1936-05-28

Mr. S. W. JACOBS (Cartier) moved:: That the petition of James Gordon Ross for a bill of divorce, presented on May 20, together with the report of the clerk of
petitions thereon, be referred to the standing committee on standing orders for the purpose of considering the suspension of standing orders 92 and 93 (3) (a) and (c) in relation thereto.


[Stage Direction]
Motion agreed to.

[Stage Direction]
Bill No. 72, for the relief of Madeleine St. Clair Peacock Milroy-Mr. Campbell (for Mr. Plaxton).
Bill No. 73, for the relief of Bella or Bessie Laurie Wozik, otherwise known as Bella or Bessie Laurie Rabinovitch-Mr. Jacobs.
Bill No. 74, for the relief of Agnes Hannah Wright-Mr. Heaps.

[Stage Direction]
(Questions answered orally are indicated by an asterisk).

Mr. PERLEY (Qu'Appelle):: 1.	Were tenders received prior to the 1st of November, 1935, for the installing of an electric clock in the post office at Whitewood, Saskatchewan ?
2.	If so, what was the lowest figure quoted?
3.	Who received the contract for installing the clock in the Whitewood post office?
4.	Did he tender on same?
5.	What was the amount of the contract and when was the clock installed?


Mr. CARDIN:: 1 and 2. A tender was received on October 29, 1935, from Mr. H. Downing, jeweller of Moosomin, Sask., at $685. On December 2, 1935, Mr. Downing offered to reduce his tender to $635.
3,	4 and 5. Mr. Edward Wiseman, jeweller of Wolseley, Sask., submitted a tender on February 3, 1936, for $635, which was accepted. Resident architect reported on April 18 that clock installed.


BROADVIEW, SASK., POST OFFICE
Mr. PERLEY (Qu'Appelle):: 1.	Has the public works department called tor tenders for installing the electric clock in the post office at Broadview, Saskatchewan?
2.	If so, when are tenders to be opened?


Mr. CARDIN:: 1.	Yes.
2.	On May 2, 1936, tender of Edward Wiseman, jeweller of Wolseley, at $635, was accepted.


EXPERIMENTAL FARM-WAGES
[Stage Direction]
On the orders of the day:
Mr. M. J. COLDWELL (Rosetown-Biggar):: Mr. Speaker, I should like to ask the government if any inquiry is being made into the rates of wages paid to married men employed
National Harbours

at the experimental form at Indian Head. I think it was on February 21 that I drew attention to this matter, and I understand that married men are still forced to maintain themselves on twenty-one cents an hour.


Right Hon. W. L. MACKENZIE KING (Prime Minister):: As my hon. friend may see, the Minister of Agriculture (Mr. Gardiner) is not in his place at the moment, and he will not be back for a day or two. However, as soon as he returns I am sure he will be glad to give my hon. friend a reply.


CANADIAN PACIFIC RAILWAY
[Stage Direction]
On the orders of the day:
Hon. C. D. HOWE (Minister of Railway; and Canals):: Mr. Speaker, yesterday the hop member for Qu'Appelle (Mr. Perley) inquired as to the truth of a rumour in his constituency that the Canadian Pacific Railway contemplated discontinuing the service on their line between Saskatoon and Unity in Saskatchewan. Upon making inquiry I find that no application for discontinuance has been made to the board of railway commissioners, and the chief solicitor of the Canadian Pacific Railway Company advises me that he has no knowledge of an application of the kind.


Mr. PERLEY (Qu'Appelle):: I may say that that line is not in my constituency.


NATIONAL HARBOURS
[Stage Direction]
On the orders of the day:
Clarence Decatur Howe: Yesterday the hon. member for Kootenay East (Mr. Stevens) directed a question to me with respect to fatalities which had occurred in the harbour of Montreal and requested that I investigate and reply. On inquiry I find that since the opening of navigation three longshoremen have been killed in the loading and unloading of ships in the harbour of Montreal. Two other men lost their lives by drowning one a sailor and the other a longshoreman who was proceeding along the docks after his work had been finished. It would appear that neither of these two men was engaged in the work of loading or unloading ships at the time he met his death. I may add that the Department of Marine employs a tackle inspector at the port of Montreal whose duty it is to safeguard as far as possible those employed in loading and unloading ships by inspecting the apparatus used

for that purpose and by seeing that safe methods are employed.
It would not appear that the death of the three men killed while actually employed in loading or unloading a ship was due in any sense to defective apparatus. I would remind the house that fatal accidents are investigated by the coroner, and, in respect of each of the five cases mentioned, the verdict was accidental death. It is regrettable that in such a dangerous occupation as that of loading and unloading ships it seems to be impossible to avoid the occurrence of such accidents.
Hon. NORMAN McL. ROGERS (Minister of Labour):	The hon. member for Winnipeg
North Centre (Mr. Woodsworth) addressed a question to me yesterday in connection with conditions affecting longshoremen in Montreal. I assume the information he was asking for has been given by my colleague, the Minister of Marine (Mr. Howe).


Mr. WOODSWORTH:: I should like to
know whether the minister is going to take any further steps to see that accidents of this kind are avoided. I assume I cannot make a speech at this time, but I would ask whether any further steps are to be taken to safeguard the lives of these men.


Mr. ROGERS:: A representative of the
Department of Labour in Montreal was instructed to make an inquiry, and I shall see that the matter is brought to the attention of the proper authorities.



WAYS AND MEANS


[Stage Direction]
The house in committee of ways and means, Mr. Sanderson in the chair.
Resolved, that it is expedient to amend the Income War Tax Act and to provide:-
1.	That the corporation rate of tax shall be increased from thirteen and one-half per centum to fifteen per centum.
Paragraph agreed to.
2.	That where a consolidation is permitted the corporation rate of tax shall be increased from fifteen per centum to seventeen per centum.
Mr. CAHAN:: What section of the Income War Tax Act will be amended by this resolution?


Mr. DUNNING:: Section 35.


Charles Hazlitt Cahan: This resolution applies
solely and exclusively to consolidated returns of incomes of corporations as covered by subsection 3 of section 35?


Charles Avery Dunning: Yes.

Income War Tax Act


Charles Hazlitt Cahan: We are dealing with rather
important matters, and in order that one may have some idea of the effect of these proposed changes, the proceedings should not be hurried. One should have an opportunity to look at the original section in order to appreciate the effect of the proposed amendment.


Charles Avery Dunning: I am not hurrying things. I want to give all the time that is required, but I would remark to my hon. friend that the exact wording of this resolution has been in the votes and proceedings since the first day of May, and it was assumed that in the interval hon. members would have made up their minds as to what they desire to say about it. I am sorry to have given the impression of hurrying; I had no such intention.


Charles Hazlitt Cahan: I was not suggesting that
the hon. gentleman was hurrying.


Mr. STEVENS:: I may be derelict in my
duty, but are we dealing with paragraph 3 of the resolution?


The CHAIRMAN:: Paragraph 2.


Henry Herbert Stevens: If it is not too much
trouble, would the chairman indicate what the paragraph is about when he calls the number?


Frederick George Sanderson: Paragraph 2 reads:
That where a consolidation is permitted the corporation rate of tax shall be increased from fifteen per centum to seventeen per centum.


[Stage Direction]
Paragraph agreed to.
3.	That payment of the gift tax be made annually.
Charles Hazlitt Cahan: What section of the act deals with the gift tax?


Charles Avery Dunning: Section 88. Considerable inconvenience arose out of the original wording of the gift tax provision. The tax was payable at the time the gift was made, but the rate of tax on the individual gift was determined by the total of the gifts during the year, so that the situation arose that a gift might be made early in the year and the tax paid upon it, and by virtue of subsequent gifts during the same year the rate of tax payable on the first gift would be increased. That was the difficulty. A yearly payment of the tax is provided for by the amendment, and that will eliminate uncertainty with regard to the rate of tax payable, since at the end of the year the exact annual amount will be known.


Ernest Edward Perley: Does that mean that if a gift is made the person making it has to pay a tax every year forever on that gift?


Charles Avery Dunning: No, once for all time. The change is that in future, instead of paying the tax when he makes the gift, as the law now calls for, he will make payment at the end of the year on the whole of the gifts made during the year.


Ernest Edward Perley: I am prepared to admit that perhaps I do not know English as well as the man who drafted this, but to my mind the language does not convey that impression. It may be perfectly plain if some lawyer has so stated, but that is not the impression I got when I read it.


Charles Avery Dunning: This is the resolution and not the bill.


Ernest Edward Perley: But I take it the bill follows the resolution.


Charles Avery Dunning: I will watch the point to which my right hon. friend refers, but I have to depend pretty much on these lawyers when it comes to using language in such provisions. They will not allow me to use my own.


Ernest Edward Perley: When I write a sentence and there is some difference of opinion in my office among the members of the staff as to what it means, I change it so that there can be no doubt about it. That is a fairly good principle. I would ask another question. With regard to this gift tax I understand that there is a departmental decision or interpretation of the meaning of this section, as to exactly what a gift is. I find it a little difficult sometimes to understand it. I know that last year we passed it when we were in office, but all the same there is some doubt as to just what a gift is, though I know exactly what the purpose originally was. The intention was that people who divided their property and gave large portions of it to their children during their lifetime should not escape taxation, but I understand that if you make Christmas gifts in proportion to your means such gifts are not included for purposes of taxation. Is that correct?


Charles Avery Dunning: The next resolution deals with that point. The one we have under consideration relates to the annual payment.


Charles Hazlitt Cahan: Is it clear from the statement of the Minister of Finance that the word "annually" refers simply to the aggregate of the gifts made during a single year, and that the payment is not to be repeated from year to year?


Charles Avery Dunning: I can assure the committee of my own intention, and it is exactly that implied by the hon. member for St. Lawrence-St. George. I will go further.
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If the language of the resolution does not carry out that meaning, the draftsman concerned will be instructed with respect to the section of the bill which will be based upon the resolution, so that there shall be no doubt about it.


Charles Hazlitt Cahan: Here we are merely concerned with the intention.


Charles Avery Dunning: Yes, and the intention is as has been stated.


Ernest Edward Perley: I can only repeat that in my opinion the wording is at any rate doubtful and ought not to be left as it stands. It is open to two interpretations.


Mr. STIRLING:: Is the information with regard to the gift tax taken from the dominion tax returns?


Charles Avery Dunning: Yes.


[Stage Direction]
Paragraph agreed to.
4.	That gifts to any one person which in the aggregate do not exceed one thousand dollars in the calendar year be exempt from the provisions of the gift tax.
Charles Avery Dunning: This bears on the point raised by my right hon. friend from Argenteuil. In the past exemption from the gift tax has been granted on a yearly aggregate of gifts up to $4,000, and it has been urged that this exemption is not sufficiently high because it acts as a deterrent to charitable giving. The purpose of the gift tax is to deter transfers of property, chiefly between members of a family, made with the object of reducing the amount of income tax which would otherwise be payable, that is, by putting it in a lower rather than a higher income bracket. It is not the purpose of the tax to deter charitable giving; that was not the original intention. This change is designed to encourage persons who for charitable reasons make annual gifts to relatives, dependents, former employees and so on, and is in the same spirit as section 5 (j) of the Income War Tax Act, which allows a deduction up to ten per cent of the total income for gifts made to charitable institutions. The $4,000 exemption will be retained but will apply only to the aggregate of gifts which individually do not exceed $1,000. That is to say, gifts of $1,000 or less shall not be regarded as gifts for tax purposes. Let me amplify that. Under the Income War Tax Act as it stands one may claim exemption up to ten per cent of one's income in respect of charitable contributions made to recognized charitable organizations. Under the gift tax provision as it has stood up to the present, if a man in a similar spirit of charity was supporting former

employees and relatives other than those in the exempted class he would nevertheless be taxed under the gift tax. It is thought that the spirit that prompted the house in 1930 to give recognition to gifts made to charitable organizations ought to be extended to cover the provisions of the gift tax in relation to gifts to individuals when the amount of such gifts does not exceed $1,000 in any one year.


Charles Hazlitt Cahan: A person may have dependents other than those mentioned in the act, as many of us have, and they may not be children or grandchildren. Few men reach an advanced age-


Charles Avery Dunning: Or even middle age.
Mr. CAHAN -who have not others that are morally and perhaps legally dependent upon them, and it does seem to me that a person should be permitted to pay for the necessary support of those who are dependent upon him, according to his own status in life and their means. I understand from this that a so-called gift of a thousand dollars to a person who is dependent upon the giver-


Charles Avery Dunning: Not necessarily even
dependent.


Charles Hazlitt Cahan: I am dealing now with dependents. I see quite a difference between my giving generally to charity and my giving to those who are dependent upon me, for whose support I am morally responsible. For instance, in the province of Quebec, as you know, the law is very wide with regard to the liability to dependent relatives, and "dependent relatives" are given a very wide interpretation under the civil code. But so long as the gift to a dependent does not exceed $1,000 in one year, this gift tax does not apply?


Charles Avery Dunning: Right. Or will not.


Charles Hazlitt Cahan: Will not apply. But assume that gifts are made to a number of dependents; if the total of such gifts to dependents exceeds an aggregate of $4,000-?


Charles Avery Dunning: No; the aggregate is immaterial so long as the gift is an individual one. My hon. friend has the privilege of supporting fifty if he likes.


Charles Hazlitt Cahan: That is what I desire to know.


Charles Avery Dunning: At a thousand dollars a year, yes. The $4,000 exemption is apart from this feature altogether.


Ernest Edward Perley: Is that correct?- because under the present law it is $4,000 to-day.

Income War Tax Act


Charles Avery Dunning: Under the amendment the $4,000 exemption will be apart altogether from the exemption relating to gifts to any one person of $1,000. If, as I suspect, my hon. friend has many more than four people to whom he feels he should contribute, he will be able to do so to the extent of not more than $1,000 in each case, and will not be taxed upon it. In addition to that he will have a general exemption of $4,000 in respect of what might be called general gifts. The object of the gift tax in the first place was very well stated by the right hon. member for Argenteuil (Sir George Perley) when he said it was designed to prevent evasion of the income tax law by those who sought to make large gifts to relatives in order to bring their income tax into a lower bracket. That object is maintained. It has been in operation, I think, only one year, but in practice hardships have been demonstrated in connection with people who, while charitably minded, having a keen sense of their responsibilities towards former employees and distant relatives, are taxed on these charitable contributions. Now this is brought into line in general principle with the income tax law in relation to charitable contributions.


Charles Hazlitt Cahan: The tax in that case upon income remains as before?


Charles Avery Dunning: Precisely.


Charles Hazlitt Cahan: And the additional tax on gifts will not apply in the cases which the finance minister has mentioned?


Charles Avery Dunning: Right.


[Stage Direction]
Paragraph agreed to.
5. That the rate of interest on unpaid instalments of tax be reduced from six per centum to five per centum.
Charles Hazlitt Cahan: No one can object to
that.


Major James William Coldwell: In connection with this particular paragraph I wish to comment briefly as I did in the course of the budget debate, with regard to people avoiding payment of income tax and therefore having, perhaps, unpaid instalments. Since I made some remarks on this matter in the House of Commons a great deal of information has come to me which I should be glad to pass along. I believe the Minister of Finance would be well advised to look into the whole matter of the incorporation of companies, particularly in Prince Edward Island. I am given to understand that at least one powerful trust company has an office in London and one in Charlottetown, and is engaged more or less in helping people to avoid payment of income tax both in Great Britain and in Canada.


Charles Avery Dunning: If my hon. friend will
permit me, he is out of order on this item, but paragraph 9 of this resolution relates directly to the matter he is discussing.


Major James William Coldwell: I shall be glad to discuss it there.


[Stage Direction]
Paragraph agreed to.
6.	That the penalty rate of interest in addition to the interest provided for in the foregoing resolution in respect of unpaid overdue tax be reduced from four per centum to three per centum.
Paragraph agreed to.
7.	That a tax of five per centum be imposed at the source on payments by Canadian debtors to non-residents in respect of films whether copyrighted or not.
Ernest Edward Perley: The minister
might make some explanation of this.


Charles Avery Dunning: Yes; I have an amendment in addition. The tax applies to films. It is found, however, that all films used in Canada are not copyrighted, and the purpose of this amendment is to ensure that payments for the use of all films, whether copyrighted or not, shall be subject to the tax. But since the original resolution was tabled the film producing companies have made representations and have demonstrated that a five per cent tax on gross remittances, which is what this particular tax is, is quite inequitable, in that it takes no account of their expense of production, and also would be unduly high. As few of the producing companies are making more than five per cent gross, we would be taking all of the income by the tax. The most important item of cost is the amortization of the cost of the negative and positive prints. The cost allocated to the Canadian business is on the basis of the number of positive prints used in Canadian distribution by comparison with the total number of positive prints used in world distribution. Therefore I propose by way of amendment to provide for a rate of allowance of sixty per cent from gross remittances, which is taken to represent the amortization of the film cost. In effect therefore the tax becomes a two per cent tax on gross remittances instead of five per cent as provided by the terms of the resolution as tabled. I am quite impressed with the representations made, and it was demonstrated to the satisfaction of the officers of the department that the proposal as originally stated would have had the effect of taking the whole gross revenue of these corporations-in some cases, not in all-because of the peculiar nature of their business. At the same time we do think we should have some
Income War Tax Act

revenue from this source; hence this proposal, which I shall ask my colleague to move, providing that an allowance of sixty per cent of such payments may be made for the amortization of film costs.


Mr. ILSLEY:: I move the amendment:
Provided that an allowance of sixty per cent of such payments may be made for amortization of film cost.


Charles Hazlitt Cahan: I do not wish to make
formal objection, but I suggest to the minister that, in dealing with such an important statute as the Income War Tax Act, these proposed amendments might be printed in the votes and proceedings of the previous day. It is impossible, from an oral statement of the case, to form a clear and definite opinion as to the exact extent and application of a proposed amendment.


Charles Avery Dunning: This gives me an opportunity to mention that, in connection with the one amendment which I regarded as important and complex, namely the amendment to paragraph 9, I handed that in and it is printed in the votes and proceedings of yesterday. As regards this one, I am sorry to say, interested parties were still making representations at this hour yesterday. In view of the fact that when everything is boiled down the explanation is a relatively simple one I thought probably the committee would accept my statement on it.


Ernest Edward Perley: I suppose the
minister finds that representations do not cease until the section is finally passed through the house, and therefore it is often the last minute before he makes up his mind.


Charles Avery Dunning: There are many people
who were fairly sure that representations ceased to be of any use after the first day of May, and it is only in cases where it can be demonstrated that all the facts were not before the officers of the department that I even consented to receive delegations after that time. The life of the Minister of Finance is all but impossible during such a period, as I am sure my right hon. friend knows.


Charles Hazlitt Cahan: These are cases of extreme
hardship.


Charles Avery Dunning: Yes.


Mr. ESLING:: I want to ask the Minister of Finance if this gross revenue represents the rentals which the Canadian theatres pay to the producers of films in the United States.


Charles Avery Dunning: It is the gross revenue
of the Canadian distributing agent that we are taxing.


William Kemble Esling: And that Canadian is the
agent for the films which are produced in the United States?


Charles Avery Dunning: That is right.


[Stage Direction]
Amendment agreed to.
Paragraph as amended agreed to.
8.	That any metalliferous mine that comes into production after the first day of May nineteen hundred and thirty-six and prior to the first day of January nineteen hundred and forty shall be exempt from income tax for the first three fiscal periods following the commencement of production; _	_
The minister, under appropriate regulations, shall determine the date of commencement of production and the properties, new or old, that shall be determined as having come into production, having regard to the production of ore in reasonable commercial quantities, and shall issue a certificate accordingly.
Charles Hazlitt Cahan: This was mentioned in the
budget speech, was it not?


Charles Avery Dunning: Yes.


Ernest Edward Perley: I take it from
reading this paragraph and after listening to the budget speech that the minister is not changing the taxation provision with regard to established mining companies. He is simply leaving them as they were, but by this change he is providing that a company coming into operation shall be exempt from that tax for three years.


Charles Avery Dunning: There is no change in
the existing provisions of the law.


Ernest Edward Perley: I wish to commend the minister for this action; it is a very good provision, and I think it will give encouragement to those who are seeking to develop paying mines to spend their money in that way. This will give such mines a chance to get on their feet afterwards, even when production is begun. Of course this provision of the law should be put into force very carefully.


Mr. HEAPS:: I was just wondering, Mr. Chairman, if the minister could give the committee some idea as to how the term "reasonable commercial quantities" would be defined.


Charles Avery Dunning: I will leave that to the
administrative minister to answer.


James Lorimer Ilsley: Of course the matter will have to receive careful consideration, but I would suggest that perhaps an appropriate point to regard a mine as being in commercial production would be when it has a net profit.


Henry Herbert Stevens: I would not dogmatize on that.

Income War Tax Act


Abraham Albert Heaps: Would not the term "gross profits" be more appropriate?


James Lorimer Ilsley: Perhaps so. We shall have to consider that very carefully. I admit there may be some difficulty about it.


[Stage Direction]
Paragraph agreed to.
9.	That (a) an investment holding company all of whose shares (qualifying shares excepted) are held by non-resident persons shall not be afforded the exemption provided by paragraph (k) of section four of the act, but shall be subject to a tax equal to one-half of the prevailing corporate rate of tax imposed upon Canadian companies;
(b)	the five per cent tax on dividends paid to such non-resident shareholders by such investment holding company shall not apply, except as hereinafter provided;
(c)	in determining the taxable income of such investment holding company a deduction shall not be allowed in respect of any interest payments or of taxes paid abroad;
(d) any five per cent tax paid by such companies in nineteen hundred and thirty-five shall be allowed as a deduction from the tax otherwise payable in respect of the said year;
(e)	to the extent that five per cent tax has not been incurred in respect of the earnings of nineteen hundred and thirty-three, nineteen hundred and thirty-four and nineteen hundred and thirty-five, the five per cent tax shall continue to be imposed until the undistributed accumulated earnings of the said years have been made subject to the said tax;
(f)	paragraph (k) of section four of the act shall be amended to apply to industrial and commercial operating companies only;
Charles Avery Dunning: In connection with this item, last evening I filed a proposed amended wording for paragraph 9 which appears in the votes and proceedings of this morning. The amended paragraph 9 is as follows:
9. That,-
(a)	an investment holding company substantially all of whose shares are beneficially owned by non-resident persons shall if it so elects be subject to a tax equal to one-half of the prevailing corporate rate of tax imposed upon Canadian companies, provided however that income received from another such investment holding company, the income of which has been taxed as provided in this resolution, and one-third of the income received by way of dividend from Canadian companies which have been taxed at the prevailing corporate rate shall be exempt from tax;
(b)	the five per cent tax imposed under section nine B of the act on dividends paid to such non-resident shareholders and on interest paid to non-resident persons by such investment holding company shall not apply except as hereinafter provided;
(e) in determining the taxable income of such investment holding company a deduction shall not be allowed in respect of any interest payments and any deduction allowed in respect of taxes paid abroad shall not exceed one-third of the tax imposed by any enactment founded on the provisions of this resolution;
(d) any five per cent tax paid by such companies under section nine B of the act
after the coming into force of any enactment founded on the provisions of this resolution otherwise than in accordance with the provisions of paragraph (e) of this resolution shall be allowed as a deduction from the tax otherwise payable thereunder;
(e)	to the extent that the five per cent tax imposed under section nine B of the act has not been incurred in respect of the earnings of nineteen hundred and thirty-three and nineteen hundred and thirty-four the five per cent tax shall continue to be imposed until the undistributed accumulated earnings of the said years have been made subject to the said tax;
(f)	paragraph (k) of section four of the act shall be amended in such manner as to limit its application to industrial and commercial operating companies and to investment holding companies the shares of the capital stock of which have been offered for public subscription or are listed on any recognized stock exchange in Canada or elsewhere;
(g)	the proviso to subsection one of section nineteen of the act shall be repealed.
This is an effort to deal with the situation of holding companies owned by non-residents of Canada and having no assets in Canada. The title "4 (k) companies" has come to be applied generally to all those companies which have taken advantage of paragraph (k) of section 4 of the Income War Tax Act. I need not read the paragraph, except to say that the qualification is the income of incorporated companies, except personal corporations, whose business is carried on and whose assets are situate entirely outside of Canada, and so on. This provision was placed in the act in 1918 to meet the case of certain industrial or commercial operating companies which were incorporated in Canada but which were carrying on business in foreign countries and which had their assets situated wholly outside of Canada. The provision, however, has been taken advantage of by two classes of companies for which it was not originally intended: First, personal holding companies incorporated in Canada to hold the assets of a foreign individual or a foreign individual and his immediate family, and second, financial or investment companies holding securities representing ownership of or interests in enterprises located in various countries of the world and whose own shares, frequently listed on one or more of the world's stock exchanges, are widely held by individuals in various countries. This latter class of companies chose to incorporate in Canada rather than in a number of other countries which were open to them because they found it advisable to do so in view of our laws and the political stability of this country.
Up to 1933 all "4 (k) companies" paid no tax under our income tax legislation. In 1933 a five per cent tax was imposed on interest or dividends paid by Canadian corporations to
Income War Tax Act

non-residents, the tax being deducted at the source. To the extent, therefore, that "4 (k) companies" distributed their income to nonresidents a five per cent tax was paid following 1933. In practice this has meant that the publicly owned financial or investment companies, the international companies, that is, have been contributing five per cent to the treasury on their distributed earnings, while generally speaking the personal holding companies which allow income to accumulate have not paid any tax.
It is this latter class which is now being excluded by this amendment from section 4 (k). At the same time a new tax category is being established for non-resident owned investment holding companies with a tax rate of 7i per cent; that is, one-half of the general corporation rate, under which these personal holding companies may elect to pay. Otherwise the full general corporation tax will apply. The publicly owned investment holding companies now in the 4 (k) category may remain there. However, they are not excluded from paying under the new category if they wish to carry on business and hold assets in Canada provided that they are entirely owned by non-residents. From the proposed amendment I think it may be said that three results will follow which should be regarded as desirable. One, personal holding companies will be excluded from using a category in the income tax act not intended for their use. Two, revenue will be increased by forcing these companies into the tax paying class. Three, under the new category investment holding companies will be able to invest in Canadian securities, which they could not do while remaining in category 4 (k) of the Income War Tax Act.
I do not know that I need go over in detail the various paragraphs of the resolution. I have endeavoured at this stage to give the purport and intention, to state what we are intending to accomplish by it. I think it answers the observation of the hon. member for Rosetown-Biggar (Mr. Coldwell), except that one should say this: speaking as Minister of Finance I am not anxious to kick these people out of Canada; I am anxious that they should pay taxes to Canada. Up to the present they have paid taxes when they distributed their income. In the case of the rest of us who pay income tax, corporations and individuals, the levying of the tax depends not upon the distribution of the income, but upon the receipt of it. In future we intend that these companies shall pay tax on their income whether it is distributed or not.


Charles Hazlitt Cahan: The minister is referring solely and exclusively to personal holding companies?


Charles Avery Dunning: Personal holding companies, in that connection. With regard to what may be called the general international concerns which incorporate here for any one of a number of reasons, whose assets are all over the world, we are giving them an option. They will be paying 7\ per cent and we think it is not an unfair rate to charge under the circumstances.


Charles Hazlitt Cahan: Does the minister think he will hold them here if he increases the rate from 5 to 7i per cent? I know of a number of such companies. Originally they were incorporated in Canada because of the security obtained under Canadian law. One large company of which I know was incorporated under the Canadian Companies Act after a conference of lawyers representing several international interests had examined the French law, the German law, and the United States law relating to the incorporation of companies. They preferred to seek Canadian incorporation because they felt that under the Canadian Companies Act there was greater security than there would be under certain foreign acts. Canada, therefore, was decided upon as the domicile of the proposed corporation. In so far as they declare and pay dividends to Canadians, if there are any Canadian shareholders, such dividends are entered by the recipients in their income tax returns, and therefore Canada obtains payment of the full amount of the tax. But in so far as such dividends are paid .to holders of stock in the so-called international corporation who are resident abroad, they are compelled to-day to pay not only the five per cent, which is withheld from them at the source in Canada, but also the heavy income taxes which are assessed by the several countries in which they may be domiciled. That is, a shareholder of such a company living, say, in a South American state would pay first the five per cent which was withheld at the source in Canada, and then the income tax in Argentina, or Brazil, or in France, or Great Britain. That makes the compensation which is paid by these shareholders for such security as they may obtain under the Canadian Companies Act or other act of incorporation in Canada, very heavy indeed in many cases. I suggest it is all to the good that the government should encourage the organization of such companies in Canada, and it seems to me that five per cent is a pretty heavy tax. If I

Income War Tax Act
were practising again in the profession-as I hope to do as soon as parliament prorogues, because I must earn a living-


Charles Avery Dunning: Hear, hear. I must try to retain the hon. gentleman.
Mr. CAHAN -I think I would advise such clients who had in view the organization of a Canadian company to reconsider their position. I can find for them other states under the British crown in which they could incorporate and avoid these taxes; they could avoid the payment of the five per cent and possibly other heavy income taxes as well. The minister is running near the margin.


Charles Avery Dunning: With that I agree.


Charles Hazlitt Cahan: You are endangering the position, the citadel, it seems to me. I have great confidence in the astuteness of those who are administering the income tax in Canada. I have had something to do with them; they are very anxious to conserve the interests of the state and to ensure that the income tax is levied and paid. But we are getting very near the margin, and I think there will be fewer of these international companies incorporated in Canada hereafter under a 7j per cent tax than there have been in times past.


Major James William Coldwell: The minister's statement meets the situation to which I have had reference to a degree, but not wholly. I understand that something of this sort is done: A dummy company is formed; securities are transferred to that company; the owner of the securities receives non-interest bearing debentures. Therefore he receives no income from the property which is transferred. The income from the property is outside Canada. It is reinvested in non-interest bearing debentures and is treated as capital appreciation-


Charles Avery Dunning: Is this a Canadian
corporation?


Major James William Coldwell: Yes. When funds are required, a formal sale of debentures is put through, by the people who organized the companies originally, and the result is that all forms of taxation are escaped. That is the information I have, and I shall be glad subsequently to supply the minister with details.


Charles Avery Dunning: I shall be very glad indeed to get such details, but I point out that in one particular at least the situation cannot be quite as my hon. friend understands it, because certainly a company formed as he suggests would itself pay income tax on its income. The individuals owning that company could of course leave the company's income in the company and thus
avoid personal income tax on receipts from the company, but offhand I cannot see how the company could escape taxation upon its own income. However, I shall be very glad indeed to get any information of that kind.


Charles Hazlitt Cahan: It is the duty and the privilege of this parliament to enact.laws to conserve dominion income derivable under the income tax, but I do not think there is any responsibility upon members of this parliament to concern themselves regarding the collection of income tax in Great Britain or the United States or any other foreign country. Those countries are very astute in the enactment of income tax laws under which they can obtain to the last cent full payment of the taxes which they levy. It is our duty to concern ourselves with the income of Canadians and to obtain such proportion of their income as is required for the purposes of the treasury. I have no hesitation, looking at it either from the political or from the moral point of view, in leaving foreign countries and foreign legislatures to enact such legislation as they may deem advisable for the purpose of preserving or increasing their revenues through their own income tax laws. If my hon. friend who has just spoken and raised the question has studied the income tax law of Great Britain, for instance, he must have found that the British parliament is very astute in making provision for the collection to the utmost possible extent of revenue derivable from the income of people domiciled in the united kingdom. That is not a concern of ours.
As to the moral aspect, in the practice of my profession I often adhere to the moral precept of an eminent English judge who says that there is no immorality in escaping an income tax that is not legally imposed by the law of the country. If it is under British legislation the income tax has to be interpreted strictly, but if it does not apply then there is no obliquity in endeavouring to escape from a tax that is not properly and legally applied. So I think we should be astute in looking after the payment of income tax by Canadians domiciled in this country, and not so astute in looking after the payment of income tax to foreign countries by those resident in foreign countries.
The hon. gentleman stated that many people in this country escape paying income tax. I do not accept his statement. If he has to do with advising clients as to the application of the income tax law he will find that in no country-none at least with which I am acquainted-is the income tax more strictly applied and more carefully collected than it is in Canada at the present time, and few escape.

Income War Tax Act


Mr. COLD WELL:: It was not with that
purpose in mind that I spoke, Mr. Chairman. My purpose was this: If we have large sums of British money in Canada that can be taxed but are not being taxed by Great Britain, then by all means let us tax them. If, on the other hand, Canadians who are making -large sums in Canada are using the laws of another country to escape payment of income tax, as perhaps some of these British people are in transferring their funds elsewhere, then I think it cuts both ways. We should look after these sums of money that are sent out of Canada to escape the payment of income tax. I am glad that the Minister of Finance has brought down this amendment.


Charles Avery Dunning: Mr. Chairman, I tried
to get in between the hon. member for St. Lawrenee-St. George and the hon. member for Rosetown-Biggar. I agree with much that the hon. member for St. Lawrence-St. George has said as to the taxation of Canadians, but when we confer upon a group of persons Canadian incorporation, do we not extend to that group the powers of an individual person? I assume therefore that corporations come within the scope of what the hon. member for St. Lawrence-St. George was referring to when he said that we should concern ourselves with taxing Canadians. I take it that from the standpoint of the treasury of Canada for purposes of taxation these institutions are Canadian institutions, and I am concerned in taxing them-well, just sufficient so that they will not leave us. I put it frankly, just sufficient so they will not leave Canada, because we need the income tax which they pay.
I certainly join with my hon. friend from St. Lawrence-St.George in commending the vigilance of the British income tax authorities and of the British parliament in relation to income tax. He spoke of doubts whether under heavier taxation imposed by this resolution there would not Be a drifting away from Canada of this class of corporation. But there is another factor, rather than what we are doing here, which creates doubt in my mind. I have doubts as a result of the budget proposals of the Right Hon. Neville Chamberlain in the British parliament just a few weeks ago in connection with which provision is made to tighten up to the very limit the British income tax provisions relating to outside investments of various kinds, among which I suspect are corporations such as those with which we are dealing. In fact, I am quite sure that portions of the budget resolutions in the British house are directed towards getting more revenue for the British treasury from classes of investments such as these. However, our law in this regard is

not confined, of course, to companies owned by residents in Great Britain. There are many other countries whose citizens regard conditions in Canada as more stable than their own, and who, therefore, as the hon. member for St. Lawrence-St. George has indicated, incorporate in this country as a measure of safety.


Charles Hazlitt Cahan: In view of the possibility
arising from month to month of war in these foreign countries.


Charles Avery Dunning: Yes. We have given this matter a great deal of study. It is a very complex one, and we have had, I think, most of the prominent lawyers who have been advising people with regard to these matters during the last few years up to see us about it. They have stayed with the job pretty steadily, and I can tell my hon. friend from St. Lawrence-St. George that most of them agree with him that we are going too far. But gentlemen in his profession who represent clients who are trying to avoid increase of taxation always say so, and I believe they sincerely mean it, in opposing an increase in taxation. It is often represented to the Minister of Finance that if he does this thing he is more likely to lose instead of gain by it, and one must forgive a minister of finance if he takes statements from interested sources with a grain of salt. He may make a mistake; he may overdo it, but at least the judgment upon which he must rely is that of his officials and his own after examining and hearing all sides of the question. The amendment now proposed represents something of an easement from the original proposal, and that is deliberately done in order to avoid, as we think, the possibility of reducing rather than increasing the income to the treasury from this source.


Charles Hazlitt Cahan: I rather resent the suggestion of the Minister of Finance.


Charles Avery Dunning: I am sorry; I did not
intend any reflection at all.


Charles Hazlitt Cahan: The representations which
I made I made in view of my past experience as a lawyer. I tell the hon. gentleman that I would rather cut off the fingers of my left hand than knowingly misrepresent a case such as that to the finance minister or to either of his assistants.


Charles Avery Dunning: I am quite sure of it.


Charles Hazlitt Cahan: A lawyer who has respect
for his own integrity - must be perfectly fair in dealing with the officers of the Income Tax department, and I have found in the few cases in which I have had to deal with

Income War Tax Act
them that if everyone were absolutely frank and candid in disclosing the situation to them, it would be far better for all concerned. When I suggested that the increase from 5 to 7i per cent may in the future preclude other companies from seeking Canadian incorporation under the same circumstances I was making representations in which I honestly believed. There may be some difficulty in companies already incorporated transferring their incorporation to another legislative jurisdiction, but I am confident that the minister has reached the limit when he increases the rate from five to seven and a half per cent.


Abraham Albert Heaps: Mr. Chairman, what has been said by the previous speaker and others prompts me to say a word or two somewhat in reverse to what has been said this afternoon. For the last hour or two we have been discussing companies located in this country but owned by people who live abroad. I have in mind the fact that during comparatively recent years there- has been a tendency for wealthy Canadian financiers to make their domiciles outside of the Dominion of Canada in order to escape taxation, particularly income taxation. I do not know whether the action suggested by the minister as having been taken in Great Britain can be taken in this regard, but I think something should be done to prevent people who have amassed fortunes in Canada from making their domiciles abroad in order to escape what I would call their fair share of taxation. I should like to know whether the minister has given consideration to this aspect of the matter and whether he thinks anything can be done. I realize the difficulties that lie in the path of any minister of finance who attempts to do anything along these lines, but I do believe that when a person has amassed a fortune here and then leaves the shores of this country for the purpose of creating a domicile in some other part of the empire or the world, there should be some regulations under which the minister would be able to obtain from such a person the share of taxation which I think he ought to pay.


Charles Hazlitt Cahan: We might do as they do in Germany. As soon as a German, particularly one who is an Israelite, seeks to leave the country with his property, he is clapped in gaol and his international movements are then rather restricted. Unless some such law were introduced in Canada I am afraid it would be found very difficult to prevent Canadians from leaving this country and procuring a domicile in another country.


Abraham Albert Heaps: I am not suggesting that we should prevent anyone from leaving the country. He cannot take his property away with him; if he owns stocks, bonds or shares, it is most difficult for him to get rid of his holdings. All I am suggesting is that where a man has commercial interests in this country and makes his domicile abroad, when he has free access to Canada he should at least pay his fair share of taxation. I am afraid that the analogy given by the hon. member for St. Lawrence-St. George (Mr. Cahan) is a very poor one.


Charles Avery Dunning: Of course my hon. friend would not expect me to advertise the methods which are taken to ensure that anyone properly chargeable with income tax shall not be able to evade it. I can say that we have endeavoured and will continue to endeavour to see that income derived in Canada is taxed as far as it is possible for us to locate it. I realize that that is a very broad statement. My hon. friend apparently thinks it is rather difficult for a man to take his wealth out of Canada with him. I shall not point out the various methods which are available for that purpose, but I know that any good lawyer could show him how wealth can be converted into what I might call portable forms. The method adopted by the German nation of holding a man's body, as indicated by the hon. member for St. Lawrence-St. George renders it difficult for him to enjoy his wealth in some other country. Apart from that method, I doubt whether any really effective means of preventing the moving of certain forms of wealth can be devised. The hon. member for Winnipeg North (Mr. Heaps) has touched upon a very real problem, one which concerns other countries probably more than it does Canada. It has been the subject of discussion among the nations at Geneva on more than one occasion, and to-day there is a greater measure of cooperation with regard to the administration of tax laws than there was in the past. I am making this general statement to assure my hon. friend that the government realizes the seriousness of the problem which he has presented.


Charles Hazlitt Cahan: I understand from the minister that apart from a personal holding company, which is a term we all understand, and apart from an investment holding company, the nature of which I understand, the 4(k) provision still stands?


Charles Avery Dunning: Yes. I indicated that an investment holding company could come under 4(k) if it elected so to do.
Income War Tax Act


Charles Hazlitt Cahan: The 4(k) provision, if I may refer to it in that way, will still apply, as before, to all companies which come within its description and which are not personal holding or investment holding companies?


Charles Avery Dunning: Right.


[Stage Direction]
Amendment agreed to.
10. That any enactment founded on the provisions of these resolutions shall be deemed to have come into force at the commencement of the calendar year nineteen hundred and thirty-five and to be applicable thereto and to fiscal periods ending therein and to all subsequent periods, except as otherwise provided.
Ernest Edward Perley: I think this is a suitable place for me to say a [DOT] few words about the exemption allowed for minor children, in connection with which no change has been made. It has been represented to me that in these times of depression a great deal of hardship is caused through this exemption not operating after a child has reached the age of twenty-one years. The father has the 'benefit of the exemption during the minority of the child, but quite often the child is not able to get anything to do after he has reached the age of twenty-one. He still remains at home and must be supported by the father, and it has been represented to me that under such circumstances the exemption should be extended. I know there are many difficulties in the way of this being done, but I thought I would draw it to the attention of the minister.


Charles Avery Dunning: Did the previous government consider it?


Ernest Edward Perley: I was not the minister in charge of that department, and I do not remember. I realize there is a great deal of difficulty in the way, but I merely mention this in order to draw it to the attention of the government. I spoke to the minister personally about it, one day, and perhaps he can explain why this has not been done.


Charles Hazlitt Cahan: I should like also to suggest that consideration be given to this matter which is covered by section 5(i) of the Income War Tax Act.


Charles Avery Dunning: It is the matter to which the hon. member for Argenteuil referred.


Charles Hazlitt Cahan: Only a few days ago a resident of Montreal in my own constituency, a man of a very high type indeed, whose revenues are somewhat limited, especially under present conditions, pointed out to me that he had grandchildren who were over twenty-one and who did not come within this qualification.

Take the parent or grandparent whose grandson or whose child, reaching the age of twenty-one, can find no immediate employment, when it is deemed necessary to keep such child or grandchild at school or college in order that he may qualify for one of the technical professions or for technical employment. Any payment made to one over twenty-one under such circumstances is not exempt. I am convinced that in these days when incomes have been cut down many men find it almost impossible to keep sons or grandsons dependent upon them at college or university or other training schools. If an exception could be made in such a case, which would enable boys and sometimes girls who are over twenty-one to enjoy the favour of exemption, even to the extent of this small amount of $400, for such time or times as they were at school or college or any other school for technical training, it would be only fair and it would promote the desire of grandparents and parents to see their children and grandchildren qualify by special training for the work of life. I do not agree with many statements that have been made in this house that there is lack of employment in Canada for those who are fully qualified. That may be so in some of the rural districts and in the western part of the country, but I am sure that in a city like Montreal there are hundreds and even thousands of cases in which there is employment available for those who are qualified for the particular work.


Abraham Albert Heaps: What kind of work


Charles Hazlitt Cahan: The engineering, chemical and manufacturing trades find it absolutely impossible to procure a sufficient number of qualified young men at the present time, and never before in Canada has there been such a dearth of supply of qualified young men for such occupations. The fact is, there is great necessity in Canada for qualifying young men and women for the work of life. Many are not qualified, and by every expedient possible we are bringing in young men from other countries, who are thoroughly qualified, getting them in under every possible pretext, to fill the vocations which are open to such young men and women in the industrial life of Canada to-day. I submit that under the circumstances the minister might consider extending that exemption.


Charles Avery Dunning: With respect to both pleas made by my two friends opposite, I would say that they are matters of revenue. Any addition to the exemptions is effective of course on the top level of the income. To a man paying a 45 per cent tax an additional exemption of $1,000 means just $450, because it is at the top of the schedule.

Income War Tax Act


Charles Hazlitt Cahan: He is not the man I am thinking of.


Charles Avery Dunning: Such a man would claim,
I am sure, any exemption that might be extended to a particular class for which he could qualify by virtue of providing education or otherwise. Many representations are made with respect to exemptions from income tax, many of them very worthy indeed. I can only say that so far as this year at any rate is concerned I am not in a position to accept any amendments that will have the effect of reducing income to the treasury from this source, but I shall be glad to bear in mind, for consideration during the year, the representations that have been made, in the hope that there may be such an increase in prosperity in Canada as will enable me to have a little softer heart a year from now.


Abraham Albert Heaps: The hon. member for St. Lawrence-St. George made a statement which I think should not go-unchallenged. He said that young men were being brought into the country from outside to fill positions here. He says there is a dearth of qualified young men in Canada to fill vacancies that occur, and that there are thousands of vacancies to be filled at the present time. Let me say this to him. If he knows of any vacancies in the engineering field or in any of the professions in Montreal or Quebec or anywhere in Ontario or in any other part of Canada I will undertake to find two efficient young Canadians to fill every such vacancy he may indicate. In fact I will go further; I should like him to suggest one hundred vacancies to-day in his own district which cannot be filled. As regards the statement about importing talent from other parts of the world, I hold that the young men of this country are just as capable as those that qualify anywhere else. We are turning out from our high schools and universities young men who are just as good as those in the United States and in some respects better. It is a reflection upon the young men of Canada to say that they are not capable of filling vacancies that occur here. If my hon. friend will supply me with a list of such vacancies in Canada I will see that they are filled on short notice.


Charles Hazlitt Cahan: I cannot accept the undertaking of the hon. gentleman, because I think it would be worthless. I think I know the situation as well as he does. For instance, the other day I had an application from a young man who had graduated in arts, I believe, and who had also graduated in engineering at McGill. He was anxious that I should assist him in securing a vocation. I asked him what income he wished. He thought that as he had spent so many years
at McGill he could not engage himself at a lower income than $3,000 or $3,500 a year. I told him of another young man in whom I had interested myself, who had also graduated in arts at a university, and in engineering, I think at McGill, and who wished then to obtain an income. My advice to him was that, if he desired to prosecute the profession which he had in view, he should engage himself with a certain hydro-electric company in the construction which was then proceeding of a station and a transmission line. I told him he would receive probably no more than enough to pay for his overalls and his board until he learned from practical experience to apply the education he had been acquiring over a period of seven years at the university. He accepted my advice and went to that company for a year. He then was quite willing to go on. He found out that the practical experience which he was acquiring would probably be very useful to him, and he came to me again. I secured for him employment for a year, during which he got his board and his overalls, with the General Electric Company in their testing department at Schenectady, and he spent another year there at that meagre income. Then he found that in order to qualify himself to compete for positions which would be open to him he required something more, and I got him employment with a large company in Pittsburgh engaged in the production of steel and iron structures. So he went for another year to learn from practical experience something about the testing of iron and steel for constructional purposes; at the end of the three years he was qualified for a position, and his services were sought.
Some of the young men who are graduating from our colleges are willing to qualify themselves in some such way, but many of them have been brought up since the war without any feeling of responsibility or appreciation of the necessity of qualifying themselves by training and experience for positions such as those of which I have been speaking. Time and time again during the last year I have been told by those engaged in the large engineering and manufacturing trades that, for expert assistance for which they are willing to pay, the young men of Canada have not qualified themselves. From my own experience in dealing with young men I feel that that is true, and I venture to say to my hon. friend that in the past ten years I have probably come in personal contact with as many young men of that class as he has-in fact, with ten for every one that he has come in contact with, because, for certain reasons of my own, including my own bereavement in the war, I have given a very considerable
Customs Tariff

part of my time to assisting young men to secure such positions and to inducing them to qualify themselves for vocations in which there are openings.


Mr. GLADSTONE:: Numerous corporations have their fiscal year end between January 1 and April 1. Under the wording of the resolution is it possible that such corporations retroactively might be called upon to pay income tax for both 1934 and 1935?


Charles Avery Dunning: The case to which my
hon. friend refers is one which, of course, does represent a difficulty, because various corporations have various dates for the ending of their fiscal years. Consideration has been given to the matter, but I am afraid it would be quite impossible to make a change on that account without upsetting the whole system of revenue collection. When that fortunate day comes on which we are able to reduce the rate of income tax, of course the companies to which my hon. friend refers will benefit.


Ernest Edward Perley: May I suggest
to the minister that he consider whether it is not about time for a revision or consolidation of the income tax laws in such a way that the ordinary person may have some idea what they all mean? I know there is an office consolidation, but it is not official, and I wonder whether it would be a very great task to have a statute passed which would cover all the different income tax acts and the changes and alterations that have been made from time to time.


Charles Avery Dunning: I shall be very glad to
bring that to the attention of my colleagues, but not, of course, for action during the present session.


Ernest Edward Perley: Oh, no.


[Stage Direction]
Paragraph agreed to.
Resolutions reported, read the second time, and concurred in.

[Stage Direction]
Hon. CHARLES A. DUNNING (Minister of Finance) moved the second reading of Bill No. 71, to amend the customs tariff.
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Sanderson in the chair.
On section 1-Undervaluation.
Ernest Edward Perley: I take it that
this is entirely in accordance with the resolutions that we have passed?


Charles Avery Dunning: It is based entirely on
the resolutions, yes.


[Stage Direction]
Section agreed to.
Section 2 agreed to.
Section 3 agreed to.
On section 4-Schedule A.
Charles Avery Dunning: It has been called to
my attention that, due to an error, one item has been missed in this schedule. I think the chairman has a note of it in his copy; it is properly recorded in Hansard and on the scroll but was missed in the printing of the bill. The section is 446c, which should appear on page 13.


Charles Hazlitt Cahan: Was that item passed?


Charles Avery Dunning: Yes. Everything is
regular about it except that it failed to get into the bill, and I should like to have it straightened out.


[Stage Direction]
Section agreed to.
On section 6 (as printed)-Schedule B amended.
Ernest Edward Perley: There does not
seem to be any section 5 in the bill.


Charles Avery Dunning: It will be necessary to
renumber the sections for the final printing. Section 6 becomes section 5.


[Stage Direction]
Section agreed to.
Sections 7 and 8 (as printed, now sections 6 and 7) agreed to.
Bill reported, read the third time and passed.
[Stage Direction]
The house in committee of supply, Mr. Sanderson in the chair.

[Stage Direction]
Militia services:	Non-permanent active
militia, $2,358,100.
Ernest Edward Perley: Mr. Chairman,
before we go on I should like to ask how many items in this department are still awaiting consideration.


Hon. IAN MACKENZIE (Minister of National Defence):: We have several yet to pass. Items 69, 70, 71, 72, 73, 74, 75 and 76 are still to be discussed by the committee.


Ernest Edward Perley: It is all right to go on with the estimates, but I want to ask that one of these items be left open for general discussion. Some of our members who are not here to-day would like an opportunity to discuss these matters.

Supply-Defence-Permanent Force


Ian Alistair Mackenzie: I shall
be very glad indeed to accede to that request.


[Stage Direction]
Item agreed to.
Permanent force, $5,546,700.
William Kemble Esling: Under this item I should like to refer to a matter with the details of which the minister is familiar, and I should like to know what interpretation is placed on the statutes by those who have the last word. In July, 1919, it may be recalled, the Militia Pension Act was amended reducing from twenty years to ten years the period within which a member of the permanent force could qualify for pension, but this 1919 amendment was not made retroactive. Consequently those who had served less than twenty years prior to July, 1919, could not participate in the benefits of that amendment. In 1928 the Militia Pension Act was again amended, making retroactive the 1919 amendment, in so far only as it applied to members of the permanent force who were wounded while on active service and who were discharged as unfit for further duty. Now, I want to take you back more than one and a half years. In September, 1934, some three or four cases were reviewed under the 1928 amendment. I wish to refer to one of these cases particularly, because it relates to a man in my constituency. First of all, the application naturally went to the minister, and by him it was referred to the branch of his department which had to deal with it. That branch reviewed the man's period of service and determined whether he came within the terms of the amendment. Then the application went to another branch for the purpose of ascertaining his overseas record, whether he was disabled and discharged as physically unfit. I cannot speak for others but his application I know was approved by those in charge of the Department of National Defence whose duty it was to review these claims as to term of service and activity overseas. It was then handed to the minister and approved by him. From the minister it went to council and thence to the treasury board. That was in September, 1934. By the treasury board it was returned to the Department of National Defence for further explanation. It is still somewhere, nobody knows where; but when the government changed it was found among the items of unfinished business, and the minister then referred it to the Department of Justice. The Department of Justice ruled that they could find nothing in the statute to serve as a basis for refusing the pension. Now, is the man entitled to his claim or not? It seems to have taken one and a half years to determine it. It is a
statutory claim; the amendments of 1919 and 1928 are as plainly stated as it is possible to state them in the English or French language, and no definite reason seems to have been given anybody for not paying this claim. Furthermore this claimant received notice from the department that his case had been reviewed and submitted to the minister and that if approved he would receive his pension. What we would like to know is, by whom is it to be approved? Is the last word with the treasury board? The statute states clearly the terms and conditions under which the man is entitled to receive pension. You can well understand the anxiety of such claimants. The Department of Pensions disclaim responsibility, yet I think they have some responsibility, because the grounds upon which the man is entitled to receive pension are the fact of service overseas and his having been wounded; to that extent at any rate it has reference to the Department of Pensions. Here is a case in which the claim was approved by the minister's own officials, handed by the previous minister to the cabinet and passed on by the governor in council to the treasury board; then reviewed by the Department of Justice, which as I say found nothing in the act to serve as a basis for refusing the pension. The applicant seems io have fulfilled all the requirements of the Militia Pension Act, and I hope the minister will be able to tell us to-day who finally decides whether or not the man is to receive his pension.


Grote Stirling: Before the minister replies may I say in support of my hon. friend's contention that I remember this matter. In the short time in which I was Minister of National Defence it came before me twice. I sent it back twice, and I was never able to understand the grounds taken by the treasury board in declining to approve the application.


Ian Alistair Mackenzie: I must
agree entirely with the observations made by the hon. members for Kootenay West (Mr. Esling) and Yale (Mr. Stirling). This case came before me very shortly after I took charge of the department. I reviewed carefully what had been done. The hon. member for Yale as minister recommended this case. As a matter of fact there are three cases involved in the construction of the statute in this regard. As the hon. member for Kootenay West stated, as soon as I came into office I referred the whole matter to the Department of Justice for a ruling as to whether or not there is any statutory bar to granting this claim, and the reply was that there is none. The matter was then referred by me to the treasury board; it is now before the treasury
3168	COMMONS
Supply-Defence-Permanent Force
board and the ultimate decision rests with them. I can assure the hon. member for Kootenay West that I shall continue to press for a decision in this matter, because I think the claim is well founded both in equity and in law.


William Kemble Esling: Perhaps the minister or
someone on that side will tell us who in the treasury board does determine this. Is it one member or all the members of the board? It puts us in this position, that after the 245 members of the House of Commons and the 96 members of the Senate have passed an amendment to the statute, three or four ministers can say: "Well, that is all right, but we will not pay."
Royal Canadian Navy	
Permanent active militia	
Royal Canadian air force.,	
Royal Canadian naval reserve	
Royal Canadian naval volunteer reserve.. .. Non-permanent active militia (Dec. 31/35).. .. Non-permanent Royal Canadian air force	
Total of all ranks and all services


Abraham Albert Heaps: What is the total number of officers and men in the permanent force?


Ian Alistair Mackenzie: In the permanent active militia, 416 officers and 3,585 men, or a total of 4,001 as of March 31, 1936.


An hon. MEMBER:: Just where is this saving of $42,447 made?


Ian Alistair Mackenzie: On the general vote there is an increase, under administration, of $3,573; an increase, under training, of $9,000; a decrease, under maintenance, of $42,620; a decrease in the vote for general purposes of $12,400, making a net decrease of $42,447.


Ernest Edward Perley: As this is the only militia item left perhaps it might be allowed to stand.


Ian Alistair Mackenzie: I was going to have the vote on civil pensions stand on the understanding that anything at all concerning the department could be discussed on that vote.


Ernest Edward Perley: That will answer the purpose, provided it is understood that the discussion can be general.


Ian Alistair Mackenzie: Absolutely.


[Stage Direction]
Item agreed to.
[Mr. I. Mackenzie.}
Ian Alistair Mackenzie: I would
rather ngt answer that question.
Mr. HfeAPS:	Would the minister be good
enough to give the committee information as to the size of our permanent force at the present time, and what it is made up of?


Ian Alistair Mackenzie: Does my 'hon. friend want just the military forces, or the entire scheme of all the defence forces? I will give the whole thing. The Royal Canadian navy-


Abraham Albert Heaps: Cut the navy out.


Ian Alistair Mackenzie: That is
the last thing that we intend to do. The standing on March 31, 1936, was as follows:
Officers	Men	Total102	830	932416	3.585	4,001147	884	1,03143	148	19171	897	9686,888	41,873	48,76152	289	3417,719	48,506	56,225
Royal Military College, $368,400.


Abraham Albert Heaps: I assume this refers to the Royal Military College at Kingston. I think we ought to have information as to the number of cadets in training.


Ian Alistair Mackenzie: At the present time, 191, but facilities are provided for 200 cadets.


Abraham Albert Heaps: Will the minister give us some idea of how they are chosen for training purposes?


Ian Alistair Mackenzie: I understand they are chosen on provincial submissions, so many from each province. If any province does not come up to its quota the full strength is made up from other sources.


Abraham Albert Heaps: How are the appointments made in the provinces?


Ian Alistair Mackenzie: There are applications, and selection is made by competition on the basis of merit.


Mr. POULIOT:: Mr. Chairman, item 70 has passed but I heard the minister say that he had no objection to the discussion of matters affecting his department.


Ian Alistair Mackenzie: I am
leaving one item over on which any matter concerning the Department of National Defence may be discussed.

Sup-ply-Defence

Permanent Force


Jean-François Pouliot: Would the minister mind if I took five minutes of the time1 of the committee to bring before it some facts that do not seem to be well understood by the house or the committee? It is about the superannuation of some people who have been seconded from the Department of National Defence to other departments. According to a return to an order of the house, there are three men in that position, General McNaughton, who is now president of the research council, Colonel Vanier, who is in England in the office of the High Commissioner, and Colonel Steel, of notorious fame, in the radio commission. The reason why the case of these gentlemen is brought to the attention of the house and the committee is not because they have been transferred, but because they have been seconded or loaned by the Department of National Defence to other departments. In the Militia Act there is a provision by virtue of which members of the staff of the Department of National Defence may be seconded instead of being transferred to other departments. What is the reason for that? The "why" is most important in this discussion. In fact, in one return the "why" was asked but was not given, and another return in which the "why" was asked has not yet been tabled. Each one of these gentlemen because he has been seconded from the Department of National Defence, to some other department, is entitled to superannuation which is twice as much as that to which he would have been entitled if he had been simply transferred. I want to bring very clearly before the mind of every member of the committee and of the minister, who knows the matter perhaps better than anybody else, that the fact that these three gentlemen have been seconded or loaned from the Department of National Defence instead of being transferred entitles them to double pension.
Last year in June, before the matter was ripe, the question was brought up in this house by you, Mr. Chairman, and also by the member for Temiscouata. We asked for some information from the government about it, and as usual the late government was entirely dumb; no answer came out of the mouth of the former Prime Minister or his colleagues. To me it seems shameful that General McNaughton and Colonel Steel, who are both members of the so-called head and brain trust of the late government, should be entitled to a reward which is twice as much as the pension to which they would have been entitled had they been simply transferred instead of seconded from the Department of National Defence to any other department.
I am strongly against that practice, and there is time yet for the Department of National Defence to bring these men back to that department and to superannuate them on the basis that would have applied if they had not been seconded. Is it not shameful to think that within six years General McNaughton will be entitled to twice as much pension as he would receive if he were retired now and were not brought back to the Department of National Defence? According to returns which have been tabled in the house General McNaughton has no office in the Department of National Defence, Colonel Steel has no office in the Department of National Defence, Colonel Vanier has no office in the Department of National Defence, but in spite of that, these people will take advantage of the fact that they passed through that department to receive twice as much for their superannuation in these days when salaries are cut by five per cent. I cannot conceive it, Mr. Chairman. Mind you, I have no grudge against General McNaughton, Colonel Steel or Colonel Vanier. I am discussing this question as a matter of principle, and I am doing it now because I believe that some members do not understand the situation. But it is very plain. It is explained in very easy language, the meaning of which can escape no one.
Moreover, I assume and I submit that General McNaughton is incompetent as chairman of the research council. Why? Because he taught physics in Montreal before the war he is now head of the scientific research council of Canada. Did he follow the scientific periodicals during the last twenty years? I wonder whether his job as chief of staff and whisperer to the ex-Prime Minister left him enough time, in order to keep himself posted on the subject of science, to read all the scientific publications that were published in all the countries of the world. Moreover, Colonel Steel has tried to hide himself behind others in the radio commission. He does not deserve a double superannuation, nor does General McNaughton. It is absurd to reward these two men for all the wrong they have done to this country thanks to their wrong advice to the late government. That is what I have to say about them. As regards Colonel Vanier, I have nothing more to say about him except that if he wants double superannuation, he should get it through a vote of parliament and not by the cellar door route. I respectfully ask the minister to consider the whole matter and see that McNaughton, Steel and Vanier are brought back to the Department of National Defence before they are superannuated.
3170	COMMONS
Supply-Defence-Permanent Force


Abraham Albert Heaps: I am told that it costs the
government approximately $2,000 per annum for each person who enters this institution, the Royal Military College, and I should like to know what the country gets in return for this amount. Is any track kept of the young men after they leave the institution? Do they enter the institution for the purpose for which it is maintained, or do they take up other vocations than those for which it was created.


Ian Alistair Mackenzie: In my
judgment, this is one of the finest investments of the Dominion of Canada. I do not think finer training is given in any other school in Canada. I visited the Royal Military College a few weeks ago and I believe they are carrying out one of the finest traditions of the dominion. The record of these boys in past years has been very encouraging and inspiring. They have gone into various professions and the surprising thing is that the majority of them have entered civilian life. Many have entered the various branches of the service in England and in this country, but in every case they have rendered valuable service to the development of fhe nation. In my judgment the Royal Military College is not only equal to any college of its kind in England or the United States, but superior to any similar college in the world.


Abraham Albert Heaps: I am glad to have the statement of the minister and I agree with much of what he has said, but one surprising piece of information he has given the committee is that a large percentage of these boys enter civilian life. In other words this college which is really for the purpose of training officers for the army is utilized for civilian purposes. That is one of the points I had in mind when I asked my previous question. If practically free training is given to a certain type of youth in this country, the same privilege ought to be extended t-o other people. I should like to know what training the boys receive in the college. I realize there is bound to be a certain amount of military training, but I understand that they receive instruction along other lines. Could the minister give the committee an idea of the training which they receive?


Ian Alistair Mackenzie: The
cadets are trained along general educational lines although there is specialization in engineering development. Their training includes mathematics, civil engineering, surveying, physics, chemistry, French and English, and the discipline maintained is one of the

most valuable features of the course. The gymnastic training and the outdoor exercises of all kinds undertaken by the cadets ensure their good health.


Abraham Albert Heaps: I understand that about
fifty per cent go into the permanent forces.


Ian Alistair Mackenzie: I can
give the figures.


Abraham Albert Heaps: For the last five years will
be sufficient.


Ian Alistair Mackenzie: In 192930, twenty-three per cent of the cadets took commissions; in 1930-31, thirty per cent; in 1931-32, seventeen per cent; in 1932-33 forty-seven per cent; in 1933-34, thirty-five per cent, and in 1934-35, the last year for which figures are available, forty-nine per cent.


[Stage Direction]
Item agreed to.
Aviation-Royal	Canadian Air	Force;-
expenses in connection with the general maintenance and training of the permanent and non-permanent active air force, and provision of facilities therefor, $4,130,000.
Mr. GREEN:: Have any steps been taken to develop the air defences- on the coasts of Canada?


Ian Alistair Mackenzie: Yes.
That was one of the first problems before the department. As a matter of fact, the problem has been before the department for several years and certain plans were laid by my predecessor in office with reference to the study of coast defences, more particularly those in British Columbia. In the estimates for this year there is provision for increasing the air force accommodation at Jericho beach in Vancouver. There was projected by my predecessor in office and his advisers an amount of $375,000 for the development of hangars and aprons at Jericho beach. The engineers have investigated the situation and have made recommendations and it has been decided that the situation is quite safe for a considerable development. Provision is made for new hangar accommodation with probably some further development to be made in the future. That is the situation with reference to the air forces. There is also projected a certain development, which I shall not mention, with reference to our naval defences in the same province, but that is taken care, of in the naval estimates.


Howard Charles Green: Are no further steps being taken to build up the air defences on the Pacific coast?


Ian Alistair Mackenzie: The air defences will be increased from time to time as funds are available. This year certain

Supply-Defence-Aviation
increases will be made at Vancouver and the ultimate plan is for a considerable increase in the air forces on the Pacific coast. Of course, the air force and naval expansion should go ahead concurrently, but I must admit that this is being done in a very modest way. However we are proceeding as fast as the economic resources at present available will permit us to proceed.


Howard Charles Green: Could the minister give the committee some idea as to what the cost would be of establishing proper air defences on the Pacific coast?


Ian Alistair Mackenzie: It is difficult for me to answer that question. It would depend entirely upon how far the government in power would go in a policy of expansion. It would depend also upon the technical advice received from the air force officers who must see that there is created in Canada, not a large air force, but an air force sufficient to look after the defence of the dominion. I could not say offhand how much money this would cost, but I say that we are alive to the situation. I think the increase in the air force estimates indicates our appreciation of the situation.


Howard Charles Green: I think the minister is to be commended for increasing the vote, but surely he should know what a complete defensive program would cost.


Ian Alistair Mackenzie: According to the recommendations of the technical officers, which are largely confidential, it would cost considerably more than the amount provided in this year's estimates. Personally, I would like to see the vote this year larger than it is. However I believe we have taken a step in the right direction. This increase in the air force vote will provide for only three new aeroplanes, most of the increase being for new ground services, for equipment and for the maintenance of personnel which was made possible by the vote submitted by my predecessor. Only three new Blackburn Sharks are provided for in the air force vote of this year.


Howard Charles Green: Has Canada any modem
fighting planes?


Ian Alistair Mackenzie: These
three will, be modern planes.


Howard Charles Green: But at the present time
have we any really modern fighting planes?


Ian Alistair Mackenzie: I would say they are very much limited in number; some of the planes that have been in the possession of the air force have been condemned in recent months and recalled from service. That is one of the most serious
features of the situation. We have, however, some modern fighting planes and we hope to obtain more. In the estimates this year there is provision for the replacement of some of the planes now in service, and that is where a large proportion of the vote has gone, namely, in overhauling and renewing some of the existing planes to make them efficient and modem.


Howard Charles Green: Have we any fighting planes that approach the modern British fighting planes?


Ian Alistair Mackenzie: Of course these three new ones that are being provided for will be the most modem planes of their type.


Howard Charles Green: So that we shall have only
three fighting planes in the whole of Canada.


Ian Alistair Mackenzie: Last year some fairly modern ones were obtained.


Howard Charles Green: How many of these have
we?


Ian Alistair Mackenzie: About
ten.


Howard Charles Green: So that after this vote is
expended our effective fighting air force will comprise only ten planes.


Ian Alistair Mackenzie: I would not admit that. We have overhauled existing planes and installed new engines in a great number of planes. If my hon. friend means the most modern planes in the world, what he says is largely true, for the economic resources of this country will not be equal for some years to anything like a real development in this direction. However, it is hoped now to provide as soon as we reasonably can a modest but effective air force for the dominion, a force such as is considered reasonable by the technical officers of the department.


Howard Charles Green: Does the air force get any
fighting training such as artillery observation, army cooperation and other strictly military training?


Ian Alistair Mackenzie: Yes, they do; they are getting progressively advanced modern training, and that is being increased from year to year.


Howard Charles Green: Do they not do considerable civil flying, such as mapping and work of that kind? What work does the air force do now?


Ian Alistair Mackenzie: The air force is divided into three departments. First, there is the Royal Canadian Air Force as such; second, there is the branch that carries
Supply-Dc jetice-Aviation

on operations for departments such as the Royal Canadian Mounted Police, the Public Works department, the Department of Indian Affairs, and the transportation of personnel making surveys in the northern parts of Canada; and third, there is civil aviation, which will be transferred, by a resolution now before the house, from the Defence department to the Transport department.


Howard Charles Green: Is it not a fact that very
little of the time of the air force is spent in fighting training? They are really doing work that could be done by civil aviation, and that might promote the development of civil aviation.


Ian Alistair Mackenzie: That is true to some extent only. A large part of the training of the Royal Canadian Air Force is in flying hours, in the control of machines, and in the survey of territory, and that can be done either in serving the military side of the force or in connection with civil aviation. The same amount of training applies in both directions, and that is being carried out.


Howard Charles Green: Will this vote provide for an increase in the personnel of the permanent air force?


Ian Alistair Mackenzie: Yes, four officers and forty-four men in the Royal Canadian Air Force.


Howard Charles Green: That is to be the total increase?


Ian Alistair Mackenzie: Yes. Last year there was an increase for which sufficient provision was not made in the estimates a year ago. There is a carryover from that amount, and that added to the new personnel accounts for a considerable amount of the vote.


Howard Charles Green: What is the strength now of the non-permanent air force? Will this vote provide for any increase?


Ian Alistair Mackenzie: There are fifty-two officers and two hundred and eighty-nine other ranks, or a total of three hundred and forty-one, as at March 31 of this year.


Howard Charles Green: Will there be an increase by reason of this vote?


Ian Alistair Mackenzie: The item of pay and allowances in this vote includes two additional airmen of the Royal Canadian Air Force, who are attached to the nonpermanent air force, and two days' additional training of the non-permanent air force is provided for three squadrons. The figure is less by $19,800.


Howard Charles Green: How many non-permanent squadrons are there, and have there been requests for more?


Ian Alistair Mackenzie: We have No. 10 squadron, Toronto; No. 11 squadron, Vancouver; No. 12 squadron, Winnipeg; all army cooperation squadrons; No. 15 fighting squadron, Montreal; No. 18 bomber squadron, Montreal; No. 19 bomber squadron, Hamilton. There is a total of fifty-one officers and two hundred and ninety-one airmen as of April 30, 1936.


Howard Charles Green: Have there been requests from different cities for more squadrons.


Ian Alistair Mackenzie: Yes,
requests are coming in from time to time.


Howard Charles Green: How many have there been?


Ian Alistair Mackenzie: In the short time I have been in the department there have been repeated requests.


Howard Charles Green: Is any provision being made to guard an empire air route that might traverse Canada?


Ian Alistair Mackenzie: Does my hon. friend mean the guarding of a civil aviation air route?


Howard Charles Green: I mean provision for an air force that could guard an air route across Canada. We hope some day to have an empire air route passing over Canada and we should surely provide some air defence for it.


Ian Alistair Mackenzie: I may tell my hon. friend frankly that that has not come before me as a matter of policy. I think, however, that the primary policy of any ministry of defence which may be in office must be with regard to the actual defence of our Canadian coasts, either for protection of neutrality or for any other necessary purpose. The matter suggested by the hon. gentleman has not come before me as one of policy.


Howard Charles Green: Apparently we have a very small air force. After all, we are a nation. Is there any reason why we should not build up an effective air force for defensive purposes?


Ian Alistair Mackenzie: The best answer I can make is that this year there is an increase of $1,000,000 for that purpose. My judgment is that we should have a reasonably modest but effective air force in the dominion.


[Stage Direction]
Item agreed to.

Supply-Dejcnee-Air Operations
Civil government air operations *-* for preventive service and other air operations, $408,300.
Howard Charles Green: What is meant by preventive service?


Ian Alistair Mackenzie: That has reference to the work done by the Royal Canadian Mounted Police in connection with customs duties, rum-running, smuggling and any operations of that sort.


Abraham Albert Heaps: Do these people come under the control of the mounted police or are they under the Department of National Defence?


Ian Alistair Mackenzie: The
actual operations are carried out by this branch of the Department of National Defence. Naturally requests come from various other departments; they estimate every year the necessities for the year and we proceed to carry out their requests as best we can.


Abraham Albert Heaps: What is the permanent number of airplanes employed by the department for this particular service?


Ian Alistair Mackenzie: If my memory is correct, it is twenty-nine out of a total of 173 employed more or less for civil government air operations. We have a departmental committee consisting of some of the deputy ministers dealing with one of these items, and every year they make a recommendation to whoever is the minister, as to the amount necessary for service in the north. For the present year $100,000 was their recommendation for aerial surveys and their advice is generally acted upon, because they review the necessities in regard to surveys in the northern countiy, and that item is carried under this particular vote.


Abraham Albert Heaps: What does my hon. friend mean by "surveys"?


Ian Alistair Mackenzie: Topographic surveys mostly.


Abraham Albert Heaps: Do the mounted police force undertake topographic surveys?


Ian Alistair Mackenzie: No. The Royal Canadian Mounted Police is only one of the five departments of government which use these surveys. Another is the Department of Indian Affairs. The Department of Public Works used them for the transportation of personnel surveying the otherwise inacces-ible portions of the northern country. As I say, I think these surveys are used by five departments of government. The Royal Canadian Mounted Police asked for $50,000 of this total vote.


Abraham Albert Heaps: Reverting to a certain extent to a previous item, may I ask the minister if he can give the committee the number of the personnel in the permanent force, the number in the non-permanent force, and the number of planes in both services?


Ian Alistair Mackenzie: The
Royal Canadian Air Force: in the permanent force, 147 officers, 884 men, total 1,031; in the non-permanent force, fifty-two officers and 289 men, or a total of 341. That is, as of the 31st March of the present year.


Abraham Albert Heaps: I understand that quite a large number of these men are not employed in aviation. They may be employed, for instance, in the stores, or what may be called ground work.


Ian Alistair Mackenzie: That is correct.


Abraham Albert Heaps: Could the minister give the committee the number of qualified airmen in the service of the government, both in the permanent, and the non-permanent forces?


Ian Alistair Mackenzie: Generally speaking, the greater part of the numbers mentioned by me in reply to the hon. member are qualified as airmen, although my hon. friend is correct in saying that some of them are employed in ground service. In fact most of the other ranks are so employed. The officers are thoroughly qualified, and from time to time the men employed in either sendee go through periods of training. Speaking generally, possibly two-thirds have some air qualifications.


Abraham Albert Heaps: Do I understand from what the minister said that two-thirds of the men referred to in the figures he gave a few moments ago are qualified air pilots?


Ian Alistair Mackenzie: Not
qualified air pilots, but they have had some flying experience. Probably fifty per cent would be a more reasonable estimate.


Howard Charles Green: Is any provision made in these estimates for the establishment of a transatlantic or transpacific air service?


Ian Alistair Mackenzie: That
comes up under the next item, civil aviation, and can be discussed then.


Grote Stirling: I think the inspectors
placed about Canada come under this vote, do they not?


Ian Alistair Mackenzie: Next
vote.


Grote Stirling: Not under civil government?
3174	COMMONS
Supply-Defence-Air Operations


Ian Alistair Mackenzie: No, they come under civil aviation.


Grote Stirling: I judge from the decrease in this item that the other departments have made smaller requests for the use of air service than in previous years: is that so?


Ian Alistair Mackenzie: That is correct in some cases.


Abraham Albert Heaps: May I turn for a moment
to another aspect of this question? I have no doubt that the government have in their employment, in the branch the estimates of which are now under consideration, quite a number of qualified and experienced pilots and quite a large number of what I would call good planes of a kind that can do long distance flying. Has it ever been under the consideration of the department whether, in conjunction with the post office, air mail services could be established under the vote that we are now considering?
Mr. MACKENZIE- (Vancouver): Of course that raises a definite question of policy. The experience of the country to the south of us has been very much against the suggestion of my hon. friend. I recall that some two years ago the United States endeavoured to establish the transportation of air mail by some of their government planes. The attempt was to some extent disastrous in its results, and as far a-s my knowledge goes it is not the intention of this government to establish such a service from directly government sources. The branch of civil aviation is being transferred from the Department of National Defence to the Department of Transport, thereby ensuring the essentially civil character of the civil aviation branch. This vote for civil government air operations is entirely civil, but the type of airplane used in many cases is a semi-military one. There is provision for four new planes in addition to the ones for purely air force purposes, and these four planes are cf a type to which my hon. friend for Vancouver South (Mr. Green) referred a few moments ago, a type easily convertible for military purposes. The four are costing, I think, $240,000; that is 860,000 apiece.


Abraham Albert Heaps: If I remember correctly,
conditions in the United States are entirely different from what we have in Canada. At the time an investigation took place in the United States with regard to the military branch of the government doing air mail work, there was already established a fairly substantial air mail service from other sources,

and it was a question of one competing with the other. I think the United States government, in its wisdom or otherwise, decided that the transportation of air mail in that country should be left to private concerns.


Ian Alistair Mackenzie: That is
correct.


Abraham Albert Heaps: In this dominion we are
in a wholly different position. Our physical layout is altogether different. We have practically no air mail service at all. When we send a letter by air mail to-day across the dominion, that letter has to go to the United States to be carried by their airplanes across the continent. If we post a letter in Ottawa to go to Vancouver by air mail, I assume it is sent there across the United States via Seattle. I wondered whether, as we have this military air service in Canada, greater use could not be made of it than is made at the present time. Of course, if conditions in this country were similar to those in the United States a couple of years ago, I could understand the contention of the Minister of National Defence having some justification,, but at this time we have no air mail service at all in Canada, and if we have airplanes that will serve us for long distance flying between one area and another, I wondered whether those airplanes could not be used in some practical way in addition to the use that is being made of them at the present time.


Ian Alistair Mackenzie: Of course the question raised by my hon. friend is a matter of policy not yet determined, so I cannot give him an immediate reply.


Abraham Albert Heaps: Would the minister state what he himself favours?


Ian Alistair Mackenzie: I believe in the principle of collective wisdom, so I would not care to venture an opinion.


Abraham Albert Heaps: Is the minister afraid of individual wisdom?


Ian Alistair Mackenzie: Never.


Grote Stirling: I do not know whether the minister remembers that when Canada was interesting herself in mail flying some years ago, this was done entirely by contract. If I may express an opinion at the moment, it is that if and when we do return to mail carriage by air, it should be under contract.


Ian Alistair Mackenzie: Hear, hear.


Grote Stirling: The minister has already referred to the fact that when the United States government took over the flying of mail

Supply-Defence-Civil Aviation
for a certain period, for a certain reason it was none too successful, and I do not think there is any reason to suppose it would be more successful in this country. As it is we are none too well supplied with planes, and I should not like to see the time of these planes taken up for mail flying purposes. When we reach the next item, it will be interesting indeed for the minister, as he probably will, to give the committee figures with regard to the amount of flying that is done now. A considerable number of commercial companies are ready and only too willing to fly if they can get the work to do. Contracts are being taken by them, and, particularly with regard to the north country, they are there ready to do the work, so that a very great service could be rendered to Canada as a flying nation by encouraging the work of these aviation companies, because of the use that, under certain eventualities, we can make of the men and the planes.


Ian Alistair Mackenzie: Of course my hon. friend will agree that the question whether air mail contracts are to be carried out by this service or by others will be a matter to be decided by the Post Office Department and the government generally, rather than a matter for the Department of National Defence.


[Stage Direction]
Item agreed to.
Civil aviation-expenses in connection with the control of civil aviation, airways, government and public airports and grants to aeroplane clubs, $1,262,800.
Grote Stirling: Would the minister
elaborate a little on this item? I remember that some weeks ago, in reply to the hon. member for Vancouver South, the minister stated his expectation that a trans-Canada route would be in operation this year. I wonder whether he would elaborate that statement.


Ian Alistair Mackenzie: Yes. In this vote will be found an increase, under airways and airports, amounting to $532,722 and a decrease, in other items, amounting to $21,286, making a net increase of $511,436. With this amount it is intended, during the present year, to complete, practically, the Canadian airways route from Winnipeg to Vancouver. That means the restoration of the facilities in five airports which were more or less closed down in 1932 and the completion of thirteen new airports, making eighteen in all, between Winnipeg and Vancouver. The estimated cost of completing the Canadian airways route between Winnipeg and Halifax is $2,314,500, of which amount over $1,000,000 would be required for the construction of new airways
and airports. So, by the end of the current year it is hoped that we shall have a modernly conditioned and equipped airway between Winnipeg and Vancouver, and it is reasonable to expect that the other portions will be proceeded with in due course.


Grote Stirling: Of the five plus thirteen airports to which my hon. friend refers, will they all have directional beacons?


Ian Alistair Mackenzie: Yes, all of them, it is understood.


Grote Stirling: Ready for night flying?


Ian Alistair Mackenzie: Yes.


Mr. MacNEIL:: This is one appropriation which, in my opinion should be increased, and I am sadly disappointed that more generous provision should be made for the military branch, and in my judgment at the expense of the civil aviation branch. I am particularly interested in the encouragement that is being given by the department to the flying clubs across Canada, as to whether they are being given proper opportunities to develop technical skill in aviation. It seems to me that the departmental policies at the present time are open to criticism, because they consider in too great a degree obsolete military traditions and do not give sufficient consideration to matters that will be of primary importance should we become involved in war. If, as the minister states, it is the wish of the people that we should have adequate defence for Canada in the event of war I suggest that public money should be voted and administered in such a way as to provide adequate defence. If we consider the requirements of modern warfare I think we may safely say that the first essential is young men of the physical stamina required in time of war and properly trained physically, and undoubtedly the second consideration under present conditions would be adequate technical training.
In neither of these respects does the department assume any definite responsibility. Viewing the matter solely as a problem of defence I feel that we are far behind other countries in the consideration of these questions. During recent years, even during the years of the depression, I feel that ample provision has been made to permit of suitable steps being taken in these matters. I directed an inquiry to the ministry, in reply to which a return was tabled by the Minister of National Defence, and in which I asked what purchases of aircraft had been made during the period from October 23, 1935, to the date of the inquiry; if such purchases had been made; what types were secured, and if tenders were called for in all instances. I notice that under

Supply-Defence-Civil Aviation
paragraph (d) the minister stated that from the Ottawa Car Manufacturing Company of this city the government purchased eight Avro Avian light aeroplanes, mark IV', powered with Genet engines, at $3,498 each, sales tax included. I wish to direct the attention of the minister to the fact that planes of this type wore condemned as obsolete many years ago. I must admit that, perhaps they are quite airworthy for the purpose of primary instruction, but I desire to point out that to supply equipment of this type to civil aviation clubs, under the regulations now existing, prevents the civil aviation clubs from modernizing their equipment for at least three years. I am open to correction if I am wrong in that.


Ian Alistair Mackenzie: I am
afraid my hon. friend is wrong.


Charles Grant MacNeil: I understand that if they
accept a machine now they cannot secure another one for a period of three years.


Ian Alistair Mackenzie: They
generally request a specific plane, and I think I am right in saying that in every case these particular machines were desired by clubs. That is the information given me by the officials of my department.


Charles Grant MacNeil: I would like to point out
to the minister that men in civil aviation clubs with whom I am acquainted desire most earnestly to secure a type of plane that will enable them to secure instruction in blind flying. These planes obviously are not suited for that purpose, and clubs which accept planes of this type will not have an opportunity to secure more modern equipment for at least three years, so in that way they are precluded from keeping abreast of the technical requirements of modern aviation.
I should also like some information from the minister with regard to the report which is in circulation, and which has been confirmed in some degree, that these planes were condemned as obsolete many years ago and that they were offered for sale in 1926, I think, at a price much lower than that which has been paid by the department.


Ian Alistair Mackenzie: With
reference to the last part of the question asked by my hon. friend, my information is that these planes were never condemned. Some of the worn out ones might have been condemned years ago but not because of any special scientific features of their construction. My information is that in every case the flying clubs, before the planes were supplied, were asked if they would be satisfied with this type of plane, and the answer was always in the affirmative.


Abraham Albert Heaps: How old are these planes?


Ian Alistair Mackenzie: I cannot tell my hon. friend.


Abraham Albert Heaps: The hon. member for Vancouver North (Mr. MacNeil) said that they were of the 1926 type. Is it true that they are ten years old?


Ian Alistair Mackenzie: I am
informed that the type is fairly old, but the age of the machine is an entirely different matter. These may be the 1926 type; I do not know, but the age of the machine is an entirely different matter. It is a model of a former year constructed more recently.


Abraham Albert Heaps: I do not know whether the hon. member for Vancouver North is correct, but he has stated that the same machines were offered for sale in 1926 at a lower price.


Ian Alistair Mackenzie: I could not speak as to that. I do not know.


Abraham Albert Heaps: Would the officials have that information?


Ian Alistair Mackenzie: My information is that they were built in 1928 or 1929.


Abraham Albert Heaps: Had they been in use before that?


Ian Alistair Mackenzie: No.


Abraham Albert Heaps: Nobody but the government wanted them?


Ian Alistair Mackenzie: I think the flying clubs wanted them; otherwise they would not have been obliged to take them.
Mr. MaeNEIL: I think it is common knowledge that these machines have been in stock at the Ottawa Car Manufacturing Company since 1928 or 1929. They were condemned because of obsolescence, and they are a very slow type of machine, quite out of date and certainly not acceptable in any sense to the British war office, though they may be air-worthy and suitable for the purpose of elementary instruction. I am also informed that when these machines were sold to the government the fabric, struts and wooden parts were in such a state of deterioration that it was necessary for the Ottawa Car Manufacturing Company to replace them completely. As a matter of fact not all the planes have yet been delivered because of inability to furnish parts. The machines are so obsolete that the company in England which manufactured them has been unable to supply these parts. I suggest that the greatest care should be exercised, particularly in regard to

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the fabric and the wooden struts, to see that no deterioration has set in which might jeopardize the lives of instructors or pupils. I think if the minister refers to journals published in the interest of civil aviation, he will find these very planes, that were in stock for some time, advertised some years ago at a price considerably lower than that paid by the government.


Ian Alistair Mackenzie: The information given me by my officials is quite different. These planes, before being placed in use, were overhauled, modernized and thoroughly inspected by competent inspectors. As far as I am concerned no representations were made to me by the Ottawa Car Company. I take my advice from officials of the department who are responsible and technically qualified in every way.


Abraham Albert Heaps: Have these planes all been
delivered?


Ian Alistair Mackenzie: I think
so.


Thomas Miller Bell: Is the statement correct that these same planes were offered for sale at lower prices several years ago?


Ian Alistair Mackenzie: I cannot say as to that because I was not in the department at that time. My information is that that is not the case, but I should not like to take the responsibility of stating that definitely, because I do not know.
Mr. CO'LDWELL:	I would not press the
minister to make that statement definitely now, but I would press him to look into the matter.


Ian Alistair Mackenzie: I will
do so.


Mr. CAMERON (Cape Breton):: I understood the minister to say that this expenditure is on the air route from Winnipeg to the west.


Ian Alistair Mackenzie: Yes.


John Charles Alexander Cameron: Entirely?


Ian Alistair Mackenzie: Yes, with possibly two exceptions. There are two improvements, one at Moncton, New Brunswick, and one at Dane, Ontario, in connection with this vote.


John Charles Alexander Cameron: Is any
provision being made for the proposed imperial air route?


Ian Alistair Mackenzie: This
makes no provision for that; it is a matter of policy to be decided. There was, as my hon. friend knows, a conference last November and December in reference to that whole matter.


Howard Charles Green: Is there any provision in
this estimate for the development of a transatlantic or transpacific air route?


Ian Alistair Mackenzie: There
will be a small provision for radio and meteorological service in connection with the development of the route from Newfoundland to Montreal. It was part of the provisional agreement reached here last December between the departmental heads of Canada, the Irish Free State and the United Kingdom, that such would be provided for by Canada. That will be in the supplementary estimates; I do not think it has yet been brought down.


Howard Charles Green: What is the present position in regard to a transatlantic air route?


Ian Alistair Mackenzie: A provisional agreement has been arrived at between the countries I have mentioned. There was a conference of officials in Ottawa followed by a conference in Washington in conjunction with the officials of the United States government. Imperial Airways are going to commence immediately experimental flights across the Atlantic; I think equipment and preparations are being completed for them. It is estimated that the preparatory work will take approximately a year and that flying on a commercial basis cannot be undertaken before the beginning of 1938, when it may be assumed that we may have our trans-Canada system completed.


Howard Charles Green: How many civil air clubs
are there now in Canada, and what is the position in regard to them? How does the government help them?


Ian Alistair Mackenzie: There
are twenty-two. A grant of $5,000 is made to the flying association. As regards the clubs the sum of $100 will be granted to each club in respect of each member who qualifies as a private pilot, and the sum of $4 per flying hour up to a maximum of forty hours for each member continuing his training and qualifying for a commercial pilot's certificate. These clubs have a total membership of 2,400.


Howard Charles Green: Has the department made
any move towards promoting research work in aviation? I understand that civil aviation



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is to be transferred to the new ministry of transport, but can the minister tell us what provision is made for research work in connection with civil aviation?


Ian Alistair Mackenzie: The
technical officers are continually in touch with all modem developments in flying not in this country only, but in other countries. The mere following up of what is being done nowadays is research work of the most extensive kind.


Howard Charles Green: Would that be under the
Department of National Defence?


Ian Alistair Mackenzie: The
technical officers will be with the Department of National Defence, but actual civil aviation will be under the department of transport.


Grote Stirling: How far has my hon.
friend got in negotiations with Newfoundland and developments there in connection with transatlantic flight?


Ian Alistair Mackenzie: A delegate from Newfoundland was present at the conference to which I referred and took part in the discussions, and naturally they are cooperating in every way in reference to the development of transatlantic flight.


Grote Stirling: Is land set apart in Newfoundland for the purpose?


Ian Alistair Mackenzie: I think
so; I think the matter has all been surveyed.


Ernest Edward Perley: Last year there
was a conference in Newfoundland. Has there been one in Canada since then?


Ian Alistair Mackenzie: Yes, last December, headed by Sir Donald Banks of the British civil service and several eminent aviation experts from the united kingdom, two delegates from Canada, one from Newfoundland, and three of our permanent officials They met here for about a week and drew up a provisional agreement which was to be ratified by various governments, and afterwards they went to Washington and consulted with the American officials with reference to cooperation with Pan-American Airways and Imperial Airways.


John Charles Alexander Cameron: Who was the representative from the Irish Free State?


Ian Alistair Mackenzie: There
were two. I regret that I cannot recall the names at the moment but I shall be glad to get them.


Mr. McCANN:: Is there any provision in this appropriation for an airport in the county of Renfrew?


Ian Alistair Mackenzie: I understand there is no provision for an airport; there is provision for intermediate landing fields only.


James Joseph McCann: Will there be further expenditure on the present airport at Killaloe?


Ian Alistair Mackenzie: I am
informed that will be completed.


James Joseph McCann: What is the amount likely to be expended upon it during the coming year?


Ian Alistair Mackenzie: It is difficult to assess that accurately for the reason that unemployment relief work on these projects is ceasing on July 1, and the work on that airport may have to be continued on a different basis.


James Joseph McCann: Has the property for a
landing field been purchased or expropriated?


Ian Alistair Mackenzie: I am
informed that it has been.


James Joseph McCann: Purchased or expropriated?


Ian Alistair Mackenzie: I cannot say which. I understand it has been acquired.


James Joseph McCann: When will that development take place?


Ian Alistair Mackenzie: Without
being too definite, during the course of the present year, I assume.
At six o'clock the committee took recess.
After Recess
The committee resumed at eight o'clock.


Mr. BARBER:: I wonder whether the
minister could give us some particulars about airports or emergency landing fields in British Columbia. There were several under construction last year, directly under this department, one at Hope and one at Boothroyd. I would also like the minister to deal with the Chilliwack airport.


Ian Alistair Mackenzie: I am quite familiar with the one at Chilliwack. There were certain difficulties in regard to that, with which I think my hon. friend is thoroughly familiar. A site was chosen by the former government I think, although I am not exactly sure about that, and certain difficulties arose with reference to the dyking charges. The whole situation was referred to the Department of Justice, which gave as a legal opinion that the virtual contract which

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had been entered into previously was not binding because the dyking charges in question had not been revealed by the owners of the property. No final determination has as yet been made in regard to that specific piece of property. The whole situation is quite open at the present moment, and the department is considering whether to accept the virtual contract that was entered into previously or whether to look for a new property in the vicinity of Chilliwack. I may say to my hon. friend that I shall be only too glad to receive from him any recommendations with reference to that site.


Harry James Barber: I think the minister will recollect that I have discussed the matter with him. Since the difficulty developed I had an interview with these people when I was at home at Easter and they advised me that they had informed the official, who came there at the time and took the particulars, that there was a dyking charge. Apparently the owners considered that the person who bought it would continue to pay the charges just as the person who buys a piece of agricultural property continues to pay the taxes on it. It developed later, after the option was drawn up, that the dyking charge was in the form of a capital charge of $50 an acre. The purchase price plus dyking charges is very reasonable for 160 acres. The property is at the present time used as a landing field. It requires very little to complete it, and $150 an acre is very reasonable if you compare that with the cost of some other landing fields.


Ian Alistair Mackenzie: I was just going to ask my hon. friend: Does he consider that with the added charges it is a reasonable price to pay for an airport?


Harry James Barber: I think anybody would say that it is a reasonable price in comparison with that of others which have been purchased. The field is almost as level as the floor of this chamber. There are five or six planes using it now. The unfortunate thing about the matter is that this land is owned by a farmer, and had it not been for this purchase being in contemplation he would have broken the land this year and put in a crop, but he has held it. We are in hopes that something will be done.
There is another point about this matter which the minister, coming from the coast, will quite understand. At the time of the fogs on the coast the fog drops down within ten or twelve miles west of this airport, which was selected by the civil aviation authorities when they went through selecting landing fields on a direct route to Vancouver. The fog at certain times is so thick that it is 12739-2031
impossible to drive or fly through it. The airmen strike the fog within ten or twelve miles west of this site which has been selected; when it is impossible to fly through they have to return to the landing field, and if this landing field were not there they would have to go back to Hope airport, about thirty miles further east; the landing fields are supposed to be thirty miles apart. I would strongly recommend the government to take over this airport which would cost very little to develop, and is being used by five or six airplanes to-day.


Ian Alistair Mackenzie: My hon. friend throws a new light on the situation. He states that the official of the department who was there was made familiar with these dyking charges. This is the first time that has been brought to my notice. In the option that was given at the time these dyking charges were not included. The whole question now is this: With these charges, is this a reasonable price for the airport? My hon. friend says that it is the best site available. The whole situation is absolutely open and the department will be glad to receive any recommendations. As I have already explained, the situation was, I was advised, that certain incidental liens or charges had not been disclosed by the owners, and when the matter was referred to the Justice department they declared that the contract was not valid.


Harry James Barber: I understand that. I have a copy of the letter. The option expired in January.


Ian Alistair Mackenzie: Yes, so I understand.


Harry James Barber: I just wish to repeat that this site was chosen, I believe, by the officials of the air force branch of the department at the coast. They went over the line and considered this landing field to be on the direct route, and a natural landing field requiring very little work, and situated favourably east of the line where the fog breaks. When a farmer sells land to another farmer or anybody else and quotes a price of $100 an acre, he naturally expects that the purchaser will continue to pay the taxes on it, and the owners of this property told the official that there was a dyking tax and a municipal tax. They never considered it a capital charge, and I would have thought that the official would go into a little more detail with the provincial government. I know the minister is deeply interested in this landing field. It was chosen, not by the previous government-and I had no say in the matter-but by the officials of the department who picked out these landing fields.

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Certainly the present situation is working a hardship on the men who own this landing field. They would have broken it up and put a crop in this year had it not been for this difficulty.


Grote Stirling: I should like to emphasize what my hon. friend from Fraser Valley (Mr. Barber) has just said. The minister was not quite accurate in saying that the late government selected this site. I remember the incident quite well. It came to my desk in the ordinary routine of recommendations.


Ian Alistair Mackenzie: That is what I meant to convey, of course.


Grote Stirling: I remember also in connection with it that the officials had been at some considerable trouble to find landing fields suitable from the point of view of position and also from the point of view of expense, because as the minister well knows that is a highly developed district, and it was not easy to get a piece of land suitable for the purpose, at a figure that the department could properly consider.
In connection with these airports to which the minister referred this afternoon, would he be good enough to give the committee the location of those west of Lethbridge and indicate which of them will have direction beacons?


Ian Alistair Mackenzie: I will start with the Winnipeg field. Then there is Forrest, Broadview, Regina, Calgary, Coleman, Lethbridge, Red Deer, Edmonton, Medicine Hat, Maple Creek, Swift Current, Vancouver headquarters, Vancouver, Hope, Princeton, Oliver, Grand Forks, Kitchener and Cranbrook.


Grote Stirling: Could we take up Grand Forks for a moment? This port has been something of a pioneer in flying in the southern boundary country. It has been used for a great many years in the development of flying. It has been used by passenger planes from the south; I can remember one which was on its way to Alaska. That is a typical example of these ports, and I should like to know what technical officers would be resident here and at the other ports.


Ian Alistair Mackenzie: Perhaps I could give the personnel for all the western districts and the expenditures contemplated. The figures are as follows:
	Per<*onnel	Expenditures
Calgary headquarters.	6	$17,400Calgary	2	14,370Coleman	3	34,980Lethbridge	5	14,140Red Deer	3	11,140Edmonton	2	14,340
[Mr. Barber. 1
Personnel Expenditures
Medicine Hat.. ..	.. 2	8,900Maple Creek. . ..	.. 3	12.160Swift Current.. ..	. 2	8,850Vancouver	headquarters.. ..	. 4	11,020Vancouver	. 5	52,780Hope	.. 2	16,400Princeton	.. 3	32.000Oliver	.. 2	17,800Grand Forks.. ..	.. 3	32,200Kitchener	. . 2	13,900Cranbrook	. . 2	14,100


Harry James Barber: Is that the total cost of the Hope airport?


Ian Alistair Mackenzie: That is the cost of special wireless equipment to be installed and other relevant changes.


Harry James Barber: Are any buildings to be erected there?


Ian Alistair Mackenzie: I think there is some clearing and other work to be done, but that will come under another item.


Harry James Barber: I understood hangars were to be erected.


Ian Alistair Mackenzie: I think there is some clearing and grading to be done under another vote. This is purely for wireless services.


Harry James Barber: I saw the field last Easter and I understood it was completed, but it was expected that some hangars would be constructed.


Ian Alistair Mackenzie: Whether that can be done immediately I could not say, but of course such buildings will probably be essential to later developments.


Harry James Barber: There will be some seeding needed and perhaps some cement runways. There is also the question of the emergency landing field at Boothroyd. Has the minister any particulars as to whether this is completed? This field is located just thirty miles east of Hope.


Ian Alistair Mackenzie: I have not that information before me at the moment.


Grote Stirling: Is the work on these emergency landing fields located between the regular air ports still being carried on under unemployment relief?


Ian Alistair Mackenzie: That work will be carried on under relief until July 1, and then the government must decide what policy must be adopted, whether the work will be carried on by day labour or by contract.

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Ernest Edward Perley: Is Broadview an emergency landing field?


Ian Alistair Mackenzie: Yes, an airport in the prairie district. The expenditure on wireless services at Broadview will be $8,710, and there will be a personnel of two.


Howard Charles Green: Is it the intention that the planes flying the trans-Canada airway are to be operated by the government or by private companies?


Ian Alistair Mackenzie: That will be a question of government policy to be determined.


Howard Charles Green: When may we expect a decision on that point? If private companies are to carry on this flying they will have to do considerable preparatory work. Apparently the western section of the airway is to be completed this fall.


Ian Alistair Mackenzie: That
question must be decided within the next month or two. First, equipment must be prepared for long distance flights and pilots must be trained if the government is going to undertake these flights. If private companies are to conduct the flights they should have at least six months' notice, in my judgment, to get properly equipped. However, this question has not yet been decided.


Howard Charles Green: That is to be decided within the next month?


Ian Alistair Mackenzie: I hope so.


William Kemble Esling: The minister went from
Grand Forks to Kitchener, and I take it for granted that Salmo field will be completed. There has already been expended upon this field something like $63,000, a larger amount than has been expended on almost any other field. I should like to ask the minister if the policy of this government is to be different from the policy of the former administration with reference to assistance to municipal air ports. There has been $63,000 expended on the Salmo airport and apparently it is not completed. The policy of the previous government with reference to assistance to municipal airports was to permit men to go from the relief camps to do this work. In the case of the Trail airport, this would have involved transportation of twelve miles both morning and evening as well as the erection of dining halls and other buildings. This would have cost the town far more than the assistance would have been worth.
I have referred already to the fact that Trail is entitled to more than ordinary recognition. This is practically the only field between Winnipeg and the coast where planes
can obtain repairs. More than $25,000 worth of repairs was made at this field last year. It is the only field between Winnipeg and the coast where radio service is available to the arctic circle or any other part of Canada for twenty-four hours in the day. This field is on the direct line of the airway as well as being on both the Great Northern and the Canadian Pacific railway lines. Actually there is more export mail leaving Trail than there is leaving any industrial point in the dominion. I hope the government can see its way clear to changing its policy in order to provide a more direct method of betterment for these municipal airports.


Ian Alistair Mackenzie: I agree absolutely with my hon. friend's reference to the progressiveness of Trail, not only in connection with the facilities provided for flying but in connection with the officials of the Consolidated Mining & Smelting company who have done so much in the way of pioneer work. One of their officials recently received the McKee trans-Canada trophy for the greatest success in flying in the dominion. With regard to assistance for municipal airports, my information is that direct contributions have never been made. My information also is that the former government offered assistance to the Trail airport as an unemployment relief project, but that offer was not favourably considered. Again I say that I agree with my hon. friend that there are no more progressive facilities provided in Canada than those at Trail.


William Kemble Esling: The proposal was to bring men from a relief camp some twelve or fourteen miles from Trail, and the town would have had to provide living quarters.


Mr. BEAUBIER:: There is a direction finding station ten miles north of Brandon at Forrest. It has not been operated recently. There is a civic airport at Brandon, located at the northern boundary of the city, and it has gone into receivership. The minister will have received a letter dated May 15, a copy of which I have, asking whether the government would consider taking over that airport. There are 187 acres as level as the floor of this chamber, with a hangar and a few other buildings, and that airport is well worth considering, for it is in the direct line of flight as you go west from Winnipeg. I should like to see it given some consideration.


Ian Alistair Mackenzie: My hon. friend is in the same position as the hon. member for Kootenay West. Brandon is just as progressive as Trail, but unfortunately is not on the direct route as laid out by the

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technical officers of the department. That route was laid out some time ago and was not under my auspices. However I can promise that every possible consideration will be given my hon. friend's representations.


David Wilson Beaubier: Do I understand that it is the intention of the department to change that direction finding station north of Brandon? It is in the direct line of flight, this airport being seven miles to the south.


Ian Alistair Mackenzie: That was not the intention, but I shall be glad to give the matter every possible consideration. A deviation of seven or eight miles in direction finding is material.


William Kemble Esling: Is it intended to finish the Trail landing field this year?


Ian Alistair Mackenzie: I am informed that it is an intermediate landing field, and as far as I am aware it is not the policy to consider it in any other light.


Ernest Edward Perley: Can the
minister give me some particulars with respect to Broadview, which is an emergency landing field with beacon lights? It is a level piece of ground.


Ian Alistair Mackenzie: In addition to what I have mentioned, there is $750 for grading to be done there.


Charles Grant MacNeil: Reverting to the discussion that took place before recess with regard to the purchase of aircraft equipment, I find in a return tabled by the minister that tenders were called for in connection with the following: two Fairchild machines; two Waco "S6" aircraft; one Stinson "SR-7B" aircraft. One Moth was purchased from de Havilland Aircraft Limited, Toronto; six fleet aircraft, from Fleet Aircraft of Canada Limited; eight Avro Avian planes from the Ottawa Car Manufacturing Company; two Fleet Trainor aircraft from Fleet Aircraft of Canada Limited and two Fairchild aircraft from Fairchild Aircraft of Canada. Why were not tenders called for in all instances for the purchase of new equipment, not including the purchase of secondhand equipment?


Ian Alistair Mackenzie: As regards airplanes, tenders are necessarily governed by the type of plane required, and the element of competition is not present in all cases. There might be one type of plane required for strictly military purposes, another type of plane for training purposes, which would be entirely different, and possibly a third type of plane for ordinary civil aviation

or transportation purposes. I was under the impression that tenders were called for in every case but I am advised that that is not so, but the prices of all types of aircraft are known in the department.


Charles Grant MacNeil: The fact that $4,130,000 has been voted for the Royal Canadian Air Force, an increase of 81,000,000 over last year's vote, and only $1,262,000 odd for civil aviation, an increase of only $511,406 over last year's vote, prompts me to make a few observations regarding what I consider a serious inconsistency. I find that during the years of depression this parliament has voted various sums exceeding in total $122,000,000, and it is interesting to contrast that with the contributions from the federal treasury for relief purposes, about which there has been so much criticism, amounting to $160,000,000. In my opinion all we have now as a result of that enormous expenditure by the department is what the officers of the force themselves describe as a bow and arrow army and a teakettle navy. As regards the aviation branch, something which is in the initial stage of development in Canada, I suggest that as far as possible we should avoid the mistakes which have been made in the past and see to it that this branch is not cluttered up with the obsolete traditions from which the military and naval branches have suffered in the past. We are asked again this year to vote, apart from the item now under consideration, some $25,000,000-and in that amount I include the votes for the various buildings and the votes made available for national defence through the supplementary estimates-all representing a substantial increase over the vote of last year. It seems to me that this should be subjected to the most rigid scrutiny. The minister has said that this appropriation is for purposes of defence, but I may say in this house-and my opinion is corroborated by many men with expert training in military matters-that this is simply a $25,000,000 cardboard front as far as defence purposes are concerned, a cardboard front behind which there operates to a large extent a social patronage racket.
When we come to aviation we find that civil aviation is sacrificed to the military branch, which is not competent to any degree to assume responsibility for the technical training of young men, and so far there has been no indication from the minister that the department is prepared to undertake technical training of the nature required. Surely any military expert will agree that under present conditions there is nothing more urgent than technical training, from the standpoint of defence, if the nation desires defence.

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In the various aviation clubs across Canada we have a very efficient organization. The young men associated in these clubs, the minister will agree, are making a notable contribution to the development of aviation in Canada. Much of the important research work which is necessary is being conducted under the auspices of this organization, and as far as I can discover it is the one agency by means of which young men may find some opportunity to secure technical training and to keep abreast of developments in aviation in the world to-day. They are eagerly and enthusiastically taking advantage of that opportunity as far as they are permitted. From my personal experience the majority of the instructors attached to the flying clubs are rendering the country admirable service and doing whatever is possible, under the serious handicaps from which they suffer, to promote aviation in the way in which it should be promoted having regard to the development of our country.
In connection with the purchase of equipment I wish to bring to the attention of the minister the fact that the general staff of the department who decide this matter are apparently palming off on our flying clubs equipment that is so obsolete that if they accept it at the present time, under the regulations, as I understand, for at least three years they cannot possibly secure access to modern equipment or obtain instruction in blind flying and in the latest aids to aerial navigation which are now being brought out. This is a policy radically different from that which has been sponsored by the British air ministry. Let me refer again to this particular purchase of equipment indicated in the return I mentioned previously. These planes are described in an article in the current issue of Cavalcade. The eight planes are Avro Avians with Genet-Major engines:
A type of light aeroplane that has not been built in Canada since 1929. Their motors are five cylinder 100-110 horsepower. Their speed is only 100 m.p.h. Their carrying capacity is 458 pounds.
Three years ago the last Mark IV Avians were washed out as obsolete by the Royal Canadian Air Force. This year the government of Canada has bought eight of the machines for issue to civilian flying clubs and paid $3,498 apiece for them. The Ottawa Car Manufacturing Company was the vendor. No tenders were asked. The Hon. T. P. Ahearn, who contributed substantially to t'he victory of Liberalism, is president of the Ottawa Car Manufacturing Company. I am not at the moment particularly interested in that angle, but I have before me an advertisement which appeared in the issue of
March, 1933, of Canadian Aviation, and in which these same Avro Avians, I understand, were advertised at "a new low price record." The advertisement reads:
The Avro Avian can now be purchased on the deferred payment plan and offers a saving to prospective aircraft owners never before equalled. Fifteen hundred dollars cash payment and you can own a new Avro Avian with Armstrong-Siddeley Genet-Major engine, 100110 h.p. The balance you "pay as you fly" in twelve monthly instalments of $140 each.
The advertisement goes on to say that these planes are "completely modified."
In every respect the purchaser of an Avian is the owner of one of the most up to date, Canadian-built, light aeroplanes suitable for training, sport and commercial use. Write for further particulars. Sole Canadian manufacturing and selling rights, Ottawa Car Manufacturing Co. Ltd., Ottawa, Canada.
The government paid the sum of $3,498. That, I submit, is not giving civil aviation the encouragement it deserves, particularly in view of the splendid record established in this branch by young men attached to flying clubs in this country. I feel that the government made a decidedly bad bargain. These machines were listed at a lower price in 1933 and intervening years. Surely they have not appreciated in value since that time. It is unquestionable that they are hopelessly outdated for purposes of aviation instruction at the present time; that they are obsolete from every point of view for such uses. Furthermore, the safety factor enters in, for if these machines have been in the stock of the Ottawa Car Manufacturing Company for seven, eight or nine years, having been purchased in the boom years when it was anticipated that there would be a remarkable development of aviation, it stands to reason that the wooden struts and the fabric in these machines must have deteriorated, and not even the most rigid inspection under the auspices of government inspectors can guarantee that they are airworthy for purposes of instruction. After all, machines used for these purposes stand considerable rough usage.
The point I particularly wish to stress is that these machines are obsolete, and in providing them for flying clubs-and there is no indication in the return tabled 'by the minister that anything but obsolete machines will be furnished to the flying clubs-the department is seriously handicapping this work. It is of little advantage to this country to vote large sums of money for the development of flying fields if the young men who are interested in the technical development of the industry are in this manner precluded from keeping abreast of modern technical requirements.

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Ian Alistair Mackenzie: I am
afraid my hon. friend has got some inadequate information with reference to this whole matter. There were some Avians purchased. I think eight planes were obtained, some Fleets, also some de Havillands.


Mr. BENNETT:: When were the eight
bought?


Ian Alistair Mackenzie: From
January 1, 1935, to February 15, 1936. I have the whole list before me.


Richard Bedford Bennett: But when were the
eight bought?


Ian Alistair Mackenzie: The
eight were bought on February 7, eight Arvo Avians with Genet-Major engines, at a cost of 126,400.


Richard Bedford Bennett: How much apiece?


Ian Alistair Mackenzie: That
would come to about $3,300 apiece.


Richard Bedford Bennett: The late government
refused to buy them.


Ian Alistair Mackenzie: That
may be so, but I want to tell my hon. friend (Mr. MacNeil) that these planes were absolutely asked for in every case by light airplane clubs before they were issued, and my hon. friend's information in regard to their being obsolete is incorrect. They were reequipped, reconditioned and then examined by the technical officers of the department and, in every instance, pronounced by them to be perfect for flying purposes. When my hon. friend says that these machines are not adequate for training purposes * he is not stating the facts. I cannot pit his judgment or my own against that of the inspectors of the department, who are qualified to pass upon such matters.
My hon. friend also said that civil aviation was being sacrificed to military aviation, and spoke about some other hon. gentleman's reference to a bow and arrow army and a teakettle navy. May I suggest that it does not help our situation in Canada for anyone to cast aspersions upon the nation's attempt to get something effective for the defence of this dominion. Some persons outside this house have made similar comments in various publications. I believe their intentions were honourable and sincere; that they were trying to mend matters, but to cast aspersions upon the adequacy of our forces is like trying to plunge a dagger in the back of this nation. As long as I am in charge of this department I am going to do the very best I can to fight for the dignity of the department and for its 
personnel in all three services, and I am going to strive as best I can, with my colleagues in this government, to see that the defence department of Canada gets a decent show in the next four years; that our navy gets a chance; that our air force get a chance, and that the personnel of our militia and our permanent force are also properly supported. I regret very much that my hon. friend thinks fit to cast continual aspersions upon the adequacy of the military aviation of this country. In our military aviation branch we have excellent men. In Canada we have men unsurpassed in the entire world. During the great war, as my hon. friend knows, Canada led the whole world on the battlefield; her soldiers blazed the name of Canada in immortal letters across the forefront of the world; and to-day some of them are still giving of their time, their knowledge and their enterprise to build up a creditable aviation service in this country. So I say that, no matter what our private opinions may be, we should strive to the best of our ability to support this work. There is nothing militaristic about it. We are trying to build up, not to tear down, aviation and in the naval and military branches, not for attacking purposes but purely for purposes of decent and honourable defence if an unfortunate necessity should ever arise. I must deny my hon. friend's suggestion that we are sacrificing civil aviation. For the first time in six or seven years we have increased very materially the vote for civil aviation. We are convinced that our policy is a progressive one, leading to the development of civil aviation and not sacrificing it for the sake of military aviation. I am surprised that my hon. friend, for whom I have a profound regard, should be continually making these attacks upon the defence forces of Canada, because I can tell him that every member of this government is as profoundly and sincerely attached to the processes of social reform and the advancement of the masses as he is. But at the same time this government is charged with the responsibility of looking after the defences of this nation, and so long as I am in charge of this department I am going to fight for the advancement and the maintenance of adequate defence forces in this dominion.


Frederick George Sanderson: Is the item carried?


Charles Grant MacNeil: No.


Major James William Coldwell: In the defence which has 'been -made by the minister, one point has not been explained. I have in my hand a copy of Canadian Aviation for March, 1933, and, as was stated by the hon. member for

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Vancouver North (Mr. MacNeil), these same planes were advertised on the basis of a cash payment of $1,500 and $140 a month for twelve months, making a total price of $3,180. Now we find, three years later, that the planes, with three years' deterioration, are bought by the government of Canada at three or four hundred dollars more. That is one point which has not been explained. It has been stated that had an offer been made last year they could have been obtained for less than the price advertised in 1933.
I listened to the minister's impassioned defence of the department, and I listened also with a good deal of interest to what my colleague in this comer of the house said. On no occasion did he attack the men under the department. He was attacking certain things in connection with the department that should be brought to the attention of the government and the members of this house. As one who is interested in civil aviation and who has done a good deal of flying, I want to say that in my opinion if Canada is to develop flying men-and flying women for that matter-the equipment used should be modern, up to date, and in the best possible condition.
The point I wish to make is this, that an explanation has not been given as to why the dominion government paid this amount for planes three years after they were advertised for sale at lower prices. And may I say that in the advertisement which I hold in my hand it is definitely stated that these machines will be thoroughly modified to suit any requirements. The question is why the government of Canada bought planes built in 1928 and paid considerably more than the price for which they could have been bought three years ago by private individuals, singly and on a time payment basis. That is the point.


Ian Alistair Mackenzie: The
answer is very simple: They were not the same planes. When completed, the planes were specially reconditioned, and therefore the price was different.


Charles Grant MacNeil: I admire the eloquence with which the minister has defended the department, and I appreciate just as sincerely as he does the necessity of dealing with this problem in a rational, sane way, always having in mind possible eventualities. But I pointed to the fact that during the years of the depression we spent in excess of $122,000,000 for national defence, and we had a right to demand efficient methods of defence. If the people of this country desire that the government should prepare for war, for heaven's sake let us prepare for war and let us expend this money in the most efficient manner possible.
I have no apology to offer to the minister for begrudging every nickel that is taken from the starving unemployed and devoted to the purpose of national defence, but I know that in Canada we do not enjoy a scheme of national defence which is commensurate with the millions that are being spent, or shall I say squandered, for that purpose in this country. While the understanding of the minister may be as he has expressed it in this chamber, I cannot help thinking that his opinion is based upon what he has been told by the general staff, from whom he must take advice. I believe there are many ex-service men in Canada who will join with me in expressing some lack of confidence in some members of that staff, in that they have a desire to build up an elaborate organization, and no doubt have some very plausible reasons for the necessity of such an establishment.
I realize that I am introducing a grave question, but I do so in sincerity. I will ask the minister to consider the possibility of Canada having to play her part in a world war to-morrow, in conflict with some of the great powers of the world. One of the first requirements would be to find young men physically well developed. The late Sir Arthur Currie made that point time and time again, and I am not casting aspersions on the personnel of the Department of National Defence when I say that the department, following out-dated traditions, is entirely disregarding its responsibilities in this connection. One has only to inspect the various parades of the militia units and see the hollow-chested youths who are in the ranks of these parades to realize that they are not given the physical training necessary to make them fit for the emergency which I hope we may avoid. Another and still more urgent consideration, under the mechanized conditions of modem warfare, is that the young men should have technical training. Bayonet practice, which is very largely the instruction they are getting in these elaborate barracks we are building here and there across the country and in the training camps, is not giving them the technical training necessary in order that we may have men who understand how to take down and reassemble all the elaborate mechanical equipment that will be employed in the war which apparently is looming before us. I am not casting aspersions on the personnel of the department when I say that in clinging to these old traditions they are not assuming any responsibility in this vital regard, and I ask the minister where, at the moment of emergency, for purposes of defence, will he find young men with the necessary technical training.

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I have no reverence for the halo of gold braid and red tabs that seems to hang around a military establishment, making it impossible for a layman to offer any sensible criticism. I have not forgotten the bitter experiences through which many of us went in 1914 and 1915 by reason of the ghastly and tragic mistakes made by the general staff, men who had occupied these comfortable offices for years and had not kept abreast of developments in military tactics. It is commonly stated that it was the man in the ranks, Tommy Atkins himself, who in a very practical way forced upon the attention of the general staff the fact that more practical methods were possible. If Heinie was in a hole over there and Tommy Atkins was in a hole over here he knew he could not reach Heinie with a bayonet, but if he filled a tin can with a little gun-cotton and a few rusty nails he could and did bomb Heinie out of that hole. So you can trace the development of these tactics to which the general staff was blind.
I am taking the minister on his own ground, that of national defence, and I am pointing out that the policy of the department as it has been conducted is not affording this country any reasonable assurance that for the money expended it is receiving adequate value in national defence. On my own responsibility I express the opinion that the present military establishment, because of the manner in which it is organized

with the non-permanent active militia split into some 443 units, for example-is not satisfactory. I say this criticism that has been offered by the president of the Canadian Infantry Association, for one, and by other men whose articles have recently appeared in Canadian periodicals, is justified because the mechanism is antiquated and could not possibly be equal to the emergency if we should be called upon to defend ourselves.
So I do not think the minister has any reason to take me to task for casting aspersions, nor do I think he has any right to suggest that I am stabbing Canada in the back when I criticize the existing system of national defence. I am quite as sincere and earnest about this matter as the minister is himself, and as a member of this house I think I have a perfect right to suggest that for this enormous expenditure, over $25,000,000 this year, the Canadian people have a right to demand full value by way of a defence organization.


Ian Alistair Mackenzie: I find
my hon. friend strangely inconsistent. He is now advocating what I announced a few days

ago as the policy of the Department of National Defence, the reorganization of the Canadian militia; that has been advocated by every defence association, infantry, artillery and the others in the Dominion of Canada. I find it difficult to understand the process of reasoning which criticizes a department that on the advice of specialists is trying to improve conditions, and at the same time moves to reduce the vote for that department by $1,000,000, as was done by the hon. gentleman in this house the other evening. Can anyone in this committee explain to me the logic of the reasoning of the hon. gentleman? He comes out now and says that he is in favour of a policy of mechanization and reorganization, a policy to which the department is pledged at the present time, but only a few days ago he voted to reduce the estimates of this department by $1,000,000, which would have crucified forever the militia forces of Canada. He was the gentleman who did that only the other afternoon in this house.
I want to explain to the committee, in regard to those who proffer advice to-day to this department, it does not matter whether it is under a Liberal or a Conservative government or even if it were Cooperative Commonwealth Federation government, that the technical officers of the department are as good as any men in the world. The specialists of the Department of National Defence are in touch with every process of military training in England and in every country in Europe. We are exchanging personnel with the very best equipped colleges in England. We know every process of mechanization, and the only reason we have not been able to carry out such processes in Canada is because we have not had the financial resources. Now we are trying to make a modest step forward, to improve conditions of mechanization and build up our defence forces; yet when we do that the very ones who would now reorganize them want to cut down the militia vote by one million dollars. That is the argument we hear. I tell my hon. friend that I have a great regard for him, but he is strangely inconsistent. He talks about hollow-chested youth and lack of physical training. Some of these hollowchested youths showed themselves the finest Canadians we ever had. Some of these men in the unemployment camps to-day have been members of our militia battalions in Vancouver and other cities for many years and I have a most profound regard for them. They carry out their duties as Canadians,

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doing the best they can under difficult circumstances. That is what they are doing, what the officers are doing, what the department is doing and what this government intends to carry on.


Grote Stirling: Although I sit on the
opposition side I should not like it to be thought that I in any way endorse the opinions expressed by the hon. member for Vancouver North (Mr. MacNeil). This is the third occasion on which I have heard him make statements which do not appear to me to be borne out by facts, and I speak with some little knowledge of the matter, having had the honour for a few months last year to occupy the position now occupied by the minister.


Ian Alistair Mackenzie: The hon. member did well, too.


Grote Stirling: The hon. member for
Vancouver North is, of course, entitled to his opinion. I have no doubt that in that opinion he may be supported by certain service men throughout Canada. You will always find that. But the charge that Canada has not received anything like the money's worth for what she has spent in the past few years is not, I think, true. It should never be forgotten that when the depression struck Canada, not only did it make it necessary for her to curtail expenditure, but she had to distribute most carefully the expenditure that she could make for such purposes as she deemed wise. In the Department of National Defence she naturally sought the advice and guidance of those technical officers in the department upon whom she had come to rely. As the minister has just pointed out, we are able to measure the ability and calibre of those permanent force officers by the fact that they are continually attending courses in Great Britain where they in turn are measured with the officers of the empire. We are satisfied, therefore, that the advice they give to the minister and the government of the day can well be followed. In those years of depression when the expenditures we were able to make were not nearly as much as we desired to make to keep the defence forces of Canada in the condition they should be kept in, we had to buy the technical apparatus required, and particularly to keep up in usable condition the properties dotted all over Canada in the various military districts. It was no easy matter to maintain buildings and structures throughout the dominion, and when the hon. member cites an expenditure of $25,000,000 this year he should remember that only a portion of that sum could go for the purpose of keeping our equipment up to date, because
a very considerable part of it has to go for maintenance, repairs, and replacement of structures such as barracks and the like.
The minister has made a spirited defence of his department. I think I can bear out all he has said with regard to the way in which the department is now run. We were oarrying on most of the things which he has continued on very much the same lines, and we shall watch the continuance of the minister if he carries on his department along those same lines.


Mr. HAMILTON:: In view of the remarks of the hon. member for Vancouver North (Mr. MacNeil) I feel it my duty to say a few words on this occasion. I happen to have been one of those who went overseas in the ranks of the Canadian forces and served as a sergeant for some time; I have some knowledge of the training of the first contingent on Salisbury plain and then on to the front. It has also been my privilege since the war to be in command of one of the regiments. While I respect very much the viewpoint of the hon. member for Vancouver North, and believe he is sincere in what he has said, yet I think it is hardly fair to call in question the splendid efforts that so many young men of Canada are making to-day in joining the militia. If the training they- are getting is not adequate to the day-and I think perhaps it is not-the minister has indicated the reason. I also think it strange that the hon. member for Vancouver North, in view of the attitude which is taken by those associated with him with reference to preparing for military defence, should question the present effort to bring our forces to such a measure of perfection as may be possible.
Remembering that the day may come when our Canadian youth may have to take part again in modern warfare, as they did in 1914, it is a serious matter to assume the responsibility of not making those men ready for that eventuality. It is easy to charge militarism, but I submit that there are few men who served in the front line overseas who are really possessed by any spirit of militarism in these matters. I unhesitatingly say that we owe an obligation to the youth of Canada to see that if the day ever comes that they again have to face the reality of actual warfare, they have officers and non-commissioned officers sufficiently trained that the men will not have to pay the penalty in physical suffering or with their lives for that lack of training. We owe it to youth to train them to understand the instruments of warfare which they may have to use. That cannot be learned in a day or a month. One of the essential things for fighting men is that degree of training
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which gives the discipline that holds when the moment of danger and strife comes, so that they then may act automatically, and be able to perform those things which without discipline they cannot perform. It is easy to say that this is advocating this, that and the other thing; I am not a member of the militia now, and have not been for some years, but in advocating this I do so with a view to the welfare of the boys themselves, because if the day of testing ever comes it will serve them well if they have some measure of preparedness and training in handling those instruments which they will have to handle and in conducting themselves in such a way as will save them under critical conditions.


[Stage Direction]
Item agreed to.
Richard Bedford Bennett: I just want to inquire whether a master general of the ordnance has been appointed, who has been appointed, under what circumstances, whether or not he had been gazetted for retirement, and why he was brought back.


Ian Alistair Mackenzie: I shall be very glad indeed to answer that question. The position of master general of ordnance was never abolished. It was vacated some years ago, and the duties of the office were divided between the quartermaster general and the chief of the general staff. Brigadier Caldwell, who is the present master general of the ordnance, was appointed on November 22, 1935, and by order in council the duties of that office were copied exactly word for word, I believe, from the duties of a similar office in the united kingdom.


Richard Bedford Bennett: But the office had expired in this country.


Ian Alistair Mackenzie: I will explain that. In the first place the office was never abolished.


Richard Bedford Bennett: The last appointment was when?


Ian Alistair Mackenzie: On
November 22, 1935.


Richard Bedford Bennett: And General Morrison-


Ian Alistair Mackenzie: I am coming to that. Appendix 6 of the King's Regulations and Orders, 1927, directs that the chief of the general staff and the quartermaster general shall perform the duties allotted to the master general of the ordnance, and then it says, "when the appointment is unfilled." Those words are in- quotation marks taken from the language of the order in council.
In appointments, promotions and retirements of November 19, 1934, Brigadier T. V.

Anderson was appointed quartermaster general vice Brigadier A. C. Caldwell, who vacates and proceeds on leave pending retirement to pension. Then the order in council says this "To draw pay and allowances to date of retirement to pension," and accordingly he was given ten months' leave of absence.
The situation is as follows: When I was entrusted with the responsibility of this department, I had some consultation with those who are responsible for the direction of policy. I found that in practically every other dominion of the empire they have taken steps to have what is termed in some countries a principal supply committee, a committee charged with the functions of surveying the industrial potentialities of the nation with reference to mobilization in case of trouble. While I agree with my right hon. friend that this position was not filled for several years, I considered that it was my duty to place the gentleman at duty. He was eminently qualified to survey the industrial potentialities of Canada, and to make a complete national industrial survey, and I am glad to say that substantial progress has already been made. His duties have been completely defined in an amendment to King's Regulations and Orders-


Richard Bedford Bennett: What date?


Ian Alistair Mackenzie: The duties are set forth in King's Regulations and Orders for the Canadian militia as amended by general order No. 12 of February 1, 1936. These are the duties as reclassified, following almost in toto, I am informed, the language of the appointment in Great Britain. In other words, the duties formerly carried out by the chief of the general staff and by the quartermaster general have been reassigned in this reclassification to the master general of the ordnance. My profound conviction is this, that there is nothing more necessary in the Dominion of Canada than the work which is being carried on in that office now. I found this-and I am certain that my predecessors found it also-that while the personnel of the militia, the air force, and the navy are splendid, the situation with reference to equipment is simply tragic. The duties of this officer are to survey the entire situation, the rifle situation, the situation with regard to all kinds of armament and all kinds of equipment, with reference to the necessity some day of the Dominion of Canada itself taking over the entire production of all equipment of arms in case there is national trouble, because I am a profound believer that private individuals and private firms should not be entrusted with the manufacture of armaments. I think some day Canada like other nations may be faced

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with that necessity, and the idea I had in mind in appointing the master general of the [DOT]ordnance was to survey the industrial field of Canada, and in a humble and unpretentious way to prepare for what may eventually be a dire necessity in this dominion.


Richard Bedford Bennett: I am afraid there is more heat than light in part of the minister's explanation.


Ian Alistair Mackenzie: No heat at all.


Richard Bedford Bennett: I ask now': What was the age of the gentleman? He was retired in November, 1934, and expressed himself as delighted with the treatment he had received. He was on pay and allowances for ten months during which he did not report for duty. He was on leave; he was not working from November, 1934, was it?


Ian Alistair Mackenzie: February 1, 1935.


Richard Bedford Bennett: From February 1, 1935. He went on leave and he had ten months leave with pay and allowances. What was his pay?


Ian Alistair Mackenzie: The same as now, $7,500 a year.


Richard Bedford Bennett: That included the allowances?


Ian Alistair Mackenzie: Yes;
everything.


Richard Bedford Bennett: So he was on $7,500 a year for ten months without having any work to do?


Ian Alistair Mackenzie: He was entitled to that.


Richard Bedford Bennett: Quite so. What was his age?


Ian Alistair Mackenzie: I think just nearing sixty-two, but I cannot say exactly.


Richard Bedford Bennett: I only point out that, after being on leave for ten months, he is now appointed to a position paying $7,500 a year after having had nine or ten months with pay and doing no work for it.


Ian Alistair Mackenzie: He was entitled to that.


Richard Bedford Bennett: He was gazetted for retirement; he was retired. The importance of this, Mr. Chairman, is because of the urgent necessity for economy which is urged by the government on several occasions. This gentleman was retired, I think it is fair to say,
partly at his own desire, and he got his leave for ten months, to which he was entitled under regulations, at his full salary of $7,500. His pension was fixed, settled and determined, and his name will be found in the gazette of I do not know what date, but some time in 1934, I think, and his leave began to run from February through March, April, May, June, July, August, September-


Ian Alistair Mackenzie: Pension would not be authorized until retirement was complete.


Richard Bedford Bennett: It is provided by regulations.


Ian Alistair Mackenzie: No.


Richard Bedford Bennett: Because if anything happens in the meantime you have to deal with it in another way. He had his pension provided under the law, towards which pension he had contributed like any other official, and then a few weeks before he would have gone out of office he is reappointed to this position. This creates a very strange precedent in this country. This man had accepted his retirement, was getting full pay and allowances for ten months, and would have gone on the pension list in a few weeks, and then he was appointed to an office that had not been filled for a period of nearly nine years. He was appointed in November, 1935, shortly after this government came into office, to the position of master general of the ordnance, a position that, according to my information, had not been filled since the late General Morrison died. Under such circumstances this involves a very strange departure from the ordinary rules that govern in cases of this kind, and raises the question of an official, once having been gazetted and accepted his leave-it is not as though he did not accept it-and having no work to do for nine months-


Ian Alistair Mackenzie: He had no alternative; he was retired.


Richard Bedford Bennett: He was quite satisfied to be retired. That is the story so far as I knew it at the time.


Ian Alistair Mackenzie: It is not quite the story, I am sorry to say.


Richard Bedford Bennett: Is it not just a case of political jobbery?
Mr.. MACKENZIE (Vancouver):	No,
absolutely.


Richard Bedford Bennett: I do not think there is any doubt of that in the mind of anyone who knows 'the story. The minister himself is not one who knows all about it.
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Ian Alistair Mackenzie: I must say I am. I accept absolute and complete responsibility for this appointment. I make this statement to this committee: Not a single soul made a recommendation to me with reference to Brigadier Caldwell. I submit I have kept away from partisan considerations in considering the estimates of the Department of National Defence because I think this is the one department which should be kept absolutely free of partisan considerations. I regret very much that my right hon. friend, who made such a noble and inspiring speech in London last night, should attribute political motives to a man who is just trying to reorganize a service and do the best he can. I believe the retirement of Brigadier Caldwell was a mistake. It was done without his consent, but that was not the reason I took him back. I took him back because I realized the necessity of the reorganization of the industrial resources branch and I take complete and sole responsibility for the appointment. As a matter of fact, I am certain I have rendered a service to the Dominion of Canada and possibly future development will prove that I am right.


Richard Bedford Bennett: I suppose there has never been a more disconcerting example of an injurious effect upon the service. Let me put to the minister what he would have said if he had been on this side of the house. Here is a man who was retired. He is gazetted as being retired. The order in council was passed in 1934 and he was entitled to ten months' full pay and allowances without service, having earned this. There is a change of government and the whole morale of the department is at once shot by this man being put back into a position which had been abolished since the death of General Morrison. That is the situation. What is more likely to have a serious effect upon the morale of that department? The minister says that I should not make these statements because I have an interest in these matters, but that is why I am making them. I cannot conceive of anything more calculated to make it at once apparent that the department is no longer being conducted on the basis of merit, but that it is being conducted on the basis of political pull.
Brigadier Caldwell's politics were well known. I am glad to hear the minister say that no one had anything to do with the appointment except himself because that places the responsibility where by law it belongs. This man received nine months' pay without doing anything for it, and I ask the minister: What is being done to offset such an example in the department? I say that the course pursued is injurious to the morale

of the department. At the same time we hear of a police magistrate, Mr. Jimmy Douglas, being removed from office in the Northwest Territories, in the interests of economy, and someone in the Department of the Interior is to discharge his duties. That was done in the interest of economy. If an industrial survey were desired, such a survey had been partly made by the Department of Trade and Commerce in the census.


Ian Alistair Mackenzie: Not of
this nature.


Richard Bedford Bennett: I know all about the
nature of this survey because it will be recalled that the United States undertook the same sort of inventory of their industrial resources. This matter has been brought to my attention by people in various parts of Canada. Has the money which this man got for no service at all been returned to the department? When he retires again will he be entitled to ten more months? He has had nine months so far without doing anything.


Ian Alistair Mackenzie: If he
retired to-morrow, of course it would be at the discretion of the minister to decide whether he was entitled to that.


Richard Bedford Bennett: The order in council provides for that?


Ian Alistair Mackenzie: That
would be at the discretion of the minister.


Richard Bedford Bennett: He had been a long time in the service, and mark you, this is the odd part: he does not add to his pension as he had completed the maximum term of service. Just think what an example this is to the militia of the country! The hon. gentleman made a plea a moment ago for support and I endeavoured to assure him, as the former minister did, of our great willingness to assist. I wonder whether the minister read the article attributed to his secretary as correspondent of the Vancouver Sun stating what the minister was going to do to the brass hats?


Ian Alistair Mackenzie: By
whom?


Richard Bedford Bennett: The present private
secretary of the minister, who was at one time the correspondent of the Vancouver Sun, Mr. Senior.


Ian Alistair Mackenzie: I think
that is incorrect; I think it was somebody else.

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Richard Bedford Bennett: I read the article. He
was the correspondent for the Vancouver Sun and he is now the minister's private secretary.


Ian Alistair Mackenzie: That is
correct, and a very good one.


Richard Bedford Bennett: About the time he
assumed office this article appeared in the Vancouver Sun.


Ian Alistair Mackenzie: He was
not the Ottawa correspondent of the Vancouver Sun.


Richard Bedford Bennett: He was here at one time doing special work.


Ian Alistair Mackenzie: I do
not think so.


Richard Bedford Bennett: Oh, yes, I saw him and
I saw his articles; do not make any mistake about that. I think if the minister will carry his mind back he will have no doubt about that. I wonder whether the minister saw that enlightening and inspiring article as to what he was going to do to the brass hats? The minister has been making a plea to-night for cooperation, but I think he should read that article which appeared in the Vancouver Sun from Ottawa, special, indicating what was going to happen to the brass hats about the time when, in the interests of this country, he appointed Brigadier Caldwell to this job which had not been filled for a long time. Brigadier Caldwell was over sixty-two years of age; he had served the maximum of time and had been gazetted as retired; he had received nine months' pay and allowances for not doing any work, and then he is appointed to this position paying $7,500. It is just this sort of thing that gives support to attacks such as that made to-night by the hon. member for Vancouver North (Mr. MacNeil). It is things like this that spread all over the country. I have met men in every walk of life, men here and in the far west as well, who knew of it. This is regarded as nothing better than political jobbery, having regard to Brigadier Caldwell's well known political views.
During the time he was half out and half in, so to speak, when he was no longer an employee in the narrow sense of the term, when he did not need to go to work because he was on leave of absence with full pay and allowances, he had no illusions as to his being once more a private citizen. I am sure if the hon. gentleman will inquire into the expressions of his opinion he will find that they were not entirely complimentary to those who for the moment happen to administer the government of the country. If an investigation were held and his opinions were challenged, I think it would be found that there is a section in the act that comes perilously near to endangering his whole position. This is something I mention to the minister because I cannot but think he suddenly acquired a knowledge of the details of the personnel of the department from October to the early part of November which was really amazing, considering the difficulties he expressed in getting a complete appreciation of other details of perhaps greater importance. I mention that merely in passing. I bring this to the attention of the minister because in several other matters economy has been the plea. It seems to have been forgotten in this particular case, as it was in the appointment of an assistant in the electoral office. I merely say to the minister that the general view of those acquainted with the facts is that this is a bit of political jobbery. He assures us that nothing but the highest of motives and an earnest desire to serve the state synchronized with the possibilities of Brigadier Caldwell being available for the job, and that this synchronization brought about his reappointment to a position that had not been filled for nearly ten years; and it is now to be filled by one whose peculiar qualities are that he had been retired on nine months' retiring allowance and full pay.
I congratulate the minister upon his loyal exposition of the reasons that brought about the result, but I cannot give him a very strong recommendation for the judgment he has exercised. For I think he would have no difficulty in selecting at least half a dozen -and I think I could name them to him- who would be more sprightly and would be better qualified to discharge the duties to which the hon. gentleman has referred. I only mention that, because I have no desire to do more than get the explanation on record. It is useful for many purposes, among them as showing how spasmodic the love of economy is and that, like lightning, it does not seem to strike often in the same place. An old gentleman who served in this house very faithfully and efficiently, and to whom the usual courtesies might be extended by those who find themselves in power, is retired, in the name of economy, as a stipendiary magistrate in the Northwest Territories, while a boy is retired from the radio service because his father was a violent partisan-all this in the interests of economy. There was not much economy about this appointment.


Ian Alistair Mackenzie: There will be in the end.
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James Shaver Woodsworth: Before we carry the last item, which has been held over, there are just a few general remarks I should like to make with regard to the Department of National Defence. My colleague from Vancouver North (Mr. MacNeil) has been charging obsolete equipment and obsolete methods, and I would go a little bit further than that and venture to suggest that war itself is an obsolete method of trying to settle international disputes. And for that reason, when these National Defence estimates are under consideration, we might at least once a year ask the more fundamental question as to what we are getting as a result of this enormous expenditure.
The minister has said that the policy of the department is not necessarily a policy that changes with a change of administration. That, I suggest, is really the trouble. We have inherited a military establishment and a theory of national defence and we have not stopped to examine the efficiency of that establishment or the soundness of the theory. In an article I read a short time ago in the Ottawa Journal, taken from the Financial Post, the writer states that the cost of the war has amounted to a grand total of $4,341,488,904. Now, that is the cost in dollars and cents, which, as the Minister of Finance confesses, is a major factor in our budgetary difficulties to-day; and none of us can estimate the cost in human wastage and the disorganization of society that has taken place.
Feeling this way some of us can hardly sit quietly year after year without at least uttering a protest against the continuance of a policy which is not bringing results. I know that some members of the house simply hurl at us the epithet "pacifist," and they think that this settles the matter. Well, I suppose it is easy for us to retort that they are militarists. But I do not know that this sort of thing gets us very far. I know we all want peace; that is taken for granted. But I suggest that we differ materially on the question as to how to attain peace, and under these circumstances those of us who have a theory other than that which is generally held by, I believe, the majority in this house, regard it as our duty to try to state our position.
We have heard it said to-night that there should be no party divisions in a matter of this kind. I suggest that in the days to come this matter of national defence, inextricably intertwined with the question of foreign policy, must become a political issue; there is no way out. Indeed, it should become a political issue because the people to-day are no longer united as to the efficiency of this method or attempted method of arriving at national
[Mr I. Mackenzie.)
security. We talk sometimes about fire protection. I can quite understand that it is all very well for us to come and talk about fire engines and ladders and hose and things of that sort; but if we are living in a city of jerrybuilt frame houses; if we have no proper wiring arrangements, no building inspection, it is manifest that though we maintain an efficient fire brigade and have finely equipped fire engines and all the rest of it, that will not prevent our city from burning down. We have to approach the matter in a far more scientific way. And so I want to ask this minister, as I have asked previous ministers, exactly what the policy of his department is.
The minister said not long ago at a meeting of the Canadian Artillery Association:
In my mind there are two cardinal and guiding principles to be borne in mind when establishing a system of national defence. First, we must have defence forces sufficient to control subversive elements from within, and secondly, to repel attacks from without.
The other day in making his statement of policy-and I commend him for having done this-he made no reference whatever to this point which he regarded as of primary importance, namely, to take care of the subversive elements from within. I am not going into that matter to-night, but I point out once more that if we give our people a decent chance we shall not need very many policemen and we shall not need any military organization. I state that as my belief and the belief of a large number of people whom I am trying to represent.
We are to repel attacks from without, we are told. I am sometimes accused of being an idealist, but to-night I should like for a few minutes to be very practical indeed. I would ask the minister and the house whether we expect any European country to attack us. Would Germany attack us? Would Italy attack us? I do not think for a moment that the great United States to the south of us, with its Monroe doctrine, would permit anything of the kind. You may say: Well, but you are simply depending upon another nation. I am not particularly concerned with what the implications of all that kind of thing may be, but I submit that if we are thinking about some foe from Europe we are putting up a hypothesis which has no basis in fact. Do we expect Japan to attack us from the oriental side? I would say that there are many other countries nearer at hand upon which Japan might cast envious eyes. And again, the United States, with its Monroe doctrine, would not suffer any invasion of the north American continent.

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Mr. REID:: Do not be so sure of that.


James Shaver Woodsworth: My hon. friend says "not so sure." I do not think so. I do not for a moment imagine that Japan would attack Canada.


Mr. McGREGOR:: There might be a "scrap of paper."


James Shaver Woodsworth: Quite so, and if a scrap of paper were involved I should like to know how that wonderful fleet we have is going to protect us. It is tommyrot to talk about a ship [DOT]or two standing against the fleet of Japan.


Mr. HARTIGAN:: We would have a few trained men, though.


James Shaver Woodsworth: I ask the minister whether we are prepared to defend ourselves against the Japanese fleet in the Pacific. What about the United States? Is the United States likely to attack us? I fancy United States financial interests have a great part of what is worth having in Canada, anyway, and they have secured it, not by means of military tactics but by way of financial penetration. But if they did want to attack us, does any sane man believe that we, with a small population of ten millions, could stand out against a population of 120 millions; that we, with this great army that we hear so much about, so splendidly equipped, would be able to hold out against the armies of the great republic to the south of us? The United States does not want to attack us; there is no doubt of that. Then against whom are we really arming? Are our defence forces to defend us against any possible enemy? Again I say, no. I think it was the minister who said the other day that we ought to have reasonable preparation for the defence of our country. Have we reasonable preparation to-day? I cannot think we have reasonable preparation whereby we can stand alone against any enemy that might attack us.
From another angle altogether than that which has been presented so far, I ask: Are we justified in spending these large amounts with the idea that they really give us security? The minister went on to say that we have certain League of Nations' commitments. I should like to know where we stand in that regard. I have asked the Prime Minister, and so far he has declined to tell the house what our commitments are, and whether or not there are any understandings.


Henry Sidney Hamilton: Does the hon. member want to start a war?


James Shaver Woodsworth: I think it is a most extraordinary position for the government to take. Mr. J. M. Macdonnell recently had a letter in the London Times, in which he suggests that Canadians might be divided roughly into three groups with regard to foreign policy: those who believe in isolation or security through their position on the north American continent; those who still maintain pretty much the attitude that most people had in 1914, that is that we are an integral part of the empire and must rush to the empire's assistance; and those who place some reliance, at least, upon the League of Nations or cling to the idea of collective security. If we in Canada are so divided, is it not about time that the Canadian people knew at least where the government stands on this matter? I think it is. Before we go on passing these estimates from year to year we should know whether we are to have any commitments under the League of Nations. I do not believe that the majority of the young men of to-day are willing to join an expeditionary force organized by the League of Nations and risk their lives in Ethiopia or in some part of Europe or Asia. We may have, the minister says, as one of our obligations certain imperial commitments.


Richard Bedford Bennett: He did not say that.


James Shaver Woodsworth: I think we ought to know from the government-


Richard Bedford Bennett: I did not understand the minister to say that.


Ian Alistair Mackenzie: No.


James Shaver Woodsworth: I have his words before me. I will look them up. He said that it might be necessary for us to send a force because of our position in the British empire.


Richard Bedford Bennett: About the British empire; that is another matter.


James Shaver Woodsworth: He said:
The defence of Canada is concerned with four possible developments. In the first place there is the defence of our own coasts; second, the defence of our neutrality in the event of war between other nations; third, the possibility, which I hope is a very remote one, of Canada being compelled at any time to dispatch an expeditionary force in order to fulfil her obligations under the terms of the covenant of the league, and in the fourth place the possible dispatch of an expeditionai-y force consequent upon any contingent developments in relation to our position in the British commonwealth.


Ian Alistair Mackenzie: There is no reference to our "imperial commitments."

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James Shaver Woodsworth: If the minister says that we have no commitments I am very glad indeed. If there are no formal commitments, at least he must have in mind certain obligations which we may have towards the British empire.


Ian Alistair Mackenzie: May I say that the only obligations as far as I am aware are those arrived at at the imperial conference in 1926, whereunder each dominion of the empire is responsible for its own defence.


Richard Bedford Bennett: And discussions by the general staffs.


Ian Alistair Mackenzie: That is correct.


James Shaver Woodsworth: 
Ian Alistair Mackenzie: Does my hon. friend say that he would follow South Africa with regard to a policy of defence?


James Shaver Woodsworth: No, I was not saying that. I said that I thought we should follow the policy of South Africa and claim the prerogative for Canada as to whether or not Canada should be at war.


Richard Bedford Bennett: So we do. We cannot send a single man out of this country without the consent of parliament.


James Shaver Woodsworth: I am quite well aware of that; I suppose that since the statute of Westminster was passed we have it entirely within our own hands as to whether or not we should send troops, but technically when Great Britain is at war Canada is at war. I think very few will deny that. I know I used to talk over that aspect of the situation with the late John S. Ewart, and many hon. members will recall Mr. Ewart's position in that regard. He seemed to think there might be a kind of personal union which might allow Great Britain to be at war while Canada 12739-204J
remained at peace, but as far as I can ascertain that position is not altogether maintained by some of our leading authorities in international law.
1 had not intended to take up this matter tonight, but since I have introduced it, I should like to mention one or two points along that line, from some notes I made some time ago. Since the passing of the statute of Westminster the dominion may make any laws it likes, regardless of whether they conflict with British laws or have effect outside the borders of Canada, provided only that they do not conflict with any limitations imposed by the British North America Act. The conduct of foreign relations, being a matter governed by royal prerogative and not by statute, was unaffected by the statute of Westminster. The governor general in Canada represents the king and exercises the royal prerogative by delegation for the purposes of the dominion government. His powers are set out in the letters patent and instructions which govern his office, to which have been added certain other powers by constitutional usage. The conduct of foreign relations, however, is not included in these powers. Every Canadian treaty above the level of a mere convention or trade treaty must be ratified personally by the king in London. To put the matter in a nutshell, Canada has now full control over her own legislation, but not full control over the executive functions of her government. What is needed is to round out her control over the executive function in the same way that the statute of Westminster rounded it out over the legislative function.
It has been suggested to me by some legal friends whom I have consulted that this might be done in one of two ways. In the first place new instructions might be issued to the governor general stating specifically that he had power to represent the king in every aspect of the domestic or external affairs of the dominion, such power to be exercised on the advice of his majesty's ministers in the dominion. In other words, Edward VIII might delegate the whole of the prerogative to the governor general instead of merely a portion, as at present. This simple act involves no legislation and no amendment of the British North America Act. At the same time it probably would be necessary to give the governor general a great seal to be affixed to all treaties and documents dealing with external affairs. Such a seal is now possessed by the governors general in both the Irish Free State and the Union of South Africa.


Richard Bedford Bennett: But not for use for those
purposes.
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James Shaver Woodsworth: It has not been used for those purposes but it might be so used.


Richard Bedford Bennett: No.
Mr, WOODSWORTH: There is another method. Since the passing of the statute of Westminster it is probably lawful for the parliament of Canada to pass a statute declaring that the royal prerogative over foreign affairs is vested in the governor general. The wide language used by the privy council in the case of British Coal Corporation v. The King, decided last summer, in which the dominion power to abolish appeals from Canadian courts in criminal matters was upheld, suggests, to use the words of Professor Berriedale Keith, in the Journal of Comparative Legislation, 1935, at page 274: -that any royal prerogatives in respect of a dominion may under suitable legislation be controlled by that dominion.
There is no logical reason why, if dominion legislation can abolish the prerogative right of appeal to the foot of the throne, it cannot also declare that all prerogative powers in regard to external affairs relating to the dominion are henceforth to be executed by the governor general on the advice of his Canadian ministers.
The only question that may arise is whether such a dominion statute might conflict with section 9 of the British North America Act which reads:
The executive government and authority of and over Canada is hereby declared to continue and be vested in the queen.


Richard Bedford Bennett: It would run contrary
to the preamble to the declaration of the statute of Westminster, too.


James Shaver Woodsworth: In view of the
element of uncertainty in regard to method 2 above it might be best to employ method 1, namely issuance of new instructions. H such instructions were requested by the dominion government it would be difficult if not unconstitutional for a British government to refuse to issue them.
In 1934 the Union of South Africa secured for herself precisely what Canada now lacks; in that year, by the Status of Union Act and the Royal Executive Functions and Seals Act, the union parliament declared that:
"The executive government of the union in regard to any aspect of its domestic or external affairs is vested in the king, acting on the advice of his ministers of state for the union, and may be administered by His Majesty in person or by the governor general as his representative;"
They provided the governor general with a great seal and a royal signet, and they added the following provision:

"6. (1) Whenever for any reason the king's signature to any instrument requiring the king's sign manual cannot be obtained or whenever the delay involved in obtaining the king's signature to any such instrument in the ordinary course would, in the opinion of the governor general in council, either frustrate the object thereof, or unduly retard the dispatch of public business, the governor general shall, subject to such instructions as may from time to time, in that behalf, be given by the king on the advice of his ministers of state for the union, execute and sign such instrument on behalf of His Majesty, and an instrument so executed and signed by the governor general and countersigned by one of the king's ministers of the union shall be of the same force and effect as an instrument signed by the king."
The proposed step would therefore place Canada on terms of complete constitutional equality, not only with Great Britain, but with her sister dominions of South Africa and the Irish Free State.
This proposal might perhaps better have been made on the more general question of external affairs. But I have ventured to deal with it to-night because I feel that the outstanding weak spot in our relationship with Great Britain is the fact that if Great Britain were involved in war we might automatically be regarded by other nations as being at war. Our shipping might be attacked. Conceivably the United States might undertake to invade Canada. That is highly improbable of course, but I speak of the constitutional aspect. In that case Canada would simply be a second Belgium. I remember a strong Conservative saying to me several years ago that if any such contingency arose the only thing for Canada to do would be immediately to declare her independence. This gentleman was not only a Conservative, but a very strong imperialist. However, I think he viewed things in a practical way. Now I do not think that situation is fair to Great Britain. If Great Britain became involved in a European war I do not think it would be fair for us at the very last moment to say: We are not going in; we will stay out. Therefore I suggest that the government might take some action along this line and make very sure that Canada would not be forced into such a position.
I come back to this: It seems to me that the minister, if not to-night, then on some occasion in the not distant future, and if not the Minister of National Defence, then the government through the Prime Minister, should state to us definitely just what we are prepared or expected to do in case of emergency. Is this country prepared to send an expeditionary force to the help of the mother-

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land? Is she prepared to go to the assistance of the League of Nations? I think we ought to know that.


Richard Bedford Bennett: She has said so.


James Shaver Woodsworth: Well, if she has said so I think we ought to have it stated by the government at this time.


Richard Bedford Bennett: It is in the covenant.


Samuel William Jacobs: Canada is a member of
the league.


Richard Bedford Bennett: We cannot be in and
out at the same time.


James Shaver Woodsworth: A great many
people at this time have declared that the league has failed and that Canada need not take her obligations seriously.


Richard Bedford Bennett: Oh, no.


James Shaver Woodsworth: Oh, yes. And if
that is so I submit that in all fairness we should say so.


Mr. GOLDING:: What is your position?


James Shaver Woodsworth: I am not concerned now with my own position, but I have no hesitation whatever in stating it in a general way. As far as the league is concerned I hope we shall have an opportunity of discussing it, and I say that the league has failed to this extent, in that it has followed up only certain parts of the covenant. Other parts of the covenant it has entirely neglected, and for that reason so far as I am concerned I do not propose simply to rush over to the military defence of the league when we have steadily refused to undertake to carry out our obligations under other clauses of the covenant. I think the whole treaty of Versailles needs to be revised, and the control of the league and even perhaps the formation of the league need to be fundamentally recast before it will assure for us the security and the peace for which it was designed.
In conclusion I say that we have no clear-cut obligations from the military standpoint which I think the large majority of Canadians are prepared to back up. If it comes to the defence of our own shores we alone are not in a position to hold off any and all comers. On the other hand, as I said at the beginning, I think we are secure in our position on this continent; my conviction is that we are a great deal safer without an army than with an army. That may be called a paradoxical statement; I do not think it is. Believing that from the bottom of my heart, I feel it my duty to put forward that point of view to-night. I think
military defence offers no guarantee of security to this country. I am as anxious for peace as anyone. [DOT] I hope no one will rise in his place and say that I am merely a wild idealist or that I am a coward because I oppose military expenditure. War is an obsolete method of securing peace and the sooner we begin to devise a better method and to carry our plans through at whatever cost may be involved, the better it will be for this country and for the world at large.


Charles Grant MacNeil: I may be risking the displeasure of the committee in prolonging the discussion, but I see no reason why we should not scrutinize the enormous expenditures of the Department of National Defence with the same care and exactitude as we examine comparable amounts voted for social service. The minister and other hon. members have accused me of inconsistency. I stated my reasons very clearly for moving a reduction of the vote for the non-permanent militia. I was not criticizing the personnel, or at the moment the necessity of some measure of national defence. I stated that I was protesting against wasteful and misdirected expenditure. I reiterate what I said before, that if we are paying for national defence we have a right to expect efficient national defence. Sir John French visited Canada and inspected the Canadian militia and he said something that has the same force to-day as when he uttered it in 1910. He said:
A sound system of organization is the cornerstone of all military efficiency.
Unless this is based on a correct appreciation of the characteristics of the country and the requirements of modern war-
I emphasize that phrase.
-waste of strength and resources will certainly result, and the people of the dominion will not get the best value for their money.
That is my point, practically the only point I made in this discussion, and one with which I am sure eminent men in military circles are bound to agree. But as my information has been challenged and it has been indicated that- it is not generally accepted, I submit to this committee some evidence from gentlemen who have made a careful study of the question. I refer to an article appearing in Maclean's magazine of May 15, entitled "Our Bow-and-Arrow Army" written by Lieutenant Colonel George A. Drew, well known to many hon members of this house. Colonel Drew says in part:
But in whatever light this expenditure be regarded, every Canadian is directly concerned with the results obtained, from the standpoint of national defence on the one hand and of national economy on the other.

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For some reason that is not easy to understand, succeeding ministers of national defence have shown a marked disinclination to take the public fully into their confidence in regard to the organization and efficiency of our national defence forces.
Again he says:
It is time for the Canadian public to awake to the fact that the Canadian defence forces are inefficiently organized, are badly equipped, and have very little opportunity for carrying out training that would fit them for modern conditions of warfare.
That is his statement and it confirms the judgment I expressed previously, that under our military organization the men get very little opportunity for that training. My remarks were opened with a plea that the opportunities which occur in civil aviation should be more fully develoyed by the department, but I feel that they are cramped at the present time by the appropriations made for the military branch.
I would refer to an article appearing in the current issue of Cavalcade by Mr. Thomas Wayling, himself an ex-service man, under the heading, "We are too fat to fight," and the subheading, "In the great war, fifty-three regiments; in hard times 263 regiments," and I advance this to show that I am on sound ground in questioning the manner in which this expenditure is made because Mr. Wayling brings forward conclusively the argument that for less money we might have greater efficiency in national defence and make good in some degree the deficiency which, I feel, exists to a marked extent in our social services, which are starved to provide for the wasteful expenditure in this regard. Mr. Wayling says in part:
By the present disposition of the forces the Canadian army is too fat to fight-is hampered by an ill-fitting uniform.
Look at the fighting record of the great war, when about the middle of hostilities the dominion had 4,452 officers and 104,251 other ranks in France; a compact fighting machine.
To-day Canada has 5,531 officers and 37,153 other ranks. The permanent force numbers 411 officers and 3,098 other ranks, the rest are non-permanent active militia.
In France, in the midst of the most desperate struggle, one officer to every twenty-four men. To-day one officer to every seven men.
Too many officers, not enough men.
The reason:	the bulky, obsolete, militia
system. Canada is too fat to fight; her military defence forces are scattered in innumerable units, the multitude of which is the army's chief weakness.
And chief source of wasteful expense.
The headquarters staff costs over $96,000 a year in pay and allowances. And there are eleven district headquarters. In pay and allowances these headquarters staffs, chiefly officers, cost $227,226 in 1933-34. They spent $10,892 on travelling expenses. Then we put on cadet services that cost us $142,000 annually. The non-permanent active militia salaries at [Mr. MacNeil.l
Ottawa totalled $25,339, the allowances to the active militia, $109,036, the annual drill cost, $1,181,468, the grants to associations, $93,183, the maintenance of military properties, $219,879, and salaries and wages, $340,926.
Canada had three divisions in the line and one in reserve in France with a reserve division in England. The Canadian corps included corps headquarters, four infantry divisions, and corps troops. Four infantry divisions means forty-eight battalions.
Then he gives a table of comparisons, then and now, as follows:
Then and now:
,	1918	1936Infantry units	
48	126Cavalry	
2	36Artillery	
3	101
The multiplicity of units is the adipose tissue on Canada's fighting forces. The units shown in 1918 were actual fighting units up to strength; the present units are skeleton.
Military commentators declare the war was won by subaltern and other ranks. These were numerically strongest in the war days. The subalterns who were the back-bone of the Canadian corps are now in the minority and the men are few.
We have major-generals, brigadiers and colonels and other senior ranks far in excess of the establishment based on rank and file.
Every separate military unit means a headquarters and senior officers-


Richard Bedford Bennett: May I ask the hon. gentleman: Does he regard Mr. Wayling as an authority upon anything?


Charles Grant MacNeil: On the facts.


Richard Bedford Bennett: Not even the facts.


Charles Grant MacNeil: They may be confirmed by reference to the auditor general's report.


Richard Bedford Bennett: Those are the figures of expenditure only in the auditor general's report.


Charles Grant MacNeil: Mr. Wayling's opinion, I submit, should be given weight, and his opinion as expressed in this article is upheld by many of those with military experience in Canada. He says:
Why should not Canada's military forces be stripped of all this surplus fat?
Given efficient cooperation and a sane, sensible policy they would build up out of the plethora of nondescript material, a small but workable service, creating one unified cohesive unit where half a dozen scratch battalions now exist.
Reorganization cannot long be delayed. There is too much overhead, too much waste. Parliament has time after time cut the military estimates but national defence has not cut its coat according to the diminishing pattern; rather has it snipped chunks off the larger pattern.
The military forces can be reorganized and the old traditions still retained.
I submit that there is conclusive evidence which may be gathered to show that this vast

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expenditure of public moneys could be directed into more useful channels fur purposes of defence and training.
I conclude my remarks with a further reference to an accusation levelled at me by the minister, suggesting that I failed in admiration and appreciation of the voluntary services rendered by the militia. Some reference was made to hollow-chested youths, to some extent, in the militia. I suggest to the minister that if he has this reverence and admiration for these young men which he professes, the department should recognize some responsibility for their nourishment, housing and physical stamina, so that they may be more effectively utilized for purposes of national defence and the general development of the nation.


Richard Bedford Bennett: Although the hour is
late there are some statements made by the hon. gentleman who has just taken his seat (Mr. MacNeil) that should not be permitted to remain on Hansard without at least some attention being paid to them. I can quite understand that the minister, having been held up by Mr. Wayling as a model of St. George about to engage in mortal combat with the dragon, might hesitate to controvert the declarations of Mr. Wayling, but I am sure that no member of this committee has a clearer appreciation of the unsoundness of the statement that has just been read than the member who has just taken his seat. To compare war conditions with militia conditions in Canada is an insult on the part of Mr. Wayling to the intelligence of the Canadian people. Just think for a moment what the position is. Why did the militia come into being? If one goes back to the days of Sir George Cartier, he will find the story of it. The Militia Act in essence was to extend to every part of Canada the opportunity for those who so desired to train and constitute a part of the active militia of the country, and that is the reason that it is scattered over every part of Canada.
Mr. Wayling suggests that in the war the regiments were at strength. Of course they were. That is the job of recruiting, the job ultimately of conscription, to maintain the units at strength. The reason the militia units are not at strength is obvious, and it may not be unattributable to just such discussions as have taken place in the house during the lastr few days, and to attacks such as that made by Mr. Wayling.
I put it to any member of this committee: What would you think if you were asked to compare the regiments of the Canadian army in France and England with the skeleton units that are scattered all over Canada, and then were asked to say that because there is only
a skeleton unit of the militia forces in this country at the present time, therefore there is too much fat in it, the militia, and it should be cleaned out and cut down to the number at full strength that existed during the war. No one but Mr. Wayling would possibly have made an argument such as that. A columnist who is paid by the column always does that because it has to be padded up with a semblance of fact, a semblance of a semblance of fact. It is made to appeal to every possible kind of prejudice and passion in those who take a certain view with respect to a matter of this kind.
Our militia goes back to the days of Cartier.
I believe he piloted the first Militia Act through this house. One section of that act has never been changed since the time it was put upon the statute books; that is the section with respect to the necessity of consultation by parliament before there could be any possible chance of Canada engaging in hostilities outside the defence of our own country. Why is it that we have a unit in Nova Scotia, another in New Brunswick and others in the different military districts throughout the country? Why have we one in Quebec? Why is it that on Sundays we get over the radio the music of the band under Captain Gagnon? Why is it that we have these military districts across Canada? Why is the minister, according to the daily press, establishing a new one here in Ottawa? This is done in order that in every section of Canada from the Atlantic to the Pacific there should exist the nucleus of some militia unit. It might be engineers; it might be artillery; it might be a machine gun corps; it might be a medical corps, it might be infantry or cavalry; they are all nuclei of units being maintained in the different sections.
Anyone who is familiar with the story of the enlistments in this country knows that the back-bone of all our efforts in 1914 was the militia. My hon. friend is so well informed that I would hesitate to express an opinion which would contravene his, but certainly the relations that existed between the efforts made under Lord Haldane to organize the territorials in England, which were so very successful, and the efforts made in this country were not wholly dissimilar. Certainly General Gwatkin, then Colonel Gwatkin, did an unostentatious service to this country. He remained in his office under protest when he desired to join his unit and go to France and Flanders. His work was of the first character and I can only say that when Mr. Wayling endeavours to compare non-comparable things he does a disservice to this country.

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I would not have dealt with this article of his had not a reputable member of this house given it a certain measure of responsibility by quoting from it as though it were entitled to some authority. As a matter of fact the figures are taken from the auditor general's report. There is no doubt that these expenditures were made. I repeat again that the reason we have militia units scattered across Canada at Calgary, Regina, Edmonton, Vancouver and throughout Ontario, Nova Scotia, Quebec and New Brunswick is to provide the nucleus of an organization which will accommodate the wishes and desires of those who are anxious to take up training, to take the oath and enlist under the colours. It is for this reason that we have a unit in Hull, as well as others here in Ottawa. No one suggests that these units are to be kept at strength. It is true that in some cities they are maintained at strength because they provide a congenial means for young men to get together to have gymnastics and other forms of training, but in a broad and general way if a unit is one-third strength, that is all that is expected. The minister probably knows what the average is, but I think in a general way it will be around thirty-three and a third to forty per cent. I repeat that such a unit provides the nucleus around which clusters the voluntary effort of our Canadian youth who desire to subscribe to the oath and offer themselves if needs be for the defence of their country.
I refer to this article because it is unfair to our fellow-Canadians who are offering themselves for the defence of their country.
I repeat that the whole policy of the territorials in Great Britain and our militia here is to maintain in every section of the country, even in the remotest, some skeleton organization that will permit of men enlisting for voluntary service. When that is understood is it not almost ungrateful of my hon. friend to give this article a degree of approval or approbation, an article that compares this condition with war conditions in France or Flanders? The mere statement is its own refutation. I take up the time of the committee because I think it is unfair that those who read this magazine-it has a circulation of 250,000 notwithstanding the great hardships it has endured and survived during the last five years-should have a misunderstanding of the real facts. A comparison of that kind is insulting to every person who understands facts.
There is one question which the minister has not cleared up to-night and in connection with which I should like to make some brief observations. This is with respect to the relations between our country and the other 
units of the British empire. In 1926 agreements were arrived at for the purpose, not of massing troops, but to make available to the different countries of the British empire information as to the best means of training or as to the type of armament that might be available or the best forms of mechanized effort that could be used. Communication of the information that came to the staff in Great Britain through their efforts was made to the staff in Canada, to the staff in Australia, to the small staff in New Zealand and to the staff in South Africa, so that in every part of this far-flung empire there might be the fullest possible information as to the latest development in the means of defence, in mechanized armament and in the use of the human element in the maintenance of the defences of the country. I understand that this has been going on steadily.
I happen to know, and those who are familiar with the literature of the day will recall, that the efforts made by Lord Haldane to develop a staff, based as he frankly said upon the German example, led to his being able, when he went back to the war office- this will be found in his autobiography and I daresay many hon. gentlemen have heard him say it himself-at the instance of Mr. Asquith, to call the appropriate official and ask him if any change had been made since he had last been there. When he found that no change had been made he was able to dispatch telegrams which brought about within a few hours the mobilization of what was known as the first expeditionary force, sometimes referred to as the Old Contemptibles.
My understanding is that that policy is maintained in this country so far as staff work is concerned. All information as to the use of mechanized armament together with the use of the human element is available to Canada in the fullest possible sense. There has been an exchange of views between the general staffs as to whether or not these matters could not be more publicly discussed, but the view of the general staff in Great Britain, as communicated to the staffs of the various overseas dominions, was that these were naturally confidential, and were communicated only for their guidance and assistance in matters of this kind.
The minister is carrying on the difficult work of endeavouring to modernize to the fullest possible extent, with a limited income, the defence forces of Canada. The late government was not possessed of sufficient money to enable it to do what it would have liked to do in that regard, and we said that financial conditions made this impossible. I am glad

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the minister has found it possible to expand his efforts. Just as they have forces in Norway and Sweden and even Denmark, and just as they have forces in Holland and in every country in the world, so there must be in this country the maintenance of some kind of force. I passed over to the minister a moment ago a volume just published by one of the leading pacifists in the English speaking world -using that word in the broad sense-the present Lord Davies, who in every part of the empire is known for his attitude on the question of peace. He points out that in the very nature of things force must be the concomitant of peace if you are to preserve peace, whether that force be a police force or force in any other form.
The minister referred' to what I said last evening. I was pointing out that by universal consent, the result of study from the earliest dawn of history until the present day, there must be a combination of two factors to secure the life of a nation. One is the power to maintain itself, to enact laws and to enforce their administration; the other is, of course, liberty. There is no conflict between the two; rather, they are interdependent, one upon the other. So far as this item is concerned, it contemplates only one thing, namely, the maintenance at as high a degree of efficiency as possible of a voluntary force, together with a limited number of permanent militia. The purpose of this-I repeat it-is to ensure our being in a position if needs be to have at our hand such equipment as would enable us adequately to defend our country and its institutions; whether the attack against them comes from without or from within, the law contemplates that force being available for either end. There need be no doubt about that; and because that is so I could not do anything other than avail myself of this opportunity to controvert the statements made in the article to which reference has been made, which I saw reproduced some years ago in other terms and now stated again by Mr. Wayling. I mention his name because it has been brought in and utilized by one of our members as authority for a statement to which, it is suggested, some attention should be paid. I do not think there is a member of this committee who, having heard it, does not realize how unfair it is to every man associated with the militia of the country to institute a comparison between a voluntary organization in peace time and the highly efficient, highly trained and full strength units that were maintained during the war.


Charles Grant MacNeil: The leader of the opposition has suggested that I have quoted a
statement containing facts which possibly do not coincide with my personal views. I may assure him that I am attempting to express the opinion of a very large body of men of military experience who are sincerely interested in the development of our defence equipment and who have not a very high opinion of its present status and efficiency. There may be differences of opinion. I have no doubt the leader of the opposition, when Prime Minister, carefully scrutinized the expenditures of this department and endeavoured to assure himself as far as possible of the efficiency of the force. I am not questioning that in the least. But in the very nature of the circumstances, it was necessary for him to base his opinion upon reports of the general staff, and I would suggest that when he has an opportunity he should examine the force from the other angle, accompanied by some impartial military expert, to see to what extent it is efficient to meet the requirements of the situation to-day.
Now, in all fairness to Mr. Wayling, whose article has been brought under question, and which I quoted only in part, which was hardly fair to him, I should point out that in one paragraph he says:
Why not eighty or eighty-five good, up-to-strength infantry regiments instead of one hundred and twenty-six struggling units?


Richard Bedford Bennett: Where would they be?


Charles Grant MacNeil: In Canada.
Take the famous old units and give them a real chance, absorbing the newer units and sharing the old traditions.
The point I am endeavouring to advance is that when I speak of the overhead and the bloated- condition of the force at the present time, and point to the fact that there are too many senior officers in ratio to subalterns and men in the ranks, I am trying to show that -the expenditure of this money, much of which is devoted to pay and allowances of senior officers, is not providing for .the actual training of the men concerned in the degree that is claimed by the staff of the Department of National Defence. That is the whole point, and again I say -that they are neglecting the technical training which is a vital requirement under the conditions of modem warfare.


Richard Bedford Bennett: I' wish to correct a misapprehension on the part of the hon. -member for Vancouver North. I was not reflecting for a moment on his sincerity, -but I did say that no one knew better than he, because he has risked his life on more than one battlefield, that it would be unfair to compare units engaged in hostilities in France and Flanders or in training in England with the skeleton

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units scattered throughout this country. I was not questioning his sincerity, because, knowing his reputation and history, one would not do that in any event. But when Mr. Wayling talks about eighty-five battalions, how would you get them together? The travelling expenses involved in taking them from one section to another would make this impossible. No one would think of organizing eighty-five battalions as a voluntary militia force. I should like the hon. member for Vancouver North to appreciate the principle of the whole act, namely, that there should be in this dominion a skeleton round which could be built to full strength the unification that might be necessitated. To compare the number of officers and men in war time with the number of men in the militia, remembering that every one of the men received pay and allowances during the war, and that these are volunteers who are receiving nothing, not even the whole of their uniforms-well, one sees that there is a real distinction between the two. I agree with what the hon. member has said as to the care with which these items have been scrutinized by successive governments, and every prime minister has always been fearful about these expenditures. But if you rely upon men of known knowledge and check up that information with what is done in other countries, you cannot be very far wrong in endeavouring to maintain the principle that though there cannot be centralized and consolidated units, in every part opportunity should be given for voluntary effort finding expression through the militia of the country.


Thomas Miller Bell: I wish to say a word, prompted by a remark which has been made by the leader of the opposition, and which from time to time has been made by various speakers throughout the country. It is this, that our military forces are required to defend our institutions under the state from attack from without or from within.


Richard Bedford Bennett: That is what the law is, I said.


Thomas Miller Bell: May I say that, in
emphasizing that particular feature of militia estimates, a great deal of colour is given to the propaganda which we hear from time to time that the economic and social changes which are coming will never be made in a constitutional manner and through our democratic institutions, but will be made through resort to force. I am opposed to the use of force to achieve an objective. I believe that in Canada, in common with other British countries, we maintain a civil police force for the maintenance of law and order. I also

believe that one of the reasons why Great Britain has been spared in these recent years the turmoil which has occurred in some other European countries is because the British people have always taken that particular attitude.


Richard Bedford Bennett: What about the general strike?


Major James William Coldwell: It is true that during the general strike in 1926 there was a military demonstration.


Richard Bedford Bennett: And naval.


Major James William Coldwell: And a naval demonstration. But may I add this: the good sense of the British people at that time overcame the dangers of that demonstration. For example, in the town of Plymouth, not far from where I was born, the soldiers and the sailors who were paraded arranged a football match, I believe, with those who were engaged in the general strike. I do not think that in any other country in the world that kind of thing could have happened. But in Britain, from time immemorial, people have believed that military forces were not to be used to suppress their fellow citizens who had legitimate grievances. If the excuse for military preparations is the preservation of our institutions, of course that is a different matter. But, as one who is fundamentally opposed to the use of force, particularly in connection with the making of necessary social and economic changes, I wish to point out to the committee that a great deal of colour is lent, by statements such as those to which I have referred, to the propaganda of those who believe, quite conscientiously, that force will ultimately be involved. I believe that if we want to maintain law and order we should rely upon a purely civil police force and not attribute that as a duty of the militia or of the military branch of the services.
One other thing. I desire to support my hon. friend from Vancouver North (Mr. Mac-Neil) in regard to the dissatisfaction which he says exists among a good many men connected with the militia, and to make this contrast. I have before me the figures expended in relief during six years of depression, amounting to about $162,000,000 prior to May a year ago, and I also have before me a statement of the amount spent on militia and defence from 1929 to 1936, amounting to $122,000,000. What do I find? That practically for every four dollars spent to relieve distress, some three dollars were spent in military preparedness. These are astounding figures. Though, as is sometimes said, Canada faces a grave situation on account of expenditures

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on behalf of the unemployed and to relieve distress, we make military expenditures involving sums of money almost as large, even in these years of depression, as we make to relieve distress. I am in agreement with my hon. friend from Winnipeg North Centre (Mr. Woodsworth) that Canada's best defence at the present time is its defencelessness. I am not going to develop that thought, but in my opinion a country the size of Canada, with its diverse peoples and small population, is best defended if we rely upon our weakness physically and our goodwill as a good world neighbour, rather than attempt to ape the military powers of the European countries.


[Stage Direction]
Item agreed to.
Progress reported.

[Stage Direction]
Hon. CHARLES A. DUNNING (Minister of Finance) moved for leave to introduce Bill No. 75, to amend the Income War Tax Act.
Motion agreed to and bill read the first time.

[Stage Direction]
Hon. CHARLES A. DUNNING (Minister of Finance) moved for leave to introduce Bill No. 76, to amend the Special War Revenue Act.
Motion agreed to and bill read the first time.

[Stage Direction]
Hon. CHARLES A. DUNNING (Minister of Finance) moved for leave to introduce Bill No. 77, to amend the Excise Act, 1934.
Motion agreed to and bill read the first time.
Richard Bedford Bennett: Is the tariff act through?


Charles Avery Dunning: It is through.



CANADIAN AND BRITISH INSURANCE COMPANIES ACT, 1932

[Stage Direction]
Hon. CHARLES A. DUNNING (Minister of Finance) moved the second reading of Bill No. 61, to amend the Canadian and British Insurance Companies Act, 1932.
Motion agreed to, bill read the second time, and the house went into Committee thereon, Mr. Sanderson in the chair.
On section 1-Application to companies incorporated after 4th May, 1910.
Charles Avery Dunning: The only amendment is the inclusion of the words "except as hereinafter otherwise provided" in both subsections.


[Stage Direction]
Section agreed to.
On section 2-Retroactive subsection.
Richard Bedford Bennett: I have some little
doubt about this part of the bill. It is an exceptional exercise of power, as I pointed out the other day, to have parliament declare that a certain act has been in force since 1910. I can understand difficulties in connection with a particular session, that the date should relate back to the opening of the session or something like that, but I must say that I think this section goes-


Charles Avery Dunning: Very far.


Richard Bedford Bennett: Yes, and further than I would care to go. If the minister has made up his mind that this is a proper exercise of power I am not going to say anything further about it, but these words seem to go very far:
Every special act of the parliament of Canada passed after the 4th day of May, 1910, for the incorporation of a company ... shall be read as if it contained the provisions hereinafter in this section set forth....
That is, in the creation of a company it is said that since that date these provisions have applied. That seems to me to be most unfair. To say that it applies from to-day is simple, but to say that a corporation created in 1911 should have attached to it and to its officers responsibilities which then were non-existent from the standpoint of legislation is going a very long distance. Perhaps the minister might state the necessity for this. The note of explanation is not quite clear.


Charles Avery Dunning: It is not really complete.


Richard Bedford Bennett: It is good as far as it
goes, but I should like to know just what pressing necessity brings about a request that parliament should exercise a power so extraordinary. It is going back twenty-six years.


Charles Avery Dunning: I must say that I had
the same view when I first read this section; I held my breath and wondered at our learned brethren in another place proposing such a thing, but the explanation helps to some extent, in that the retroactive amendment in respect of companies incorporated since 1910 makes effective the provisions intended to be incorporated by references in the special acts of incorporation. All such companies have been incorporated under a model form of bill varied, however, in many cases to suit special circumstances affecting the company. The section of the act providing for the model bill did not contemplate am

Canadian and British Insurance
variations therefrom, and in the opinion of the parliamentary counsel of the senate the variations introduced in some special acts may have the effect of depriving the companies of the benefit of certain provisions of the act essential for the organization of the companies. The essential portion of the amendment is the insertion in section 5 of the act of the words, referring to the model bill, or in that form varied as such special act shall provide." Far be it from me to quarrel with the opinion of the parliamentary counsel of the senate that this retroactive amendment, so far from being restrictive, really removes doubts as to the powers of companies.


Richard Bedford Bennett: Yes, but the other side of the question is the phase in which I was interested, the imposition of responsibilities.


Charles Avery Dunning: Yes, but of course in that connection we must take into account the words "or in that form varied as such special act shall provide."


Richard Bedford Bennett: In view of what the minister has said I can only repeat that this is a most extraordinary power.


Charles Avery Dunning: It is.


Richard Bedford Bennett: The argument the minister has presented to the committee is perfectly sound. That is, if a company was compelled to be incorporated in accordance with the model bill, and was incorporated not in accordance with the terms of the model bill, it might well be, having regard to the language used, that if that company attempted to exercise powers other than those contained in the model bill there would be some difficulty. But the answer is that parliament is omnipotent, and parliament has seen fit in special cases to clothe companies with powers other than those mentioned in the model bill. It must be taken that parliament is at least fairly sensible in the exercise of its duties, so these words must be read in accordance with what has been said, as a first canon of construction, so as to give common sense to the general terms that were used. I appeal to my hon. friend the Postmaster General (Mr. Elliott), toho, according to report, is so soon to grace the judiciary; I am sure he will agree with me that parliament must be taken to express consistently a common sense view of the legislation. Here you have an act not strictly in accordance with the model act. Parliament passed that act, presumably with its eyes open.


Charles Avery Dunning: Of course the words "or in that form varied as such special act shall provide" would come in there.


Richard Bedford Bennett: Those are the new added words, and that is said to be retroactive for twenty-six years.


Charles Avery Dunning: Yes. The opinion of the parliamentary counsel of the senate is that they make certain that the special act shall apply.


Richard Bedford Bennett: Quite so. I just put this case, and then I will not take up further time. If parliament saw fit to create by special act a company, and the powers conferred upon that company were less or more than those named in the model bill governing such companies, now to go back over a period of twenty-six years and say that the company shall be governed by the provisions of this act hereinafter mentioned is to do a most extraordinary thing. If the minister who is charged under the statute with responsibility for the administration of the insurance act thinks it is desirable, however, I am not going to labour the point at all.


Charles Avery Dunning: I asked precisely the
questions my right hon. friend has indicated, particularly from the point of view of retroactive legislation. Of course I was especially careful to ask if any institution could be prejudicially affected and the answer given to me was that the insurance companies were represented before the banking and commerce committee of the senate by an eminent counsel, in the person of Hon. N. W. Rowell, I believe, and that this was not questioned there by any of the companies. In fact I was assured that some of them asked for it, although I do not know why.


[Stage Direction]
Section agreed to.
On section 3-Annual meeting to be at the head office.
Charles Avery Dunning: This is just relating one
section to another.


[Stage Direction]
Section agreed to.
On section 4-Approval of bylaws by treasury board.
Richard Bedford Bennett: The approval of bylaws
by the treasury board has been in force since the passing of the last insurance act some few years ago.


Charles Avery Dunning: Yes.
Mr. BENNETT.:	Although we did this
I always doubted the advisability of it.


Charles Avery Dunning: The value lies, I think,
in a report from the superintendent of insurance, with respect to such bylaws, to the treasury board.

Canadian and British Insurance


Richard Bedford Bennett: The point was not that. Ultimately the report of the treasury board goes to the governor in council. Just what point there is in putting the superintendent of insurance in between, I could never quite understand, because it is not like the administration of the treasury in the old country, where the treasury board stands for something entirely different from the one here. I suppose this is merely to connect the two sections.


Charles Avery Dunning: That is all.


[Stage Direction]
Section agreed to.
On section 5-Lending funds.
Charles Avery Dunning: Section 5 is for the purpose of making sure that the limits imposed by section 60 of the act on the investment in common stocks may not be effectively doubled by loans on such stocks, in addition to the amounts permitted to be invested therein.


Richard Bedford Bennett: That is at the instance of the superintendent of insurance?


Charles Avery Dunning: Yes.


[Stage Direction]
Section agreed to.
On section 6-Power to invest in stock of other insurance companies.
Charles Avery Dunning: Section 6 simply contains the amendment contained in subsection 1 of the next preceding section.


Richard Bedford Bennett: I do not think we should pass this one.


Charles Avery Dunning: Section 60 imposes two limitations on investment in common stocks. The first limitation is that common stocks to be eligible for investment must have paid dividends of at least four per cent per annum or $4 per share per annum for seven years next preceding the date of investment, and that the investment in the stocks of any corporation shall not exceed thirty per cent of the total stocks issued. The limitations in this subsection have been in force since 1910.
The second limitation is contained in subsection 6 of section 60, and limits the percentage of the assets of any company which may be invested in common stocks to fifteen per cent. This limitation was first proposed in 1932.


Richard Bedford Bennett: We did it because of a specific case.


Charles Avery Dunning: In the amendment of 1927 the limitation contained in subsection 1 of section 60 was overridden by an amendment to section 61 of the act to permit companies
other than life insurance companies to invest a certain portion of their funds in the common stocks of other insurance companies, even if those stocks did not comply, as to dividends or as to the percentage of the total stocks invested in, with subsection 1 of section 60.
. The limitation now contained in section 6 of subsection 60 had not then been enacted, and therefore section 61 overrode all of section 60.
With the introduction in 1932 of the limitation now contained in subsection 6 of section 60, section 61 should have been amended to make it clear that subsection 6 was not also overridden by the amendment of 1927 to section 61. This, however, was not done, and the amendment now made by section 6 of the bill is to make it clear that section 61 overrides only subsection 1 of section 60 and not subsection 6 of section 60 as well.


Richard Bedford Bennett: Putting it shortly, the . minister might have said that it simply provides that "notwithstanding anything herein contained an insurance company other than a life insurance company can buy shares in any other insurance company regardless of whether they have been paying dividends continuously or not."


Charles Avery Dunning: Other than a life company.


Richard Bedford Bennett: Yes, this does not touch a life company. If it did I would have no doubt that my duty is to oppose it. Having regard to the constant complaints that are being made about the centralization of power in the hands of a few, which often are wholly unsound, this does lend itself to support that argument, because it enables a fire insurance company or any other form of insurance company other than a life insurance company to acquire shares in any other kind of insurance company, life insurance or otherwise, notwithstanding the fact that it may not have paid dividends during the prescribed time.


Charles Avery Dunning: My right hon. friend appreciates that there is no intention of changing what has been the law.


Richard Bedford Bennett: But as a matter of fact, as the law stands now, they cannot do it.


Charles Avery Dunning: Is it not rather a matter of doubt?


Richard Bedford Bennett: I would hardly put it in that way. I think parliament intended, judging from its temper at the time it passed the law, that they should not do it. I do not say that with any certainty. In 1932 I personally had to do with the matter; in 1934 the then Minister of Finance was dealing with it.
3206	COMMONS
Canadian and British Insurance


Charles Avery Dunning: I am quite willing to leave the bill in committee on that.


Richard Bedford Bennett: Is that the last clause?


Charles Avery Dunning: No; there are several more, but we have passed the controversial ones. I do not want to press something which should be given further consideration. Perhaps it would be well for me to confer further with the superintendent of insurance on that matter, although I am fairly clear what his object is.


Richard Bedford Bennett: I put this to the minister: A large and powerful fire insurance company knows that a life insurance company has not been paying dividends during the last few years, and that it has really been in some difficulty having regard to the great decrease in values of common stocks, so it conceives the happy plan of acquiring control of that enterprise. Under this section it could do so.


Charles Avery Dunning: That is, a fire insurance company could.


Richard Bedford Bennett: A fire insurance company could acquire control of a life insurance company. As the law stands to-day, it could not do so. When this bill passes it would be possible for it to do so.


Charles Avery Dunning: That was not my impression, but I should like to consult the legal authorities.


Richard Bedford Bennett: Mark you, a life insurance company could not do it, but a fire insurance company could acquire the shares of a life insurance company.


Charles Avery Dunning: We might rise and report progress and ask leave to sit again on this bill.
Progress reported.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Friday, May 29, 1936