scotia, which then comprised the shores of New Brunswick to the Maine border, and there attempted to work out their own destiny as British subjects, enjoying, as they hope to do, the liberties and privileges which appertain to British citizenship.
He then went further and said:
These men brought with them the ideas which germinated and found expression in the British North America Act, that act representing an expression of the profoundest emotions of these people and of others who had been born and bred in this country, all of whom agreed, irrespective of their political affiliations, to unite to carry the confederation program to success. And entertaining those ideas-because I have lived for a certain time of my life among men who would rather fight and die than see any changes made in the British North America Act which they regarded as contrary to their best traditions and their best aspirations-I look upon that act, I look upon the constitution of Canada as something that should not be amended frivolously or without impartial and anxious investigation and study.

B.N.A. Act-Mr. Pelletier
I should like to refer also to the address of the Minister of Justice (Mr. Lapointe), who referred to the words used by Sir Wilfrid Laurier, who said:
-it is the duty of everybody in this house and in this country to take confederation as we find it, with its good points and its blemishes,, and carry it to the end of the principle upon which it was established.
Having before me such utterances from such sources, and knowing it is the desire of us all to safeguard the constitution of Canada, I ask myself this question: As a common member of this House of Commons would it not be well first to know exactly what we seek to amend? It seems to me that before we can proceed to make any amendment to our constitution it should be possible for us common members of this house to have before us what we may term a certified copy of the act we are being asked to amend. I have made certain inquiries and have been told by one whose authority cannot be questioned that in his opinion such a certified copy is not to be found in Canada to-day.
Mr.	McLEAN	(Melfort):	Who	is	the
authority?


René-Antoine Pelletier: If my hon. friend will look up what I have said he will run across that authority.
Mr.	McLEAN	(Melfort):	Who	is	the
authority?


René-Antoine Pelletier: I have no permission from that authority to say who he is.


Ernest Lapointe: Monsieur X.


René-Antoine Pelletier: No, it is not Mr. X. However, be that as it may, I simply raise this point, because it seems to me that a matter of such grave importance as we have been led to believe it is certainly demands most careful consideration.
There is another important fact which I would like to point out. The first part of my remarks stands for what it is worth; it is not for me to give any legal opinion on that point. I leave it in the hands of the Minister of Justice; to my mind he is quite capable of protecting the interests of all the Canadian people. I simply give it to hon. members for what it is worth; possibly it may deserve some consideration. However I hold in my hand the report of the dominion-provincial conference of 1935, and I notice, under the heading Constitutional Questions, at page 37, the following:
This conference, in the interests of the dominion and of the provinces, is of the opinion:-[DOT]
(a)	That amendments to the British North America Act are now and subsequently may be necessary and imperative.
I agree with that clause. If the time comes that the British North America Act no longer serves the needs of the people of Canada then it should be amended so as to be of service to Canadians at large. That, to my mind, is one of the purposes of government Then the next clause:
(b)	That, as in the case of all the other self-governing dominions, Canada should have the power to amend the Canadian constitution provided a method of procedure therefor satisfactory to the dominion parliament and the provincial legislatures be devised.
(c)	That the Minister of Justice convene at an early date a meeting of the appropriate officials of the dominion and of the provinces to prepare a draft of such method of procedure, to be submitted to a subsequent conference.
That, I understand, has already been done. But this clause follows:
(d)	That a conference be held at an early date after such draft has been prepared to consider such a method of procedure.
This resolution is now brought before the house without the recommendation of the dominion-provincial conference being taken into consideration. There was recently a meeting of, in the opinion of the Minister of Justice, appropriate officials. I do not know what the results of their labours were, but I know they did not result in the calling of a conference, at an early date after such draft had been prepared, to consider such a method of procedure. But in view of the grave concern which has been expressed, not by myself-I do not regard myself as an authority-by the hon. member for St. Law-rence-St. George as well as by the late Sir Wilfrid Laurier, I simply ask myself this question: Is it a good thing to proceed with such an amendment before everything necessary is done and all those interested have been consulted?
We have also been told that as far as the resolution is concerned it is not of material importance at the present time because it does not mean any legislation just now; it is simply to seek power to obtain such legislation as might be necessary later on. The point is, however, that the first part of the resolution is perhaps the result of the demands of various provinces, but I have now the words of the Minister of Finance (Mr. Dunning) when he stated a few moments ago that the last part simply represents the idea of this government at the present time. There are two clauses which certainly do not represent the general opinion of all the provinces of Canada or of the people of Canada, and because they are both embodied in the same resolution it makes it very difficult to know how one should proceed.
B.N.A.Act-Mr. Pelletier

When we speak of the last part of this resolution it cannot be said that it is the desire of any great number of people in Canada to-day. I have before me a resolution adopted, not by a social credit group, because I know that would have absolutely no influence on my hon. friends opposite or elsewhere, but a resolution which certainly must be taken into consideration, and which goes a good deal further than I could possibly go myself. It is from the Western Producer of April 30, 1936, a statement made by the United Farmers of Canada, an organization which has been recognized in the past, and which to my mind certainly deserves consideration. This is what they have to say about this proposed loan council:
t At the present time Premier Patterson is in conference with Hon. C. A. Dunning, considering whether Saskatchewan shall place herself under the financial domination of Ottawa, through the proposed loans council scheme. Before this is done, if not already too late, it is essential that we should realize what is involved. Previous warnings of the J.F.C. have gone unheeded, hence the present statement.
If this proposal is agreed to it means that Saskatchewan will surrender her financial autonomy to the Minister of Finance, who will thus be placed in the position of a dictator in regard to any refunding plan and of all future borrowings of the province, and as collateral security Saskatchewan will be required to pledge all amounts payable by the dominion in the form of subsidies and other specific revenues. Once our government has placed itself in this position it cannot withdraw. Call it what we will, this is fascism pure and simple.
In case subsidies are withheld, as may happen at any time under this plan, the immediate sufferers will be the most needy class in the community. Shortage of funds will cause the provincial government to begin to chisel at old age pensions, mothers' allowances, relief and other forms of expenditure, in an endeavour to make up the deficiency, and this would inevitably lower the general standard of living throughout the province. We trust Premier Patterson will have the courage to resist to the limit any effort at dictatorship from Ottawa.
As I said a moment ago, that is not the ppinion expressed by some group of social creditera or anyone who might be said to be prejudiced against any plan of this nature, but a statement issued by the United Farmers of Canada.


Mr. EVANS:: Cooperative Commonwealth
Federation.


René-Antoine Pelletier: They are people just
like you and me.


Mr. McLEAN (Melfort):: How many people issued that statement?
(Mr. Pelletier.]


René-Antoine Pelletier: I have read it exactly
as it is reported in this paper.


Malcolm McLean: At a convention?


René-Antoine Pelletier: The point is that they are people just like yourself and myself; they have reason to issue a statement like that and their remarks are entitled to consideration.
Now, to come to the point raised by the Minister of Finance. I remember not long ago the Minister of Labour (Mr. Rogers) said that he wanted to know where he was going to land before he jumped. On the other hand I recall the Minister of Finance saying, when we asked a certain question in this house, that it was such questions which brought fear into the minds of certain people and retarded progress in Canada. I would say this to the minister, that I believe early and provident fear is the mother of safety, and if there is in this resolution something which causes us to be apprehensive for the future the time for us to state those fears is now before this wedge has been introduced.
The second part of this resolution is based upon this fact: It is stated as a matter of principle, and it cannot be gainsaid that the dominion .has every right to ask a province to submit to certain conditions if it desires to obtain a loan from the federal government. It is said that that position cannot successfully be attacked. But just reverse that for a moment. By what power, for example, do we go into any province of this dominion and impose taxation upon its people in order to spend it upon a harbour in eastern Canada or in western Canada? They are Canadians like us all, and as such they submit to this taxation. Then, why should it be necessary for the people of any one province, who are also Canadians, to be subjected to conditions such as these?
There are certainly a great many things to be said about this resolution, and it would be impossible for me to make such a brilliant plea as has been made by the right hon. leader of the opposition (Mr. Bennett), who, I realize, is one of the greatest legal authorities in this dominion, and who states clearly that he does not see the necessity for the latter part of this resolution. As a layman and, as I said at the beginning, as one of those common people in Canada to-day, I listened to his argument, and I am forced to the conclusion that the resolution lacks the logic which one would expect to find in the persons who drew it up. I am not referring to the Minister of Justice because I believe he was away at the time. Be that as it may, I do not see that we require constitutional authority in the future to do the things that we are seeking to do and that have been done

B.N.A. Act-Mr. Stevens
in the past. I have in my hand sessional paper No. 80, certified to be a copy of order in council P.C. 1135, dated May 12, 1936, and I find it contains this clause:
The minister further states that the said treasury bills of the province of Manitoba have been consolidated into one bill bearing interest at the rate of 4J per cent per annum and that the total amount less repayments of $20,090.12, namely $5,874,037.37, matured May 1, 1936, respecting which the province has requested a renewal.
The minister recommends that under the authority of the Unemployment Relief and Assistance Act, 1936, the dominion grant a renewal of its guarantee of the foregoing treasury bill amounting to $5,874,037.37 for a period of one year from the first of May, 1936.
Looking at that with the eyes of a layman it seems to me to show definitely that the dominion government has guaranteed-call it what you like, give it any legal definition you like-the debts of one province, and now the government contends that it is necessary to obtain power from Westminster in order to be able to do these very things. That argument appears to lack consistency, and therefore we have every reason for being on our guard. Fear is the mother of safety, and we are compelled to ask why it should be necessary to seek power to extend the powers which the government already has.
As I said before, I cannot make the brilliant plea that was made by the right hon. leader of the opposition, who pointed out that by passing this resolution we would be admitting that we did not possess these powers in the past, or be admitting a sense of inferiority. That is one point I should like hon. gentlemen to consider.
I cannot, of course, go into legal details in connection with this resolution, but I would ask this question: Is it necessary for us in Canada to rush into some agreement without being given adequate reasons for doing so? I admit that at times it might be necessary to amend the constitution of Canada in order that it may better serve the interests of the Canadian people, but I say that such a change should not be made until we have had at least an opportunity of obtaining the opinion of all the people of Canada, who are, after all, deeply concerned in this matter.
Before sitting down I cannot help referring to an incident which occurred yesterday, and to which the Minister of Finance referred today, stating that a communication introduced into the debate yesterday was from an anonymous correspondent. I simply want to leave this impression on the house: I know definitely that that letter was in existence. The extract put upon Hansard has been withdrawn, but I do not wish any reflections to be cast upon the leader of this party (Mr. Blackmore) by people who suggest that he was trying to bring before the house something that did not really exist at all. It did exist, and it was brought before the house in good faith. That is all I have to say so far as that matter is concerned.
In conclusion I would ask, if we are going to amend the constitution of Canada to-day for what appears to the Minister of Finance to be good and sufficient reasons, might not the day come when the minorities in this dominion, who have been guaranteed certain rights under the British North America Act, might not find themselves in the same position that certain people find themselves in to-day? That must be left to the patriotism of those who are the government. All I suggest is that we do not know what the future holds. I sound this note of warning against trifling with such an important document as the British North America Act. To my mind there are serious objections-and I am speaking not from the point of view of a partisan but as a Canadian-to proceeding with this legislation, and I trust that the views I have put forward will receive consideration by hon. members of the house.


Hon. H. H. STEVENS (Kootenay East):: Mr. Speaker, I would like to say just a few words in regard to this resolution which is of very grave importance, because otherwise my silence might be misinterpreted or misunderstood. Ever since this resolution appeared on the order paper I have been baffled as to the need of at least three of its provisions. I shall deal with the four sections of the resolution in a moment. But first let me say this, and I am induced to say it by some of the observations made by the Minister of Finance (Mr. Dunning): When he was speaking he asked in an impassioned manner: AVhere are we going? He insisted that we should ask ourselves where this was going to end, referring to loans to provinces and the present day method, or the method of recent times, of dealing with the monetary relations between the provinces and the dominion. Then he addled this:	The dominion will soon be
the majority creditor of the provinces, and he insisted that that condition, which he suggested we were rapidly approaching, was so serious that it called for definite and serious treatment at the hands of parliament. I asked myself this question: Assuming that the Minister of Finance was quite right in his diagnosis of the situation, does this resolution as it now stands before us adequately meet the situation which he so graphically described.
In the first place I would say fo the Minister of Justice (Mr. Lapointe) in particular and to the right hon. the Prime
B.N.A. Act-Mr. Stevens

Minister (Mr. Mackenzie King), that what we are doing here is amending the British North America Act. That is the effect of the resolution. That is a tremendously important matter. It is something which has been rarely done. It has been done on occasion, but it is what might be termed a major action on the part of this parliament. That being so-and I do not think it will be disputed-ought not a major action on the part of this parliament in dealing with a constitutional matter achieve a major result, that is, if we are justified in taking action at all? The question which occurs to my mind1 is whether we are justified in making or asking for an amendment to the British North America Act.
This brings me to the resolution itself, and I shall try to be brief. Like the Minister of Finance, I disclaim any capacity or ability to discuss this matter in a constitutional or legal way. I am not in my observations presuming to do that. Dealing first with section 1 which refers to the question of taxation, in ,he first place, I do not think it solves the outstanding problems facing the dominion and the provinces. Let me illustrate what I mean. One of the most perplexing difficulties facing the people of Canada to-day-I am talking about the taxpayers-is the dual power to impose income tax. That is not provided for in this resolution. We are not dealing with that. It is something with which we ought to deal in making a major amendment to the British North America Act. I think it is far more important than what is contained in the resolution. That is one problem.
Let me turn to what is being done by the resolution and ask if this parliament really appreciates the extent to which we are going in this proposed subsection 2A to section 92 of the British North America Act. What we are proposing to do is to empower the provinces to impose indirect taxation in the form of a tax on retail sales. That is a turn-over tax on retail sales. I suggest that that places in the hands of the provinces the power to impose a tax which will make it impossible for the dominion to continue the sales tax as we now have it as a source of revenue. If we are going to give the provinces this power, then I think we ought to say to parliament and to the country that when this power is exercised by or made available to the provinces. the parliament of Canada will abandon the sales tax system. I venture the opinion- I claim the right to express an opinion because this is within my own sphere; it is not legal- if thi^ power is taken advantage of by the provinces, such a burden will be placed upon commerce that it will be impossible to carry an.

Supposing the provinces impose a two per cent retail sales tax right across the country. That would be a terrific tax. I question whether the provinces realize the magnitude of such a tax. Another point is this: If you give to the provinces such a power without restriction-it is restricted only as to liquor, tobacco and so forth-the power is unlimited as to the extent to which they can go and they might impose a tax of four, five, six, seven or even ten per cent. In other words, a province in dire distress, under pressure of need, might go to an extent which would be ruinous to business. Rather than give the provinces a power of this kind, I think we should have endeavoured to come to an understanding with them on the question of income taxes. The minister very properly pointed out the advantages of having local authorities impose taxes as they were closer to the people and could supervise expenditures, but so complex has business become that I think he will have to abandon that principle in favour of such a proposition as I am now going to make. Supposing we could come to an understanding with the provinces as regards income tax that they should abandon the field of income tax to the federal authorities?


Charles Avery Dunning: We tried that.


Henry Herbert Stevens: The minister laughs before I make my proposition.


Charles Avery Dunning: Not at the hon. member.


Henry Herbert Stevens: The provinces would
abandon the field of income tax provided the dominion would collect the tax and divide with them on a fifty-fifty or some other basis. The dominion then, being the one income tax imposing body, could raise that tax to the level of the tax imposed in Great Britain or in other countries where circumstances prevailing are similar to ours. This could be done when it was known that there was not a second authority which could impose another income tax. In other words, we could gauge what would be the justifiable, equitable and workable level to which we could raise the income tax. As matters are to-day, we are forced to recognize .that some of the provinces have an income tax which makes this action impossible.
I submit to the minister that an indirect retail sales tax virtually means a turn-over tax. Ever since we imposed the luxury taxes in 1917 I have been of the opinion that it was incompatible with equity or practical administration to impose both a sales tax and a turn-over tax. It should be one or the other, and it should foe under the juris-

B.N.A. Act-Mr. Stevens
diction of this parliament. If we give the authority to the provinces to impose a retail sales tax, we should abandon the principle of a federal sales tax.
I have no desire or intention to discuss sections 2 and 3 from a constitutional standpoint. I was deeply impressed with the argument made by the right hon. leader of the opposition (Mr. Bennett) and, as a layman, I am inclined to agree with his argument. I believe and I have always believed that the federal parliament had absolute power to make agreements with the provinces, and I believe that the provinces have the power to make agreements with this parliament or with the government of Canada. Therefore I agree with the argument of the right hon. leader of the opposition that it is not necessary to make amendments to the British North America Act in order to make loans or advances to the provinces. I am not going to labour that point as it has been dealt with so ably and I shall leave it at that.
I also agree with the point raised by the right hon. gentleman that the language used in this resolution implies that the provincial legislatures, on the one hand, and the dominion parliament on the other, have been acting in an unconstitutional manner. I do not think we should place in any resolution to amend the British North America Act any language -that would leave any question whatever as to the constitutionality of our actions in the past. I urge very strongly that the Prime Minister (Mr. Mackenzie King), the Minister of Justice (Mr. Lapointe) and their colleagues should give careful consideration to this point.
May I say this to the leader of the government? In offering these observations, I do not do so as a reflection upon the government. This is an extremely difficult matter with which to deal and I am not criticizing the government personally for any imperfections which may appear. I am sure the Minister of Justice will respond to this advance. Neither he nor his staff should feel there is any reflection upon them because these suggestions are made. I appeal to him carefully to study the suggestions that have been put forward from all sides of the house, and, I imagine, from some of his own supporters, as to redrafting the resolution.


Ernest Lapointe: Oh, no.


Henry Herbert Stevens: The Minister of Justice says, oh, no; well, I will leave it at that.


Ernest Lapointe: We have been working on the resolution for three months.


Henry Herbert Stevens: Let me assure the minister that there is no desire to reflect upon his work or that of those who worked with him, but I cannot agree with the form in which the resolution now appears.
Let me deal with the point raised yesterday by the leader of the social credit group, the hon. member for Lethbridge (Mr. Black-more). Part of the language in section 2 gives me some concern, and I should particularly like the Minister of Justice to listen to the arguments of a layman on the point. Again I am not arguing it legally, but I am raising what is at present a doubt in my mind. The minister may be able to reassure me, and, if so, I shall be pleased to hear him. The hon. member for Lethbridge raised a question about this language:
The parliament of Canada may authorize the government of Canada to guarantee the payment of the principal, interest and sinking fund of any securities (hereinafter called "guaranteed securities") which any province of Canada may from time to time make or issue, and, subject to the provisions of this act, may prescribe the terms and conditions upon which any guarantee so authorized shall be given, and the provisions of this act shall, in the event of any such guarantee being given, apply and have full force and effect-
I ask the minister particularly to follow the next few words:
-notwithstanding anything contained in the British North America Acts, 1867 to 1930, the British North America Act, 1907. the parliament of Canada Act, 1875, the Canada (Ontario Boundary) Act, 1889, the Canadian Speaker (appointment of deputy) Act, 1895, session 2, or any acts, orders, rules and regulations pussed or made thereunder or pursuant thereto. establishing a province or admitting a colony or province into the union, or affecting the constitutional relationship between Canada and a province.
That is sweeping language. In other words, my interpretation in the plain ordinary language of a layman is that it authorizes the government of Canada to make loans to a province, but-the minister shakes his head-[DOT]


Charles Avery Dunning: To guarantee payments.


Henry Herbert Stevens: The correction is justified; it authorizes the government of Canada to guarantee principal and interest, but such action or agreement, no matter what it is-


Charles Avery Dunning: Subject to certain provisions.


Henry Herbert Stevens: -yes, will be subject to the provisions of this act, and all these other acts, powers, authorities and safeguards whatsoever they may be, are not effective. The Minister of Justice laughs; am I wrong?


Ernest Lapointe: It is the usual language in all amendments which have
B.N.A. Act-Mr. Stevens

been made to the British North America. Act. You must refer not only to the original act, but to amendments which have been made thereto.


Henry Herbert Stevens: That is not the point.
The point I make is that any agreement made with a province will be subject to the new act, but the province may be now enjoying some rights; I do not say what they are, because heaven knows there are so many acts I could not know them; they cover the whole history of confederation. The province may enjoy some rights under some of these acts which may be swept aside.
I ask the Minister of Finance a practical question: Supposing a province approaches him this coming summer or winter and states that it is up against it; that it has maturities which it cannot meet. He knows the Dominion of Canada cannot pay its maturing obligations by actually meeting the payment. Of course the dominion can renew the obligation and use its credit to overcome the difficulty and postpone payment. But we could not meet it. If a province finds it is in the unhappy position where an obligation which it cannot meet is maturing, where can it go? It may go to the minister or to the bank. Now, what happens? It comes to him and the minister prescribes the terms and conditions-


Charles Avery Dunning: No; the hon. member is wrong, because the legislation of this parliament pursuant to these constitutional amendments will set out the terms the Minister of Finance may impose.


Henry Herbert Stevens: Yes, but let me point
out that the language of the resolution indicates that there is some doubt about past action, a point which has been ably covered and to which objection has been taken this afternoon. It points out that there is some doubt, but that it will be brought to absolute finality by the passing of this amendment to the British North America Act. Any legislation the minister introduces must be controlled, dominated and limited by the British North America Act.


Charles Avery Dunning: 
Charles Avery Dunning: In his argument the
hon. member persists in regarding this constitutional amendment as if it were the statute of Canada which will later on be introduced, upon which occasion it would be perfectly proper to discuss the authority this parliament will give to the government of Canada. But I can assure the hon. member that I do not intend to become responsible for the introduction of legislation conferring upon me any such powers as those he imagines, and they cannot be exercised without legislation.


Henry Herbert Stevens: All I can say is that the
government has power now to bring in a bill to give them all the rights of control they may wish in making loans to any province. They have that, without this amendment at all.


Charles Avery Dunning: That is a matter of
opinion.


Henry Herbert Stevens: I do not think there is
the remotest doubt about it.


Charles Avery Dunning: I am not a lawyer.


Henry Herbert Stevens: What I am trying to point out to the minister is that, if there is any

B.N.A. Act-Mr. Stevens
justification for the language which appears here and there through this act, making it retroactive, clearing up doubts about past actions of this parliament, he must accept the position that any legislation he introduces must be in conformity with this act.


Charles Avery Dunning: Of course.


Henry Herbert Stevens: I am quoting the resolution, which will be the act.


Charles Avery Dunning: This is a constitutionally limiting act; that is all.


Henry Herbert Stevens: Certainly this is a constitutionally limiting act, and my hon. friend will have to found his legislation upon it. But let me proceed. The resolution goes on to say this:
The government of Canada may, ... out of any revenue received or collected by the government of Canada or any department or officer thereof for or on behalf of the province, make payment direct to a creditor of the province of any amount owing to such creditor....
The minister may say that he will never do that. I am not saying that he will, but I am pointing out in the first place that the government have removed from the provinces any rights they may have under existing legislation, and in the second place they are giving a right or a power to a federal finance minister or government to effect payment direct to a creditor of a province of any amount owing to such creditor under the guarantees, without consulting the province at all. The minister will say that he would never do that, and I do not think he would.


Charles Avery Dunning: This does not contemplate it.


Henry Herbert Stevens: But it is there. I am not a lawyer, nor am I reflecting in the slightest degree upon lawyers, but I say that if that meaning is not in the clause I do not know the English language. Some of us have been in parliament long enough to know from experience that, after someone has assured us that thus and so is not meant, we take up our newspaper six months, two years or even ten years afterwards, and we find that the courts have interpreted the language entirely differently from what we were led to believe was meant. You cannot read that language and say that a minister of finance in a federal government has not power to effect payment in whole or in part of any such amount by payment direct to a creditor. The federal minister, if he is so minded, can pay direct to the creditor without consulting the province.


Charles Avery Dunning: That is the arrangement. The provinces do not have to come into it.


Henry Herbert Stevens: If men, with both hands tied, and faced with disaster in the provinces, are told that they can accept or reject a ten or twenty million dollar loan or guarantee, will they not take it? Tell me of any bankrupt business man or other private individual, any province or municipal government that would not do so. The hon. member who is mayor of Vancouver (Mr. McGeer) and who has spoken here frequently can tell of the dilemma with which some of these cities are faced. When they come to the federal minister and say, "Here is our position; we need five or ten million dollars," and the minister says, "All right, we will give you five or ten million dollars, but these are the only conditions upon which the loan can be made," I do not care twopence what the minister's will may be; those will be the conditions.


Charles Avery Dunning: Is it unfair?


Henry Herbert Stevens: No; I will say this to
the minister-


Charles Avery Dunning: Is it unfair?


Henry Herbert Stevens: I will limit my answer to this, that without knowing what rights the provinces are surrendering under section 2, I cannot say whether it is fair or not. Parliament ought not to pass this resolution until its members are fully aware of what rights the provinces may be surrendering under the "notwithstanding" clause of section 2.


Charles Avery Dunning: None.


Henry Herbert Stevens: None? I should not like to say that. I am under the impression that they have certain rights. I am not prepared to cite them. I am not a constitutional authority, but from arguments I have heard on the matter I know there are certain rights accruing to the provinces-one was cited here this session-which enabled them at least to resist any, shall I say ruthless, action on the part of the dominion government. Do not conclude that I am suggesting that such action will be taken by the present government, because this part of the legislation will probably not be effective for ten or possibly fifteen years, and it is not likely that my hon. friends who are now on the treasury benches will be there at that time. I do not care what government-


Charles Avery Dunning: Let us say, any government.


Henry Herbert Stevens: I submit that until we know what we are surrendering we should not pass this resolution.

B.N.A. Act-Hon. Mr. Stevens


Charles Avery Dunning: You are surrendering
nothing.


Henry Herbert Stevens: There is another point. In section 4 we make the dominion the sole judge as to the rights or merits of a creditor. It is easy to understand a condition where, i bank or some other great financial institution having made a loan, guaranteed by the dominion, to a province, in the opinion of the people of the province, supporting their government by an overwhelming vote, that .nstitution might be held to be unreasonable n their attitude and unfair in their treatment of that province.


Charles Avery Dunning: That is not the point.


Henry Herbert Stevens: Wait a minute. The minister always jumps ahead of me. My mind is not quick enough for his nimble intelligence. I say that a condition of that kind might arise. But under this legislation the government of Canada is really the sole judge of whether the creditor is right or the province is right.


Charles Avery Dunning: No; whether a default has occurred.


Henry Herbert Stevens: What is default? There s such a thing as technical default. I submit to the minister that such a thing as technical default has very little merit. Let us come face to face with conditions. In 1937, with four or five hundred million dollars due, are you going to pay it? The minister knows perfectly well we are not going to pay it.


Charles Avery Dunning: Surely we are.


Henry Herbert Stevens: The minister should not quibble. He will pay it by using the credit of Canada to renew it, or make another issue.


Charles Avery Dunning: We shall borrow it and pay the existing holders.


Henry Herbert Stevens: Let us get down to individuals. If I have a mortgage coming due to-morrow, and I happen to have credit enough to borrow a similar sum, and so meet the mortgage, I am not paying it.
Mr. D'UNNING:	Of course.


Henry Herbert Stevens: It is simply a renewal
of the mortgage.


Charles Avery Dunning: But it is not a default.


Henry Herbert Stevens: I say this, that there
might be circumstances in connection with a province where they could not pay, or there might perhaps be some term in the arrangements which could be legally interpreted in such a way that a technical default would arise. There is no doubt in my mind

that the people of this country want to pay their debts. That impulse is deeply rooted in the hearts and minds of the Canadian people. But they also have a feeling that there is a degree of injustice in the weight of the debt, due to higher rates of interest and other circumstances. I was a little surprised1 at the refusal of Alberta and British Columbia to accept the proposals of the minister, but as I studied this resolution I began to appreciate their feelings of alarm, and to realize that they had good grounds. It is not that an individual minister or the present government is going to be unfair or unjust, but it is the apprehension which enters their minds as to the future if they place themselves under the terms of this legislation. I do not blame them for this feeling, and I submit in all earnestness that this resolution should be very carefully reconsidered before the government asks parliament to pass it. And when the parliament of Canada ask for an amendment to the British North America Act there should be a reasonable degree of unanimity with regard to it. There should 'be at least assurance not that some particular minority is safeguarded but that the change carries the judgment of the people of this country, and if two provinces have already indicated their alarm or fear-


Charles Avery Dunning: They are both agreeable to this legislation passing, and have so expressed themselves.


Henry Herbert Stevens: Well, the minister knows, and I have to accept his word in that regard.


Charles Avery Dunning: I assure my hon. friend that is so.


Henry Herbert Stevens: I am not disputing it for one moment; it is news to me; that is all I can say But I would say that if there is any body of opinion expressed in this house; if there is an apparent division of opinion, there should be great hesitancy in asking for an amendment to the British North America Act. I assure the minister and the government that I am not opposing this resolution on any frivolous grounds. I earnestly feel an amendment should not be asked which purports to deal with a major outstanding difficulty between the provinces and the dominion unless it adequately meets that problem, which I do not think the resolution does. In the second place I submit that sections 2 and 3 are not necessary, because I fully accept the argument of the right hon. leader of the opposition (Mr. Bennett) that we already have the power to make these agreements. In the third place I submit that in section 4 we are going too far in placing in the hands of the

B.NA.Act-Mr. Lapointe (Quebec East)
federal government the absolute right and power to determine, in advance of the problem arising, whether the creditor or the province is right in any dispute between the two. I think'that is tying the hands of the provinces altogether too much, because the only time a province will take advantage of this legislation will be under conditions of distress, when it will be inclined to accept almost any kind of agreement that the minister likes to dictate.


Ernest Lapointe: Mr. Speaker, the proposal embodied in this resolution, as all will agree, has met with strong criticism, but the various angles of that criticism, its diversity and even the contradictory nature of it, show that most, if not all, of the criticism is unwarranted.
First, may I say a word as to the method of securing this amendment. I confess that I was surprised to hear my good friend the hon. member for St. Lawrence-St. George (Mr. CahaD) complain that we are asking to amend the British North America Act according to the old method and the old practice of doing so. But I was still more amazed to hear my hon. friend from Winnipeg North Centre (Mr. Woodsworth) blaming me and the government for not having resolutions of all the provincial legislatures of the dominion before presenting this measure.


Mr. WOODSWORTH:: I must correct that impression; that was not my point at all. I congratulated the minister upon having proceeded to do this by a simple resolution, but I said that at the same time there was no reason why we should not do other things in a similar way.


Ernest Lapointe: I did not understand my hon. friend in that way, and I was tempted to use the language so brilliantly used by my hon. friend from Nanaimo (Mr. Taylor) the other day, "quantum mutatus ab illo." However my hon. friend explains that that is not what he had in mind. Then my right hon. friend the leader of the opposition (Mr. Bennett) said, "Well, the government is still trying to amend the British North America Act by applying to the imperial parliament for a bill in order to do so."


Richard Bedford Bennett: I never questioned that. That is the only way to do it. My hon. friend misunderstood me.


Ernest Lapointe: My right hon. friend said that if we were in the United States-


Richard Bedford Bennett: I said-


Ernest Lapointe: I am
going to say what my right hon. friend said.
"If you were in the United States," he said, "an important amendment of this kind would have to be made by first having a bill passed by the congress of the American union, and then this amendment would have to be approved by a certain number of the constituent states. If you were in Australia you would have to do the same thing, and would even have to submit the amendment to the people by way of referendum. If you were in South Africa," he said, "there would be another procedure, but here you content yourself with the introduction of a resolution in this house, asking the imperial parliament to make the change."
I agree with the right hon. gentleman that this is not the best way for a country like Canada to amend its own constitution. For years and years I have been pleading for a change in that method, and I am pleased to see that apparently there are converts to the ideas which I have tried to express frequently inside and outside this house. I think a country like Canada should have the power to amend its own constitution when the necessity arises. I think Canada is the only country of its size and the only federal countiy in the world which does not possess that power, but we do not possess it. Somebody-and I think it was the right hon. gentleman himself-spoke of subordination because of this resolution, and the inferiority that it-implied. I am not responsible for that; at the present time it is the only way for us to effect a change in our constitution. I will help as strongly as I can to change that method, but as long as the situation is as it is to-day we have to resort to this method, namely, to have both houses of parliament adopt an address to His Majesty the King, asking the [DOT]imperial parliament to agree to an amendment to our constitution.
As you know, Mr. Speaker, a conference has studied this question, and during the last session of parliament a committee of this house also considered it. A subconference was called to study this problem and a committee has been appointed for the purpose of drafting a new statute and doing all that is necessary in order to attain the end which most of us have at heart, but that will come only after the work is completed. Surely, after what has been said in this house since yesterday afternoon as to the extreme importance of anything that changes the constitutional act of Canada we must have the necessary time to do what is essential to be done in the matter. Nothing will be done before it is submitted to every province of the dominion and then to the parlia-
2868	COMMONS
B.N A. Act-Mr. Lapointe (Quebec East)
ment of Canada for its approval. But meanwhile we cannot mark time and stand pat when necessity arises to effect some changes, as is the case in the present instance. If we are right-of course every hon. member of the house is entitled to his own opinion about that-in thinking that the provinces are not unfair- in their claim, their request, that their field of taxation should be enlarged and broadened, if their demand appeals to the majority of the house as it appeals to the government; if it is right to believe that it is essential for them to have a little more revenue without having to fight to uphold the legality of their taxation in all the courts of the land, this is the only way of coming to their rescue, and we have finally come to the conviction that 'we should help the provinces in that respect.
Now it is said that the provinces have not been consulted. Well, they have been consulted at least as much as in the case of any other amendment to the British North America Act which has been made since 1867. and a good deal more than in the case of most of them, because, if I am not mistaken the only case in which the provinces were consulted was at the dominion-provincial conference that preceded the increase of the subsidies in 1907. Then the right hon. gentleman called the provinces into a conference in 1931 prior to introducing in this house an address seeking the enactment of the Statute of Westminster, in which the provinces were interested.


Richard Bedford Bennett: And there is the signature of the representative of every province and a memorandum in the archives of the department.


Ernest Lapointe: Yes; the' delegates, the premiers or their representatives, came here and they agreed to that, as was done in this case. Not any more in 1931 were the legislatures called upon to enact resolutions of approval. Not in 1907 were there resolutions of the legislatures, and I think these are the only two cases in which the provinces were consulted and their approval asked for. In every other instance the amendments were made at the instigation of the parliament of Canada. In most cases I admit that the provinces may have had only distant interests in the amendments which were made.


Richard Bedford Bennett: In the Saskatchewan-
Alberta amendments that were made in 1930 we passed the same sort of address here as we are passing now.


Ernest Lapointe: Yes, the same thing. I admit that this was done while we were at the head of the government as it was done when my right hon. friend was leading the government of Canada.
But there is more. Why talk of the provinces being consulted? They have asked for this thing, at least part of it, the first part of the resolution; they are keen on securing this power of wider taxation. They have been imploring this government and this parliament to give it to them, not only this year but for many years past. And as far as the second part of the resolution is concerned, they have agreed to it. I was a member of the conference and the subconference, and every premier and provincial treasurer there was asked whether he was in favour of parliament securing this power. As I said yesterday, most of them declared that they would be opposed to coming under the scheme themselves, but they were all in favour of the machinery under which the dominion could guarantee the bonds of the provinces by taking securities, and getting remedies, because this is the important part of the resolution. The hon. member for Kootenay East (Mr. Stevens) speaks of sections 2 and 3; those sections are there just to lay the basis, but it is section 4 of the resolution which is the most important, and it is the opinion of the law officers of the country that an amendment to the British North America Act is necessary to enable us to get those remedies.
At six o'clock the house took recess.
After Recess
The house resumed at eight o'clock. PRIVATE BILLS



CONSIDERED IN COMMITTEE-THIRD READINGS

[Stage Direction]
Bill No. 25, to incorporate The Economical Mutual Fire Insurance Company.-Mr. Gray.
Bill No. 39, respecting the Northern Trusts Company.-Mr. May-bank.
Bill No. 43, to incorporate The Equitable Life Insurance Company of Canada.-Mr. Gray.
Bill No. 48, respecting the Pension Fund Society of the Bank of Montreal.-Mr. Jacobs.


[Stage Direction]
The house resumed consideration of the motion of the Minister of Justice (Mr. Lapointe) for an address to His Majesty the

B.N A. Act-Mr. Lapointe (Quebec East)
King praying that' a measure be submitted to the parliament of Great Britain and Ireland to amend the British North America Act with respect to taxation and guarantee of provincial debts.
Ernest Lapointe: Mr. Speaker, I have said that the criticism of the resolution before the- chair has been of a contradictory nature. For instance, during the course of the debate the provinces have been alternately represented as being allies who were being ill treated and sacrificed by the central government, and almost immediately afterwards as being aggressive enemies wanting to grab everything. They were alternately lambs and tigers. They have been represented as trespassing upon the rights of others. As the hon. member for Broadview (Mr. Church) said, they were wanting to take away what really belonged to the municipalities, such as the amusement tax. Immediately afterwards he said that the whole resolution was a gross invasion of the rights of the provinces. It has been stated that they already have the power which it is sought to grant them by this resolution, and then in the next sentence the danger of granting that is pointed out.


Richard Bedford Bennett: Not the danger of
granting that, no.


Ernest Lapointe: I am not referring just to my right hon. friend although I shall come to him in a minute or two. The hon. member for St. Lawrence-St. George (Mr. Cahan) was quite strong in his denunciation of the provinces and provincial methods of taxation. If I am not mistaken, he used the word "probity" towards the end of his remarks. My right hon. friend said that the whole thing appeared to be lightly done; then he went on to say that it was done in a loose way. I know he did not mean to be offensive, but that is what he said. I think that was a harmful'statement to make. I do not think there has ever been a resolution of this kind introduced in this House of Commons which has been surrounded with more precautions than this one. The subject matters of this resolution were discussed at great length at a dominion-provincial conference, they were discussed in a subconference of that conference, and in committees. The drafting of the resolution was carried out by the law officers of the dominion who had the cooperation of the attorneys general and law officers of the various provinces. The drafting of the resolution was changed because of objections which were made from time to time. I do not think it is fair to say that the necessary care was not given to its preparation.
I do not resent that statement for my own part-I take full responsibility for this resolution-but I do resent the statement on behalf of the officers who worked so hard in the preparation of this matter and on behalf of those who cooperated in order to make it as complete and as lawful as possible. As I said,
I think such a statement on the part of my right hon. friend is harmful. He must have realized this afterwards when other members of the house said that they did not know themselves, but they had heard the right hon. gentleman say that this had been done in a bad and loose way. Of course, this will be repeated elsewhere. I do not think it is a fair statement to make and I think it would be better for a distinguished gentleman like my right hon. friend not to cast reflections of this kind on a piece of legislation that everybody knows has been given all the care justified in its preparation.
My right hon. friend says that there is no necessity to widen the field of taxation for the provinces because they already have the right to tax commodities by way of a retail sales tax. They have had this right since the decision of the privy council in the British Columbia and Kingcome Navigation Company in 1934. At that time the privy council upheld the legislation of British Columbia after having declared void and invalid the legislation passed for the same purpose a few years ago but in another way. The privy council stated that the last piece of legislation was direct because it was taxing not the article, fuel oil in this case, but the consumer. Everybody in British Columbia who consumed fuel oil would be taxed. The provinces claim, and I think rightly, that it would be very difficult to apply the same sort of tax to other commodities which they might want to tax; that the method used by British Columbia would make it a very expensive tax to collect. They thought it would be much better if the same purpose could be achieved in another way, and I do not see why this right should be refused to them.
I must say that I was surprised when I heard my right hon. friend make a certain statement yesterday. When he saw the utter surprise on this side he admitted lateir on that it was not his strongest argument, but at the time he advanced it as a very serious one. He said that by giving to the provinces this right of an indirect retail sales tax we were taking it away from the Dominion of Canada.
Section 92 states:
In each province the legislature may exclusively make laws in relation to matters coming within the classes of subjects next hereinafter enumerated.
2870	COMMONS
B.NA. Act-Mr. Lapointe (Quebec East)
This would come among those subjects, and consequently it would give the exclusive power of retail sales taxation to the provinces.
But section 91 is the section which gives the powers to the federal parliament, and in that section we find this statement:
It shall be lawful for the queen, by and with the advice and consent of the Senate and House of Commons, to make laws for the peace, order and good government of Canada, in relation to all matters not coming within the classes of subjects by this act assigned exclusively to the legislatures of the provinces; and for greater certainty, but not so as to restrict the generality of the foregoing terms of this section, it is hereby declared that (notwithstanding anything in this act) the exclusive legislative authority of the parliament of Canada extends to all matters coming within the classes of subjects next hereinafter enumerated, that is to say,-
3. The raising of money by any mode or system of taxation.
This power is given exclusively to the parliament of Canada by section 91. Then at the end of the section appear these words:
And any matter coming within any of the classes of subjects enumerated in this section shall not be deemed to come within the class of matters of a local or private nature comprised in the enumeration of the classes of subjects by this act assigned exclusively to the legislatures of the provinces.
Surely the parliament of Canada has the right to raise money by any mode or system of taxation, and whatever is stated in section 92 is specifically mentioned not to affect what is stated in section 91. I am sure that any hon. member, whether a lawyer or a layman, may read the British North America Act, either separately or as it is found in the book of rules, and come to the conclusion that at least on this point my right hon. friend opposite was certainly wrong in the statement he made last night. Indeed, if he were right, even now we would have no right to direct taxation. No person claims that we have not that right.
As has been stated, this tax may be delegated to the municipalities, and of this my right hon. friend, and more particularly the hon member for St. Lawrence-St. George are very much afraid. They are afraid that the provinces may empower the municipalities to impose retail sales taxes, and they have fears as to the consequences. Well, the right to use a power does not necessarily mean an abuse of that power. I hope in the future, as at present, legislatures may be composed of men of common sense, and we must assume that they will act as men of that kind would act. The same argument has always been raised against any new move or reform. When selfgovernment was first sought there were always some who were afraid of the use which would 
be.made of it by those who did not have it before. Even after the conference of 1926 I listened in this house to debates in which some hon. members expressed their fears that the new powers claimed by the dominion parliament might be abused. I think the hon. member for St. Lawrence-St. George was one of them. In connection with the shipping act, dealt with in the report of the imperial conference of 1926, he asked me this question: "If you eliminate Canada from the control of the provisions of the shipping act, by what will you replace them?" I answered, "We will replace them by Canadian laws made by Canadian legislatures and a Canadian parliament." I believe the same applies to-day. Why be afraid that the provinces will not use their powers of taxation in a straightforward, honest, correct and useful way?
I now come to the second part of the resolution, a part which my right hon. friend says is not necessary because we already have the powers it seeks. Of course this does not harmonize with the fears of the hon. member for Lethbridge (Mr. Blackmore), or those which the hon. member for Kootenay East (Mr. Stevens) expressed this afternoon. If we already have the po-wers indicated in the resolution there can be nothing so dreadful about adopting its terms. May I repeat that the main part of the second division of the resolution is found in section 4. Sections 2 and 3 appear only to lay the foundation for section 4, and are included in order that the whole structure may be clear and that everybody may understand clearly the amendments being made. Notwithstanding any views to the contrary, we needed the amendments more particularly to effect the remedies mentioned in the resolution which would protect the Dominion of Canada on guarantees given to the provinces.


Richard Bedford Bennett: But they are by contract with the provinces.


Ernest Lapointe: Yes, by contract with the provinces. Let us consider subsidies. The principal of these is payable to the provinces by virtue of the section in the constitution which states that the subsidies will be payable yearly to the provinces for the support of governments and legislatures. No doubt local purposes mean provincial purposes, and the provincial legislatures might appropriate every year some of the subsidies for the payment of interest or even the principal of bonds. At the same time the constitution contemplates that the governments of the provinces should each year receive the revenues so provided, and I think it doubtful-the law officers of the crown think it cannot be done-that with the act

B.N.A. Act-Mr. as it is a legislature could validly appropriate future payments so as to deprive a government of the future of this revenue.
That is where the situation is complicated, and it applies equally to taxation. No doubt the government of any province may apply to-day the revenue of a special tax for the purpose of paying interest on bonds or even the principal of bonds. But I fail to see in the act any authority to bind future legislatures, and if there is not the amendment which is being sought through the present resolution, the law which appropriates the revenue of that tax for the payment of that bond may be repealed at any time by any legislature of a province. Those, I repeat,, are the views of the law officers. I have a great respect for the opinions of my hon. friend from St. Lawrence-St. George. I have great respect and admiration for those of my hon. friend the leader of the opposition. But when it comes to entering into a project which may involve millions, nay, hundreds of millions of dollars to the treasury of the dominion of Canada, surely it is the part of wisdom and of prudence to do what is being done to-day, when the law officers of the dominion are of this opinion.
My right hon. friend quoted this afternoon section 118 of the British North America Act, and upon that based his contention that the provinces had the power at the present time to apply, or to let the dominion apply, part of the grant or subsidy for the payment of those bonds.


Richard Bedford Bennett: Payment of interest.


Ernest Lapointe: Payment of interest. I am going to present certain quotations to show that the dominion has the right to deduct a certain specified sum for a special purpose mentioned therein, and that strengthens my contention that they have no right to do that for other things. By section 111 of the British North America Act, Canada became liable for the debts and liabilities of each province existent at the time of the union. Section 112 reads:
Ontario and Quebec conjointly shall be liable to Canada for the amount (if any) by which the debt of the province of Canada exceds at the union sixty-two million five hundred thousand dollars, and shall be charged with interest at the rate of five per centum per annum thereon.
The same provision applies to Nova Scotia:
114. Nova Scotia shall be liable to Canada for the amount (if any) by which its public debt exceeds at the union eight million dollars, and shall be charged with interest at the rate of five per centum per annum thereon.
2871
Lapointe (Quebec East)
There is a similar provision for the debt of New Brunswick. But what does section 118 say? It enumerates the grants that Canada will make to various provinces, the fixed grants, then the grant per capita, and it says:
Such grants shall be in full settlement of all future demands on Canada, and shall be paid half-yearly in advance to each province; but-
Mark these words:
-the government of Canada shall deduct from such grants, as against any province, all sums chargeable as interest on the public debt of that province in excess of the several amounts stipulated in this act.
Only these sums mentioned in sections 111, 112, 114 and 115, by section 118 may be retained in deduction of the grant that is payable yearly to the provinces.


Richard Bedford Bennett: But section 118 has been amended.


Ernest Lapointe: I am
coming to that. My right hon. friend, in answer to my hon. friend from Selkirk (Mr. Thorson) says: Yes, as far as the original provision is concerned, but it has been amended. In 1907 this was amended for the purpose of increasing the grants to the provinces to be paid by the Dominion of Canada. Subsection 6 of section 1 of this amendment to the British North America Act reads as follows:
The government of Canada shall have the same power of deducting sums charged against a province on account of the interest on public debt in the case of the grant payable under this act to the province as they have in the case of the existing grant.


Richard Bedford Bennett: That is the section which took the place of the repealed section 118.


Ernest Lapointe: Yes, except that it is the same provision which is being continued. I read in the address which was adopted by parliament for the purpose of getting this amendment to the British North America Act, and which is a schedule of the imperial act, these words showing that parliament took the trouble to limit to this interest on the public debt the deduction that could be made by the government of Canada. It said:
Such grants shall be paid half-yearly in advance to each province, but the government of Canada shall deduct from such grants, as against any province all sums chargeable as interest on the public debt of that province in excess of the several amounts stipulated in the said act.
I submit that the fact that this was mentioned, not only in the original British North America Act of 1867 but in the amendments

2S72	COMMONS
B.NA. Act-Mr. Lapointe (Quebec East)
thereto which have been made since, specifically mentioning that those grants must be paid yearly but that the dominion has the right to deduct the amounts for the interest on the public debt in excess of the amount mentioned in the act, debars absolutely any right to deduct any other sum than the one mentioned specifically in the constitution and the amendments thereto.
To show that special provision must be made for the future in cases of arrangements of this kind, I refer to an imperial act of 1892, chapter 52 of 55-56 Victoria, authorizing an advance to the government of British Columbia. An arrangement had been made between the imperial parliament and British Columbia with regard to the settlement in that province of families from parishes in Scotland. I do not know whether my hon. friend the Minister of National Defence (Mr. Mackenzie) came out at that time.


Charles Avery Dunning: When was this?


Ernest Lapointe: 
Richard Bedford Bennett: Mr. Fielding did the same thing with respect to our trust securities.


Ernest Lapointe: Yes, I think he did. Does anyone think-do you think, Mr. Speaker-that we introduced this resolution simply for the purpose of enjoying ourselves, or to hurt or do harm to anybody? If we had all the powers which my hon. friends claim we have already, it would have been so easy to exercise them and not be subjected to the criticism we have been

meeting yesterday and to-day. We thought, and we are sure, that this is the proper way to protect ourselves. I make bold to say that if my hon. friend the Minister of Finance (Mr. Dunning) had brought into the house legislation such as he will be able to bring in after this amendment is made, without having first had the British North America Act amended, in my imagination I can hear the voices of my hon. friends Strongly criticizing us and declaring that wre were assuming powers which did not belong to us. This resolution is merely for the purpose of doing the right thing in the right way, and I do not see that we deserve all that has been said yesterday and to-day with regard to this matter.
Of course it may be a question of a different state of mind, a different mentality. We want to be sure that we have a right before we make use of it. I remember well, a year ago, the government of that day introducing in the house many pieces of legislation which a good many hon. members thought the parliament of Canada had no authority to enact. My right hon. friend-and I admired his courage in those matters-said, "I have the right and I am going to use it." Of course he did so, but I am not sure that my hon. friend from St. Lawrence-St. George was so sure of the constitutionality of some of those statutes. However, at the present time there are eight references before the Supreme Court of Canada. The other day in his speech on the address my hon. friend said that it was a mistake to make such references even if we were not sure. He said that lawyers generally held the conviction for years that the Lemieux act with regard to industrial disputes was ultra vires of the Dominion of Canada, but we left it on the statute books until someone challenged its validity and the privy council declared it void. My hon. friends thought that was the proper way to act. I do not think it is the proper way. I believe that before taking a step involving the expenditure of millions of dollars belonging to the Dominion of Canada we must be sure of our law, and it is not after the thing is on the statute books that the ratepayers should be compelled to apply to the courts in order to ascertain whether or not the legislation is valid.
Then my hon. friend from St. Lawrence-St. George, supported to some extent by my right hon. friend the leader of the opposition, criticized the drafting of the resolution. My hon. friend said that he did not know where section 2A would come in the section as amended. Well, I suggest that there is no

Customs Tariff
2S73
other place for 2A than right after 2. It cannot be before 2 or immediately before 4, and I do not think anyone, any court of law or any parliament, would find fault with section 2A being mentioned as it is in the resolution. My right hon. friend said that it was bad drafting to put a number like this in a constitutional act.


Richard Bedford Bennett: Having regard to the
provisions of section 2.


Ernest Lapointe: Yes.
While my right hon. friend was saying that I had before me the British North America Act with amendments up to 1927, on the very page facing me was the British North America Act of May 19, 1915, by which I saw that the British North America Act, 1867, was amended by adding thereto the following section, immediately after section 51 of the said act: 51 A.


Charles Hazlitt Cahan: If you had inserted that there would have been no objection, but you have not inserted that. That is all. You have not followed the precedent.


Ernest Lapointe: My hon. friend from St. Lawrence-St. George also strongly criticized the words "the patronage of hotels, restaurants and places of amusement." He did not know what that meant. Of course in hotels and restaurants there are not only the rooms and the meals. I am sure my dignified friend from St. Lawrence-St. George does not go to night clubs and restaurants where they dance as well as dine, but people going there have to pay what they call a cover charge, whether or not they eat. They pay a cover charge for being there and watching the performance. It is to cover the cover charge, and other matters of that kind, that the word "patronage" has been selected. I may tell my hon. friend that this word has given a good deal of worry and trouble to the draftsmen, and it was after discussion and cooperation with the provincial law officers that this word was finally selected. I really believe it is a good word and will cover what they want-including the cover charge.
I thank the house for having allowed me to exceed the time at my disposal. My hon. friend the member for Parkdale (Mr. Spence) whom I see in his seat, threatened us that he would prevent the adoption of this resolution in the senate, and would even go to England or see that someone goes to block it there. I may tell my hon. friend that if he attempts that I believe his attempt will end in inglorious failure, and he would do better to come to another view. The whole object is 12739-1834
to allow cooperation in financial matters between the Dominion of Canada and the provinces, cooperation which is badly needed at the present time on the part of some provinces. As I have said already, we had no interest in it except to see that the credit of the country and the credit of the provinces were securely protected. In bringing in this resolution we want to make sure that it will withstand any attempt to declare it void, and it is better to ensure that by the passing of this resolution to-day than to fight the matter before the courts later on.
Motion agreed to on division.


Ernest Lapointe: That a message be sent to the senate informing their honours that this house has passed an address to His Most Excellent Majesty the King, praying that he may graciously be pleased to give his consent to submitting a measure to the parliament of the United Kingdom of Great Britain and Northern Ireland to amend the British North America Acts, 1867 to 1930, and the British North America Act, 1907, and requesting their honours to unite with this house in the said address hereto attached.
And that the clerk of the house do carry the said message to the senate.


[Stage Direction]
Motion agreed to.


[Stage Direction]
The house in committee of ways and means, Mr. Sanderson in the chair.
1.	Resolved, that the customs tariff, being chapter forty-four of the revised statutes of Canada, 1927, as amended by chapter thirty-nine of the acts of 1929, chapter thirteen of the acts of 1930 (first session), chapter three of the acts of 1930 (second session), chapter thirty of the acts of 1931, chapters six and thirty-seven of the acts of 1932-33, chapters thirty-two and forty-nine of the acts of 1934 and chapter twenty-eight of the acts of 1935, be further amended by striking thereout subsection one of section six thereof and substituting therefor the following:-
(1) In the ease of articles exported to Canada of a class or kind made or produced in Canada, if the export .or actual selling price to an importer in Canada is less than the fair market value of the same article when sold for home consumption in the usual and ordinary course in the country whence exported to Canada at the time of its exportation to Canada, or is less than the fair market value or value for duty thereof as determined under the provisions of section thirty-six of the Customs Act, or is less than the value for duty thereof as determined by the minister under the provisions of paragraphs (a) and (e) of section forty-one of the Customs Act, or is less than the fair market value thereof as fixed under the provisions of section forty-three of the Customs Act, there shall, in addition to the duties otherwise established, be
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[Stage Direction]
levied, collected and paid on such article, on its importation into Canada, a special or dumping duty, equal to the difference between the said selling nrice of the article for export and the said fair market value thereof or value for duty thereof; and such special or dumping duty shall be levied, collected and paid on such article although it is not otherwise dutiable.
Provided that when it is established that any articles though of a class or kind made or produced in Canada are not offered for sale to the ordinary agencies of wholesale or retail distribution or are not offered to all purchasers on equal terms under like conditions, having regard to the custom and usage of trade, such articles may be exempted from special or dumping duty.
Provided that the said special duty shall not exceed fifty per centum ad valorem in any case, and the following goods shall be exempt from such special duty, viz:-
Goods of a class subject to duty under the Excise Act.
Provided, notwithstanding, that on importations from Australia under The Australian Trade Agreement Act, 1925, the said special duty shall not exceed fifteen per centum ad valorem in any case.
Hon. J. L. ILSLEY (Minister of National Revenue); Before this resolution passes in that form I would point out that the last proviso referring to the Australian Trade Agreement Act, 4925, is now obsolete and I move that it be struck out.
Richard Bedford Bennett: It is unnecessary to
substitute anything for it? It is covered by the agreement itself?


Mr. ILSLEY:: That is correct. It is all
dealt with by the agreement with Australia. I move:
That resolution No. 1 be amended by deleting the following paragraph:-
"Provided, notwithstanding, that on importations from Australia under The Australian Trade Agreement Act, 1925, the said special duty shall not exceed fifteen per centum ad valorem in any case."


[Stage Direction]
Amendment agreed to.
Richard Bedford Bennett: Might I ask the minister who settles these two questions? If he will look at the bottom of page 4 he will see that the resolution provides, first, that "such articles may be exempted from special or dumping duty," and, second, "that the special duty shall not exceed 50 per centum," I should like to know who settles these two questions. Who decides what articles may be exempted and who fixes what the special duty shall be.


James Lorimer Ilsley: The Minister of National Revenue. There is at present in clause six a provision which we propose to retain, stating that the minister "may make such regulations as are deemed necessary for carrying out the provisions of this section and for its enforce-

ment," and "minister" is defined as meaning in the Customs Act the Minister of National Revenue. That provision taken with the rest of the section makes it clear I think that it is the minister who makes the decision.


Richard Bedford Bennett: I quite agree with the minister. I asked him only because I desired to have placed on record that this arbitrary power about which we used to hear so much is still to continue and to be exercised by the same minister in the same way. It is pleasant to recollect that the hon. gentleman who is now sitting on the treasury benches was once sitting over here, and it makes all the difference in the world where you sit as to what your attitude towards these questions will be. If the Minister of National Revenue could only come over here for a few minutes and forget that he is minister, I should like to hear him repeat once more those denunciations of the arbitrary powers exercised by one man in dealing .with these matters, fixing the duty and determining where it shall be applied. But now he is sitting over there and sounder counsels prevail. He and his colleagues realize that, after all, laws must be administered; that to administer them there must be someone to do it, and that the someone in this instance happens to be the competent minister. The special duty must be within the maximum fixed of fifty per cent, and I notice that the minister was very careful to use the words "within the provisions of the statute." The dumping duties will now be administered with the same zeal, the same enthusiasm, I trust, and the same care for Canadian interests as characterized the administration of his predecessors in office, whoever they might be.


James Lorimer Ilsley: I do not know that any reply is required to that. I do not recollect that any criticism was ever made of this provision of section 6 of the customs tariff that the minister may make such regulations as are deemed necessary. That provision has been in the customs tariff ever since the dumping clause was enacted. Our criticisms were directed against something else entirely.


Richard Bedford Bennett: I would not for a single moment deprive the minister of any satisfaction he may derive from that observation. I asked him a question, who decided these two questions, and he was good enough to explain that it was the minister himself, not the Minister of Finance but the Minister of National Revenue, the same minister who in times past was exercising arbitrary powers in determining by regulation just what the duty should be, in which determination, of course, he exercised his best judgment. The regula-

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tion makes it clear that the special duty shall not exceed fifty per cent ad valorem in any case, and "the following goods" shall be exempt from such special duty. The question I asked in order to lay the foundation for my observations was which minister was meant, and I was glad to receive the answer I did. Therefore, under the regulations the minister exercises this most unwholesome and un-British arbitrary power which has caused such pathetic concern to the people of this country as expressed by the minister himself in times past. I think I see now his high intellectual brow being wrinkled as he waved his arms in days gone by in denunciation of such arbitrary powers being exercised by the minister.


Mr. STIRLING:: As you read the wording of the amendment, Mr. Chairman, I was not in a position to follow it in the office consolidation copy. Would the minister indicate any changes made in the first long paragraph before you get to the proviso. I think there were some changes made in the sixth and seventh lines.


James Lorimer Ilsley: There is only one change in the first paragraph, and that is that the reference to section 37 of the Customs Act is omitted because section 37 has been repealed.


Mr. STEWART:: Would the minister be good enough to explain to the committee the effect of any changes that have been embodied in this section as compared with the old section? In what respect does this change the law as it existed before the section was repealed?


James Lorimer Ilsley: One important addition to this clause is the first proviso:
Provided that when it is established that any articles though of a class or kind made or produced in Canada are not offered for sale to the ordinary agencies of wholesale or retail distribution or are not offered to all purchasers on equal terms under like conditions, having regard to the custom and usage of trade, such articles may be exempted from special or dumping duty.
That is the part which refers to the offering for sale of goods offered on equal terms under like conditions, having regard to the customs and usage of trade. It was part of section 6 of the customs tariff for a long time, for twenty or thirty years, I believe, and then it was stricken out. That is being restored, and the other part has been added, namely, that part which relates to the sale through ordinary agencies of wholesale or retail distribution. The class of cases that it is intended to cover is this: There is, I think, an admitted tendency towards large scale production and
distribution in the Dominion of Canada. The price spreads commission which sat two years ago and a year ago discovered that that was the case. There are what some people call monopolies and what others call quasi-monopolies doing quite a large part of the business of Canada, and some cases where combines or monopolies control particular articles or a particular class of goods manufactured and offered for sale; there is no real competition there at all. There are instances of that which I have in mind.


Richard Bedford Bennett: Can the minister without violating any secrecy give us an illustration, using fictitious names, just to make this clear?


James Lorimer Ilsley: It is questionable whether I should, but I think I will.


Richard Bedford Bennett: I do not want the names, just the facts.


James Lorimer Ilsley: But the moment you mention the commodity the name suggests itself to anybody. There is in use in nearly every household in the country, particularly in the poorer households, an article which is manufactured in Canada by one company alone. That company has in Canada a complete monopoly of the manufacture and sale of that article. It does not offer that article to any wholesale or retail agencies of distribution at all, but sells it directly to the public.


Richard Bedford Bennett: Directly to the retail trade?


James Lorimer Ilsley: No; it sets up its own retail agencies. There is only one seller of that article in Canada. That article can be imported, and under conditions which technically at least, perhaps, call for the imposition of a dumping duty. It is considered that under circumstances of that kind there should be discretion in the minister to enable him to exempt the article from dumping duty if advantage is being taken of monopolistic conditions. That- is what we have in mind there.


Grote Stirling: Is it an article produced in Canada?


James Lorimer Ilsley: Yes, it is produced in Canada. If it were not of a class or kind produced in Canada the dumping clause would not apply. It is just a matter of opinion as to whether some freedom of importation should be permitted in cases of that kind, but apparently it was considered for many years. I assume that it must have been considered by Mr. Fielding when he introduced this legislation, although I have not read his speeches on the subject. Where there are not conditions of
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competition in the country, as, for instance, in the cases covered by the latter part of this section, and where the goods are not offered to purchasers on equal terms under like conditions, having regard to the custom and usage of trade, there should be some discretion in the minister to permit some importation in order to bring about a reasonable level of prices in the industry. This section does not quite cover the particular article to which I had reference. There may be a certain type of machinery in connection with which there may be a monopoly in the country. A person purchasing machinery should be enabled to buy it as cheaply as he can obtain it, instead of being thrown into the hands of one producer or a combine of producers in Canada. To a certain extent this, shall I say, liberalizes the section or permits the waiving of the dumping duty under certain conditions when the consumer is likely to be exploited by a monopoly or a monopolistic combine.


Hugh Alexander Stewart: Would an order in council be required to do that, or would the minister make the decision on his own responsibility?


James Lorimer Ilsley: The minister can do this.


Richard Bedford Bennett: I should think a power as great as that should at least have behind it the sanction of an order in council. I desire to congratulate the hon. gentleman again upon his manifestation of that fine spirit of example or, shall I say, of learning by responsibility that, after all, some things have to be done if business is to be carried on. I think it would be better if the power were exercised by the governor in council rather than by the minister. I shall give the benefit of my observations with respect to these matters. This will sound a little like hon. gentlemen listening to their own voices, not so melodious, and if I only had the proper record I could turn it on. That would express the views with respect to the matter, and undoubtedly it would enable someone on the other side to say "gramaphone record." This is my observation. Where the minister has to make a decision, sometimes the bulletins which are sent out to the various customs houses do not reach there as quickly as they might and certain difficulties might arise, to which reference has been made in this house. If this were made by governor in council, perhaps it would carry more authority.
I was going to point out another matter. I could name a substance which is produced in this country by one producer, and which is undoubtedly highly protected or, shall I say, fairly highly protected. The previous government provided the tariff and that is sufficient to indicate that it is a fairly high

tariff. I am speaking now as though my hon. friend were here and I were over there. From what the minister has said, I assume that under those circumstances, notwithstanding the provisions of this resolution, the minister would in no sense interfere with the tariff except that he might put the article on the free list or he might reduce the tariff. That is, the governor in council might do that, but the minister does not contemplate by this section the doing of anything with respect to tariffs. That will be dealt with in an entirely different way. All he does is to say that if I import goods into this country and show him that I must go to a monopoly for them if I desire to purchase them in Canada, and must pay a price which is out of all reasonable proportion to that at which I could import them, he has the power to dispense with the dumping duty. That is all that is meant by that. There is another class of case in connection with which I have received communications. The minister can only recommend to the governor in council that action be taken to reduce the duties, and they can reduce them to the extent of making them free if they so desire. That is as the law now stands.


James Lorimer Ilsley: Goods may be put on the free list by the governor in council and the governor in council may reduce or remove duties as compensation to another country which gives corresponding advantages to us. I am not aware of any power in the governor in council to reduce duties or place goods on the free list, unless they come within one or the other of those categories.


Richard Bedford Bennett: Is there not another one?


James Lorimer Ilsley: I cannot think of it at the moment. As the right hon. gentleman well knows, an order in council may always be passed to remit or refund duties, but that is a different matter.


Richard Bedford Bennett: I do not mean that.


James Lorimer Ilsley: The right hon. gentleman may have been referring to section 17 which reads:
In the event of producers of goods taking advantage of any duty imposed under this act to increase the price of such goods to the consumer, or using any such duty to maintain prices at levels deemed by the governor in council to be higher than should prevail, having regard to general economic conditions in the country, the governor in council may reduce or remove such duty.


Richard Bedford Bennett: That still remains?


James Lorimer Ilsley: Yes.
Resolution 1 agreed to.

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2.	Resolved, that the aforesaid section six of the customs tariff he further amended by striking thereout subsection eight thereof and substituting in lieu thereof the following:-
(8) The minister may make such regulations as are deemed necessary for carrying out the provisions of this section and for its enforcement, and such regulations may also provide for the exemption Irom special or dumping duty of any imported article when the minister is satisfied that the article or class of articles is not available at fair competitive prices in any consuming market in Canada owing to the remoteness of such market from the Canadian source of supply.


Richard Bedford Bennett: I think the real reason why action was taken to modify the provisions mentioned by the minister was that under the combines act power was given which previously existed in respect to that, and I believe the government of the day thought that was sufficient. Was it repealed? I think it was modified, not by the previous government but by its predecessor in office after the combines act in its present form was held to be valid by the privy council.


James Lorimer Ilsley: I should like to withdraw this resolution. We have considered it and it certainly will not cover the case in its present form. I should like to ask unanimous consent that it be withdrawn. The effect will be to leave the subsection in these words:
The minister may make such regulations as are deemed necessary for carrying out the provisions of this section and for its enforcement.
It would stop there. It is just as though I am asking that all the words after "enforcement" be deleted. Those words open up a very difficult and important question.


Richard Bedford Bennett: The government is still protected by the general provisions with respect to the regulations?


James Lorimer Ilsley: Yes.


Richard Bedford Bennett: That is, the general power to make regulations has no't been impinged upon. As I read it I realized that it might be open to some difficulty, but after all this government regards difficulties as one of the main reasons for its existence.


Charles Avery Dunning: It does.


Richard Bedford Bennett: It did, I think is better.
Resolution 2 withdrawn.
3.	Resolved, that the aforesaid section six of the customs tariff be further amended by adding thereto the following subsection:-
(10) For the purposes of this act articles shall not be deemed to be of a class or kind made or produced in Canada unless so made or produced in substantial quantities; and the
governor in council may by order in council provide that such quantities, to be substantial, shall be sufficient to supply a certain percentage of the normal Canadian consumption and may in such order fix such percentage.


Mr. MacNICOL:: What definition does the minister give to the term "substantial quantities"?


Richard Bedford Bennett: Is the whole of section
8 withdrawn?


James Lorimer Ilsley: The whole of resolution
No. 2 is withdrawn.


Richard Bedford Bennett: The new subsection 8?


James Lorimer Ilsley: Yes.


Richard Bedford Bennett: Because as the law now
stands it reads:
The minister may make such regulations as are deemed necessary for carrying out the provisions of this section and for its enforcement.


James Lorimer Ilsley: Yes.


Richard Bedford Bennett: It is to be left as it
was, without change.


James Lorimer Ilsley: Yes. Then, with regard to
resolution No. 3, the hon. member has asked my definition of the term "substantial quantities." Am I correct?


John Ritchie MacNicol: Yes.


James Lorimer Ilsley: The resolution provides that:
The governor in council may by order in council provide that such quantities, to be substantial, shall be sufficient to supply a certain percentage of the normal Canadian consumption and may in such order fix such percentage.
The hon.. member may recollect that there was an interchange of notes with Japan whereby this government undertook that "substantial quantities" would not be regarded as substantial quantities unless the amount produced in Canada was sufficient to supply at least ten per cent of normal Canadian consumption. I anticipate that the order in council which is passed will fix that percentage as the percentage which constitutes a substantial quantity.


Mr. NEILL:: Why not put it in the subsection?


Richard Bedford Bennett: I protest against government by order in council. The idea of any government endeavouring to deal with a matter so important as this, by order in council!


Ian Alistair Mackenzie: Hear,
hear.
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Richard Bedford Bennett: I am glad to hear that
conscience has had the effect of inducing the Minister of National Revenue to recollect an echo of the past. But this should be in statute. Let there be no question about that. A note has been exchanged with the empire of Japan, and so far as we are concerned that note settles for all countries doing business with Canada what shall constitute goods made in Canada. In dealing with this country Japan cannot be placed in a more favoured position than other parts of the world. All countries must thereafter be upon a parity, and as it has been declared in the note, unless an industry in this country produces ten per cent of the consumptive requirements of Canada it is not an industry concerning which we may say that the goods produced by it are of a class or kind made in Canada. Why should this not be in the statute?


James Lorimer Ilsley: Because it might be varied by agreement from time to time.


Richard Bedford Bennett: Yes, but it is quite clear that so far as Japan is concerned it will not be varied within the next year, because the arrangements cover a period of time.


James Lorimer Ilsley: Yes.


Richard Bedford Bennett: Therefore this statute
should cover until the next time parliament meets, so that there may be no misapprehension and so that every man who does business with the customs house and every man who starts up an industry knows where he is. And every person who does not produce ten per cent of the consumptive requirements of the country will know that until such time as parliament acts he is not within the terms and conditions of the law as we have declared it.
I said, and I repeat, that it was a great mistake to endeavour to fix that percentage in the Japanese note. However it has been done, and it having been done, this is an effort to cover it up, an effort which should not be winked at by this committee. I say that this is an effort to cover it up, to cover up something which should see the light of day. It should be clear as crystal; it should be in the statute, and not somewhere else. Since we have taken these steps, steps which, I believe, were improperly taken, the government must accept the responsibility for their action. They have the majority and must bear the consequences. They know; I do not know. But certainly they should not endeavour to cover up by this section what is now a matter of record between Japan and Canada. This is a declared policy. It was rushed out so that it would be finished before Christmas, [Mr. I. Mackenzie.!
or thereabouts; I think it was the day after Christmas. The action called for was taken, and the cries to high heaven of my hon. friend from Vancouver Centre were rewarded in due course. Now he sits in the seats of the mighty. I do not know whether he saw the records of it, but far pastures looked very green, when he was far away. However, when you get close, you are not so sure. The hon. member for Comox-Albemi says that they are still green.
The point I wish to make, and one which I think the government cannot evade, is that in view of their own protestation we must put into this statute, or into this section, the conditions of the Japanese note. It is clear that under the terms of that note those conditions will continue at least until after this parliament will have met again, and at that time if new arrangements are made they can be met. There is nothing more hurtful than insecurity and instability. Now that we have taken this step there is no doubt that we should not endeavour to cover it up, or to frame it in general terms. Rather, we should make clear beyond doubt just what is meant. Subsection 10 should read:
For the purposes of this act articles shall not be deemed to be of a class or kind made or produced in Canada unless so made or produced to the extent of ten per cent of the consumptive requirements of Canada; and the governor in council may by order in council-*
And that is all that need be done. This is going to give to the governor in council power to modify declarations made with Japan, and to treat with discrimination other countries and special industries-


Charles Avery Dunning: No.


Richard Bedford Bennett: Read what it says. It states:
The governor in council may by order in council provide that such quantities, to be substantial, shall be sufficient to supply a certain percentage of the normal Canadian consumption and may in such order fix such percentage.
Mr .DUNNING: But it could not possibly discriminate between countries.


Richard Bedford Bennett: It could not possibly, but in view of this section it could, probably. That is the difficulty, and the point I am trying to make is that, having made a declaration, the Minister of National Revenue states it is probable that ten per cent will be the figure mentioned in the order in council.


James Lorimer Ilsley: I will say it will be ten per cent.

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Richard Bedford Bennett: That makes it clear, then, and partly covers the point I make. If the hon. member will say that the order in council will contain a statement that ten per cent of the consumptive requirements of Canadians must foe produced so as to meet the "made in Canada" provision, then of course that covers one of my points. But it does not cover the second point, namely, the desirability of placing provisions in a statute so that he who runs may read, and so that what was declared as a policy may be crystallized into legislation. I have not yet heard any reasons why it should not be. Perhaps the minister will enlighten me in that regard.


James Lorimer Ilsley: I wish to make my position quite clear, and to do so perhaps I ought to read that part of the note to Japan which was the occasion for making this change in the act. It reads:
The classification "goods of a class or kind made or produced in Canada," as it appears in the customs tariff, will be restricted to goods which are of a class or kind made or produced in Canada in quantities sufficient to supply at least ten per cent of the normal Canadian consumption. Adequate notice will be given of the transfer for customs purposes of a product from the category "not of a class or kind made or produced in Canada" to the category "of a class or kind made or produced in Canada."
The government of Canada will of course carry out this undertaking in the note to Japan. That means that, the government having the power after this resolution is carried into an act and becomes legislation, an order in council must and will be passed fixing at least ten per cent as the figure. I said that it probably would be ten per cent. I had not intended that it would be more than that, and I will say here and now for the purpose of definiteness that the figure in the order in council will be ten per cent. The reason for doing this by order in council instead of by statute is, as I said a few moments ago, that the percentage may be subject to change by agreement in the future, and if there should be an alteration in the agreement so as to substitute some other figure, it would be desirable for the power to exist to change by order in council to the new figure so fixed. It gives the degree of elasticity which is necessary to meet the agreements which are made with other countries.
As regards the suggestion of the right hon. gentleman that there may be some discrimination, that is impossible. Under our most favoured nation agreements we can have no discrimination. This provision must apply
not only to Japan but to all other most favoured nation countries in the world. The order in council will not relate to Japan; it will relate to the percentage which will constitute a substantial quantity before goods will qualify as goods of a class or kind made or produced in Canada. It will be a very simple and short order in council, and it will be perfectly definite; everyone will know what it is, particularly if they read Hansard. This statement is quite open and public, that ten per cent has been agreed upon with Japan and will be carried into our order in council.


Henry Herbert Stevens: May I ask the minister
a question? I admit it may seem a little improper, but if the minister so considers it, it need not embarrass him. Would such order in council be of a general nature or would it specify certain classes or types of goods?


James Lorimer Ilsley: It will be of a general
nature. All and any goods, in order to be considered goods of a class or kind made or produced in Canada for the purposes of section 6 or for any other purpose, must be produced in Canada in sufficient quantities to meet this ten per cent of normal Canadian consumption.


Henry Herbert Stevens: Has the minister considered that the figure of ten per cent might be low in respect of some goods, but very high in respect of other classes of goods?


James Lorimer Ilsley: I do not know of any with
regard to which it is too high.


Henry Herbert Stevens: Oh, I think so.


John Ritchie MacNicol: I desire to ask the minister one or two questions, based upon the assumption that the ten per cent applies to importations from the United States too.


James Lorimer Ilsley: Yes.


John Ritchie MacNicol: Or only from Japan?


James Lorimer Ilsley: The ten per cent does not
apply to importations from any country. It applies to the amounts produced in Canada, but it is general in its application. We cannot apply the dumping clause, so-called, against the United States or any other most favoured nation country, on goods unless those goods are produced in Canada in sufficient quantities to supply at least ten per cent of the normal Canadian consumption.


John Ritchie MacNicol: I read lately that the Japanese have got out a very special machine for the manufacture of textile articles. It is high class and very speedy. This kind of machine, of course, is not made in Canada, although we do manufacture textile machines. Naturally, Canadian manufacturers would like
28S0
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to make the machine here if it were possible, but as I understand it, under this regulation, as none of these machines is made in Canada, that is, no percentage at present is being made here, the manufacturers would not be able to undertake to make this new machine as they would be up against Japanese competition which they could not meet because of wages and other conditions. It follows that that line of products is not likely to be made in this country. I could mention a score of lines of material with which I am familiar, that never would have been made in this country had the manufacturers been up against the regulation that they must have a market of ten per cent in Canada before they received any protection, for obviously they could not have any market until they began to produce. I may not be correctly interpreting the regulation. All I have in mind1 is that nothing should be permitted that will unnecessarily interfere with the incentive to produce in Canada.


James Lorimer Ilsley: It is not correct to say that ten per cent must be produced in Canada before the industry receives any protection, because this has no relation whatever to the tariff protection that the goods receive. For instance, they may have a hundred per cent, or fifty per cent, protection under the tariff schedule even though they are not made in Canada at all, or although only one per cent of the normal Canadian consumption is supplied. The only effect this provision has is that they do not receive the additional protection of the dumping clause unless they are made in Canada in sufficient quantities to supply ten per cent of Canadian consumption.


Alan Webster Neill: The dumping clause is the only protection we can get in respect of anthracite coal coming from Britain. It comes in free, of ordinary duty, and the dumping duty is the only protection our coal industry has. I had a case before the tariff board, and it was ruled that anthracite was not produced in Canada; the production being, I think, 900 tons, they simply said that it was not produced in Canada at all. They admitted that the words "a substantial quantity" used to be in the act, but had been taken out. I would point out to the minister that a quantity which might not be ten per cent all over Canada might be quite a large percentage in some particular part of Canada.


James Lorimer Ilsley: The case of anthracite coal is one of the best illustrations of the need of this provision. To all intents and purposes anthracite coal is not produced in Canada. As the hon. gentleman says, 900 tons are produced, but that is a drop in the

bucket; it is so small as to be almost negligible. There is a lawyers' phrase, de minimis non curat lex, meaning that the law takes no account of trifles, or has no regard for trifles. This is one of the best illustrations which could be given of the need of some provision like this, so that the department will not have to apply a dumping clause against something which to all intents and purposes is 100 per cent an imported article.


Alan Webster Neill: Will the minister explain how this native industry can be built up if it has no protection whatever? It has no protection under the tariff and none under the dumping clause. How is it to be built up?


James Lorimer Ilsley: There are in the country
some industries that should not be built up. The hon. member will understand what I mean. That- has been impressed upon me more and more in my work of the last few months, that there are some industries the cost of which to the dominion is so tremendous that they should never have received, to begin with, government assistance or encouragement.


Alan Webster Neill: Does the minister suggest
that that would apply to the bituminous coal mining industry of British Columbia?


James Lorimer Ilsley: The bituminous mines?
No.


Alan Webster Neill: It is to compete with that
industry that anthracite coal is brought in from Britain free of duty and free of dumping duty.


James Lorimer Ilsley: The hon. gentleman is talking about anthracite coal.


Alan Webster Neill: Which is competing.


James Lorimer Ilsley: But only to a very slight
extent.


Alan Webster Neill: No; it is not necessarily
to a slight extent. It can be brought in free of dumping duty, free of duty, and practically as ballast from Great Britain. Why is it not competitive? Bituminous mines in British Columbia are expensive to operate.


An hon. MEMBER:: Give the British
people a chance in the world.


John Ritchie MacNicol: Would the minister
mind giving us the names of some of the industries which should never have been built up in this country?


James Lorimer Ilsley: I would not care to be
drawn into a discussion of that kind.

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28S1


John Ritchie MacNicol: I have heard so often in
this house, not from every quarter but mostly from eastern or western free traders, that certain industries should never have been built up in this country. I should like one, and if possible half a dozen of them to be named. Then we shall be able to tabulate how many men would be thrown out of work if these industries were further crucified.


Richard Bedford Bennett: I still think the minister should not leave that subsection as it now stands. I do not think the government should leave it in that form. The minister has made a perfectly clear statement. He proposes to pass an order in council in the terms of the Japanese agreement, and he has very properly pointed out that under our agreement with Japan we are now bound to declare, qua Japan, that any goods which are manufactured or produced in Canada and which do not fill ten per cent of our consumptive requirements are not subject to dumping duty. That is the story, because they are not of a class or kind made in Canada.
In other words we have defined those phrases, "a class or kind not made in Canada," and "a class or kind made in Canada." For the first time we have defined those phrases in exact terms. Heretofore we have never defined them, or attempted to do so. The words "substantial quantities" were used at one time, and owing to differences of opinion as to what "substantial" meant, those words were removed and the words "made in the country" replaced them. Then, when the tariff board, in the particular case to which the hon. member for Comox-Alberni had reference, determined that anthracite coal as produced in the old mine at Bankhead, Alberta, did not constitute commercial production and was so trifling that no attention should be paid to it, that definition was changed again. Now, we having made an agreement with Japan which, as the minister very properly says, will be carried out; we having committed ourselves to that, it follows that the phrase as defined in that note is now so defined with respect to all the countries of the world with which we trade and to which the phrase may apply. In other words, by reason of our having included it in the agreement with Japan every country that enjoys favoured nation treatment from us has a right to set up that provision. That means practically all the trading nations of the world, though I dare say it does not apply to Germany.


Charles Avery Dunning: Would that be the practical effect? I would ask my right hon. friend to consider if the practical effect of such an order would be against any particular country.


Richard Bedford Bennett: I am coming to whether or not it is not necessary that it should be. That is the point I am making. In the exchange of notes with Japan we said that we would pass an order in council. What were the words?


Charles Avery Dunning: Not with respect to Japanese goods.


Richard Bedford Bennett: In our note to Japan we made a declaration that we would pass an order in council.


Charles Avery Dunning: If my right hon. friend will permit me I will read the note:
The classification "goods of a class or kind made or produced in 'Canada," as it appears in the customs tariff, will be restricted to goods which are of a class or kind made or produced in Canada in quantities sufficient to supply at least ten per cent of the normal Canadian consumption. Adequate notice will be given of the transfer for customs purposes-
And so on. It is general; it does not apply to Japan only.


Richard Bedford Bennett: The note was addressed to Japan and, of course, in its direction to Japan, covered only Japanese imports, because that paragraph was part of the note sent to that country. Are we not bound to include that in the statute itself? Shall we have discharged our duty under that undertaking if we do less? We have said that we will do that. There is only one way in which we can do it beyond the power of repeal, except by termination of the agreement, and that is by parliamentary act. When I read the letter which the Prime Minister dispatched to the Japanese minister I certainly had no doubt that it meant parliamentary action, statutory action. I do not think anyone had any doubt as to that. Now we are told, not that but this:	.
For the purposes of this act articles shall not be deemed to be of a class or kind made or produced in Canada unless so made or produced in substantial quantities-
Once more that is the test, not the ten per cent but the substantial quantity, which is exactly what we did not say in the letter to the Japanese minister. Then this follows: -and the governor in council may by order in council provide that such quantities, to be substantial, shall be sufficient to supply a certain percentage of the normal Canadian consumption and may in such order fix such percentage.
That is not carrying out that agreement.
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James Lorimer Ilsley: If we pass the order in council it is.


Richard Bedford Bennett: No, because the statute says:
For the purposes of this act articles shall not be deemed to be of a class or kind made or produced in Canada unless so made or produced in substantial quantities-[DOT]
That is not what we undertook to do. We should say, "For the purposes of this act articles shall not be deemed to be of a class or kind made in Canada unless ten per cent of the normal Canadian consumption is produced in Canada."


James Lorimer Ilsley: We do exactly that when we pass the order in council.


Richard Bedford Bennett: But that was not what we undertook and promised.


James Lorimer Ilsley: We said that we would do it.


Richard Bedford Bennett: But we must do it by statute.


James Lorimer Ilsley: We did not say that.


Richard Bedford Bennett: That is the sense of that note, and I will tell the minister why. When you promise that you will do something, it is assumed, as between nations, that you do it at least in the form which gives permanency to it during the life of the agreement, but an order in council may be rescinded the day after it is passed, or the next day. That is not so with regard to 'a statute, which requires the three branches of government to cooperate to bring about that end.
I want to make this clear, that in the letter we wrote to Japan we undertook to define what is of a class or kind made in Canada. Having thus defined it-and I submit this as a matter of good faith- we should follow exactly the terms of that letter and say that for the purposes of this act articles shall not be deemed to be of a class or kind made or produced in Canada unless produced in sufficient quantities to supply ten per cent of the normal Canadian consumption. That was what we said in the note, and I think it is not unreasonable to expect the statute to embody the terms of the agreement. To do otherwise is not what we promised, at any rate; to do otherwise is to leave to the executive action that, clearly, the terms of the agreement contemplated should be taken in another way. I cannot see that this is doing what we said we would do.


James Lorimer Ilsley: The Japanese are interested in having their goods treated in a certain way when they enter this country, and it is a

matter of complete indifference to them as whether that is done by act of parliament or by order in council so long as it is done. That is the important matter from the standpoint of Japan. Certainly it is not to be thought that a government which enters into an undertaking will violate it. This authorizes the government to carry out the undertaking; that is the intention of the government, and that is all we agreed to do.


Richard Bedford Bennett: I do not want to prolong the discussion, but I am sorry to hear my hon. friend adopt that view, for even during the worst moments of the depression, when we had to rely so much on the governor in council to take such action as might be necessitated from day to day, the argument which was then made was treated with contempt by the opposition of that day. Now we have the hon. gentleman saying, "We are not interested in the way in which the matter is to be accomplished. What we are interested in is whether it is being done."


James Lorimer Ilsley: I said that was what Japan was interested in.


Richard Bedford Bennett: I am talking about Japan. For the moment I was think of Canadians; I was thinking of other people affected besides the Japanese. If this concerned only Japan I might be in a different position, but it is because I believe this will prejudicially affect a great many industries in this country, that it is desirable that this should be known at once, and that their death should not be prolonged any more than necessary, because there is no order in council at the moment. There is a letter outstanding; Japan is receiving the treatment that accords with the application of the ten per cent, but there are industries in Canada.
I now put this case to the committee: The consumptive power of this country with respect to some articles is very great in the east and very small in the west, and in some instances very small in the east and great in the west. This is a very large country. The demands of eleven million people scattered over a wide area are not easy to ascertain. A small concern in the east may be able to supply the requirements for specialized articles in the east, and on the prairie and in the west the demand may be great, so that the result is that the factories do not produce ten per cent of the entire consumptive power of Canada, although they supply sufficient to meet the requirements of that particular area. In many instances we have brought goods in from other countries sometimes free and sometimes at low duties; then the dumping

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duty has been the all important thing to preserve these small industries scattered all over the country. That is to be done away with; that is done away with. The government of the day have seen fit to define the matter. I say the results are such that we cannot contemplate them; I think I can say we should not contemplate them with equanimity. But they are there. Now, is the government keeping faith with this House of Commons or with the people of Canada who are engaged in these productions unless it inserts in this section as a part of the law of Canada, not a discretionary power to a minister or the governor in council at all, but that which they have promised, namely a definition of the words "of a class or kind made or produced in Canada" and says frankly in the statute that unless ten per cent of the normal consumptive requirements of the Canadian people are produced in Canada the dumping duty does not apply? That is the real issue. It is no good to say: We are doing this by order in council. That is not as good as by statute, because with respect to the question of doing it by order in council there is always uncertainty as to when, and in the other case it is a part of the law of the country.
The language I find in the note is this:
I have the honour to inform you that the Canadian government, in accordance with its general policy respecting trade and tariff matters, has decided to make the following modification in its customs-


Charles Avery Dunning: Regulations; that is what we promised.


Richard Bedford Bennett: That has been done only by statute heretofore, not by regulation. What the hon. minister is talking about was done by statute, and the old words "substantial quantities" were in the statute, not in an order in council; they were taken out of the statute, and it was under the statute the ease was presented to the tariff board.
Now let us look at these words:
The classification "goods of a class or kind made or produced in Canada" as it appears in the customs tariff-*
Not in the regulations, but, "as it appears in the customs tariff." That is what we are now amending. "As it appears in the customs tariff will be restricted"-that is a promise of legislation, not of regulation, a promise that the tariff act would be amended. The letter says "as it appears in the customs tariff" it will be changed.


Charles Avery Dunning: It has been read a half a dozen times.


Richard Bedford Bennett: The promise of the Prime Minister of this country was that a classification "of a class or kind, as it appears in the customs tariff" would be amended.


Charles Avery Dunning: Yes.


Richard Bedford Bennett: -will be restricted to goods which are of a class or kind made or produced in Canada in quantities sufficient to supply at least ten per cent of the normal Canadian consumption. Adequate notice will be given of the transfer for customs purposes of a product from the category "not of a class or kind made or produced in Canada" to the category "of a class or kind made or produced in Canada."
I am prepared to leave it to any judge in the world whether that does not contemplate the amendment of a statute, and not a regulation, the action of parliament, not of the executive.
The other questions are those of production and valuation of their money, and appeal to the tariff board, and then look at the top of page 4, paragraph 3:
In computing the value for ordinary duty and for special duty under section 6 of the customs tariff-


Charles Avery Dunning: But we are not amending the statute to carry that out.


Richard Bedford Bennett: Then all I can say is you do not have to do that because you have the power to enter into an agreement with respect to it, which has been done. That part is not difficult to understand. But when you turn to paragraph 2, leave it to any judge you like or to the tariff board or to any other tribunal; can any other meaning be derived from that than the one simple meaning, that this contemplates an amendment by parliament of a statute, namely the customs tariff? How otherwise can you take those words than as they appear in the customs tariff and restrict them to the meaning given to them? I had no doubt as to how that was to be done until I read this section. I think I am doing only what is my bounden duty in saying that as far as it is possible we call upon the government to carry into effect the plain meaning of paragraph 2 of that letter, and to amend the tariff act in accordance with the proposals of the Prime Minister.


Some hon. MEMBERS:: Carried.


Richard Bedford Bennett: No. It is of course impossible in the face of the majority which exists to do more than say that that is not implementing the terms of a letter which says in its very terms that it is dealing with the customs tariff-"as it appears in the customs tariff." Is there any method by which that can be done other than in the
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way I have mentioned, namely by a statute in accordance with the act that now exists, as modified and amended. That is, the old one disappears and the new one takes its place, but the new one that takes its place is one which provides in terms not for someone else but for parliament to do it. What is more, if that is not in accordance with the principles of Liberalism as declared from this side of the house, I am unable to appreciate what they were. If a Conservative government had made proposals such as are contained in this statute, how the welkin would have rung! I direct attention to the plain undertaking of the Prime Minister of Canada, that certain words contained in the customs tariff will be restricted to one meaning and one only, and that parliament is going to do this; it is not to be left to the executive, or to the governor in council, or to someone else, but parliament itself is going to give effect to those words.


Charles Avery Dunning: Well, in case there
should be on the part of any country a belief that .because of the opinion expressed by the right hon. leader of the opposition Canada is not carrying out the express terms of an undertaking solemnly given, I must on behalf of the government repudiate any such suggestion, and in doing so I need only quote from the letter itself:
Sir. I have the honour to inform you that the Canadian government, in accordance with its general policy respecting trade and tariff matters, has decided to make the following modifications in its customs regulations-
The Canadian government proposes "to make the following modifications in its customs regulations." Certainly the country receiving that message did not expect an act of parliament. It relied upon the good faith of the government of Canada to give effect, in the manner appropriate to Canadian conditions to the undertaking which the government of Canada had given.
Now, with respect to the other point, as to the power which is being extended to the executive by this amendment, and which is calling forth such condemnation by my right hon. friend, might I point out that it is a power to do what? To reduce the burden of the tariff. That is what it is; it is a power to reduce. It is a power which can be used to ensure that the dumping provisions of the law shall not be applied in eases where the quantity of the goods specified produced in Canada is so small as to have no real place in our commerce and industry. The case of anthracite coal cited by my hon. friend is an excellent illustration. I am sure he would not argue that because it was foimd that 900

tons of anthracite coal were produced somewhere in Canada, therefore all users of British anthracite coal should be compelled to pay a dump duty in addition to the price.
The argument in respect to duty is a different argument altogether, as I am sure my hon. friend from Comox-Alberni realizes. If he cares to argue that because we desire to encourage coal mining in Canada, therefore British anthracite coal should not be imported, that at least is arguable, but I am reasonably sure he would not argue that because someone somewhere in Canada produces 900 tons of anthracite coal, therefore all users of imported anthracite should be compelled to pay a higher price for the article they are importing. What is true in the case of anthracite coal has been true in connection with other commodities. That is the complaint, and the proposal is simply this, as a practical matter to carry into the law the principle stated in the note to Japan, but leaving liberty to the governor in council to determine the percentage. That liberty will be indicated in the manner indicated by the Minister of National Revenue. In the first instance, the percentage specified will be ten per cent because we have so agreed with Japan.


Richard Bedford Bennett: Not less than ten per
cent.


Charles Avery Dunning: Quantities sufficient to
supply at least ten per cent, yes; that is the phraseology. Let us consider it as a practical question. We are here endeavouring for the first time to define the quantity. The Minister of National Revenue and his officers have used the best judgment of which they are capable in setting it at ten per cent, without, remember, having had experience in trying to set a percentage basis, and we have said to Japan, in order to get on a friendly trading basis with her once more, that we will set it at ten per cent. But does that mean that if, as a result of experience with ten per cent as the limit, we find that it is injurious to Canadian industry, on the one hand, or to Canadian consumers, on the other we are not to be at liberty to approach Japan and point out in connection with this single undertaking that embarrassing conditions are being created in Canada and that, therefore, we would like to be released from the obligation or to change it in some particular? That is the reason for the proposal of the government that the actual percentage should be determined by order in council, without in any way at all intending to go back in the slightest degree on our undertaking with Japan, but it leaves us at liberty to negotiate with

Customs Tariff
28S5.
the country to which we gave the undertaking if during the course of weeks or months that undertaking should prove to be one which ought not to be expressed in these precise terms but in some other. Experience, in other words, will be the guide, and I suggest to the committee that inasmuch as the power conferred is a power to reduce the burden of taxation, it is not a dangerous power to place within the hands of the executive.


Henry Herbert Stevens: May I ask the minister this question? Is it proposed that this new subsection 10 shall apply in the tariff to ether than section 6 of the tariff act, namely, the dumping clause?


James Lorimer Ilsley: Yes; the words are:
For the purposes of this act articles shall not be deemed to be of a class or kind made or produced in Canada unless so made or produced in substantial quantities; and the governor in council may by order in council provide-
And so forth. This act includes not only section 6 of the customs tariff but also all the schedules of the customs tariff.


Henry Herbert Stevens: May I suggest to the minister that if this new subsection 10 is intended to apply to the whole act it should be a separate section instead of a subsection of section 6? Section 6 is limited ; it is the well known dumping clause of the tariff act, and it would appear to me that if you make this a subsection of section 6 you will limit its application to section 6. To put the matter in another way, it wrnuld be more proper, I think, if it were made a separate section of the tariff act.


James Lorimer Ilsley: That is a problem of draftsmanship more than anything else, but wherever the words appear they can mean only one thing. Subsection 10 reads:
For the purposes of this act articles shall not be deemed to be of a class or kind made or produced in Canada unless made or produced in substantial quantities-
And so on.


Henry Herbert Stevens: The reason I asked the question was this: The argument regarding the application of the duty is based upon section 6, namely the dumping clause. It will be found, if examination is made of the schedules of the tariff act, that many items are specifically referred to as of a class or kind made in Canada.


Charles Avery Dunning: Not a great many.


Henry Herbert Stevens: But there are some where that is stated in the item itself, and if this is passed as a subsection I question whether
it will be applicable to such items. The letter from Japan intimates that it will, but I doubt whether by this method the government are making it applicable.


James Lorimer Ilsley: The letter to Japan covered not only section 6 of the customs tariff but everything.


Henry Herbert Stevens: That is what I say.


Richard Bedford Bennett: Section 43, for instance.


James Lorimer Ilsley: The letter to Japan referrea to the classification as it appears in the customs tariff; that is the whole of the customs tariff, and this provision, I feel sure, carries out that undertaking. The fact that this appears as a subsection of one section does not take away from the force or the power of the words because the words used are "for the purposes of this act," and that carries through the whole act, schedules and all.


Henry Herbert Stevens: I do not want unduly to press the point but certainly I should like to have seen that point submitted to the law officers of the crown. If the committee will read section 6 they will see that each of its subsections deals with matters pertaining to section 6. It is very lengthy and I am not going to read it, but it is quite clear on reading them that they apply to section 6. For instance, subsection 9 of section 6 reads:
(b)	Any order in council made hereunder may be varied, extended or revoked at any time by the governor in council.
(c)	This subsection shall be deemed to have had effect from and after the first day of September, 1931.
That applies only to subsection 9 of section 6. Now we come along and insert subsection 10 following these other subsections, which completes the section undoubtedly so far as draftsmanship is concerned. But, by its very wording, "for the purposes of this act," it means the whole act and should be a separate section instead of simply a subsection of section 6. I would suggest to the minister that, before we pass this, it might be once more submitted to the law officers of the crown in the light of what I have said.


James Lorimer Ilsley: I thank the hon. gentleman for bringing the point to our attention, but the proper course I suggest is to pass the resolution. Regarding the point raised I will undertake to submit it to the law officers before the bill is brought into the house. There will have to be a bill based upon the resolution.


Alan Webster Neill: The minister said that the question which was raised about 900 tons of anthracite was a very good illustration of the
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need for this subsection. There is another aspect of it which I would bring to the attention of the committee. We have bituminous coal mines on Vancouver Island which are deep and expensive to work. Their market is principally in the cities on the coast. The government of the day made an agreement with Great Britain whereby anthracite coal could be brought in free of duty. It also made an agreement under which it was, if not profitable, at least convenient to take wheat out from Vancouver in ships. The result was that some ships found it necessary to come out in ballast, and they would bring out British anthracite coal at very low rates in lieu of ballast. The production of British anthracite coal is subsidized by the government to a considerable extent. The coal was allowed to come in free of duty; it was subsidized by the government in its production; it was carried for little more than ballast rates and was landed in Vancouver to compete with the local coal which was expensive to mine. We thought we still had a dumping duty to fall back on. When I took the case before the tariff board this clause was not in the act, but they threw out the case although the words "in substantial quantities" were not there. They simply ruled that this coal was not produced in Canada. I offered evidence that 900 tons had been produced last year, but that did not avail. I produced evidence that in years gone by the production had been much larger. I am speaking from a somewhat treacherous memory, but some years before I believe it ran to something like 126,000 tons annually. That was the production a matter of some ten or twelve years before.
What happened is not for me to say. Possibly times got bad or there may have been a lack of capital. Possibly there was competition from other mines which were able to obtain better rail rates. At any rate the production went down. But this is a Canadian institution. The present production is only 900 tons, but how are we going to build it up to its former level of 126,000 tons? Are we going to allow this British coal, subsidized in its production and brought out at little more than the cost of ballast, to come in free of duty and free of dumping duty? The Minister of Finance says quite truly that this is an argument to place a duty on anthracite coal, but we are prevented from, doing that by the British agreement. Our only protection is to fall back on the dumping duty. I considered that we got a raw deal from the tariff board when they practically said that no coal was being produced. They could not 
use the words "in substantial quantity," because they had been taken out of the act. Notwithstanding the objection made by the leader of the opposition, I contend that this ten per cent is too high.
I just want to place the situation before the Minister of National Revenue and the Minister of Finance. I need not go into the evidence. To some extent shipments of coal from Great Britain fell off, but there is nothing in the world to prevent their being increased. In that case it will be disastrous for our local coal mines. The Minister of National Revenue said our coal and the British anthracite served different purposes, but I do not think so. Our main mine serves a purely domestic market, although some of our mines produce coal for bunkering purposes. A great deal of the coal mined at Nanaimo has to go to Vancouver. If every housewife in Vancouver realized the superior qualities of anthracite coal, they would adapt their furnaces to its use. That has been the main obstacle in the use of this coal; the furnaces are not adapted. In the meantime sales have fallen off, but with the assurance in this act that they will never be troubled with a dumping duty, there will be considerable encouragement to go ahead. That is the situation, viewing it from a local angle. I think it is a different picture when I put it in that way.


Hugh Alexander Stewart: Does the minister think the provisions of paragraph 6 in the note to Japan can be carried out by regulation? This paragraph reads:
Opportunity will be afforded for appeal to the tariff board of Canada respecting any value for duty which may in future be established under section 43 of the Customs Act. In the event of such an appeal the value for duty in force will, upon the expiration of three months after the date of appeal, cease to have any force or effect unless the tariff board, following a public inquiry, finds that such value or some lower value is required to prevent the importation of the goods into Canada from prejudieiously or injuriously affecting the interests of Canadian producers or manufacturers. If a lower value is found by the tariff board to be appropriate such lower value will promptly be made. effective.


James Lorimer Ilsley: That undertaking has been carried out by regulation, by amending the Customs Act. It could have been done by order in council under the Tariff Board Act.


Hugh Alexander Stewart: We regulate our customs by an act of parliament, which is the proper way, and we regulate administration by orders in council and by regulations passed under the provisions of the act. To show that this is not simply an amendment of customs regu-

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lations, the government has amended the act of parliament providing for proceedings before the tariff board. I do not think the contention of the Minister of Finance that this amounts simply to a change or an amendment of the regulation is well founded. I submit that the government should put in the act an amendment about this ten per cent. All along we have heard that the tariff ought to be made certain; that there should ibe no uncertainty about it; that if there was a change of government all this possibility of change in the tariff by order in council would disappear, and that he who ran might possibly read the provisions. As the minister of Finance has pointed out, the effect of this is to make the tariff subject to change. In order to carry out the meaning of the law, this ten per cent should be embodied in the act.


Richard Bedford Bennett: There was one thing the minister did and that was to answer himself. The cuttlefish when pursued is always careful so to obscure the waters that he cannot be followed. We can pass by the hon. gentleman's appeal about the reduction in price, the aid to the consumer and all that sort of thing. Let us look at what was done and find the answer to his whole argument. He said that all they were going to do was to take action by regulation, but we are now considering an amendment to an act of parliament.


Charles Avery Dunning: To make the regulation possible.


Richard Bedford Bennett: Not at all, excuse me. The minister as usual has made an impassioned speech. He called upon high heaven to witness his concern for the poor, suffering consumer and at the same time he pointed out that all they promised to do was to deal with the regulations. That is all the minister did promise; he merely suggested that we should amend the regulations. We are now considering an amendment to an act of parliament. That is not dealing with regulations.


Charles Avery Dunning: Oh, yes.


Richard Bedford Bennett: Not at all. It deals with an order in council and not with regulations. It deals with a statute; it deals with subsection 10 of section 6 of the act. That subsection constitutes my complaint. The Prime Minister promised that he would make the necessary changes, and now his government introduces a statute providing what? There is no reference to -ten per cent? No. There 12739-184
is no reference to that being the quantity? No. But that is what he promised. Now we have a statute introduced, and what does it say? It says:
For the purposes of this act articles shall not be deemed to be of a class or kind made or produced in Canada unless so made or produced in substantial quantities.
And then the minister states, "We will determine what the substantial quantities will be." That is what was said to Japan. He said to Japan, "I promise that we will reduce that to at least ten per cent." But this resolution does not make that declaration, either by regulation, by order or by statute. As I say, the minister has promptly proceeded-


Charles Avery Dunning: The promise is being
carried out.


Richard Bedford Bennett: The minister says that the promise is being carried out. What has that to do with the matter? The answer is that the terms are contained in a letter written by the Dominion of Canada to the empire of Japan, and the promise was that the government would make these changes. The fact that they carried this into effect by executive direction until parliament met is one point to be considered, but now parliament has endeavoured to deal with, the matter by statute. What was said by the hon. member for Kootenay East is perfectly true, namely, that this applies to the whole act. All that is necessary to do is to make it so that it would no longer be subsection 10; it could be a new section; probably paragraph (a) of some other section would do.


Charles Avery Dunning: I think so.


Richard Bedford Bennett: I should think so; that would be all that would be necessary. Possibly it could be made section 2A or section 3A, and that would cover the situation. But so far as possible I must insist upon placing ourselves on record to the effect that we have endeavoured to meet the conditions which we must impose upon ourselves because of our letter to Japan. In the amendment to' the statute we have made no reference to ten per cent. Instead of ten per cent we have mentioned "substantial quantities"; for ten per cent we have substituted a provision enabling the governor in council to provide that that expression may mean something more, and we have covered it up, cuttlefish-like, with the statement that if we find it works out badly we may be able to induce the Japanese to change their minds and help us out.


Charles Avery Dunning: I did not say that.

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Richard Bedford Bennett: That is the sense of the minister's observations.


Charles Avery Dunning: The cuttlefish is now at work.


Richard Bedford Bennett: All the minister has to do is look at what he said, and he will find that I am correct.
One word more. I have to answer a point raised by the hon. member for Comox-Alberni. The colliery to which he referred has been abandoned. It was abandoned not for lack of capital. May I observe that it belonged to the Canadian Pacific Railway. It was abandoned because measures had petered out, and houses had been moved. The mine had been abandoned, and there are pickings taken from the dump and some excavations not far from the surface from which this 900 tons of coal was taken. That is the story about Bankhead. Therefore, so far as that case is concerned, I do not think there is much in it. But that has nothing to do with the essential fact that we have come to the parliament of Canada with a statute, and that statute does not contain what we promised, namely, that ten per cent would be the determining factor. Unless it does, all I can say is that while your majority may say no, we are bound to protest against a promise that has been made and is not being kept. The minister may call out to high heaven that that is a reflection upon the honour of his country, and all that sort of thing, if he wishes. But the ink is not any good; it does not darken the view; one can see straight through. The government are alarmed at what they have said, and want to get out of it, if it is possible to do so.


Charles Avery Dunning: No.


Richard Bedford Bennett: And they look for a loophole. Finding it will not work satisfactorily, they say, "We will go to Japan and say, ' It has not worked out very well; let this go.' " And, of course, having been inspired by high heaven with this high impulse, they, as good neighbours, will at once yield to the view suggested and, if desirable, make it two per cent or three per cent. But remember always that the keynote of all the discussions is this: Just think what we are doing for the consumer.


Charles Avery Dunning: Yes.


Richard Bedford Bennett: Yes? Well, a few more idle people and a few more on relief will probably induce the consumer to believe that it is perhaps more desirable to supply employment than to supply relief.


The CHAIRMAN:: Is the resolution carried?


Richard Bedford Bennett: No; we can only say no.


Charles Avery Dunning: Is it carried?


Richard Bedford Bennett: On division.


Alan Webster Neill: The leader of the opposition spoiled my perfectly good argument.


Richard Bedford Bennett: No, I do not think so.


Alan Webster Neill: I would point out that we have heard of mines that could be rehabilitated. We have heard of mines that have been scratched on the surface and, if encouraged by suitable .provisions in the tariff, it meant that those mines could be brought back again, and that new areas could be developed. It is quite possible that in the case of the mine to which the right hon. gentleman refers they had taken only the immediate portion which was readily available and that had the demand in the market-justified it, a further extension could have been made and a greater demand would have been produced. However, the argument I advanced was not so much on behalf of the Bankhead mine-and there are others in the vicinity I will not mention-as it was with regard to our coal mines on the Pacific coast. It was our hope that there would be a dumping duty imposed on British anthracite for the protection of our bituminous coal mines, which were running up against the competition of subsidized British coal, to which I have referred. Is that fair competition? It is brought out at less than the regular freight rate, and it is entering our competitive market free of duty. That is the situation.
Resolution 3 agreed to on division.
Resolved, that the French version of tariff item 691 of schedule A to the customs tariff, being chapter forty-four of the revised statutes of Canada, 1927, as enacted by section five of chapter twenty-eight of the statutes of 1935, be amended by striking out the word "croix" in the second line of the said item and substituting therefor the word "crosses."


[Stage Direction]
Resolution agreed to.
Charles Avery Dunning: Probably we should consider the Excise Act.


Henry Herbert Stevens: While the minister is preparing to discuss the Excise Act, may I ask him to bring to the house certain information which will be available when we come to resolution 5 of the group of resolutions we have been considering, that is, the resolution repealing a large number of items. A number of these items will undoubtedly be consoli-

Excise Act
dated and will appear in composite form in the amended schedule to the tariff. Already I have noticed one or two. Where such occurs would the minister be prepared to inform the committee just what items have been so consolidated, and the reasons therefor?


Charles Avery Dunning: I think that is carried
out already, if my hon. friend will go through the items. If it is not, I shall be in a position to deal with it.


Henry Herbert Stevens: No, it is not carried out
there. It is merely given in the form of figures, and no explanation.


Richard Bedford Bennett: The number of the
tariff item does not appear.


Charles Avery Dunning: Is it the numbers that
my hon. friend from Kootenay East would like to get?


Henry Herbert Stevens: Yes, and in addition to
that, the reason for the consolidation. I will not go into the matter now, but there are definite reasons why that should be done.



EXCISE ACT

[Stage Direction]
Kesolved, that it is expedient to introduce a measure to amend the schedule to The Excise Act, 1934, as amended by chapter twenty-nine of the statutes of 1935 and to provide:-
1.	That the duty of excise on Canadian brandy be reduced from four dollars to three dollars per proof gallon;
2. That the duty of excise imposed upon spirits used in the manufacture of patent and proprietary medicines, extracts, essences and pharmaceutical preparations be reduced from two dollars and fifty cents to one dollar and fifty cents per proof gallon;
3. That the duty of excise imposed upon spirits, sold to licensed druggists and used exclusively in the preparation of prescriptions for medicines and pharmaceutical preparations be reduced from two dollars and fifty cents to one dollar and fifty cents per proof gallon;
4.	That paragraphs (d) and (e) of section six of the said schedule, being the duties imposed upon imported leaf tobacco unstemmed and imported leaf tobacco stemmed be repealed;
5.	That any enactment founded on paragraphs one, two, three and four of this resolution shall be deemed to have come into force on the second day of May, 1936.
Richard Bedford Bennett: Perhaps it would be well to deal with the resolution paragraph by paragraph.


Charles Avery Dunning: The right hon. gentleman prefers to take each paragraph separately ?


Richard Bedford Bennett: Yes.
12739-I84i
1.	Resolved, that it is expedient to introduce a measure to amend the schedule to the Excise Act, 1934, as amended by chapter twenty-nine of the statutes of 1935 and to provide:-
1.	That the duty of excise on Canadian brandy be reduced from four dollars to three dollars per proof gallon.


Charles Avery Dunning: With regard to the
change in the excise duty on spirits, it will be remembered that in last year's budget the domestic excise duty on spirits was reduced from S7 a gallon to $4 a gallon. At the same time the customs duty on spirits under the British preference was reduced from $8 to $5. Under the previously existing rate, brandy from Australia and New Zealand enjoyed a $6 rate on imports. This differential of $2 as compared with the British preferential rate of $8 is fixed by the terms of the agreement. It is provided in the agreement that the $2 spread as compared with the British preference shall be coincident. Accordingly, under the customs tariff as it now stands, brandy from these two countries may be imported under the $3 a gallon duty, while domestic producers of brandy are still required to pay $4 a gallon domestic excise duty, and the reduction here is for the purpose of equalizing the rate of excise upon Canadian domestic brandy with brandy imported under the customs tariff from these two countries.


Richard Bedford Bennett: What do we produce in
this country in the way of brandy?


Charles Avery Dunning: The production is not
large. I understand three firms are making it, but no separate statistics are kept to date of its production in Canada.


Richard Bedford Bennett: Of course, so far as the
excise payable of $3 against the 5H, the reducing of it to $3 is concerned, the import charges from Australia and New Zealand have to be reckoned with. There was not a difference of a dollar; there was only the difference between a dollar and that portion of it which covered freight and insurance and the cost of transporting the brandy from Australia and New Zealand.


Charles Avery Dunning: Rather a wide spread
for that purpose, is it not?


Richard Bedford Bennett: Oh, a dollar a gallon
would be large, but not very large.


[Stage Direction]
Paragraph agreed to.
2.	That the duty of excise imposed upon spirits used in the manufacture of patent and proprietary medicines, extracts, essences and pharmaceutical preparations be reduced from two dollars and fifty cents to one dollar and fifty cents per proof gallon.
Excise Act
Charles Avery Dunning: This change is to establish a uniform rate for spirits used for pharmaceutical purposes with the rate at present existing for spirits used in the manufacture of perfumes.


Henry Herbert Stevens: I understand that this is limited to manufacturers, and the word "manufacturers," I understand, is defined-my definition may not be exact-as bona fide or large manufacturing concerns, as distinct from the chemist who from time immemorial in his own dispensary formerly was in the habit of manufacturing many medicinal concoctions in which spirits were involved. I am informed that ordinary chemists or chemist's shops or drug stores, if you like to call them so, where they put up prescriptions and so forth, cannot now manufacture for sale in their own shops many of these articles that formerly were so manufactured or so prepared, because they have to pay the high retail .price for the spirits so used. I ask the minister if it is not possible to extend the definition of "manufacturers" to bona fide chemists putting up medicines for their own sales.


Richard Bedford Bennett: Is that not covered by the next section, which reduces it down to the same rate, a dollar and a half?


Henry Herbert Stevens: I was told this past week that most of the druggists-I am speaking of bona fide chemists who have little dispensaries attached to their drug stores-have been forced to give up the preparation of cough medicines. Many of them, particularly in the smaller towns, who put up their own little cough medicines, have been forced to buy these preparations from large manufacturing concerns. Unless this paragraph 3 is entirely new-


Charles Avery Dunning: The next paragraph is the one.


Henry Herbert Stevens: Is this entirely new?


Charles Avery Dunning: It is a reduction on the very thing my hon. friend is speaking of.


Henry Herbert Stevens: I am told that they cannot get it; that this is limited to the manufacturer.


Charles Avery Dunning: Perhaps my hon. friend will allow me to pass paragraph 2 and deal with his point on paragraph 3, where it belongs, the paragraph which specifically mentions druggists.


[Stage Direction]
Paragraph agreed to.

3.	That the duty of excise imposed upon spirits, sold to licensed druggists and used exclusively in the preparation of prescriptions for medicines and pharmaceutical preparations be reduced from two dollars and fifty cents to one dollar and fifty cents per proof gallon.
Charles Avery Dunning: I am advised that any druggist-any chemist, I think was the term my hon. friend used-can get a licence which will enable him to take advantage of the provisions of this section.


Henry Herbert Stevens: Limited, of course, to
prescriptions and pharmaceutical preparations.


Charles Avery Dunning: That is pretty broad, is it not?


Mr. BARBER:: I think the trouble is that a druggist or chemist necessarily must purchase a certain quantity, five or ten gallons. I think that is where the Objection arises.


Charles Avery Dunning: The commissioner advises me that five gallons is the minimum purchase.


Harry James Barber: I think that is the trouble.


Charles Avery Dunning: I suppose it is difficult to administer smaller quantities.


Richard Bedford Bennett: Under existing conditions in the provinces the druggist buys the spirits largely from the licensed vendors, from the government liquor shops in many cases-I think, in all cases now in the western provinces-and it seems to me that he should be allowed to buy as small a quantity as a gallon. There is no difficulty in respect of administration, is there?


Mr. HOWDEN:: With all due deference to the hon. member opposite (Mr. Barber), who is a druggist, I think I can say without fear of contradiction that it is very many years since ordinary chemists have used alcohol in the preparation of tinctures or anything of the kind in retail trade. They buy these preparations from the wholesalers, and the only use that I know of for spirits in the retail drug trade is to supply occasional prescriptions from medical men.


Harry James Barber: With all due deference to
the medical man on the other side (Mr. Howden), I have been in the business for thirty years or more, and have practised in his province as well as my own. I know that to-day in many sections the druggists are manufacturing all their tinctures and many of their pharmaceutical preparations. They have been forced to do that. In the past the drawback has been that they had to purchase alcohol in large quantities at a very high

Special War Revenue Act
price, and it did not pay them to make the tinctures. Perhaps five gallons would be a satisfactory quantity, and that would permit the druggists to continue to manufacture their tinctures and pharmaceutical preparations. I can assure the last speaker that leading druggists throughout all the provinces do a considerable amount of manufacturing at the present time.


Charles Avery Dunning: Do I understand my hon. friend to say that he regards a five gallon limitation as satisfactory?


Harry James Barber: I think that would be all
right, at the present price.


Charles Avery Dunning: Well, this discussion will ensure that the department concerned will look into the possibility of any hardship as indicated by the hon. member for Kootenay East. It is a matter of regulation with respect to quantities and so forth, and a note will be made of this point.


Mr. DONNELLY:: Is the druggist required to apply for a licence?


Charles Avery Dunning: Yes.


James J. Donnelly: Is there any charge
for it?


Charles Avery Dunning: Two dollars per annum.


[Stage Direction]
Paragraph agreed to.
4.	That paragraphs (d) and (e) of section six of the said schedule, being the duties imposed upon imported leaf tobacco unstemmed and imported leaf tobacco stemmed be repealed.
Richard Bedford Bennett: May we have a little
explanation about this?


Charles Avery Dunning: The explanation is that
this involves a transfer from the Excise Act to the customs tariff at precisely the same rates, for the reason that it applies entirely to an imported article. From a ministerial point of view it is considered better to have it as a customs item rather than an excise item.


Hugh Alexander Stewart: Is provision made in the
customs tariff for this?


Charles Avery Dunning: Yes. My right hon.
friend will remember that there is a provision for preference on certain types of tobacco, such as Rhodesian tobacco of a Turkish type, and that also entails considerations which touch this matter.


[Stage Direction]
Paragraph agreed to.
Paragraph 5 agreed to.
Resolution agreed to.

[Stage Direction]
Resolved, that it is expedient to introduce a measure to amend the Special War Revenue Act, chapter one hundred and seventy-nine of the revised statutes of Canada, 1927, and amendments thereto and to provide:-
1.	That part VII of the said act be amended to provide for the taxation of every change of ownership of any participating interest in the operations or profits of any association, company, corporation, fund or trust not divided into shares at the rate of one-tenth of one per cent of the value of every such participating interest so transferred or assigned.
Richard Bedford Bennett: Does this include devolution by operation of law, that is, either the executor or the administrator?


Charles Avery Dunning: It is not desgined for that particular purpose. It is designed to tax participating interests.


Richard Bedford Bennett: I know what it is.


Charles Avery Dunning: It will not apply to devolution of estates.


Richard Bedford Bennett: It usually does not, as a matter of fact. The minister knows it is not customary to impose that tax on transfers by operation of law. There are two forms of transfer, one by act of the parties and the other by operation of law. This, I take it, was originally intended to tax transfers by acts of the parties, not those by operation of law. It usually has been the practice to make an exception in respect of transmissions. I think in the other provisions of the statute transmissions are free from this tax, because they are brought about not by acts of the parties but by operation of law.


Charles Avery Dunning: I am advised that there is no change in that respect.


Richard Bedford Bennett: Will this resolution not make the change? That is what I am pointing out. You see, "every change of ownership" is covered here.


Charles Avery Dunning: That is the same phrase which is used elsewhere.


Richard Bedford Bennett: Is there a general clause covering it all? Undoubtedly there is a clear distinction 'between the two, andi I think there should be a general clause if there is not. I happened to have this matter brought to my attention not long ago by someone who does not live in this country.


James Lorimer Ilsley: The section dealing with the sale or transfer of stock is section 58 of the Special War Revenue Act, and it starts with the words:
There shall be imposed, levied and collected upon every change of ownership consequent upon the sale, transfer or assignment of any share of stock of any association, company or corporation-
Customs Act

And so on. I assume that the wording of the proposed bill will be the same, although the resolution shortens it. This is merely a resolution.


Charles Avery Dunning: We will watch that point in drafting the bill.


Richard Bedford Bennett: "Every change of ownership" is the way it appears in the resolution.


James Lorimer Ilsley: It is not intended to make any difference in principle.


Richard Bedford Bennett: That is why I mentioned the matter.


James Lorimer Ilsley: We shall have to watch the drafting of the bill.


Richard Bedford Bennett: I suppose this covers syndicates and matters of that kind?


Charles Avery Dunning: Yes.


[Stage Direction]
Paragraph agreed to.
2.	That subsection two of section seventy-seven A of the said act, as amended by section twelve of chapter fifty of the statutes of 1932-33 and amended by section two of chapter forty-two of the statutes of 1934, be further amended by providing that the excise tax on packages of cigarette paper tubes be reduced from three cents to two cents for each one hundred cigarette paper tubes or fraction thereof;
Richard Bedford Bennett: Why is this done?


Charles Avery Dunning: It is just equalizing the papers and the tubes.


[Stage Direction]
Paragraph agreed to.
Progress reported.
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Monday, May 18, 1936