1938-06-16

Right Hon. W. L. MACKENZIE KING (Prime Minister):: Mr. Speaker, I beg to lay on the table copies of order in council P.C. 1367 approving the report of the Minister of Justice (Mr. Lapointe) to His Excellency the Governor General in Council respecting certain measures enacted by the legislature of Alberta; and of order in council P.C. 1368 disallowing an act of the Alberta legislature for the security of home owners and an act to impose a tax on certain securities in the year 1938.
I had hoped if possible to table these orders in council before the house adjourned yesterday, but as the signature of His Excellency the Governor General had not been affixed until a minute or two after six o'clock, it was not possible to do so.



PRIVATE BILLS


[Stage Direction]
Bill No. 155, for the relief of Stella Maud Lash Dawes.-Mr. Lawson.
Bill No. 156, for the relief of Elizabeth Dubnitslcy, otherwise known as Elizabeth Dubney.-Mr. Lennard.
Bill No. 157, for the relief of Harry Roth. -Mr. Jacobs.


[Stage Direction]
On the orders of the day:
Mr. H. G. CLARKE (Rosedale):: Mr. Speaker, I should like to direct a question to the Minister of Transport (Mr. Howe) in connection with a question I directed to him about ten days ago with respect to the transfer of wheel shops from Toronto to London. I have in my hand a letter from the secretary of the International Association of Machinists, stating distinctly that he understands there are twelve cars of defective wheels, four cars of new wheel blanks and three cars of axles rebilled to London from Toronto. Would the minister give me information in reference to the matter, because it is indicated that the work was being taken from Toronto and sent to London?


Hon. C. D. HOWE (Minister of Transport):: Mr. Speaker, I referred the questions asked in the house to the management, and was advised by them there was no work being transferred from Toronto to any other place. It is simply a case of an oversupply of products in the Toronto shops, and the work is suspended until the oversupply is used.



VALIDITY OF ALBERTA STATUTES


[Stage Direction]
On the orders of the day:
Mr. A. H. MITCHELL (Medicine Hat):: Mr. Speaker, in connection with the tabling of certain reports confirming disallowance of legislation of the province of Alberta, I should like to ask the following question of the Prime Minister (Mr. Mackenzie King). Are we to understand that sixteen men comprising this government have taken upon themselves-


Some hon. MEMBERS:: Order.

The Budget

Mr. Dunning


Mr. SPEAKER:: The hon. member should state his question.


Archibald Hugh Mitchell: It is a question, Mr. Speaker. Have these men taken upon themselves the responsibility of imposing their will and judgment upon the democratic province of Alberta composed of many thousands of people?


William Lyon Mackenzie King: If that is a question, it
is not a proper question to ask in this house.



THE BUDGET


[Stage Direction]
Hon. CHARLES A. DUNNING (Minister of Finance) moved:
That Mr. Speaker do now leave the chair for the house to go into committee of ways and means.
He said:	Mr. Speaker, the year which it
now falls to my lot to review has been an eventful, indeed a dramatic, one. In the budget speech of last year I stressed the extent to which continued economic progress for Canada as for other countries depended upon the preservation of peace and the lessening of international friction. But in February, 1937, there were few who were bold enough to predict the sudden and, in some countries, drastic reversal of world economic trends which began last autumn, and fewer still, at that time, who could possibly foresee the astounding series of crises and near-crises in international political relations which the ensuing twelve months were to bring. Yet these things have come to pass. A new major war has embroiled the Asiatic continent and in Europe we have had a succession of incidents which at times have strained the fabric of peace almost to the breaking point. In the last four months of 1937. our nearest neighbour experienced a decline in business activity more drastic than that which followed the collapse of 1929. World production, trade and prices have also declined but less rapidly than in the United States.
Functioning under the shadow of these disturbing world events, the Canadian economy, nevertheless, has given a good account of itself. The recovery movement which had been under way for some time continued with surprising vigour almost to the end of 1937. The physical volume of business which is our most comprehensive measure of current economic activity expanded by 4 per cent from March to
August and by nearly 4 per cent additional between August and November. In December a moderate decline set in and by April, the index of the physical volume of business in Canada was about 9 per cent below that for April, 1937. The low point, however, was reached in February and since that time the Canadian index has risen by 5-3 per cent. In the United Kingdom, the index of business activity compiled by the London Economist rose slightly over 2 per cent from March to August, 1937, and began falling in November to a point in April 6 per cent below the level of April, 1937. In the United States, industrial production fell slightly from March to August, 1937, then dropped sharply by 25 per cent between August and November, and by April of this year was 35 per cent below the level of April. 1937. In neither of these two countries which constitute the most important markets for Canadian products has there been in recent months any tendency to that reversal of the downward trend of the business curve which has been evident in Canada since February. World industrial production which apparently reached a peak in the first quarter of 1937, and maintained a fairly horizontal trend until August, has been declining for the last eight or nine months, the New York Annalist's world index for March, 1938, being 17 per cent below the level of March, 1937. According to the League of Nations, the physical quantum of world trade was 12 per cent less in the first quarter of 1938 than in the last quarter of 1937, and in most of the leading countries the level of wholesale prices has fallen 5 to 10 per cent from the high point reached in 1937.
The lag between the downward trend in Canada and that in other important countries is all the more remarkable when we recall that as early as last June or July it became apparent that drought conditions on the western prairies were to produce a wheat crop failure of a magnitude which a few years ago would have rendered our then less diversified economy almost prostrate. Last year Canada harvested only 182,000,000 bushels of wheat, barely 50 per cent of the average of the previous ten years, and the smallest crop since 1914. In 1914 we produced 90 per cent of last year's total from an acreage which was only about 40 per cent of the acreage seeded last year. The havoc wrought by this plague of drought reached its extreme in Saskatchewan where only 37,000,000 bushels were harvested from an acreage of almost the same size which in 1928 had produced a crop of 321,000,000 bushels.
The Budget-Mr. Dunning
[Stage Direction]
I need not discuss the effect of this disaster on the purchasing power of western Canada- it is self evident-but I shall have occasion later to indicate what it meant to governmental expenditures. Fortunately, agricultural conditions in other parts of Canada and in respect to other farm products were more favourable and preliminary estimates show a net value of all agricultural production aggregating $681,000,000 in 1937, only $9,000,000 less than in 1936 and higher than in any other year since 1930. I recognize, Mr. Speaker, that he who ventures to make a crop forecast in the middle of June must bake his courage in his hands, but I think we can safely say this much

that by and large in the wheatgrowing area crop conditions at this stage are better than at any time since 1932, that in the southern drought triangle the improvement in moisture conditions has been substantial although current rains are needed in certain other areas, that the increased planting of Thatcher wheat gives a more effective insurance against rust than we have ever had before, and that the adequate preparations being made by the prairie provinces to deal with the somewhat less intense but perhaps more widespread infestation of grasshoppers should assure that losses on this account will be minimized. In other words, although we are only at the beginning of the critical period for the wheat crop, we may agree that there appears to be a sounder basis, than at any time in the last ten years, for that buoyant optimism which is again evident on the western prairies. Even with a lower world level of wheat prices, a good wheat crop would in my opinion do more than any other single factor to revitalize our whole economic life, to establish confidence and to restore a more normal balance between east and west.
It was inevitable that a wheat crop failure to the extent of our 1937 experience would exercise a depressing influence on Canadian business. Apart altogether from the effect of external factors reduced purchases by the farming community of consumable goods and of farm implements, reduced volume of freight traffic on our railroads, the reduced volume of wheat and flour for export and the unfavourable reaction on business psychology would in any case have caused some slowing up in our rate of progress. But the timing and nature of the slowing up of business in this country indicate that external factors were of predominant importance.
TMr. Dunning.]
Certainly it would be difficult to discover any evidence of lack of balance or other unsoundness in our internal situation which in itself would have caused a set-back. In spite of a prolonged, consistent and indeed a rapid recovery, Canadian industry and trade had expanded and developed on a rational, well-balanced basis, the tendency for speculative activity to get out of hand had been curbed at an early stage, the normal equilibrium between various prices and items of cost was being gradually restored, and there was no evidence of any undue piling up of excess inventories, except perhaps in the newsprint industry which again is so dependent upon foreign markets. A critical examination of all the major factors leads me to the firm conviction that, had it not been for economic depression and political tension abroad, Canadian business would have continued its upward trend with only a moderate slackening in its rate of advance.

[Stage Direction]
The influence of these external factors may best be seen in the statistics of our foreign trade, particularly of our exports. Export trade is the chief medium through which changes in economic conditions in other countries affect the Canadian economy. Up to August last business conditions throughout most of the world had been improving and the world price level had been rising. These favourable external conditions, coupled with the efforts which this government had made to widen export markets for Canadian products, had resulted in a steady expansion of our exports which had been the principal factor generating a steady increase in the national income of this country during the last few years. This expansion was particularly rapid during 1936 and the first nine months of 1937. Since that time, however, the business depression in the United States, the more moderate recession in the United Kingdom and several other countries, the pronounced fall in the world prices of many raw materials and the small Canadian wheat crop, have had their inevitable effect, a smaller total value of Canadian commodity exports each month than in the corresponding month of the preceding year. There have, however, been certain counteracting factors and the surprising thing is that the decreases in the latter part of the fiscal year were not sufficient to offset the gains made in the early months of the year. Thus for the 12-month period ending March 31, 1938, our aggregate external trade was

The Budget-Mr. Dunning
within $54,000,000 of the two billion dollar figure and was $154,684,000 or 8-6 per cent above the total for the preceding fiscal year. Our total export trade aggregated $1,148,000,000 or $27,000,000 in excess of that for the year 1936-37. While our imports have been declining since January, they registered an increase for the full fiscal year of $127,000,000 to a total of $799,000,000.
In the figures given for our total export trade I have included all exports of gold, including $22,000,000 of gold which has been sold and paid for by foreign purchasers,
although the gold is still physically held earmarked in the vaults of the Bank of Canada. I have also included shipments of gold coins which are classified as monetary gold in our trade returns but which in reality are commercial gold, having been shipped in substitution for a corresponding amount of gold bullion newly produced by our gold mines.
I now desire to place on Hansard a table showing the comparative figures for imports, exports and total trade during each of the last two fiscal years:

[Stage Direction]
Fiscal year ended		Increase (+)
Mar. 31,1937	Mar. 31, 1938	Decrease (-)$	S	$Imports	671,875,566	799,069,918	+127,194,352Exports- Merchandise (excluding gold)	990,152,778	989,790,065	- 362,713Commercial gold	84,091,442	95,031,139	+ 10,939,697Gold coin	706,875	40,440,096	+ 39,733,221Gold earmarked*	45,282,860	22,462,195	- 22,820,665Total exports	1,120,233,955	1,147,723,495	+ 27,489,540Total trade	1,792,109,521	1,946,793,413	+154,683,892
'Valued at $35 per ounce.
An understanding of the course of our foreign trade during the past year and of its effect on the Canadian economy, however, must involve an analysis of the changing composition of our export trade as well as of changes occurring throughout the year in the direction of that trade. For instance, if we are to make a fair comparison of our exports during the last two years to particular countries, it is necessary to exclude gold
movements, changes in the direction of which are not primarily related to trade considerations. For this reason, in the tables which I now present showing comparative figures for the last two years of the trade of Canada with the United Kingdom and other commonwealth countries, and with the United States, the figures given do not include gold of any kind but relate solely to other merchandise transactions:
TRADE OF CANADA WITH THE COMMONWEALTH (Merchandise-all gold excluded)
	Fiscal Year ended		Increase
	Mar. 31, 1937	Mar. 31, 1938	
$	$	$Imports from United Kingdom	129,507,885	144,978,493	15,470,608Exports to United Kingdom	406,825,443	407,797,610	972,167Imports from other Commonwealth countries	68,657,957	88,194,545	19,536,588Exports to other Commonwealth countries	88,206,497	108,722,853	20,516,356Imports-Total Commonwealth	198,165,842	233,173,038	35,007,196Exports-Total Commonwealth	495,031,940	516,520,463	21,488,523Total trade with Commonwealth	693,197,782	749,693,501	56,495,719
The Budget-Mr. Dunning
[Stage Direction]
TRADE OF CANADA WITH THE UNITED STATES (Merchandise-all gold excluded)
	Fiscal year ended		Increase t+) or Decrease (-)
	Mar. 31, 1937	Mar. 31, 1938	
Imports from the United States	
Exports to the United States	
Total trade with the United States	% 393,720,662 364,354,990	$ 487,328,980 343,250,669	$ + 93,608,318 - 21,104,321758,075,652	830,579,649	+ 72,503,997
From these tables it will be noted that the United Kingdom purchased from us during the last fiscal year goods to the value of $407,798,000. This is slightly in excess of 41 per cent of our total exports of merchandise, excluding gold. Exports to other commonwealth countries showed an appreciable improvement, the increase being 23 per cent, and the total volume $108,700,000. Commonwealth countries as a whole, including the United Kingdom, took approximately 52 per cent of our total merchandise exports. Imports from all commonwealth countries increased during the past fiscal year by over 17 per cent, accounting for about 29 per cent of our total purchases from abroad. From the United Kingdom alone our purchases were $15,000,000 greater than in the previous year and amounted to $145,000,000. With the United States our total merchandise trade, again excluding gold movements, amounted to $830,600,000, as compared with $758,100,000 for the preceding fiscal year. Total exports to that country fell six per cent below the figure for the previous year to a total of $343,300,000, while imports at $487,300,000 showed an increase of nearly 24 per cent.
It is significant of the influence of business depression in the United States that during the first quarter of 1938, our exports to that country were only $61,600,000. This is a decrease of 31 per cent from the first quarter of 1937 as compared with only a 6 per cent reduction for the year as a whole. Imports from the United States for the same three-month period totalled $106,400,000, a decrease of about 3 per cent. During April, exports to the United States decreased by 21 per cent and imports from the United States by 14 per cent. An analysis of a few individual items will show more clearly the adverse effect of restricted United States demand on important Canadian industries. Thus, during the first four months of this year, exports of newsprint to the United States fell by 25 per cent, of wood pulp by 41 per cent, of planks and boards by 35 per cent, of nickel by

58 per cent, of live stock by 64 per cent, of hides by 77 per cent and of furs by 44 per cent. The comparison in each case is with the first four months of 1937.
Fortunately, economic conditions in other markets were not so depressed and important increases in exports to other markets of various types of products tended to offset these substantial declines in shipments to the United States. Thus, for instance, during the first four months of 1938, Canadian exports to the United Kingdom increased by 4 per cent as compared with the same period in 1937, while our exports to Australia and New Zealand increased by 35 per cent and to all empire countries by over 5 per cent. Similarly, if we take the exports of non-ferrous metals, other than gold, we find that during the first four months of 1938 total shipments to all countries were over 12 per cent in excess of those for the same period in the preceding year. Moreover, examination of exports of individual commodities to the British market for the last fiscal year as a whole shows such striking increases as 17 per cent in the case of bacon and hams, 33 per cent in the case of coarse grains, 86 per cent in the case of tobacco leaf, 49 per cent in the case of fresh and canned fruits and 27 per cent in the case of iron and steel products. As a result of these divergent trends in the trade with particular countries and in particular commodities, the reduction in our total merchandise exports during the first four months of this calendar year, when our economy was feeling the full brunt of the world depression, has been kept to what I regard as the very satisfactory figure of 9 per cent.
Before leaving this discussion of our export trade, it is essential to refer to an important decrease which is not the result of external influences. For the fiscal year ending March 31st last, our exports of wheat and wheat flour are down from the previous year by 43 per cent, the total amounting to only $139,000,000 as compared with $245,000,000 for the year 1936-37. This drastic decline reflects

The Budget-Mr. Dunning
of course the failure of the western wheat crop, and with the small amount of wheat now in the country no improvement in this export can be expected until the new crop comes on to the market.
From the figures I have given for total exports and total imports, it will have been noted that the balance of trade remained favourable to Canada during the fiscal year and amounted to 8348,000,000 as compared with S44S,000,000 during the preceding year. However, the calculations of our international balance of payments are made by the Dominion Bureau of Statistics on a calendar year rather than a fiscal year basis. For the calendar year 1937, their figures show a favourable merchandise balance of 8212,000,000. Gold exported or earmarked established a further credit of 8145,000,000. Visiting tourists are estimated to have spent no less than
8290,000,000 in Canada during 1937, which is an increase of 13 per cent over the amount expended in 1936. After deducting expenditures of Canadians abroad, there emerges a net credit of $170,000,000 on account of the tourist trade which, by the way, it will be noted is substantially larger than the value of our total exports of wheat and flour during the fiscal year. Adding up these three items we get a total credit of S527,000,000 which was sufficient to enable us to meet all of our foreign obligations on account of interest and dividends as well as various miscellaneous debits, and at the same time enabled us to pay off foreign indebtedness or repatriate Canadian securities held abroad to an estimated amount of approximately $215,000,000. These facts indicate not only a highly favourable position for Canada in international payments during the past year but also a considerable strengthening of our ability to meet any strains that the future may bring.
All who have listened to this recital of the facts in connection with recent developments in our foreign trade will, I am sure, be impressed with how vulnerable our economy is to the impact of adverse external influences, and there may also be some who will question the wisdom of any substantial reliance upon foreign trade. There is no doubt about the high degree of vulnerability in our position. Whether we like it or not, our whole economy, including particularly our primary industries, is geared to the world economic machine and particularly to that of the British commonwealth of nations and that of the United States. It is thus much more than the mere friendly interest of a sister commonwealth or of a good neighbour which leads us to follow with anxious eyes the progress of economic conditions in these countries. This 51953-247}
dependence on other nations inevitably follows from the simple fact that Canada is highly fortunate in possessing an abundance of what many other countries lack, namely, a rich and diversified treasure-house of agricultural, forest, and mineral resources. If we desire to capitalize these resources by specializing in their development and marketing the products abroad in exchange for commodities which we cannot ourselves produce or which we can only produce at greater cost, we must assume the risks inherent in the fact that our well-being will to a considerable extent be dependent upon the prosperity of our customers and upon the fluctuations in that prosperity. We can only avoid these risks, if we are content to place our economy on a self-sufficient basis. This would mean not only tremendous costs and wastes in the adjustment process but also a permanent and substantial lowering in the Canadian standard of living, not merely in times of economic depression but at all times. There are few in this country, I am confident, who are willing to pursue the mirage of national self-sufficiency. But, if that objective is not to be accepted, the course which should be followed by any government charged with the administration of affairs in this, country is clear, and I submit it is the course which is represented by the policies which this government is following. In the field of external relations, it means not only such action on our part as may appropriately be taken to lessen the evils of international friction and political tension but also active cooperation in all efforts to re-open the markets of the world to the normal interchange of goods and services.
In emphasizing as I have done certain external and uncontrollable forces which have been influencing our economy, I would not have you think that I neglect or minimize the importance of the domestic factors. The fundamental fact that in this modern world no nation can live unto itself alone does not lessen, indeed it reinforces, the necessity for Canada to devote its maximum energies to the solution of its own internal problems. Concentration upon its domestic problems is the primary duty of any nation. It goes without saying that conditions favourable to economic expansion must be maintained. The fundamental structure of business in itself must be sound. Costs must be in the right relationship to prices. There must be a. properly adjusted balance of factors within the price structure. Ample credit accommodation must be available for the needs of trade and for business expansion. Speculative enthusiasm must not be permitted to get out of hand. Maladjustments in the economy
The Budget-Mr. Dunning
[Stage Direction]
must not be allowed to develop. Above all, under our present economic system, there must be a prevailing atmosphere of confidence in regard to our institutions, broad governmental policies and general conditions.
I have already expressed my own conviction that, measured by these tests, the Canadian economy during 1937 was in a sound position- that it disclosed no serious weaknesses which required the drastic corrective processes of a depression or even of a "recession." I shall now give some evidence to support this conviction but I do not wish to weary you with statistical details and shall confine myself to comment on some of the more important industries and factors which may have special significance for the outlook as to the immediate future.
In each of the last two years I have had to refer to the failure of employment to keep pace with the striking gains in business activity and to point out that this was a condition usually met with in the early stages of recovery from business depression. I am therefore pleased to be able to report that during 1937 the increase in the volume of employment was for the first time since 1929 more rapid than the rise in industrial production, and also that since the downward trend in business began last December employment has declined less rapidly than other business indices. Estimates by the Dominion Bureau of Statistics of the total number of wage earners employed in all industries show that the number in employment was higher in March, 1938, than in the corresponding month of the preceding seven years, and only slightly less than in March of 1929 and 1930. The estimated number of unemployed wage earners, including unemployables, was 456,000 in March, 1938, which was lower than in the same month of any year since 1931. The index prepared by the bureau based on reports from 10,550 firms employing over a million persons, rose from 110-4 on May 1, 1937, to 119-6 on October 1, 1937, and on May 1 of this year stood at 111-5, still about one per cent higher than a year ago. The trend disclosed by this index is confirmed by the figures showing the numbers on urban relief rolls. Preliminary estimates of the number of relief recipients in April show a total including all dependents of 1,038,000 persons, whieh represents a decrease of 121,000 since April, 1937. However, if we exclude, as we should, recipients of agricultural relief whose situation is a result of climatic rather than of economic conditions, we find that the number of persons on relief including all dependents declined from 833,800 in April, 1937. to 632,000

in April, 1938, a decrease of 201,800 persons or over 24 per cent during the period. Costs of urban direct relief have perhaps not been reduced proportionately with the decrease in numbers on relief but considerable progress has been made in many communities in securing a more effective control over expenditures.
I know of no better means of expanding employment in Canada to-day than by stimulating building activity. The construction industry is the most important of our capital or durable goods industries and it is the drastic fluctuations in this group of industries which largely account for the wide differences in general economic activity as between good and bad times. Purchases of consumers' goods maintain a fairly steady volume, but the durable goods industries tend to expand to abnormal proportions during boom periods and to lapse into comparative stagnation during depressions. Perhaps in no other industry is the range of fluctuation apt to be so great as in construction. It is difficult to exaggerate the bad effects which this extreme variability has upon the general welfare of the community. The reason will be obvious to anyone who takes the trouble to examine the magnitude of the dollar value of the products of the construction industry in normal times; the long series of industries which produce its raw and processed materials-lumber, iron and steel, cement, lime, brick, stone, glass, heating equipment, plumbing equipment and many others; the very large number of skilled craftsmen and unskilled labourers to whom it gives employment, both directly and indirectly; and the fact that its effects on employment and business activity ramify so widely in every community throughout the country. It has been frequently pointed out that this industry suffered most from the onset of the great depression, that it has been the most laggard of our major industries in recovering from the depression, and that its many branches include the occupations in which unemployment has been most heavily concentrated. In the eleven years from 1921 to 1931, the average annual value of all construction contracts awarded in Canada was
8370,000,000 and the annual totals ranged, during that eleven year period from a low of $240,000,000 in 1921 to a high of $577,000,000 in 1929. During the worst year of the depression, 1933, the total dropped 73 per cent from the 11-year average to less than $100,000,000. From that low point the industry has been slowly recovering and during 1937 this upward movement was accelerated, total contracts awarded rising by 38 per cent over

The Budget-Mr. Dunning
1936 to S224,000,000. The increase of residential contracts by 31 per cent to $56,000,000 was very largely attributable to the stimulus provided by the Dominion Housing Act and the Home Improvement Plan. But, even with this increase, the total volume of construction during 1937 was still less than half the total for 1930, and construction during the first five months of 1938 again fell 25 per cent below the level of the corresponding period in 1937.
The experience of several countries with expansionist policies during the last few years has proven that only a rise in the rate of new investment can provide a durable basis for an upswing in business activity. Attempts to stimulate consumption by government expenditure or by suddenly improving labour conditions have been tried on more than one occasion but in every case they have been found wanting. They produced, it is true, an immediate temporary stimulus, but they did not awaken the more normal and permanent motive forces which are essential to continuing prosperity and they tended to put too heavy a burden upon production which ultimately produced an effect the reverse of what was intended. Furthermore, we have had several conclusive demonstrations of the principle that government expenditure to create or stimulate employment will not have beneficial results if it is carried on in such a way or on such a scale as to create an atmosphere of fear and uncertainty. It is of little use to prime the pump of business enterprise with government expenditure if at the same time we dry up the springs of private initiative which feed the well. It may be arguable as to whether a system of free enterprise is the most desirable economic and social system but as long as we believe in such a system-and few of us have seen any other system which we would be willing to accept as a substitute- we must follow policies that will enable it to work in accordance with its essential principles. The most important of these principles is that decisions as to whether the individual shall spend and consume, or shall save and invest, or shall save and hoard, are left to the individual's own initiative. If, therefore, the answers to the questions as to whether plants are to be built or extended, new houses are to be erected, and industry is going to expand or to stagnate, depend upon the decisions of tens of thousands of individuals who are free agents and not regimented sheep, it follows that governments must pursue policies which create confidence rather than fear and uncertainty-which give leadership and guidance and encouragement rather than stifle initiative and paralyze new enterprise. If in order to create employment we embark upon expenditures which create undue deficits, or if in any other way we show no sense of financial responsibility, we are certain to find that the relatively small amount of employment which we create is much more than offset by new unemployment resulting from paralysis of private enterprise. Under our system at least, government expenditures cannot take the place of private enterprise, and I do not think that our people are prepared to accept the alternative system of regimentation under which all or practically all expenditures would be government expenditures.
It was this set of principles and the set of facts which I have given in regard to the construction industry which led the government to ask parliament's approval of the Municipal Improvements Assistance bill and of the comprehensive housing program which I had the privilege of introducing the other day. Two phases of the tripartite housing program seek to restore a more normal volume of construction activity by removing obstacles which have hampered individual initiative and by providing facilities and incentives which are designed to bring into full play the energies and resources of the various branches of the industry itself. The third phase provides for a larger measure of governmental assistance but this is in the field of low-rental housing, where such direct governmental assistance can be given without the risk of subsidizing competition to private builders and thus discouraging more building than is stimulated. Moreover, the program for the most part involves government aid by way of loan for productive undertakings of a self-liquidating character. If there is, as there undoubtedly will be, a proportion of loss in respect of these loans, that loss will be amply compensated for not only by the employment created during the present emergency but also by the permanent improvement in the living conditions of our people.
I said the other day that the program constituted a challenge to the building industry. I repeat that challenge to-day with all the emphasis I can command. I wish to add that I am confident the challenge will be accepted. If it is, the contribution which it can make to the elimination of unemployment, to the stimulation of our whole economic life and to the expansion of the national income will be difficult to exaggerate.
While I am dealing with one of our major durable goods industries, let me say that activity in our factories producing capital or producers' goods was one of the brightest
[Stage Direction]
The Budget-Mr. Dunning
spots in the manufacturing field during the past year. The output of industries engaged in the manufacture of producers' goods showed a gain of 13 per cent in 1937 over the preceding year. The primary iron and steel industry reflected the revival in the domestic demand for industrial equipment and durable goods as well as a brisk demand from the United Kingdom. The output of steel ingots recorded a gain of nearly 26 per cent over the preceding year, while the increase in pig iron production was over 32 per cent. The index of employment in this industry averaged 18 per cent higher than in the previous year. Since the first of the year, activity has declined but it is interesting to note that while in the United States the steel industry is operating at less than 30 per cent of capacity, the Bureau's index of steel production in Canada for April was 16T7 and for pig iron production 108-5 as compared with averages of 178-1 and 148-7 respectively for the boom year 1929.
The industry, however, which during the past year has been responsible, and is still to-day responsible, for the greatest stimulus to an upward movement in our economy is the mining industry. In 1937 for the third consecutive year it established a new record in the total value of its output. Reflecting in part a higher level of prices during most of tne year, total production was estimated at
55457,000,060, an increase of 26 per cent over tne 1936 output. The dollar output of copper rose by 77 per cent, of nickel by 36 per cent and of lead by 43 per cent. Production of gold increased by 9 per cent to a total of $143,000,000, or more than double the output of eight years ago. While prices, particularly of base metals, have been substantially lower this year, and while the exports of nickel to the United States have been affected by the depression in that country, the performance of the mineral industry during the first four months of this year in the face of declining trends elsewhere, has been a truly remarkable one. The Bureau's index of physical output of the mines rose by 18 per cent from January to April and the figure for April was almost 15 per cent, higher than that for April, 1937. Particularly noteworthy were the increases recorded in April of this year which would appear to forecast the impetus to general economic recovery which may be expected from this industry during the balance of the year. In this connection it is estimated that thirty new gold mills will come into operation during 1938, increasing existing capacity by more than 11 per cent.

Less encouraging has been the record during the last few months of that other great primary industry which is based on the products of our forests. During 1937, it is true there was a rapid expansion of production in its various branches, but this rapid pace has bpen slowed down materially because of a combination of factors, including the slackening of the British building boom, restricted demand from the United States and from the far east, severe weather during the winter months in British Columbia, and an overaccumulation of stocks in at least one branch of the industry. Newsprint output expanded during 1937 to a record high point, not far from the practical limit of capacity of the mills, and reached a total volume for the year more than 14 per cent in excess of that for 1936. But in the third quarter an excess of stocks in publishers' hands in the United States began to appear and sharp curtailment of Canadian production became necessary. However due to the substantial falling off in the United States' demand consequent upon the business depression, the industry has made relatively slow progress in disposing of accumulated stocks of newsprint. During the first four months of 1938, total output of newsprint mills in Canada was down 27 per cent from the corresponding period of 1937, and the industry will in my opinion do well if it is able to operate for Ihe year as a whole on an average basis of about 65 per cent of capacity.
Other branches of the forest industry have fared considerably better. Logging operations requiied an expansion in number of employees of 36-5 per cent during 1937 while saw milling and paper industries recorded an advance of 11 per cent. Timber sealed in British Columbia which is a good index of saw mill operations showed a gain of 7-5 per cent while the exports of all wood and paper products rose by 25 per cent to a total of $263,000,000. During the winter months, however, lumbering operations were on a smaller scale than during the previous season and the general level of activity to-day is probably substantially below that of a year ago. On May 1st, employment in logging operations was 12 per cent higher than on May 1st, 1937, but in the rough and dressed lumber industries it was almost 9 per cent lower. Exports of planks and boards decreased by about 20 per cent in the first four months of 1938. It is difficult to forecast the outlook for lumber demand from foreign markets during the balance of the year, but the sharp decline in ocean freight rates to United Kingdom ports from the excessive levels of 1937 will place British Columbia lumber on a more advantageous

The Budget-Mr. Dunning
basis in that market in competition with Baltic timber. The lumber industry should also be one of the chief beneficiaries of expanding activity in the domestic construction field which the government's housing program is designed to bring about.
Summing up the net production of goods and services in all fields of economic activity, we reach that most significant of the measures of national well-being, namely, the total national income. By national income I mean not the revenues of the dominion government but the aggregate of the individual incomes of all the people. Unfortunately, the statistics of our national income, although the most important of all statistics for purposes of analysis and policy determination, leave much to be desired both in their adequacy and in the time at which they become available. I believe that the methods used by the Bureau in compiling their estimates are being revised and their compilations for the year 1937 have not yet been completed. Preliminary estimates from unofficial sources, however, appear to indicate that Canada's national income in 1937 amounted to 84,830,000,000, which is an increase of 13 per cent over the Bureau's revised estimate for 1936.
I turn now to a number of considerations which are primarily financial in character. Last July, the index of the wholesale prices of commodities reached a high point for the recent movement, only 12^ per cent below the average level which prevailed in 1926. Since that time there has been a gradual downward . tendency, the index for April representing a drop of almost 6 per cent from the high of last July. This 6 per cent compares with a decrease of 9 per cent in the United Kingdom and of about 10 per cent in the United States. During the last two years, however, the disparities which had previously been an unsound and retarding factor in the Canadian price structure have been largely corrected. For instance, it is significant to note that while the index of April of this year for all commodities stood at 82-3, that for Canadian farm products was 82-5 and for fully and chiefly manufactured goods 81-3. In other words, the normal equilibrium between farm prices and other prices has been restored.
The decline in common stock prices has been drastic. Canadian stock markets felt the full blast of the hurricane which swept the New York stock exchange last autumn and security prices in the two countries are about on a par. This is true despite the highly satisfactory earnings of Canadian business enterprises as a whole last year. A recent listing of the net earnings of 522 corporations for the fiscal year ending in 1937 gives a total
of over S450,000,000, which is 17 per cent above the aggregate net earnings of the same corporations for the previous year. It is only natural, however, that our financial markets should move closely in sympathy with New York. Apart from the important relationships in trade and commerce to which I have already referred, securities of a value of hundreds of millions of dollars flow annually ' north and south between the financial centres on this continent. Elaborate machinery has been developed to facilitate these transactions, and the daily intercommunication between brokers and financial houses has its effect in tending to create the basis for a common outlook on business prospects. Obviously, this has dangers as well as advantages. Depression psychology may affect our financial and business leaders when our own conditions do not justify it, and what is more important, if the North American investor for any reason loses confidence in any phase of the Canadian position, capital may fly from Canada overnight and our own securities held abroad' may be dumped on our markets in enormous quantities. Fortunately there is no reason for the American investor to lose his undoubted faith in Canada which has been grounded in long and satisfactory experience, but those in charge of financial affairs in this country must always keep such considerations in mind.
The bond market in Canada has given an infinitely better account of itself than the stock market during the past year. During 1937, bond issues were sold by dominion, provincial and municipal authorities and by private corporations to an aggregate amount of $701,700,000, of which $225,600,000 was for new cash and $476,100,000 for refunding purposes. During the first quarter of 1938, the total offerings were $162,100,000 of which $76,800,000 was for cash and the remainder for refunding. These are substantial totals for a country of small population and indicate a healthy functioning of the capital markets. To-day the interest yields of dominion bonds are lower than they have ever been before in our history except for a short period in 1936. In another connection I shall give details of the favourable basis on which we were able to carry out a heavy volume of dominion financing last year.
If hon. members will examine the statistics published by the League of Nations on the percentage yield of government bond issues they may be surprised to find that of all the countries of the world only the United States, Great Britain, Holland, Sweden and Switzerland show the obligations of their respective governments selling on as low a yield basis as the obligations of the government of
The Budget-Mr. Dunning
[Stage Direction]
Canada. This is all the more remarkable when you remember that these are great creditor countries while Canada is one of the greatest debtor countries in the world, that is to say, has more foreign capital invested within her borders than most other countries. In making such comparisons, care must be taken of course to see that maturity dates, coupon rates and tax exemption features are reasonably comparable. On a recent date the quotations showed the following yield basis for a government bond of 17 to 19 year term in the domestic markets of the respective countries: Canada, 3-01 per cent; United Kingdom, 3-09 per cent; Australia, 3-76 per cent; New Zealand, 4-31 per cent; South Africa, 3-45 per cent; and the United States, 2-56 per cent,-but that United States issue is free of income tax, and therefore is not strictly comparable. No comparable quotation could be secured for France, but her perpetual rentes were selling in March on a 4-43 per cent basis while Canada's per-petuals were on less than a 3-40 per cent basis.
I have also caused to be made certain calculations showing for the latest available date the average rate of interest being paid on the outstanding debt of several important countries. In the case of Canada, the average rate on our outstanding debt including treasury bills and allowing for the effects of the conversion issue floated in London last January, was 3-53 per cent. As the volume of outstanding treasury bills and other short term debt varies considerably as between different countries and as the information regarding this short term debt is not available in all cases, I will use for purposes of comparison the average rate on our Canadian debt excluding treasury bills. This was 3-67 per cent as at March 31, 1938. Contrast this percentage with the following figures for other countries: United Kingdom, 3-56 per cent; United States, 2-69 per cent, but again I must point to the tax free feature of the United States obligations; New Zealand, 3-79 per cent; South Africa, 3-92 per cent; Australia, 3-9S per cent; and France, 4-36 per cent. Of this comparison I think Canadians have real reason to be proud.
It may be of interest, Mr. Speaker, to make a further comparison with the Commonwealth of Australia. There is frequent controversy in this country as to whether we should have followed the plan adopted by Australia in 1931 when the interest rate on outstanding government bonds was cut by an average of 22^ per cent. I shall not undertake to pass judgment on the wisdom of such a policy for Canada in 1931 or 1932 but I do

wish to point out that as at June 30, 1931, before the conversion operation took place in Australia, the average rate of interest on Australia's outstanding debt was 5-25 per cent and as at June 30th last, it was 3-93 per cent, a decrease therefore in the average rate on the Australian debt of 25-1 per cent. On the other hand the average rate of Canada's debt outstanding as at March 31, 1931 was 4-98 per cent, and to-day the corresponding rate is 3-53 per cent, a decrease in the case of Canada of 29-1 per cent.
In other words, by following a different and more normal policy, Canada has been able to secure a reduction in her average rate of interest by a larger percentage and to a lower relative figure.
To keep the record straight, I wish also to mention two additional facts. First, the arbitrary reduction in interest was applied only to domestic holders of government bonds, a policy which it was easy to enforce in Australia because of the established practice of issuing bonds in registered form rather than bonds payable to bearer, and bonds payable optionally in two or more currencies. Secondly, the policy was only one part of a comprehensive program designed to reduce all costs, including wages, by an approximately equal proportion.
Moreover, the Australian conversion offer was originally on a voluntary basis and it was only after 91 per cent of the bondholders had voluntarily accepted that the conversion was made compulsory on the 3 per cent who had dissented and the 6 per cent who had not been heard from. Canada has followed consistently the policy of offering voluntary conversions to holders of our bonds as these bonds become due or callable. This policy has amply justified itself. I have already shown the extent to which we have succeeded in reducing the average rate of interest on our outstanding debt. But rates of interest represent small figures and their full significance may not be apparent. Let me state the facts in another way. As at March 31, 1938, our total bonds, debentures and treasury bills outstanding amounted to approximately
83,315,000,000. This represents an increase since 1930 of $1,031,000,000 due mainly to the emergency expenditures incident to the depression. The annual interest charge, which represents the burden of this debt as at March 31 last, was $117,063,000 which was less than the corresponding figure at the end or any other year since the close of the war, with the single exception of March 31, 1930. The interest requirement on the funded debt outstanding on the latter date was $114,577,000.
It should be remembered, however, that since 1930 we have invested a substantial sum in

The Budget-Mr. Dunning
additional active loans and investments which as at March 31, 1938, accounted for an offsetting credit to the treasury of $5,470,000 in the form of interest receivable. If this sum be deducted, the net interest burden on the funded debt is less than in any year since the great war, in spite of the increase in the public debt itself of over $1,000,000,000 since 1930.
Let me now sum up the argument I have been developing. In the first place we have succeeded in getting our interest rates on current borrowings down to levels comparable with those of the oldest and wealthiest countries in the world. Secondly, we have been able to reduce the average interest rate on our total outstanding funded debt to approximately 3i per cent, although much of that debt was created in years past when interest rates were substantially higher than they are to-day, again a level comparable with the oldest and wealtiest countries. Finally, in spite of the fact that during the depression years our funded debt has had to be increased by over a billion dollars, the burden of that debt in the form of its annual interest charge is less than the payment required to service our smaller debt in any year since the war except 1930. All this I submit is no small achievement for a young and debtor nation. It reflects careful administration of the government's finances, a persistent endeavour to achieve a budgetary balance at the earliest practicable date, a healthy functioning of the capital markets, and the results of an easy money policy efficiently carried out.
There are some, of course, who appear to believe that the government should not pay interest at all or, indeed, should issue debt free money to finance its expenditures or to retire its interest bearing debt or to do both of these things. It is incredible that this hoary fallacy should persist after so many historical demonstrations of its devastating possibilities. Perhaps I underestimate the insidious appeal of a program which promises to make something out of nothing, although I must say that for no one more than for a minister of finance should such a program have seductive charm. How much easier my task would be if I could draw on the accumulated savings of the Canadian people without paying interest thereon or if indirectly I could do the same thing by issuing credit against our natural wealth, that is, against the resources of farm and forest and mine and factory now owned by the Canadian people as individuals and not by the dominion government. I am sometimes criticized because I do not accept the so-called "new economics," which in fact is centuries old.
It dates back to the first monarch who, finding it difficult to replenish the royal coffers by taxation, tried to filch the needed funds from the pockets of his subjects by debasing his currency. When first introduced this currency debasement gave some temporary stimulus to trade, because there were in circulation more of the sovereign's coins, albeit each had a lower intrinsic value. But when the smoke cleared away the net result became evident, namely, that the sovereign had obtained a larger share of the product of his people's labour. It may be that our taxation system is not the most scientific, but at least the attempt has been and is being made to make it progressively more equitable. The kind of device to which I have been referring takes many different forms, but there is nothing more certain than this, that in any of its forms it constitutes the most unjust and most inequitable type of taxation that could be devised. Not only that, but the inflationist expansion of currency and credit which it contemplates is bound to initiate unhealthy speculative activity and to result in overexpansion of particular industries. When maladjustments become too pronounced, the speculative boom always collapses and depression sets in. Surely we have suffered too much, Mr. Speaker, from the inflationist experience of the war and its sequel to deliberately embark upon such a program again.
This is not the way of sound and healthy prosperity. On a recent occasion in the house I had the privilege of discussing the monetary policy which has been followed in this country in recent years and of showing why in my opinion that policy was well conceived. It has been an easy money policy designed to offset any deflationary tendencies and to ensure that ample currency and credit would be available to meet the needs of industry and trade. Its general objective has been to promote the maximum possible sustained level of productivity and the minimum possible level of unemployment. It is a tribute to the skill with which this policy has been administered that while currency and credit have been expanded at a quite rapid rate, the substantial rise in production and trade which occurred has been consistent and has taken place without speculative excesses or other unsound features developing in our economy. To monetary policy must be given at least some share of the credit for the health and soundness of our internal economic conditions which I have already reported. We may feel confident, Mr. Speaker, that it will adjust itself with equal efficiency to the changing conditions that may arise in the future.
The Budget-Mr. Dunning
[Stage Direction]
In this review of current economic conditions during the past year, I have tried to indicate the divergent influences at work. The net result of these conflicting forces will determine the course of Canadian business during the remainder of this year. On the unfavourable side we find two external factors which for us are uncontrollable and unpredictable. I refer to the progress of business depression abroad and to developments in the field of international relations. It is to be hoped that business in the United States is now dragging on the bottom and that the steps which have been and are being taken will promote an up-turn before the end of this year. In the United Kingdom and other European countries, the acceleration of the armaments program should exert a favourable short-term influence, although none of us look forward with confidence to the more distant results of a program which involves so heavy a concentration of the resources of the leading nations upon preparation for war. In the political field it is even more difficult to make predictions. Realism compels us to face frankly the fact that the potential dangers are indeed great. We can only hope that the forces which are striving to prevent war, while maintaining freedom, will achieve success.
Any improvement in conditions abroad will strongly reinforce the influence of the favourable forces which are at work within our own country. As I have already stated, our internal economy is sound, our price structure is in reasonable balance, ample credit accommodation is available for further expansion, and our people need not be affected by fear and uncertainty. Production in our major industries has shown what is relatively a moderate decline in the face of depressed
conditions elsewhere and since February our index of the physical volume of business has been tending upwards. Moreover, there are now important forces at work which in my opinion should give a vigorous impetus to further recovery later in the year. Most important of these is the improved prospect for a good wheat crop and for good agricultural conditions generally. The mining industry may also be counted on to provide a further stimulus. Finally, I am confident that as a result of the government's program in relation to housing, municipal improvements, and national conservation and development generally, we may expect to see during the next few months the beginning of a more vigorous revival in the construction industry and the many industries which depend upon it. These are all powerful influences making for recovery, and if backed by the wholehearted cooperation of all elements in our population, they should make the current year a reasonably satisfactory one.

[Stage Direction]
Turning now, Mr. Speaker, to the government accounts, I am pleased to state that, because of the late date at which the budget is being brought down, I am able to present the figures for the past fiscal year in practically their final form instead of making the provisional estimates which are usually necessary. Following the procedure of last year, I shall first, with the permission of the house, place on Hansard a number of tables giving a complete summary of revenues and expenditures under the usual categories and of the over-all deficit or increase of net debt for the fiscal year 1937-38, together with comparative figures for the four preceding fiscal years:
STATEMENT OF REVENUES FOR THE LAST FIVE FISCAL TEARS .	(000 omitted)
-	1933-34	1934-35	1935-36	1936-37	Estimated 1937-38$	$	$	$	$Tax Revenues-	Customs import duties	66,305	76,562	74,004	83,771	93,456Excise duties	35,494	43,190	44,410	45,957	52,037War tax revenues-	Banks	1,336	1,369	1,281	1,210	1,107Insurance companies	742	750	761	775	867Income tax	61,399	66,808	82,710	102,365	120,366Sales tax	61,392	72,447	77,552	112,832	138,054Manufacturers', importations, stamps,	39,745	35,181	39,641	42,765transportation taxes, etc	45,184	Tax on gold	-	3,573	1,413	-	-Total revenue from taxes	271,852	304,444	317,312	386,551	448,652
[Mr. Dunning.1

The Budget-Mr. Dunning
STATEMENT OF REVENUES FOR THE LAST FIVE FISCAL YEARS-Concluded
(000 omitted)
-	1933-34	1934-35	1935-36	1936-37	Estimated 1937-38$	S	%	$	$Non-Tax Revenues-	Canada Grain Act	1,236	1,205	1,213	1,192	680Canada Gazette	56	47	49	48	47Canals	878	838	890	1,004	1,866Casual	3,622	4,337	4,636	6,276	6,598Chinese revenue	6	6	6	7	2Electricity	440	485	542	646	692Fines and forfeitures	178	90	295	134	209Fisheries	39	43	42	56	60Gas inspection	76	96	91	93	88Insurance inspection	149	139	147	152	162Interest on investments	11,148	10,963	10,614	11,231	13,120Lands, Parks and Forests	419	516	458	478	541Marine	208	218	222	263	336Mariners' fund	188	181	187	205	206Military college	20	20	20	20	20Militia pensions revenue	165	174	178	187	194Ordnance lands	18	16	16	15	16Patent and copyright fees	429	426	455	464	452Penitentiaries	98	74	68	62	63Post Office	30,893	31,248	32,508	34,275	35,546Premium, discount and exchange	-	752	36	-	27Public Works	250	2.54	251	274	318Radio Licences	1,291	1,487	1,574	t1) 990	(') -R.C.M.P. officers' pensions	12	9	11	10	11Weights and measures	400	407	401	396	393Total non-tax revenue	52,219	54,031	54,910	58,478	61,647Total ordinary revenues	324,071	358,475	372,222	445,029	510,299Special Receipts-	Sundry receipts	409	3,397	320	(J) 8,464	3,009Other Credits-	Refunds on capital account	90	so	27	616	1,542Credits to non-active accounts	91	21	27	45	819Net credit resulting from various adjustments in Railway accounts authorized by Canadian National Railway Capital	Revision Act, 1937	-	-	-	-	1,023Total Special Receipts and Credits	590	3,498	374	9,125	6,393Grand Total Revenue	324,661	361,973	372,596	454,154	516,692
0) As from Nov., 1936, radio licence fees deposited to credit of The Canadian Broadcasting Corporation. (2) Includes $8,000,000 from Canadian Wheat Board taken into the accounts as an offset, in part, to the disbursements in 1935-36 re losses on 1930 wheat pool and stabilization operations.
The Budget-Mr. Dunning

[Stage Direction]
FISCAL YEARS (000 omitted)
1933-34	1934-35	1935-36	1936-37	Estimated 1937-38	$	$	$	$	Ordinary expenditures-	Agriculture	6,996	7,107	9,399	8,741	9,017Auditor General's Office	376	377	429	423	463Civil Service Commission	221	221	259	305	358External Affairs, including Office of Prime	Minister	974	1,427	1,290	1,341	1,450Finance-	Interest on Public Debt	139,725	138,533	134,549	137,410	132,118	Cost of Loan Flotations	2,550	2,890	3,577	3,839	4,555Premium, Discount and Exchange (net)	167	-	-	400	-Subsidies to Provinces	13,728	13,769	13,769	13,735	13,735	Special Grants to Provinces	1,600	1,600	3,975	3,225	7,475Other Grants and Contributions	396	467	736	540	5S0Civil pensions and superannuation	1,032	943	854	787	995Government contribution to Superan-	nuation Fund	1,986	1,948	1,875	2,019	2,065Old Age Pensions	12,314	14,942	16,764	21,149	28,653	General Expenditure	3,152	3,939	3,735	3,579	3,635Fisheries	1,596	1,641	1,710	1,691	1,850Governor General's Secretary's Office	136	133	138	143	144Insurance	152	156	163	172	187Justice	2,711	2,718	2,748	2,773	2,507Penitentiaries	2,677	2,667	2,377	2,372	2,577Labour	561	581	660	720	706Technical Education	129	91	99	76	49Government Annuities-Payments to	maintain reserve	184	146	272	541	(*) 5,000	Legislation-	House of Commons	986	1,796	1,486	1,760	1,516Library of Parliament	69	71	76	75	79Senate	286	491	491	587	536General	62	95	55	73	57Dominion Franchise Office	-	1,545	498	53	76Chief Electoral Officer, including elec-	tions	32	146	1,089	72	45M ines and Resources-	Administration	-	-	-	-	(*) 1,518	Immigration and Colonization	1,374	1,269	1,322	1,313	1,163Indian Affairs	4,380	4,362	4,869	4,904	4,8972,857	2,750	2,939	2,8871	-[DOT]j I.ands, Parks and Forests	-	-	-	-	1,875(Purveys and Engineering	-	-	-	- J	941Mines and Geological Survey	909	965	1,040	1,135	658Movement of Coal and Domestic Fuel Act	2,772	2,124	2,103	2,277	2,521National Defence-	Militia Service	8,773	8,853	10,141	11,346	17,223	Naval Service	2,171	2,222	2,380	4,763	4,372Air Service	1,685	2,258	3,777	5,822	10,018	Sundrv Services	847	847	879	992	1,147National Revenue (including Income Tax)	10,360	10,166	10,963	11,205	11,870	Pensions and National Health-	Treatment and after-care of returned	soldiers	9,571	10,127	11,060	11,579	12,152	Pensions, War and Military	42,923	43,232	42,790	43,067	42,240	Health Division	802	809	993	873	914Post Office	30,554	30,252	31,438	31,906	33,762	Privy Council	49	46	46	45	48Public Archives	157	209	165	160	170Public Printing and Stationery	172	368	169	169	161Public W orks	10,827	9,905	12,945	14,519	12,385	Royal Canadian Mounted Police	5,528	5,970	6,165	5,635	6,308Secretary of State	387	395	705	655	692
0) This represents a tentative estimate pending definitive calculations by Department of Labour on an actuarial basis.
(2) Prior to 1937-38 general administration expenses were not segregated from other expenditures of the respective Services of the Departments which were amalgamated to form the Department of Mines and Resources and the Department of Transport.
[Stage Direction]
The Budget-Mr. Dunning

[Stage Direction]
fiscal years-Continued
(000 om itted)
-	1933-34	1934-35	1935-36	1936-37	Estimated 1937-38$	$	$	$	$Ordinary expenditures-Concluded Soldier Settlement	810	746	762	806	801Trade and Commerce	3,007	3,057	3,458	5,523	4,070Canada Grain Act	1,759	1,679	1,848	1,739	1,675Mail Subsidies and steamship subventions	2,221	2,274	2,426	2,120	2,029Transport- Adm inistration	_	_	___	(*) 358Air Service	-	-	-	-	(*) 2,961Marine	5,439	5,742	5,857	5,614	4,308Canadian Broadcasting Corporation -	1,025	1,249	1,500	878	3,927Railways and Canals	3,315	4,581	4,250	4,019	Maritime Freight Rates Act	1,989	2,529	2,348	2,506	3,182Railway Grade Crossing Fund	310	275	128	54	180Total ordinary expenditure	351,771	359,701	372,539	387,112	410,954Capital Expenditure Canals	1,986	338	458	52	Railways	754	526	287	203	71Public Works	3,840	6,243	5,799	3,237	4,359Total capital expenditures	6,580	7,107	6,544	3,492	4,430Special Expenditures Unemployment Relief Act, 1930	4	2	26	Unemployment Relief Act, 1931	564	52	26	-	-Unemployment Relief Act, 1932	6,948	399	111	-	-Unemployment Relief Act, 1933	28,382	2,420	494	-	-Unemployment Relief Act, 1934	-	49,114	1,152	-	-Unemployment Relief Act, 1935	-	-	48,027	-	-Special Supplementary Estimates- Administration-Relief Acts, 1936 and 1937	194	378Grants-in-aid to Provinces	-	-	-	28,930	19,493Dominion share of joint Dominion-Provincial projects	__	__	12,692	8,841Dominion Projects	-	-	-	23,554	13,911Transportation facilities into mining areas	-	-	-	1,221	1,324Railway Maintenance Relief Work	-	-	-	2,662	-35,898	51,987	49,836	69,253	43,947Western Drought Area Relief- Direct Relief	5,144	11,925Feed and fodder and freight thereon	-	-	-	3,517	11,352Freight charges on movement of cattle...	-	-	-	90	-Expenses of marketing cattle	-	-	-	-	337Purchase and distribution of foodstuffs..	-	-	-	-	971-	-	-	8,751	24,585Public Works Construction Acts	-	8,673	29,581	-1930 Wheat Crop Equalization Payments Act	6,600	Loss on 1930 WTheat Pool and stabilization operations- Payment to Canadian Wheat Board of nel liability assumed as at Dec. 2, 1935. ...	15,856	Loss on 1930 oats pool under guarantee of bank advances to Canadian Co-operative Wheat Producers, Limited	-	-	174	-	-Total special expenditures	35,898	60,660	102,047	78,004	68,532(1)	Prior to 1937-38 general administration expenses were not segregated from other expenditures of the respective Services of the Departments which were amalgamated to form the Department of Mines and Resources and the Department of Transport.(2)	Prior to 1937-38 expenditures on civil aviation, now the Air Service Branch of the Department of Transport, were included under expenditures for the Air Service Branch of the Department of National Defence.
The Budget-Mr. Dunning

[Stage Direction]
fiscal years-Concluded
(000 omitted)
-	1933-34	1934-35	1935-36	1936-37	Estimated 1937-38S	$	S	$	$Government Owned Enterprises Losses charged to Consolidated Fund- Canadian National Railway System, ex-eastern lines	52,264	42,590	41,796	37,449	37,8826,692	5,818	5,625 270	5,854	4,464Canadian National Steamships	National Harbours Board	-	-	1,126	250	289Trans-Canada Air Lines	-	-	-	111Total charged to consolidated fund	58,956	48,408	48,817	43,553	42,746Loans and advances non-active- Canadian National Steamships	(*) 14	487	(*) 333	(>) 1,754	104National Harbours Board	2,110	1,242	2,456	2,419	1,983Total non-active advances	2,096	1,729	2,123	665	2,087Total government-owned enterprises	61,052	50,137	50,940	44,218	44,833Other Charges Write-down of assets chargeable to Consolidated Fund- Reduction in soldier and general land settlement loans	1,766	469	488	628	750Yearly established losses in seed grain and relief accounts-Department of Mines and Resources	91	21	27	44	14Cancellation of Canadian Farm Loan Board-Capital Stock	20	10Province of Manitoba Treasury Bills	-	-	-	-	805Non-Active Accounts- Canadian Pacific Railway advances (Relief Acts)	1,000	Active assets transferred to non-active...	-	11	-	(«) 18,487	139Total other charges	2,857	501	515	19,179	1,718Grand total expenditures	1	458,158	478,106	532,585	532,005	530,467
(l) Credit. (2) Dominion contribution to Voluntary Debt Adjustment Program effected in Provinces of Manitoba and Saskatchewan respecting Drought Area Relief that was financed by the Dominion to January 1, 1935-Manitoba $805,000, Saskatchewan $17,682,000.

[Stage Direction]
(000 omitted)
Ordinary expenditures		351,771 324,071	359,701 358,475	372,539 372,222	387,112 445,029	410,954 510,299
Ordinary revenues						
Deficit (-) or surplus (+) on ordinary account						
	-27,700	-1,226	-317	+57,917	+99,345
Special expenditures						
	35,898 409	60,660 3,397	102,047 320	78,004 8,464	68,532 3,009
Less special receipts						
Balance						
	35,489 6,580 61,052 2,857	57,263 7,107 50,137 501	101,727 6,544 50,940 515	69,540 3,492 44,218 19,179	65,523 4,430 44,833 1,718
					
" Government Owned Enterprises						
Less other credits						
	105,978 181	115,008 101	159,726 54	136,429 661	116,504 3,384
Add deficit or deduct surplus as above	 Over-all deficit or increase of direct net debt						
105,797 27,700	114,907 1,226	159,672 317	135,768 57,917	113,120 99,345133,497	116,133	159,989	77,851	13,775
[Stage Direction]
The Budget-Mr. Dunning
revenues, 1937-38
With regard to revenues for the fiscal year 1937-38, the last fiscal year, our revenues from taxation and all other sources aggregated $516,692,000. This total exceeded that of the previous year by some $62,538,000, and surpassed by $55,835,000 the previous high total of the fiscal year 1928-29. The extent of our recovery from the low point of the depression is strikingly illustrated by the fact that our total revenue for 1937-38 represented an increase of more than 65 per cent over that for the low year 1932-33.
Total revenue from taxation amounted to $448,652,000, and exceeded the total for last year by over $62,000,000. Every major tax source contributed to this increase.
The sales tax for the second successive year led the field as a revenue producer. The total of $138,054,000 was $25,222,000 in excess of the previous year, and this increase resulted almost solely from a heavier turnover of merchandise and a higher price level, as the rate of tax has remained unchanged since May 1, 1936.
The income tax, which along with the sales tax now provides over one-half of our total tax revenue, was the second largest producer. Receipts from this source amounted to $120,366,000, an increase of $18,000,000 over last year, and much the highest total on record. There is no more conclusive evidence, Mr. Speaker, of the substantial improvement in both individual and corporate incomes. Of the total receipts, $69,769,000 was derived from corporations, $40,445,000 from the tax on individual incomes and $10,152,000 from the five per cent tax on interest and dividends.
Excise duties, levied principally on liquor and tobacco, increased $6,080,000 over the previous year, to a total of $52,037,000.
Customs duties accounted for $93,456,000, a substantial increase over last year when the total was $83,771,000. Although this revenue falls far short of previous high totals in 1929 and 1920, it must be noted that the proportion of imports entering this country entirely free of duty is larger at the present time than it has been since the turn of the century. In the two high revenue years mentioned. 1929 and 1920, for example, duty-free imports accounted for only about one-third of the total, whereas last year and the year before free imports amounted to almost one-half of our total imports.
Special excise taxes, of which the three per cent tax on imports is the most important as a revenue source, showed an increase of $3,124,000 over the previous year, the total
receipts amounting to $42,765,000. The bank note circulation tax continues to decline from year to year due to the statutory decreases in the note circulation of the chartered banks.
Non-tax revenues, that is to say, the revenues derived from investments and from various departmental services, aggregated $61,647,000 during 1937-38, and increase of $3,169,000 over the previous year. This increase took place despite the fact that radio licence fees, previously shown as non-tax revenue, were eliminated from the government's accounts in 193738 and credited directly to the Canadian Broadcasting Corporation. The largest single item in this group of non-tax revenues is Post Office receipts which totalled $35,546,000, an increase of $1,271,000 over 1936-37. The nominal surplus on Post Office operations is estimated at $1,784,000. The other major source of non-tax revenue, interest on investments, totalled $13,120,000, as compared with $11,231,000 during the preceding year. This increase is largely accounted for by the receipt of $1,700,000 from the Canadian National Railways representing interest paid on capital advances made to the railway by the government. It will be remembered that payment of interest on these advances was provided for in the C.N.R. Capital Revision Act passed at the last session, so that this represents a new revenue item in our accounts.
Special receipts and other credits for the past fiscal year totalled $6,393,000, as compared with $9,125,000 in the previous year. The exceptionally large figure for 1936-37 was accounted for by the $8,000,000 payment from the Canadian Wheat Board for which there is no counterpart in the year under review. The total this year is comprised mainly of refunds on relief and capital expenditures and a net credit of $1,023,000 resulting from adjustments made in the railway accounts under authority of the C. N. R. Capital Revision Act.

[Stage Direction]
In dealing with expenditures, I shall, for the purpose of analysis and comparison with previous years, use the five main categories in which expenditures are now classified in the public accounts, but I wish again to emphasize the importance of concentrating our attention on the aggregate of our expenditures of all kinds, and on our over-all deficit rather than on ordinary expenditures and the surplus or deficit on ordinary account.

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The ordinary expenditures for the year totalled $410,954,000, an increase of $23,842,000 over the previous fiscal year. As ordinary
The Budget-Mr. Dunning
[Stage Direction]
revenues amounted to $510,299,000, the so-called surplus on ordinary account was almost $100,000,000. As I have already stated, however, this surplus on ordinary account has only slight significance under present conditions which require substantial expenditures for relief and other purposes.
The largest increase in ordinary expenditures was accounted for by the new defence program initiated last year. Total expenditures of the Department of National Defence during 1937-38 amounted to $32,760,000, an increase of $9,837,000 over the previous year. The dominion's share of the cost of old age pensions increased by $7,504,000 to a total of $28,653,000. Special grants to provinces increased by $4,250,000, reflecting depressed conditions in western Canada. The cost of running the Post Office, due chiefly to increased business, rose by $1,856,000 to a total of $33,762,000. I wish to call special attention to an item of $5,000,000 representing the estimated amount required to be transferred to the Government Annuities Fund to maintain the reserve. This amount is very much larger than the provision made in any previous year and the increase results from the necessity of valuing our liabilities under annuity contracts in force as at March 31, 1937 on the basis of the increased rates now in effect. I should add that the figure mentioned is only a rough estimate pending completion of the actuarial calculations by the Department of Labour. It is obvious also that this item adds to our expenditure for the past year an estimated $5,000,000 which is really attributable to the operations of many prior years. Other increases in ordinary expenditure were of minor significance.
Fortunately I am also able to report a number of decreases in ordinary expenditure. Of these the most important were declines of S2,134,000 in ordinary expenditures on public works, $1,306,000 in the cost of operations of the marine branch of the Department of Transport, and $5,292,000 in interest paid on public debt. This last-named decrease in annual interest charges is one to which I will have occasion to refer later.

[Stage Direction]
Total expenditures charged to capital account amounted to $4,430,000, an increase of $938,000 over the previous year. Of this amount $4,359,000 was spent for public works construction.

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The next category of expenditures which J wish to discuss is that important group ox items which are classified as Special, and which this year, as last year, relate solely to disbursements made for unemployment relief purposes. The aggregate of these expenditures for the year 1937-38 amounted to $68,-
532,000,	a decrease of $9,472,000 from the previous year.
Direct grants in aid to provinces declined from $28,930,000 in 1936-37 to $19,493,000 in 1937-38, and the dominion's share of joint dominion-provincial projects, including transportation facilities into mining areas, decreased from $13,913,000 to $10,165,000. The total cost of public works and other projects sponsored by the dominion alone amounted to $13,911,000 last year as compared with $23,554,000 during the preceding year.
The largest single item of special expenditures, however, was necessitated by the disastrous drought in Saskatchewan and Alberta to which reference has already been made. To meet the emergent and unforeseen problems created by this renewed drought condition, the dominion government felt obligated to appropriate funds by governor general's warrants in order to pay the expenditures involved in purchasing and distributing feed and foddeT for live stock in the drought-stricken areas, and in providing direct relief to farmers living in these areas. Agreements were entered into with the provinces of Saskatchewan and Alberta under which the dominion agreed to bear 100 per cent of the cost of direct relief in the drought areas as defined, and 100 per cent of the cost of feed and fodder for live stock, including the net freight charges incurred on live stock shipped from the drought areas to suitable feeding ground and return therefrom. Arrangements were also made for the marketing of surplus live stock which cost the dominion treasury the sum of $337,000. The amount spent for direct relief was $11,925,000 in the drought area; for feed and fodder $11,352,000; and for the purchase and distribution of foodstuffs $971,000. The total of these special expenditures for western drought area relief amounted to $24,585,000, which compared with an expenditure of only $8,751,000 for similar purposes in the fiscal year 1936-37. Of this total, the sum of $19,232,000 was expended from the moneys provided by governor general's warrants.
The following table which I will place on Hansard compares the expenditures made for direct relief and various unemployment relief projects during each of the last two fiscal years:-

The Budget-Mr. Dunning

[Stage Direction]
1937-38
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Grants-in-aid to Provinces	
Dominion's share o! joint Dominion-
Provincial Projects	
Railway Maintenance Works	
Dominion Projects:-
Department of Public Works	
Department of National Defence	
National Harbours Board	
Department of Mines and Resources	
Department of Agriculture	
Department of Transport	
Miscellaneous and Sundry Departments	
Special Drought Area Relief:-
Direct Relief	
Agricultural Relief (feed and fodder and freight on live stock) Food Stuffs	
28,929,774
13,912,623
2,662,084
10,043,785
3,746,849
4,733,256
2,182,794
1,048,738
1,152,035
840,773
5,143,658
3,607,333
78,003,702
19.493.000
10.165.000
7.098.000 75,000
1.565.000
1.474.000
1.937.000 882,000
1.258.000
11.925.000
11.689.000 971,000
68,532,000
GOVERNMENT OWNED ENTERPRISES The next main category of expenditures to which I wish to call attention comprises the losses of, and non-active advances to, government owned enterprises which are operated as separate corporations.
Canadian National Railway System Operating revenues of the Canadian National Railways amounted to $198,396,000, an increase of $11,786.000, or 6-3 per cent over the corresponding figure for 1936, in spite of the falling off in grain traffic in the late months of last year resulting from the crop failure in western Canada.
Operating expenses of the railway increased by $9,311,000 or 5-4 per cent, to $180,789,000, although wage cuts were partially restored in 1937, the increase in the railway's payroll amounting to $6,584,000. This moderate increase in operating expenditures for the higher volume of traffic carried, compared favourably with the showing made last year by other railway systems on this continent.
The net revenue available for interest on the railway's debt was $8,287,000 compared with $6,409,000 in the preceding year. After payment of interest charges of $50,633,000, including $1,685,000 to the government on capital advances not paid in previous years, there was a net income deficit of $42,346,000 for the year, a decrease of approximately a million dollars from the comparable figure for 1936.
Under the provisions of the Canadian National Railways Capital Revision Act, certain changes were required to be made in the books of the dominion. These reflected the transfer to the securities trust of certain indebtedness formerly held by the minister on behalf of his majesty in exchange for capital stock of the trust, together with other adjustments in non-active accounts which resulted in a net credit of $1,023,000 as shown in the table of revenues. A recapitulation of these changes is given in the table which I now place on Hansard:
Adjustment in Public Accounts resulting from Canadian National Railways Capital
Revision Act, 1937
Credit-
Non-active assets:
Railway accounts (old)	$ 25,607,393
Railway accounts (loans non-active)	 655,527,456
Investments in Canadian government railways	 589,708
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Active assets:
Canadian government railway stores and open accounts..	15,748,922

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The Budget-Mr. Dunning
[Stage Direction]
Adjustment in Public Accounts resulting from Canadian National Railways Capital
Revision Act, 1937-Cone.
Debit-
Non-active assets:
Canadian National securities trust stock account	$269,325,706
Canadian National stock account	 18,000,000
Investment in Hudson Bay railway	 457,527
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	$287,783,233
Active assets:
Canadian government railways	working capital	 16,771,980
Charges to consolidated fund	 392,918,266
[Stage Direction]
The increase of $1,023,058 in active assets shown by the above table is due to a transfer from Canadian government railways capital account to active assets-Canadian government railways working capital.
Canadian National Steamships
The operations of the Canadian National (West Indies) Steamships Limited in 1937 after payment of bond interest to the public but before depreciation and interest on government advances, resulted in a surplus of $189,000, which was paid to the government in partial reimbursement of prior deficits and interest. The corresponding figure in 1936 was $87,000.
An advance of $16,000 was made to the company for capital improvements on vessels under its control. In addition to this nonactive advance, the table of expenditure also shows a further amount of $88,000 which represents an adjusting entry in connection with the 1936 surplus which was credited in 1936-37 to loans and advances, non-active.
Harbour Commissions
The operations of harbours under the new national harbours board again showed an improvement over the results obtained during the preceding year. Operating income for the calendar year 1937, after payments of interest to the public but before depreciation and interest payable to the government, totalled $2,872,000 or an increase of $598,000, as compared with 1936. This does not take into account the operations of the Prescott and Port Colborne elevators and of Churchill harbour, which were placed under the control of the board during 1937.
Government assistance to harbour commissions charged to expenditure during the fiscal year totalled $2,272,000.	Of this amount
$289,000 represented the operating deficit of the harbours at Quebec and at Churchill and of the elevator at Prescott. The remainder comprised non-active advances of $367,000 for the deficit on the Jacques Cartier bridge at
Montreal, $1,269,000 for retirement of obligations of the harbour commissions at Halifax and Saint John, and $347,000 for capital purposes at Saint John, Three Rivers and Churchill.	-
In addition to the foregoing items an expenditure of $1,565,000 on various works at certain of the harbours was made under authority of the special supplementary estimates and charged to special expenditures.
Trans-Canada Air Lines
A new item of expenditure appeared for the first time last year in our accounts under the heading of government owned enterprises. This was the net deficit of the Trans-Canada Air lines for the period June 1st to December 31, 1937. The amount of the deficit contributed by the government and charged to expenditure was $111,000.
To sum up, the total amount of assistance to the various government owned enterprises which was treated as expenditure in our accounts was $44,833,000. For 1936-37 the total was $44,218,000, the slightly smaller amount being accounted for by a substantial credit from Canadian National Steamships because of the winding up of the Canadian Government Merchant Marine. Advances to government owned enterprises which are treated as active assets I shall refer to later.

[Stage Direction]
The final category of expenditures, namely, Other Charges, accounts for a total of only $1,718,000 last year as compared with over $19,000,000 in 1936-37. This is comprised of the usual write-offs of soldier and general land settlement loans and the old seed grain and relief accounts, amounting together to $764,000, ascertained losses and concessions granted and credited to settlers' accounts
[Stage Direction]
The Budget-Mr. Dunning
under the New Brunswick 500 British family settlement scheme, amounting to $139,000, and the final charge to consolidated fund of $805,000 of Manitoba treasury bills which were written down to non-active assets last year as the dominion's contribution to the voluntary debt adjustment program in that province. As the write-down to nonactive assets took place last year, the charge to consolidated fund this year is offset by a corresponding credit.
SUMMARY OF EXPENDITURES If we add together ordinary, capital and special expenditures as well as expenditures in connection with government owned enterprises and the other charges to which I have just referred, we find that the grand total of
expenditures for which the government is responsible aggregated $530,467,000 during the fiscal year 1937-38. This is approximately $2,000,000 less than the total for each of the two preceding fiscal years.
I wish again this year to place on Hansard a table showing the percentage distribution of revenues and expenditures, that is to say, the percentage which each major source of revenue and each major item of expenditure bears to our total revenue as well as to our total expenditure. This table is subject to the same defects to which I called attention last year, but with the new form of estimates which we introduced this year I am confident that in future years most, if not all, of these defects can be removed.

[Stage Direction]
(000 omitted)
Revenues	Amount (estimated)	Percentage of total Revenues	Percentage to total ExpendituresOrdinary Revenue-	$	$	sIncome Tax	120,366	23-29	22-69Customs Duties	93,456	18-09	17-62Excise Duties	52,037	1007	9-81Sales Tax	138,054	26-72	26-03Manufacturers', importation, stamp taxes, etc	42,765	8-28	8-06Other tax revenues	1,974	0-38	0-37Total Revenue from taxes	448,652	86-83	84-58Non-tax Revenues	61,647	11-93	11-62Total Ordinary Revenues	510,299	98-76	96-20Special Receipts and Credits	
Other Receipts and Credits- Refunds of capital expenditures and receipts on non-	3,009	0-59	0-57active account	3,384	0-65	0-64Grand Total Revenues	516,692	100-00	97-41Expenditures	Amount (estimated)	Percentage of total Expenditures	Percentage to total RevenuesOrdinary Expenditures-	$	$	$Interest on public debt	132,118	24-91	25-57Cost of loan flotations-	Amortization of bond discount, etc	4,555	0-86	0-88Charges of management	202	0 04	0-04Total public debt charges	136,875	25-81	26-49Subsidies and special grants to Provinces	21,210	4-00	4-10Old Age Pensions	28,653	5-40	5-55Civil Pensions and Superannuation charges	995	0-19	0-19Pensions and after-care of soldiers-	Pensions, War and military	42,240	7-96	8-18Treatment, and after-care of returned soldiers....	12,152	2-29	2-35Total	54,392	10-25	10-53
51952-248-J
The Budget-Mr. Dunning
[Stage Direction]
PERCENTAGE DISTRIBUTION OF REVENUES AND EXPENDITURES, 1937-38-Concluded
(000 omitted)
Expenditures	Amount (estimated)	Percentage of total Expenditures	Percentage to total Revenues$	s	$Ordinary Expenditures-Concluded	9,017 1,850	1-70 0-35	1-74 0-36Agriculture	Legislation	2,309	0-44	0-45Mines and Resources	13,573	2-56	2-63National Defence	32,760	6-17	6-3433,762	6-36	6-53Public Works	12,385	2-33	2-40Transport	14,916	2-81	2-89All other	48,257	910	9-34Total Ordinary Expenditures	410,954	77-47	79-54Capital Expenditures-	71	001	0-01Railways	Public Works	4,359	0-83	0-85Total Capital Expenditures	4,430	0-84	0-86Special Expenditures-	19,493	3-67	3-77Grants-in-aid to Provinces	Dominion Projects	13.911	2-62	2-73Western Drought Area Relief	24,585	4-64	4-76Miscellaneous	10,543	1-99	2-00Total Special Expenditures	68,532	12-92	13-26Government Owned Enterprises- Losses charged to Consolidated Fund-	42,346	7-98	8-20Canadian National Railways	National Harbours Board and Trans-Canada	008	0-08Air Lines	400	Loans and Advances Non-active- National Harbours Board and Canadian National	0-39	0-40Steamships	2,087	Total Government Owned Enterprises	44,833	8-45	8-68Other Charges-	1,718	0-32	0-32Write-down of assets	Grand Total Expenditures	530,4o7	100 00	102-66
annuities reserve and the substantial unanticipated increase in our expenditures resulting from the crop failure in western Canada. As I have already indicated, the increase in our special expenditures resulting from intensified drought conditions was over $20,000,000, and the increase in the C.N.R. deficit arising from this cause was at least $7,000,000. Had it not been for this unfortunate catastrophe, it is clear that to-day I would have been able to report an overall surplus.
The progress which this government has made in approaching its objective of a balanced budget within the shortest practicable period is indicated by the fact that, while the over-all deficit in our first year, 1935-36, was $159,-
989.000,	the deficit was reduced to $77,851,000 in 1936-37, and to $13,775,000 during the past fiscal year.

[Stage Direction]
As I have reported our total revenues at $516,692,000 and our total expenditures at $530,467,000, it is apparent that the over-all deficit, in other words, the increase in net debt, for the fiscal year which ended on March 31 last, was $13,775,000.
While naturally I am disappointed to have to report any deficit, I believe there is cause for gratification over this close approach to a balanced budget after eight years of very large deficits. It will be recalled that for 1936-37 the realized deficit was $77,851,000 and that when I delivered the budget speech last year I did not venture to forecast a deficit for 1937-38 of less than $35,000,000. That we have done so much better than that forecast is all the more gratifying when we consider the abnormal item of $5,000,000 added to the

The Budget-Mr. Dunning

[Stage Direction]
Active Assets
In addition to the expenditures for the year, as outlined, we should also take into account loans and investments which are treated as active assets in the public accounts. For the year under review, the transactions in loans and investments resulted in a net credit to the dominion treasury of $4,202,000 as compared with a net debit during 1936-37 of $21,457,000. In other words, total repayments of loans and advances made in previous years exceeded new advances made during the year by a substantial amount.
Loans to Provinces
The total of loans made to the four western provinces for relief purposes during the fiscal year 1937-38 was slightly higher than the total advanced in 1936-37. The net amount of such loans was $16,298,611 which compares with $15,462,477 made during the preceding fiscal year. The Unemployment and Agricultural Assistance Act of 1937 restricted such assistance to a maximum amount to be measured by the provincial share of the cost of unemployment relief and relief projects incurred under agreements with the dominion entered into pursuant to the act. Furthermore the terms of the act required any province desiring assistance by way of loans to establish the necessity therefor by the submission of detailed statements of the financial position of the province.
As at March 31, 1938, loans made to the four western provinces under authority of the various relief acts were outstanding in the dominion's books to an aggregate amount of approximately $129,800,000. The totals for the various provinces, in round figures, were as follows: Manitoba, $22,285,000; Saskatchewan, $48,350,000; Alberta, $26,079,000; and British Columbia, $33,087,000. In the case of Manitoba, the total which I have given is the amount outstanding after deducting the sum of $804,897 written off in accordance with vote 392 of the further supplementary estimates for 1936-37, and in the case of Saskatchewan the total given is after deducting the sum of $17,682,158 written down to nonactive assets pursuant to vote 393 of the further supplementary estimates for 1936-37.
I desire now to place on Hansard tables showing the net loans made to each province during each of the last seven fiscal years, and a classification of such loans on the basis of the general purposes for which the loans were obtained.

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-	Manitoba	Saskatchewan	Alberta	British Columbia	Total$	$	$	$	$1931-32	2,788,812	10,934,341	4,097,740	4,813,124	22,634,0171932-33	5,171,904	7,578,556	1,902,041	912,636	15,565,1371933-34	2,273,283	5,469,240	4,050,743	1,321,761	13,115,0271934-35	2,874,631	10,141,014	1,926,476	7,966,714	22,90S,8351935-36	2,396,226	14,245,478	13,104,000	12,558,445	42,304,1491936-37	4,626,000	6,058,879	805,198	3,972,400	15,462,4771937-38	2,959,188	11,604,787	193,000	1,541,636	10,298,611Less reductions as provided by votes 392 and 393 of further supplementary estimates 1936-	23,090,044	66,032,295	26,079,198	33,086,716	148,288,25337	804,897	17,682,158	-	-	18,487,055-22,285,147	48,350,137	26,079,198	33,086,716	129,801,198
The Budget-Mr. Dunning

[Stage Direction]
-	Loans specifically to meet maturing obligations and interest	Loans specifically for agricultural relief including purchase of seed grain	Loans for Provincial purposes generally including direct relief and public works	Total$	$	$	$1,139,455 3,934,341 8,577,000 9,818,845	234,819 15,134,633 3,152,748	21,715,770 46,963,321 14,349,450 23,267,871	23,090,044 66,032,295 26,079,198 33,086,716
British Columbia					
	23,469,641	18,522,200	106,296,412	148,288,253
	Less reductions as provided by votes 392 and 393 of further supplementary estimates 1936-37, Manitoba $804,897 and Saskatchewan $17,682,158				18,487,055
				129,801,198
Loans to Canadian National Railway System
In addition to paying the net income deficit of the Canadian National Railways, the government advanced to the Railway 811,035,000 for capital purposes and for the retirement of miscellaneous obligations. This amount, together with advances of $41,358,000 made for similar purposes in the years 1932 to 1936, were repaid to the extent of $50,000,000 out of the proceeds of a dominion guaranteed bond issue marketed in January, 1938. This issue took the form of $20,000,000 2 per cent four-year bonds yielding 2-20 per cent and $30,000,000 3 per cent thirteen-year bonds yielding 3-29 per cent. An amount of $2,393,000 of temporary loans remaining unpaid is carried on the books of the dominion as an active asset.
There was also advanced to the Canadian National Railway Company $3,390,000 for the construction of the Senneterre-Rouyn branch line, $1,500,000 for the purchase of the capital stock of the Trans-Canada Air Lines and $7,040,000 as a temporary loan pending the passing of the 1938 budget of the Railway Company. A repayment of $394,000 was received on account of loans made in prior years for betterment and repairs to railway equipment. The net result of these various transactions was a reduction in government loans to the Canadian National Railways of $27,429,000, but an increase in our indirect liabilities of $50,000,000.
Mr. BENNETT:: Which should have been included as part of the national debt.


Mr. DUNNING:: Not according to law.


Richard Bedford Bennett: But according to the arrangement.


Charles Avery Dunning: No.
I Mr. Dunning.]
Other Loans and Investments
During the fiscal year, the government's purchases of Canadian Farm Loan Board 3i per cent bonds amounted to $3,550,000, and of the board's capital stock to $282,000. An amount of $10,000 was advanced to the board as initial capital under the authority of the Fisherman's Loan Act. A further amount of $6,000 was advanced to the board to cover losses on operations in respect of loans made under the provisions of part II of the Canadian Farm Loan Act. As at March 31, 1938, the total investment by the Government of Canada in the farm loan board had reached $31,598,000.
An amount paid out by the government during 1937-38 on loans approved under the terms of the Dominion Housing Act totalled $1,679,000. The dominion's share of such loans is not in excess of 20 per cent of the lending value of each property financed under the act and is paid out from time to time as required after loans are approved.
During the year $1,891,000 was advanced to the National Harbours Board for the ports of Montreal and Vancouver for capital purposes. These loans are considered as active assets, as both these ports have paid a substantial part of the interest accrued on their obligations held by the government.
A loan of $500,000 was made to the Canadian Broadcasting Corporation to assist in the building of two broadcasting stations.
Owing to the winding up of the Canadian Government Merchant Marine, it was necessary to provide $450,000 by way of loan to the Canadian National (West Indies) Steamships Limited for working capital purposes.

The Budget-Mr. Dunning
Loans to the Canadian Pacific Railway Company made in previous years for relief purposes were reduced by $211,000. In addition, railway equipment was purchased to a value of $89,000 which in turn was leased to the Canadian Pacific Railway Company.
The dominion's investment in the government of Roumania's bonds was increased by $359,000 due to the receipt of bonds representing an adjustment for interest unpaid in 1931.
A repayment of $1,422,000 was received during the year in reduction of loans to provinces for housing purposes, made under the act of 1919. The increase in active loans to the soldier settlement board amounted to $505,000, which was more than offseJ by a write-off of $750,000 to consolidated fund.
The following is a statement of the amount of loans and investments made during the last fiscal year which are regarded as active assets and the comparable figures for the four preceding years:
LOANS AND INVESTMENTS, ACTIVE (000 omitted)
-	1933-34	1934-35	1935-36	1936-37	Estimated 1937-38$	$	$	$	$Canadian National Railways	2,628	16,579	3,689	4,573	Cr. 27,429Canadian Pacific Railway	-	-	1,270	555	Cr. 211Canadian Farm Loan Board	416	353	7,933	10,991	3,848Dominion Housing Loans	-	-	82	995	1,679National Harbours Board	1,677	393	1,438	323	1,891Provinces-under relief legislation	13,115	22,909	42,304	15,462	16,299Provinces-housing program 1919	Cr. 213	Cr. 397	Cr. 3,003	Cr. 2,038	Cr. 1,422Railway equipment purchased	-	-	7,244	5,120	89Soldier and general land settlement	Cr. 726	Cr. 102	Cr. 566	Cr. 489	505Roumanian government	-	-	-	-	359Bank of Canada-Class "B" shares	-	-	-	5,100	-Canadian Broadcasting Corporation	-	-	-	-	500Canadian National (West Indies) Steam-	ships	-	-	-	-	450Net Advances	16,897	39,735	60,391	40,592	Cr. 3,442Less write-offs-	Soldier and general land settlement	loans	-1,766	-469	-488	-628	-750Canadian Farm Loan Board-capital	stock	-	-	-	-20	-10Write-down to non-active assets-	Manitoba and Saskatchewan treasury	bills	-	-	-	-18,487	-Net change in active investments	15,131	39,266	59,903	21,457	Cr. 4,202



LOAN FLOTATIONS

[Stage Direction]
The fiscal year under review witnessed a heavy amount of government financing. Obligations of the government falling due during the year, including $52,000,000 of sterling issues maturing on July 1, 1938 which it was considered wise to provide for by prior financing, totalled $321,920,508 and both my predecessor and myself had looked forward, perhaps at times with a little misgiving, to the magnitude of the task which the year 1937-38 would bring. I am now pleased to be able to report that all this
financing was successfully accomplished, and the maturing obligations were paid off or refunded at a substantial interest saving to the country. New dominion obligations were floated to a total amount of $295,460,138, and the maturing obligations were redeemed out of the proceeds of these new issues and out of cash of $26,460,370 supplied directly from the treasury.
In the table which I now place on Hansard full details of the amounts and terms of each of the new issues and of the prices at which they were sold are set forth.
The Budget-Mr. Dunning

[Stage Direction]
Issue Date	Maturity Date	Interest Rate	Where Payable	Price	Yield at	Amount Issued	Purpose to Refund	To Public	To Govern- ment*	Public Price	Price to Government	Amount	Int. Rate1937	%	%	%	%June 1	June 1, 1939	1	Canada	99.25	99.125	1-38	1-45	$20,000,000	June 1	June 1, 1942	2	Canada	98.25	98.00	2-375	2-43	60,000,000	$113,500,000	51June 1	June 1, 1949	31	Canada	99.00	98.25	3-35	3-43	33,500,000	July 1	July 1, 1938	4	Canada	100.00	4-00	33,293,471	33,293,471	4(School Lands)	Nov.15	Nov. 15, 1944	21	Canada	98.50	98.125	2-74	2-80	20,000,000]	Nov.15	Nov. 15, 1951	31	Canada	99.00	98.25	3-34	3-41	60,000,0001	122,799,800	51Dec. 1	June 1, 1939	1	Canada	99.125	99.00	1-59	1-68	20,000,000]	1938	July 1**..	July 1, 1963	31	London	98.50	97.18	3-34	3-42	48,666,667	f 37,271,230	3I 15,056,007	31$295,460,138	$321,920,508	
'Price to public, less commission to underwriters and dealers.
''Issued in January, 1938, to provide funds to pay off bonds aggregating $52,327,237, which are to mature in London on July 1, 1938.		
As a result of these refunding operations during the past fiscal year the government has effected a saving in interest charges of $6,342,000 per year. Since the present government took office in October, 1935, the refunding operations which have been carried out have effected an annual saving of over $10,-
200,000.	In addition the calendar year 1937 saw the elimination of the last two tax-free bond issues sold to the public during the war period. These two issues-the five per cents maturing on March 1st, 1937, and the five and one-halfs maturing on December 1st, 1937-had been outstanding in total amount of over $326,000,000, and they required an annual interest payment of over $17,485,000. The fact that these tax-free issues have been replaced by taxable issues means that in future years our income tax revenues should be substantially increased. It is impossible to determine precisely what this increase should be, but if we assume that the cash proceeds of the two tax-free issues were reinvested by their former holders to yield an average return of 3i per cent and if we assume that these holders paid an average rate of tax on this income as low as the corporate rate, namely, 15 per cent, the estimated annual increase in income tax revenues would be over $1,700,000.
During the year we continued the established practice of offering fortnightly issues of three months' treasury bills. While the primary purpose of these offerings is to assist in the effective functioning of the short-term money market by keeping available at all times a reasonable amount of liquid credit instruments of the highest grade, they also

serve, of course, to provide a revolving fund of cash which is available at very low interest rates. The last issue of treasury bills during the fiscal year 1937-38 was sold at what was up to that time the record low yield of -524 per cent. Since that time, however, rates have tended still further downwards, and our latest offering, dated June 1st, was sold on a yield basis of -466 per cent. The average cost to the treasury of funds obtained by the twenty-four offerings made during the fiscal year was a yield basis of -689 per cent. The total amount of treasury bills outstanding on March 31st, 1938, was $150,000,000, the same as was outstanding a year previously.

[Stage Direction]
As of March 31st, 1938, the outstanding unmatured funded debt and treasury bills of the dominion, less sinking funds, amounted to $3,248,900,000. Adding to this amount $287,400,000 of other liabilities, consisting chiefly of annuity, insurances and superannuation funds, post office saving deposits and certain trust and contingent accounts, we arrive at gross liabilities for the dominion of $3,536,300,000. Active assets, including cash on hand and investments, amounted to $438,573,000. After deducting the latter figure from the gross liabilities we reach an estimated net debt of $3,097,727,000 as at the close of the fiscal year. The increase over last year of $13,775,000 represents, of course, the amount of the over-all deficit to which I have previously made reference.
I now place on Hansard a statement showing the assets and liabilities of the dominion as estimated as at March 31st, 1938.
JUNE 16, 1938 3919 The Budget-Mr. Dunning		
LIABILITIES-MARCH 31, 1938 (estimated) Bank Circulation Redemption Fund			$	5,967,000
Post Office money orders, postal notes, etc., outstanding			3,665,000
Post Office Savings Bank Deposits			22,588,000
Insurance and Superannuation Funds- Government Annuities	$	103,703,000	
Insurance Fund, Civil Service		11,385,000	
Insurance Fund, Returned Soldiers		16,827,000	
Retirement Fund		9,126,000	
Superannuation Fund		56,151,000	
Trust Funds- Indian Funds		14,082,000	197,392,000
Common School Funds		2,677,000	
Contractors' Securities Deposits		1,157,000	
Other Trust Funds		3,036,000	
		20,952,000
Contingent and Special Funds			2,981,000
Outstanding cheques			9,885,000
London Loan Suspense (registered stock 1958-63)			8,988,000
Province Debt Accounts			9,624,000
Interest due and outstanding			1,680,000
.pUnded Debt- * Unmatured less sinking funds		3,248,900,000	
Matured and outstanding		3,678,000	
	$	3.252.578.000 3.536.300.000
ASSETS-MARCH 31, 1938 (estimated) Active Assets- Cash, working capital advances and other current assets			 $	16,665,000
Bank of Canada, class "B" shares			5,100,000
Gold Bullion account			16,000
Loans to Provinces- Housing	$	3,308,000	
Relief Acts		129,801,000	
Subsidy Account, Alberta		469,000	
Loans to Foreign Governments- Greece		6,525,000	133,578,000
Roumania		24,329,000	
Loans to National Harbours Board- Montreal		60,114,000	30,854,000
Vancouver		24,977,000	
New Westminster Harbour Commissioners			85,091,000 275,000
Dominion Housing Act-Loans			2,755,000
Canadian Farm Loan Board			31,598,000
Soldier and General Land Settlement			42,233,000
Loan to Canadian Broadcasting Corporation			500,000
Loan to Canadian National (West Indies) Steamships			450,000
Seed Grain and Relief Advances			2,364,000
Canadian Government Railways working capital			16,772,000
Deferred debits- Unamortized discount and commission on loans			 $	41,209,000
Bond Holding Account			328,000
Railway Accounts- Canadian National Railways- Advances, Financing and Guarantee Act, 1937		2,393,000	
Senneterre-Rouyn Railway Line		3,390,000	
Trans-Canada Air Lines		1,500,000	
Temporary Loans		7,040 000	
Loans for betterment or repair of railway equipment		395,000	
Purchase of equipment-leased		6,723,000	
Canadian Pacific Railway- Loan for betterment or repair of railway equipment		1,170,000	21,441,000
Loan for wages on special works program		444,000	
Purchase of equipment-leased		5,730,000	
	$	7,344,000 438,573,000
Net debt, March 31, 1938			 $	3,097,727,000
The Budget-Mr. Dunning
[Stage Direction]
assets-march 31, 1938-Concluded
(estimated)
Net Debt represented by-
A. Expenditure and non-active assets, March 31,1938 (estimated).
Capital expenditures-
Public Works-
Canals	 240,350,000
Railways	 429,691,000
Public buildings, harbour and river improvements	 286,507,000
Military property and stores	 12,050,000
Territorial accounts	 9,896,000
Loans non-active-
Canadian National Railways Security Trust..
Canadian National Railways Stock	
Canadian National Steamships	
Railway Accounts (old)	
Loans to Province of Saskatchewan (Relief Acts)
National Harbours Board-
Quebec	 26,293,000
Chicoutimi	 3,796,000
Churchill	 9,000
Halifax	 10,468,000
Saint John	 16,003,000
Three Rivers	 3,554,000
Montreal (Jacques Cartier Bridge)	 3,313,000
Seed Grain and Relief advances	
Soldier and General Land Settlement. Miscellaneous advances	
978.494.000
269.326.000 18,000,000
13.858.000
62.791.000
17.682.000
63.436.000 478,000
16.653.000 3,536,000
B. Consolidated Fund-
Balance, consolidated fund brought forward from March 31,
1937		 1,250,051,000
Excess of expenditure over revenue, fiscal year ended March 31,
1938	(estimated)	 10,503,000
Charges authorized by C.N.R. Capital Revision Act, 1937...	392,919,000
[Stage Direction]
 1,653,473,000
$	3,097,727,000
The following table, which I also wish to unmatured funded debt and treasury bills of 1938, and the annual interest charges thereon:
place on Hansard, gives a statement of the the dominion outstanding as at March 31,
[Stage Direction]
The Budget-Mr. Dunning

[Stage Direction]
Date of Maturity	Rate Per Cent	Where Payable	Amount of Loan	Annual Interest Charges
			$ cts.	S cts.
1938, July 1	4	Canada	33,293,470 85	1,331,738 83July 1	3	London	8,071,230 16	242,136 90July 1	3	London	18,250,000 00	547,500 00July 1	3	London	10,950,000 00	328,500 00July 1	London	15,056,006 66	526,960 23Oct. 15	2	Canada	90,000,000 00	1,800,000 001939, Jan. 1	2	New York	40,000,000 00	800,000 00June 1	1	Canada	20,000,000 00	200,000 00June 1	1	Canada	20,000,000 00	200,000 00Oct. 15	4	Canada	47,269,500 00	1,890,780 00Oct. 15	2,	Canada	7,933,000 00	198,325 00Nov. 15	2	Canada	20,000,000 00	400,000 001940, Mar. 1	3	Canada	115,013,636 82	3,450,409 10June 1	n	Canada	80,000,000 00	1,200,000 00Sept. 1	4J	Canada	75,000,000 00	3,375,000 001941, Mar. 15	1	Canada	45,000,000 00	450,000 00Nov. 15	5	Canada	141,663,000 00	7,083,150 001942, June 1	2	Canada	60,000,000 00	1,200,000 00Oct. 15	3	Canada	40,401,000 00	1,212,270 001943, June 1	2J	Canada	20,000,000 00	500,000 00Oct. 15	5	Canada	147,000,100 00	7,350,005 001944, Jan. 15	2*	New York	30,000,000 00	675,000 00Oct. 15	Canada	50,000,000 00	2,250,000 00Nov. 15	2\	Canada	20,000,000 00	500,000 001945, Aug. 15	2\	New York	76,000,000 00	1,900,000 00Oct. 15	4	Canada	88,337,500 00	3,533,500 001946, Feb. 1	4j	Canada	45,000,000 00	2,025,000 001947, Oct. 1	2}	4,888,185 64	122,204 641949, June 1	31	Canada	33,500,000 00	1,088,750 00Oct. 15	31	Canada	138,322,000 00	4,841,270 001950, July 1	31	London	137,058,841 00	4,797,059 431951, Nov. 15	31	Canada	60,000,000 00	1,950,000 001952, May 1	5	New York	100,000,000 00	5,000,000 00Oct. 15	4	Canada	56,191,000 00	2,247,640 001955, May 1	31	London	48,666,666 67	1,581,666 67June 1	3	Canada	40,000,000 00	1,200,000 00June 1	3	Canada	55,000,000 00	1,650,000 001956, Nov. 1	41	Canada	43,125,700 00	1,940,056 501957, Nov. 1	41	Canada	37,523,200 00	1,688,544 001958, Sept. 1	4	London	73,000,000 00	2,920,000 00Nov. 1	41	Canada	276,687,600 00	12,450,942 001959, Nov. 1	41	Canada	289,693,300 00	13,036,198 50I960, Oct. 1	4	London	93,926,666 66	3,757,066 67Oct. 1	4	New York	100,000,000 00	4,000,000 001961, Jan. 15	31	New York	48,000,000 00	1,560,000 001966, June 1	31	Canada	54,703,000 00	1,777,847 50Perp. Sept. 15	3	Canada	55,000,000 00	1,650,000 001967, Jan. 15	3	New York	55,000,000 00	1,650,000 00Demand	6	Canada	4,000 00	240 00Demand	6	Canada	11,827 40	709 64Demand	31	Canada	9,600 00	336 00Treasury Bills due April 1, 1938...	[DOT]744	Canada	25,000,000 00	186,000 00Treasury Bills due April 14, 1938. .	*726	Canada	25,000,000 00	181,500 00Treasurv Bills due April 30, 1938..	[DOT]700	Canada	25,000,000 00	175,000 00Treasury BillsdueMay 16, 1938...	[DOT]648	Canada	25,000,000 00	162,000 00Treasury Bills due June 1,1938....	[DOT]584	Canada	25,000,000 00	146,000 00Treasury Bills due June 15, 1938...	[DOT]524	Canada	25,000,000 00	131,000 003,314,558,031 86	117,062,906 61Payable in Canada..	2,455,690,435 07	74-09%Payable in New York	449,000,000 00	13-55%Payable in London...	409,867,596 79	12-36%3,314,558,031 86	100 %Less bonds and stocks of the above loans held as	sinking funds...	65,657,699 66	3,248,900,332 20	
The Budget-Mr. Dunning

[Stage Direction]
Bonds and debenture stocks bearing the guarantee of the dominion outstanding in the hands of the public at the close of the last fiscal year amounted to $1,050,608,000. Canadian National Railway guaranteed obligations increased by $47,577,000 to $1,019,947,000 due to the issue of $50,000,000 guaranteed bonds to repay temporary loans obtained by the railway from the government for capital purposes, less retirements of serial issues in the amount of $2,423,000. Guaranteed bonds of harbour commissions and steamships decreased by $304,000 during the year under review.
There are also outstanding other contingent liabilities arising out of guarantees given under relief and other acts. During the fiscal year under review the only new guarantee was that under The Saskatchewan Seed Grain Loans Guarantee Act, 1936. Under provincial statutes the province of Saskatchewan guaranteed loans made by chartered banks to municipalities or to the Department of Municipal Affairs for seed grain assistance to farmers during the crop year 1936. The provincial guarantee is in turn supplemented by a dominion guarantee, the amount of which at March 31, 1938, was $2,555,000.
A similar arrangement was made under the terms of The Seed Grain Loans Guarantee Act. 1937, to provide for seed grain assistance to farmers in the provinces of Manitoba, Saskatchewan and Alberta during the crop year 1937. Pending the submission of definitive documents no formal guarantee has yet been given by the dominion. The amounts involved for each province are approximately as follows: Manitoba, $130,000, Saskatchewan, $6,498,000 and Alberta, $911,000.
There were also outstanding at the close of the fiscal year guaranteed bank loans to
the Canadian Wheat Board in the amount of $489,000 and to the Canadian Cooperative Wheat Producers Limited in the amount of $169,000 for the purchase of oats for the account of the province of Saskatchewan. The guarantee of the dominion to the Winnipeg Grain and Produce Clearing Association Limited, referred to in previous budgets, is still outstanding, although trading by the board in futures is very limited. No liability in connection with the guarantee accrues from day to day as margin deposits are made to the clearing association daily.
At March 31, 1938, home improvement loans had been granted by banks and approved lending institutions to home owners in the amount of $14,526,000. The dominion's contingent liability with respect to these home improvement loans is limited to 15 per cent of the aggregate of such loans made by each approved lending institution. As claims for losses have been paid in the amount of $2,500, our contingent liability as at March 31, 1938, w'as $2,176,400. While it is far too early to form any judgment as to what our ultimate losses may be, it is encouraging to note that at the end of the first 17 months of the operation of the plan, the loss ratio is insignificant, only 11 loss claims for $2,500 having been paid out of 37,108 loans in the total amount of S14,526,000. In terms of dollar losses to total volume of loans, this means a loss ratio over the seventeen months of only slightly over l/60th of 1 per cent.
I shall now place on Hansard a statement of the principal amount of bonds and debenture stocks and other indebtedness guaranteed by the dominion outstanding at March 31, 1938.

[Stage Direction]
Date of Maturity	Issue	Interest Rate	Amount OutstandingMay 1, 1938	% 2	$ 13.400.000	00 750.000	00 20,000,000 00 55.000.	000 00 15.500.000	00 35.000.	000 00 24.238.000	00 700.000	00 50.500.000	00 50.000.	000 00 20.000.	000 00 667,953 04 25,000,000 00 9,359,996 72Aug. 1, 1938	5	Jan. 15, 1942	2	Feb. 15, 1943	0	Feb. 1, 1944	2* 3	May 1, 1944	July 1, 1946	6	Apr. 1, 1948	4! 3	Dec. 15, 1950	Sept. 1, 1951	4* 3	Feb. 1, 1952	Aug. 1, 1952	5	Feb 15, 1953	3	July 10, 1953	Canadian Northern	3	
[Stage Direction]
The Budget-Mr. Dunning
BONDS AND DEBENTURE STOCKS GUARANTEED BY DOMINION GOVERNMENT AS AT MARCH 31, 1938-Cone.
Date of Maturity	Issue	Interest Rate	Amount Outstanding
		%	*
		5	50,000,000 00
Mar. 1, 1955		Canadian National (West Indies) Steamships Limited		5	9,400,000 00
		4f	50,000,000 00
		41	70,000,000 00
		41	65,000,000 00
		31	7,896,543 87
		3|	3,149,998 66
		3|	34,229,996 87
		3	34,992,000 00
		4	8,440,848 00
		5	60,000,000 00
		5	60,000,000 00
		5	19,000,000 00
		5	18,000,000 00
		2	23,282,603 80
	City of Saint John Debentures assumed by Saint		
		\ arious	892,641 72
		4	60,833,333 33
<«	5	20,782,491 67t< ' '	5	13,252,322 67it	4	119,839,014 33Northern Railway of Canada Debenture Stock..	4	1,499,979 671,050,607,784 35
Other Indebtedness Guaranteed
Bank Advances, re Province of Manitoba Savings Office	5
Bank Advances, re Government of Newfoundland	* [DOT]	 [DOT]	
Bank Advanoes, re Dominion Steel and Coal Corporation (order for rails).
Province of Manitoba Treasury Bill	
Province of British Columbia Treasury Bill	[DOT] [DOT] [DOT] *	
Bank Advances, re Canadian Co-operative Wheat Producers (Saskatchewan
Oats Account)	_	
Bank Advances, re Canadian Wheat Board	
Bank Advances, re Saskatchewan Seed Grain Loans	*[DOT] *
Guarantee of Home Improvement Loans (15 per cent of aggregate loans made)
less claims paid	
Deposits maintained as reserves by chartered banks in Bank of Canada....
Principal Amount Outstanding Mar. 31, 1938
6,875,932
625,000
9,724
4,878,764
626,534
168,909
488,965
2,555,113
2,176,391
194,859,595
I now come to that part of the budget for which you have all more or less patiently waited.

[Stage Direction]
I have already stated that the over-all deficit for the past fiscal year is estimated at $13,775,000. In the budget a year ago, I forecast a deficit of $35,000,000, and stated that in accordance with the government's definite program of attaining the final objective of a balanced budget at the earliest practicable date, I hoped to wipe out the deficit altogether during the current fiscal year. While we have been able to do very much better than my forecast for 1937-38, conditions
beyond our control have made it difficult, if not wholly impossible, to achieve the goal I had in mind for 1938-39.
The house will recall that the main and supplementary estimates, already submitted, call for total appropriations of $524,600,000. If we can judge by the experience of previous years, the departments will be able to effect considerable savings in their appropriations, and these savings, judging from experience, should be more than sufficient to offset any additional expenditures that may be authorized. I believe,, therefore, that I am safe in estimating that total expenditures for the current fiscal year will not exceed $524,600,000.
The Budget-Mr. Dunning
[Stage Direction]
Our revenue prospects for the full year will be greatly influenced by whether or not our hopes for a good wheat crop are realized and whether or not the current trend of business in the countries which constitute our chief markets show improvement during the next few months. However, two and one-half months of our current fiscal year have already elapsed and our revenues for tihis period provide a fairly good basis for estimating our total receipts for the year. On the basis of these partial returns and of a reasonable forecast of business prospects for the remainder of the year and allowing for the tax changes which I am about to announce, I estimate that for the year as a whole our aggregate revenue will approximate $501,700,000 made up as follows:
Taxation revenue:
Customs duties	$ 82,000,000
Excise duties	 51,000,000
Income tax	 138,000,000
bales tax	 125,000,000
Manufacturers', stamp, importation and other special taxes.. 39,000,000 Banks and insurance companies.. 1,950,000
Total taxation revenue.. .. $436,950,000
Non-tax revenue:
Post office receipts	$ 35,000,000
Interest on investments	 13,500,000
Other	 13,250,000
Total non-tax revenue.. .. $ 61,750,000
Total ordinary revenue.. .. $498,700,000 Special receipts	 3,000,000
Grand total revenue	$501,700,000
These estimates of revenue and expenditure indicate an estimated deficit for the current year of approximately $23,000,000. I do not think it will be larger than this. It may indeed be substantially smaller, if the west produces a good crop, if the business trend in the United States and other important countries is reversed at an early date, and if our own construction industry takes full advantage of the opportunities now afforded to it. I may add that the results of such favourable developments will not be wholly realized until next year and not be fully reflected in the government accounts until the next budget.
In view of the current business situation, we have not thought it wise to attempt this year to wipe out a possible deficit of the moderate proportions I have indicated by imposing further burdens upon industry and upon the people. On the contrary in the tax changes which are being proposed we are trying in the first place to eliminate certain

anomalies and inequities and in the second place to make certain important adjustments designed to accelerate the forces making for business recovery.
Tax Changes
Under the Income War Tax Act, no changes will be made in the rates of tax on individual and corporate incomes. Amendments to this act, however, will include a provision to allow Canadian companies a deduction in respect of lump sum contributions to employees' pension funds covering past years' services, such deductions to be spread forward over a ten-year period. The government hopes that this concession will encourage the present tendency in industry to create pension funds for employees. Annuities received under the provisions of any will or trust will be made taxable. In respect of royalties paid abroad from sources within Canada, no deduction will be allowed on account of the amount of any such royalties passed on to another party. An amendment will also be made to assure that financial companies operating in the small loan field will in future be subject in all cases to the normal corporation tax rates. The gift tax provisions are to be amended in order to allow an exemption up to one-half of a person's taxable income less the amount of income tax paid. This is to meet the objection which has been raised in this house to the fact that the gift tax in its present form is unduly severe in its effects on gifts which were not made for the purpose of tax avoidance. At the same time, we propose to discourage still further the making of gifts for tax avoidance purposes by substantially increasing the rates applying to gifts in excess of the increased exemption. The new schedule of rates will be graduated from 5 per cent on gifts totalling $25,000 or less, up to 15 per cent on gifts of $1,000,000 and over.
Provision is also to be made to allow Canadian parent companies an exemption from corporation tax in respect of dividends received from wholly-owned non-resident subsidiaries if at least 75 per cent of the combined capital of the parent and subsidiary companies is employed abroad and if the country in which the subsidiary is located grants a like exemption to parent companies in respect of subsidiaries in Canada.
It is also proposed to insert a provision in the act designed to prevent taxpayers from effecting transactions, using persons or corporations abroad for the purpose of evading Canadian taxation and not for business reasons.

The Budget-Mr. Dunning
No changes are proposed in respect of rates of tax under the Excise Act.
Under the Special War Revenue Act, one important change and several minor ones are proposed. The minor changes, include an amendment to exempt from the sales tax feed for all fur bearing animals, harness, harness parts and materials used in the manufacture thereof, ingredients used in making gopher poison, and materials for the repair of fishermen's boats. Another amendment provides that in future the special excise tax on tires and tubes will in no case be levied when the items in question are for original equipment of automotive vehicles including tractors, trucks, trailers and motor cycles.
I come now to the most important change in taxation which the government proposes. Starting to-morrow the major products used for the building of houses, will be given complete exemption from sales tax. It is proposed that this exemption from sales tax shall cover all lumber, sashes, doors, laths, and shingles; bricks, building tile, building blocks, cement, stone, plaster and lime; plaster boards, fibre board, insulating materials, building paper and wallpaper; paints, varnishes, white lead and paint oil; prepared roofings; glass for buildings; plumbing fixtures, not including piping and pipe fittings; furnaces for heating buildings; builders' hardware; and some other minor items. It will be realized, I am sure, that an exemption of the type here attempted presents considerable difficulties, and it was found impossible to provide specific exemption in respect of all the hundreds of various miscellaneous items entering into the construction of houses. It was necessary to make a selection but all the important materials which have their primary or predominant use in house-building are included. Accordingly, lumber, for example, although having many other uses, will be tax-exempt no matter for what purpose it is used. This will be the case with all the items exempted.
I believe the house will agree that this proposed tax change is highly constructive. Coupled with the various legislative measures which the government has already introduced, this tax reduction should act as a further powerful stimulus to the construction industry. If these various measures now before the house result in restoring normal construction activity, a large proportion of our remaining employable unemployed will go back on the payrolls of industry and to self-reliant citizenship. These important objectives are in my opinion ample justification for so radical a proposal. I need only add that the benefits of these tax reductions must be passed on to the consumer, and personally I am confident
that the construction industry, for which so much is being done, will rise to the occasion with a renewed efficiency and vigour worthy of the great opportunity now presented to it.

[Stage Direction]
For reasons which I believe will commend themselves to the house, I am not proposing any amendments to the customs tariff in the present budget resolutions. It is true that the government had hoped that it would be found feasible to deal with a new United States agreement as part of this year's budget. Circumstances, however, have compelled us to abandon that expectation and the government, therefore, is not proposing any changes in the Canadian tariff pending the satisfactory conclusion of the negotiations now in progress.
In the budget speech two years ago, I said, "Canada cannot give to-day and bargain to-morrow." It is even, more true, Mr. Speaker, in the world as it is to-day that unilateral tariff reductions will not get the wider export markets which our products need and which the government is securing for them. Since the present administration came into office, Canada has been a contracting party to the two most comprehensive trade agreements that have been concluded since the great war. Our agreement with the United States in 1935 and our agreement with the United Kingdom in 1937 resulted in the reduction of effective duties on a wide range of Canadian imports. They also secured the enlargement and consolidation of marketing opportunities for Canadian exports in the two biggest import markets of the world, which in the last calendar year took between them about eighty per cent of Canada's total exports. They were long strides towards our goal-both in intra-imperial and international trade-of lowering tariff barriers and freeing trade from fettering restrictions. We are now ready for further progress in this direction and we hope to take it in concert with the United Kingdom and the United States.
No commercial treaty policy can, in the nature of things, ensure against the disturbing influences on our national economy of industrial depression to the south of us, or of wars and rumours of wars to the east and the west of us. These disturbing influences are apparent from the most casual scrutiny of our trade returns. The returns reveal an expansion of those exports for which demand has been increased by the fears of war, and at the same time a falling off in the value of those exports for which demand depends on peace and prosperity in the countries which normally buy our goods. This is not, fundamentally, a healthy condition. The
The Budget-Mr. Dunning
[Stage Direction]
world itself is not in a healthy condition and Canada's economic relations with the outside world reflect the disturbances beyond our frontiers.
I see no reasonable hope of restoring normal trade relations except by a vigorous prosecution of the policy of tariff reduction through bilateral trade agreements, a policy for which this government has stood since its entry into office. For better or worse, the force of circumstances has eliminated at least for the present the alternative approaches of unilateral or universal action. The United States is not prepared to reduce its tariffs except by way of trade agreements, and the United Kingdom is now pursuing a similar policy. This being the present attitude of our two best customers, it is surely apparent that Canada should try to reach agreement with them rather than to pursue at this time an isolated policy of further unilateral tariff reductions. I do not think there should be any real difference of opinion as to where the national interest of this country lies. It is bound up inseparably with the restoration of free and stable international trading conditions. Every effort in that direction has had and will continue to have our wholehearted support and practical cooperation.
It would not be proper for me, at this time, to make any statement with regard to the negotiations looking toward the conclusion of new trade agreements between Canada and the United States, and the United States and the United Kingdom, which have been pursued steadily in Washington for some months now. We have embarked, it is true, on a big and difficult undertaking which for its successful completion will require the continuing collaboration in good faith of all the countries concerned. We believe that all the benefits of the good neighbourhood which we in Canada appreciate in our relations with the United States of America can be fully realized only through closer cooperation in the economic field between the United States and all the countries of the British commonwealth. The process of translating these hopes, which we all share, into concrete results has been difficult and protracted. In the present instance, it is clear that if we are to find fair and practicable solutions to the problems involved. Canada must make its contribution along with the rest towards a general settlement. It is perhaps true that in some areas and in some industries we have been enjoying the best of both worlds, and it has been argued, therefore, that our interest is to sit tight and exploit such privileges for what they are worth-while they last. Such an attitude is obviously shortsighted; it is

certainly not the policy of this government, which is striving, on the basis of reciprocity and fair dealing, to work out trade arrangements with all nations which will serve the best interests of Canada as a whole.
I shall not attempt to prophesy the consequences that may follow from a successful completion of the present negotiations. I cannot refrain, however, from reminding the house that proof of the will and capacity of the countries of the British commonwealth of nations and the United States of America to cooperate in the field of trade will be a political fact of world importance. Conversely, the acknowledgment of inability to do so would limit the influence of the great democracies as a stabilizing factor in a disturbed world. The economic benefits of success in our efforts would not be confined to the trade and prosperity of the countries directly engaged in these negotiations. They would, through the application of the policy of equal treatment in commercial matters, be shared in some degree by every country in the world. The progressive reduction of the tariffs of the great trading nations will undoubtedly lessen the present strains under which the economies of many less fortunate nations are labouring. It should help to turn the nations of the world away from economic nationalism which is both a cause and a consequence of the growing fear of war.
In conclusion, Mr. Speaker, I do not exaggerate when I say that the fate of civilization to-day depends on whether the qualities of toleration, of good-will, of friendly cooperation, of ability to take the far-sighted view and of willingness to sink differences of lesser importance for the sake of the larger interest triumph in human affairs. If I may say so, these old-fashioned qualities are needed not only in international affairs but in the day to day relations between individuals, social groups and political bodies in this country. In spite of all our difficulties, I am confident that the Canadian people possess these qualities to a degree which will ensure continuous and progressive development of a united Canada.

[Stage Direction]
Mr. Speaker, I beg to give notice that when we are in committee of ways and means I shall move the following resolutions:

[Stage Direction]
Resolved, That it is expedient to amend the Income War Tax Act and to provide:
1.	That lump sum payments made in Canada, which sever the funds permanently from the assets of the payor company, for the establishment of superannuation or pension fund plans with a view to providing benefits for employees

The Budget-Mr. Dunning
in respect of past years' services, shall be allowed as a. deduction to the extent of one-tenth of such lump sum payments in each of ten successive years, commencing the year in which the payment is made; provided that in the case of superannuation or pension fund plans heretofore established by lump sum payments the said deduction shall commence m the year 1938 and continue thereafter until ten years shall have elapsed from the date of the initial payment.
2.	That every corporation, the main business of which is the making of small loans shall, notwithstanding any other provision contained in the Income Tax Act, be subject to normal corporation rates of tax.
3.	That annuities received under the provisions of any Will or Trust shall b® taxable income of the recipient. Such annuities shall be taxable for the year 1937 and each year thereafter notwithstanding when the VVill or Trust became effective.
4.	That the Gift Tax shall not apply to any gifts made in any year by an individual the aggregate value of which in such year does not exceed an amount equal to one-half of the difference between the income which was subject to income tax in the previous year and the income tax payable thereon. Any enactment founded on this resolution shall be applicable to gifts made in the calendar year 1938 and thereafter.
5.	That the rates of tax set forth in the schedule to the Gift Tax be increased as follows:
On gifts up to and including $25,000-from 2 per cent to 5 per cent.
On gifts exceeding $25,000 but not exceeding $50,000-from 3 per cent to 6 per cent.
On gifts exceeding $50,000 but not exceeding $100.000-from 4 per cent to 7 per cent.
On gifts exceeding $100,000 but not exceeding $200,000-from 5 per cent to 8 per cent.
On gifts exceeding $200,000 but not exceeding $300,000-from 6 per cent to 9 per cent.
On gifts exceeding $300,000 but not exceeding $400,000-from 7 per cent to 10 per cent.
On gifts exceeding $400,000 but not exceeding $500,000-from 8 per cent to 12 per cent.
On gifts exceeding $500,000 but not exceeding $1,000,000-from 9 per cent to 14 per cent.
On gifts exceeding $1,000,000-from 10 per cent to 15 per cent.
Any enactment founded on this resolution shall be applicable to gifts made in the calendar year 1938 and thereafter.
6.	That royalties paid by persons abroad out of royalties received from sources within Canada shall not be allowed as a deduction in determining net royalty income from sources within Canada.
7.	That if any person or corporation ordinarily resident in Canada effects any transaction which at any stage makes use of any person or corporation ordinarily resident abroad, and which has the effect of reducing the liability to taxation under the Act of such person or corporation ordinarily resident in Canada, such person or corporation ordinarily resident in Canada, shall continue to be liable to taxation under this Act to the same extent as if the transaction had not taken place. This provision shall apply to any transaction only if
the Treasury Board upon a reasonable interpretation of the evidence available makes a ruling that the transaction was effected mainly for the purpose of avoiding liability to taxation under the Act. An appeal shall lie from any such ruling of the Treasury Board to the Exchequer Court of Canada.
8.	That dividends received by Canadian parent companies from wholly-owned non-resiclent subsidiary companies shall be exempt from the corporation rate of tax if at least 75 per cent of the combined capital of the parent and subsidiary companies is employed abroad. Such exemption shall be granted only if and to the extent that the country in which the subsidiary company is located grants a like exemption to parent companies in respect of dividends emanating from subsidiary companies in Canada and shall not extend beyond dividends that are equal to profits that have been subject to tax abroad in the year previous to the year of declaration of the said dividends. Any enactment founded on this resolution shall be deemed to have come into force at the commencement of the calendar year 1938 and to be applicable to the calendar year 1938 and to fiscal periods ending therein and to all subsequent periods.
9.	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 1937 and to be applicable to the calendar year 1937 and to fiscal periods ending therein and to all subsequent periods, except as otherwise provided.

[Stage Direction]
Resolved, That it is expedient to introduce a measure to amend the Special War Revenue Act, chapter one hundred and seventy-nine of the Revised Statutes of Canada, 1927 and amendments thereto and to provide:
1.	That Schedule III to the said Act being the list of articles exempted from the consumption or sales tax be amended by adding to the said Schedule the following:
"Materials for use exclusively in the manufacture of gopher poison;
Harness for horses and complete parts therefor and articles and materials to be used exclusively in the manufacture thereof;
Feeds for fur-bearing animals whose pelts have commercial value;
Articles and materials for use exclusively in the equipment or repair of boats used by fishermen in the fisheries;
Bricks; building tile, building blocks and building stone; plaster; lime, cement; stucco and stucco dash:
Lumber; sash; doors; shingles; lath; siding; stairways; balustrades;
Plaster boards, fibre boards, wallpaper, building paper, and materials manufactured wholly or in part of vegetable or mineral fibre for wall coverings or building insulation;
Paints, varnishes, white lead and paint oil:
Prepared roofings;
Shower baths, bath tubs, basins, faucets, closets, lavatories; sinks and laundry tubs, not including pipes and pipe fittings;
Glass for buildings;
[Stage Direction]
The Budget-Mr. Dunning
[Stage Direction]
Furnaces for heating buildings;
Builders' hardware, namely; locks, lock sets, butts, hinges, pulleys and window fasteners.
2.	That Schedule II to the said Act be amended by striking out the following words in paragraph three thereof:
"Provided that the tax hereby imposed shall not apply to the goods mentioned herein, when sold to or imported by manufacturers of automobiles or chassis for the original equipment of such automobiles or chassis under the following conditions:
(i)	If less than ten thousand automobiles or chassis are manufactured or produced per annum and at least fifty per centum of the factory cost of manufacturing or producing them, exclusive of duties and other taxes, is incurred in the British Empire;
(ii)	If ten thousand automobiles or chassis or more are manufactured or produced per annum and at least sixty per centum of the factory cost of manufacturing or producing them, exclusive of duties and other taxes, is incurred in the British Empire;
Provided, however, that effective April 1st, 1938, the words "sixty-five" shall be substituted for the word "sixty" in this paragraph." and substituting therefor the following:
"Provided that the tax hereby imposed shall not apply to the goods mentioned herein when used exclusively for the original equipment of such automotive vehicles."
3.	That subsection two of section fifty-eight of the said Act be amended to provide that the excise tax payable upon the sale, transfer or assignment of any share at a price or valuation of one dollar shall be one-quarter of one cent per share.
4.	That any enactment founded on this resolution shall be deemed to have come into force on the seventeenth day of June, one thousand nine hundred and thirty-eight and to have applied to all goods imported or taken out of warehouse for consumption on and after that date and to have applied to goods previously imported for which no entry for consumption was made before that date.
Hon. J. E. LAWSON (York South):: Mr. Speaker, I desire to move the adjournment of the debate, and if the Prime Minister would be good enough to intimate whether Monday or Tuesday would in his opinion be most suitable to the house I should be glad to include the day in the motion.


William Lyon Mackenzie King: Mr. Speaker, just whatever day will suit the convenience of hon. gentlemen opposite. We had thought of proceeding on Monday. I indicated that a day or two ago.


Richard Bedford Bennett: Yes.


James Earl Lawson: Then, Mr. Speaker, I move the adjournment of the debate.
Motion agreed to and debate adjourned.


The house in committee of supply, Mr. Sanderson in the chair.



DEPARTMENT OF LABOUR

[Stage Direction]
Employment Offices Coordination Act-
Administration, $63,925.
Payments to the provinces in connection with the organization and coordination of employment offices, $150,000.
Hon. NORMAN McL. ROGERS (Minister of Labour): This was the item which was held at the request of the leader of the opposition pending the securing of some further information from the Department of National Defence.
Mr. MACKENZIE (Vancouver):: During my absence the other day some question came up with reference to the disposition of some horses, I believe, from project-


Richard Bedford Bennett: No; first, certain documents. This item is standing in order that I might be provided with a report which was made by Major, now Colonel Stethem, and the reply, and when the report reached here.


Ian Alistair Mackenzie: I will deal first with the first point, and then I will deal with the second. I have a memorandum here from the director of supply and transport, who says that prior to the date mentioned, namely June, 1936, all stores of whatever kind were transferred from project No. 37 to project No. 42, and the former project closed down. There were on charge to project No. 42, five horses. These had originally been on the strength of the Royal Canadian Artillery but became surplus and available for use with the unemployment relief work. These five horses were disposed of as follows:	One
was destroyed June 2, 1936, age nineteen; four were sold through the dominion salvage officer (salvage minute 8,849, dated June 8, 1936) to Mr. N. Greenlee, rural route No. 1, Joyce-ville, Ontario, for the sum of $300. The ages of these horses were sixteen, sixteen, fifteen and thirteen years respectively. So far as can be traced, the above were the only government owned horses employed on unemployment relief work in the Kingston area at the time of closing down the project.
The second request made by the right hon. gentleman came up during the last evening I was present. The first statement made by him was that a report had been made by the commandant of the Royal Military College.


Richard Bedford Bennett: Excuse me; he said no
such thing. What he said was that there
was a report made which was in the hands of the minister. He knew nothing of it. In

Supply

Labour-Employment Offices
consequence of what occurred here Friday night,-the minister was not in his place

I was in a position to state definitely there was a report by the officer administrating, which was placed in the central registry, and I gave the date.


Ian Alistair Mackenzie: The
first remark made was that my right hon. friend believed there was a report made by the commandant. That was immediately investigated, and I told him later on that day that I was informed there was no such report. I believe that later on my right hon. friend suggested there was a report made through the quartermaster-general.


Richard Bedford Bennett: He asked if there was a
report to the quartermaster-general.


Ian Alistair Mackenzie: I believe my recollection is correct. I will look up the question in Hansard. An immediate investigation was made, and it was found there was no report made through the quartermaster-general. What actually occurred was read in the house on Tuesday by the Minister of Labour. During the debate on Monday my right hon. friend suggested, I believe, that a report was made by Major Stethem to another officer of the Royal Military College.


Richard Bedford Bennett: Will the minister read
what was said? That was made with leave, after what took place here on Friday.


Ian Alistair Mackenzie: I have
accordingly since then made further investigations, and I have found that a letter was written by the officer in question on May 26. It was written to a fellow officer, the staff adjutant of the Royal Military College.


Richard Bedford Bennett: He is the person to
whom Major Stethem should report.


Ian Alistair Mackenzie: Well,
of course that is a matter of military etiquette which I do not choose to discuss with my right hon. friend at the present time. But a letter was written at the time to the staff adjutant. I shall read it. That letter arrived here yesterday at Ottawa by telephone message from the commandant of the Royal Military College. As far as my knowledge or recollection goes, I never saw this letter until it came in yesterday by telephone from the commandant at Kingston. Also the commandant stated yesterday over the telephone that he had never reported the letter to national Defence headquarters.


Richard Bedford Bennett: To whcrtn did he say
that? To the minister himself?
51352-249}


Ian Alistair Mackenzie: To the
adjutant general. I confirmed that by telephone, to the adjutant general yesterday, from the commandant at Kingston:
It will be remembered that on or about January 2nd I made a verbal report to the effect following:
"At about 12.10 p.m. on January 2nd, a large dump truck, no. 33511-C, bearing the name of L. Drinka, was seen loading up and carting away a full load of several cubic yards of crushed stone by the stone crusher at the R.M.C. stone pile near Navy Bay. I was unable to get in touch with the R.M.C. constable who had orders to watch this stone pile.
"I followed this truck to see where the stone was being taken. The truck pulled up at the entrance to a laneway running off Sydenham street and the stone was delivered to a stone shed which was being converted into a garage, the floor of which was under construction. This shed was near Johnston street. I asked the driver where he got his instructions and he replied he had received orders to take it from Mr. Bert Stansbury."
As stated above, I reported this verbally to you and to the commandant R.M.C. I would like this verbal report made a matter of record in the R.M.C. central registry as, from reports I have received, it would appear very possible that this may become a subject of controversy at a later date.
That is to the best of my recollection the first I ever heard of that report, and I have reason to believe that the action was taken on a verbal report by the commandant before this letter was sent. That is all with regard to that.


Richard Bedford Bennett: There was a letter written by the Minister of Labour as acting Minister of National Defence which I was anxious to see.


Mr. ROGERS:: My right hon. friend will recall that when he raised the point the other day I had been acting Minister of National Defence at that time, I said I had no recollection whatever of having received such a letter and having replied thereto, but I would immediately ascertain whether or not such was the case. I gave instructions at once to my own officers that they should examine the files of the Department of Labour to see if such a letter had been received and a reply made thereto. Search was made, and no such correspondence is in the files of the Department of Labour. I feel sure, however, that if such a letter had been received, it would probably have been in the files of the Department of National Defence, inasmuch as it pertained clearly to a matter which affected the operations of that department; but again, my information is such as confirms my own recollection that no such letter was received and no reply was made by me to it..
3930	COMMONS
Supply-Labour-Employment Offices
What I stated with regard to it was absolutely m accordance with the facts as I knew them, . and that appears to be fully confirmed by the statement just made by the Minister of National Defence, namely that this report was filed with the staff adjutant, placed in the central registry there, and not forwarded to Ottawa. I should also like to point out that the information contained in the report just now given to the committee is substantially the information which I gave as coming trom Mr. Stansbury when this matter was first brought to my attention, namely that a load had been taken and placed upon a roadway leading to his garage.


Richard Bedford Bennett: If two ministers say that they have no such document; that there is none on the file, for the moment I must accept that but I think a little clearer search would perhaps disclose a different result. The Minister of National Defence says. that the contents of that note were not communicated to Ottawa; the Minister of Labour says that they were not communicated to him. Do I understand him aright?


Norman McLeod Rogers: Most certainly. I said the other day that I had no recollection whatever of having received such a letter, but that I would immediately make an effort to ascertain whether any such letter could be found. If it could have been found, it would have been placed on the table before now.


Richard Bedford Bennett: If that be so, it is obvious that the minister did not send a reply to anyone, and for the moment I have to accept that statement. It will be observed that Major Stethem says that this stone was used in the construction of the garage.


Norman McLeod Rogers: No.


Richard Bedford Bennett: Excuse me, the floor of the garage-in the conversion of a shed into a garage. The document is laid on the table, I take it, inasmuch as it is a public document. Is that the original?


Ian Alistair Mackenzie: It was
telephoned yesterday from Kingston.


Richard Bedford Bennett: I was going to ask for it that I might read it. One section of it I have not seen. I assume that this is what he reported:
I followed this truck to see where the stone was being taken. The truck pulled up at the entrance to a laneway running off Sydenham street and the stone was delivered to a stone shed which was being converted into a garage, the floor of which was under construction. This shed was near Johnston street.
That is the shed which was owned by Mr. Stansbury. I assume that the Minister of
[Mr. Rogers.!
Labour has satisfied himself as to why Major Stethem made the report that he did. The real difficulty about this lies in the fact that under our system of accounting we can have no public accounts inquiry with respect to these matters until the auditor general's report is filed, and the auditor general's report covering this matter will not be tabled in this house until next year. Ordinarily a meeting of the public accounts committee would be called; witnesses would be brought and evidence produced, so that there would be no difficulty at all on that score. But we found, to our dismay. on one occasion in this house that inasmuch as the transactions were not within the period of time covered by the auditor general's report as tabled, nothing could be done until the next year; and in view of the importance of the whole question to the general conduct of public business it was thought desirable that it should be discussed here.
I find, on looking through Hansard, that the hon. gentleman is entirely in error when he asserts that any effort was made to attack him in the first observations that I made in connection with the abuse of patronage at Kingston. I endeavoured to point out to him that a condition had prevailed there in years gone by which had been the subject matter of much acrimonious discussion in this house in 1911 and in succeeding years, with respect to penitentiary matters, with respect to the public service generally, and questions of that sort, and I pointed out to him that I believed and had hoped-and I gave my reasons for that hope-that he might be able to effect some improvement in the way of removing these abuses. I had been curious to watch and see what would happen, for the reasons I gave-I need not restate them- having regard to what was said in 1935; and now I say that so far as I can ascertain, there were on the Fort Henry job at one time four Conservatives, known to be such, who were allowed to work on it, apart from those who worked for the contractors. It may be the minister is right when he says that this was a contract made with the province. But if it is made with the province, I would point out that there were under the old contracts of the former government general powers of supervision with respect to the work itself. Leaving that out for the moment, it gets down to this: The minister gave certain dates with respect to the movement of cement, and I asked him the other day, Does he approve that way of transacting public business? These were not two contractors exchanging cement; the contracts provided that the province of Ontario wras to provide the cement. It was the property of the crown in the right of that

Supply-Labour-Employment Offices
province, and the cement was to be delivered at a particular point, which was done. What happened is that the Frid Construction Company had a contract at Queen's university and one at Fort Henry; they took from time to time large quantities of cement from the car, as I pointed out, to Queen's university and placed it in bins, and at night the same trucker conveyed the paper bags which had contained the cement that had been left there, to Fort Henry. There was no one at the cars checking out the cement, and we were interested because half the cost of that is to be borne by the people of Canada. What I was endeavouring to ascertain was whether or not the minister had knowledge of the matter.
I was only stating what the facts were; I was not endeavouring to suggest that he was personally responsible for what had been done.
I was pointing out facts from which he draws an inference that I was not drawing at all, inasmuch as I was not drawing inferences but stating facts.


Mr. GRAY:: Is it suggested that the Frid Construction Company was dishonest?


Clarence Decatur Howe: You are attacking one of the most reputable firms in Canada, and through them the whole construction industry. Tell us whether you think they are dishonest.


Richard Bedford Bennett: I am reciting facts.


Clarence Decatur Howe: What reason have you for stating them?


Richard Bedford Bennett: It is not for me to draw conclusions. I am telling the minister what the facts are, and I ask him whether he approves that method of dealing with public property.


Norman McLeod Rogers: The leader of the opposition has asked me a question-


Richard Bedford Bennett: Wait until I finish.


Norman McLeod Rogers: But you asked me a
question.


Richard Bedford Bennett: I was not asking for the answer now. However, if the minister thinks that any advantage is being taken of him he can answer the question now'.


Norman McLeod Rogers: I stated, when the question was first put to me, that I was absolutely convinced there was nothing dishonest in the transaction. In the first place, as the right hon. gentleman will understand, I do not know anything of the actual operating details of these contracts, nor did he or his Minister of Labour, in connection with .joint works carried on with the provinces. Actually the contracts are let by the provinces, and the provision of materials is entirely a matter for
the inspectors of the provincial department of highways. I stated further that I was informed, as soon as the matter was brought to my attention by the leader of the opposition, that this loan and replacement had been made with the knowledge and consent of the provincial department.


Richard Bedford Bennett: And I said it was not consented to until after. I asked him when consent was given.


Norman McLeod Rogers: I have a telegram just received from W. L. Somerville, the architect in charge of the work at Fort Henry. He was president of the Canadian Architects' Association last year


Richard Bedford Bennett: What has he to do with it?


Norman McLeod Rogers: -and I assume my right hon. friend will have no complaint to make about the quality of his evidence.


Richard Bedford Bennett: What has he to do with the cement?


Norman McLeod Rogers: I might place this telegram on Hansard. It is addressed to me as Minister of Labour:
In June, 1937, contractor at Fort Henry obtained permission to borrow cement which was duly returned.
He was the architect on the job, acting for the provincial department of highways.


Richard Bedford Bennett: That does not give any
power with respect to this. I asked, when did the contractor obtain the consent? The minister said he had the consent of the provincial government.


Norman McLeod Rogers: In June, 1937.


Ross Wilfred Gray: Where is the dishonesty?


Richard Bedford Bennett: In treating the property
of the crown thus. This is not a case of two contractors. This is a case in which I say that without anyone checking the cement out of these cars, Drinka was hauling it to the Crain contract at Queen's university.


Norman McLeod Rogers: Both ways, in fact.


Richard Bedford Bennett: And he also was taking
some to the fort. But he did take the paper bags to the fort, and the paper bags are the basis of the count that determines who shall pay.


Clarence Decatur Howe: The counting of bags went
out when the cloth bags went out.


Richard Bedford Bennett: Excuse me; it did not.


Clarence Decatur Howe: They have no more importance than the paper bags you buy full of pop-corn.
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Richard Bedford Bennett: I admit the hon. minister has had considerable experience, for some of which this country has paid.


Mr. THORSON:: And got value for it too.


Richard Bedford Bennett: Go to Prescott. Let us go a step further. The minister says that paper bags are of no importance. But they give the count for the delivery, because there was no man there. That is the reason why they were preserved. As a contractor he should know that.


Clarence Decatur Howe: I know no such thing. The
delivery of sacks of cement is counted by the sacks themselves; the paper bags have no value as counters or in any other way. The right hon. member is talking about twenty years ago when cement was delivered in cloth sacks, and the bags had to be returned for credit.


Richard Bedford Bennett: Surely the Minister of
Transport is not going to get away with that sort of statement. He knows perfectly well the cloth bags were counted as they were delivered back to the company from which they came.


Clarence Decatur Howe: And paid for.


Richard Bedford Bennett: And credit was given for them. The paper bags were counted merely for the purpose of ascertaining how many bags of cement had been delivered, which is an entirely different matter. This truckman loaded so many bags of cement, paper bags, he took them to Queen's, and from Queen's the empty bags were taken back to the fort. Why they were taken there I do not know-


Clarence Decatur Howe: But the right hon. member
insinuates.


Richard Bedford Bennett: I said the evidence was
that they were taken there at night, and I asked why.


Norman McLeod Rogers: And you said it was dishonest.


Richard Bedford Bennett: So it is. It is a dishonest transaction for anyone to take cement belonging to the crown and use it on a private job on the say-so of the architect.


Norman McLeod Rogers: The architect was representing the provincial government and was in full charge.


Richard Bedford Bennett: He was in Toronto. The one to give the consent is the crown, who signed that contract.


Norman McLeod Rogers: He was representing the
government.


Richard Bedford Bennett: He did not represent
the government with respect to that. It is distinctly provided, unless this contract is different from any other-and what is more, these contracts for joint work by the federal and provincial governments provided for supervision by the federal government.


Ross Wilfred Gray: Does the right hon. gentleman say that this government lost any bags of cement in the transaction? That surely is the question.


Richard Bedford Bennett: I was observing, Mr. Chairman, when I was interrupted-


Ross Wilfred Gray: Will the right hon. gentleman answer that?


Richard Bedford Bennett: When I was interrupted, Mr. Chairman-


Ross Wilfred Gray: Will the right hon. gentleman answer that question?


Richard Bedford Bennett: This is the hon. member who examined with respect to the cost of my living, and I do not answer his questions, if I can avoid doing so.


Ross Wilfred Gray: I suggest I made a fair job of it.


Richard Bedford Bennett: I have never forgotten that.


Ross Wilfred Gray: I notice that.


Richard Bedford Bennett: I have now the document signed by the Canadian National-


Mr. SLAGHT:: I rise to a point of order. Surely this debate can proceed without animosities and personalities of the kind the right hon. gentleman has just expressed.


Richard Bedford Bennett: That is not a point of order. I was interrupted in the course of my observation iby questions which I do not see fit to answer and have no intention of answering from that source. And I have given my reasons. I think there is nothing that is personal about that.
I say that not only is it bad practice, it is dishonest for any contractor to take cement from a car of cement consigned to the crown at Kingston or anywhere else under the circumstances that this cement was taken. The matter has developed to this point, that we cannot have the public accounts committee investigate it this year, but surely we can have an adequate and proper investigation with respect to it at the right time. I say that the evidence discloses such a condition as should not exist with respect to public property. That is what I say. And I believe the people everywhere think so. I brought

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the matter to the attention of the minister for the purpose of having him make the necessary changes to see that we do not have that sort of thing taking place. He has become angry, abusive, has said many things which he should not have said; and I still bring these matters to his attention as indicating the conditions that exist at Kingston with respect to these contracts and with respect to the conduct of public business. I pointed out that I am not responsible, but I said that reputable persons saw a letter written to the Abramsky people who said they gave this man Stansbury $100 to be put on the list-


Norman McLeod Rogers: May I answer that? I always find it a little difficult to keep up with these charges.


Richard Bedford Bennett: These are not charges.


An hon. MEMBER:: What are they?


Norman McLeod Rogers: I at once took the matter up with Mr. Stansbury and he told me immediately that there was no basis for it. I said, If that is the case, Abramsky should himself write a letter at once to that effect. And he did.


Richard Bedford Bennett: Which one of them?


Norman McLeod Rogers: Only one of them was in the city at. the time; the other was in Boston. But he vouches for the truth of the statement-


Richard Bedford Bennett: Perhaps the minister will read the letter.


Norman McLeod Rogers: If they had both been
there, I naturally would have had both sign the letter. This letter is addressed to A. E. Stansbury, and reads as follows:
For your information and following up statement made on official report, Hansard, dated June 10, page 4072, the writer and his brother did not give Mr. Stansbury any moneys.
My brother is out of the city when I make this statement and I have an idea that he was joking with some member of the Conservative party that may have been a friend of his.
In closing, I assure you that no moneys have been paid by my brother or myself to Mr. Stansbury or any other individual in the Liberal party.
Yours very truly,
(Signed) Harry Abramsky.


Richard Bedford Bennett: That proves exactly what I said, that Mr. Abramsky said he did pay $100. Now he says he was joking.


Norman McLeod Rogers: But when my right hon.
friend made this statement he said he made it on the basis of something someone had heard in the presence of two credible witnesses; but my right hon. friend has never
mentioned a single name in connection with this or much more of the information or misinformation that he has brought to the attention of this committee.


Richard Bedford Bennett: It would seem to be
abundantly established by Abramsky himself.


Norman McLeod Rogers: Why does my right hon. friend bring gossip into this place?


Richard Bedford Bennett: He established it without any difficulty.


The CHAIRMAN:: It is six o'clock.
At six o'clock the committee took recess.
After Recess
The committee resumed at eight o'clock.


Richard Bedford Bennett: Mr. Chairman, during the period that elapsed from the last time we had the matter under consideration until to-day I looked up the record, and I point out to the minister that I made it abundantly clear that no one expected him to do the impossible. In the very first discussion which took place I made it clear that there were a number of questions in connection with patronage. I was discussing that; and I said that the statement made by the Prime Minister the other evening had been highly satisfactory, and that I had said, "splendid," because his statement indicated he thought matters in these days at least should be conducted in a different way. Then I told the minister I would direct his attention to two or three matters in his own constituency. Whereupon this long discussion has taken place.
I repeat that if you take the record produced this afternoon, alone, the evidence indicates a condition which is not satisfactory; whether it be the Rollands case or the Marshall case or some other case, is not a matter of importance. I use the words I used then; being a substantial taxpayer I decline to believe that this government has a right to say that my taxes are to be used for the purpose of paying only those men who support the government and who are opposed to me. I say that is not sound.
The other evening I thought the statement made by the Prime Minister was an admirable one, and I said, "splendid," in answer to it, and asked the minister to give effect to it. That is all. I made the request as quietly and calmly as I could at that time, but apparently brought about a great deal of annoyance and anger. And the minister ever since has shown much animosity about the matter.
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All I want to say is this: The answers then given had nothing to do with the case at all. The Minister of National Defence (Mr. Mackenzie) rose in his place and read a declaration of a cheese inspector in eastern Ontario, an admirable man I am told, who makes a declaration that says nothing. He says that the bin would hold fifty tons of coal. This was a matter which was discussed during the course of the election, and I do not propose to endeavour to discuss it to-night, except to say that Mr. Sowards is perfectly content and willing to have the matter dealt with at once. What was said by the Minister of National Defence is at variance with what was said by me. He said it was some labour matter. Unfortunately, in the order in council the blame was put upon the deputy minister, and it turned out he had nothing to do with it at all.


Ian Alistair Mackenzie: On a point of order, every order in council is prepared on the recommendation of the deputy minister of the minister concerned. There is nothing unusual in the slightest degree in the order in council.


Richard Bedford Bennett: I did not say anything about its being unusual; I said that the deputy minister was blamed for something with which subsequent events disclosed he had nothing at all to do. The record shows that.
As a second line of defence the hon. member for Provencher (Mr. Beaubien) read a statement from the records that were brought down on June 9 last. It is dated Thursday, June 9. and the motion, which was made only a few days before, limits the papers in this case to those between August 20, 1935, and October 15, 1935, and no others. The papers were asked for on June 6 and submitted on June 9, and limited to the two dates, August 20 1935' and October 15, 1935.


Ross Wilfred Gray: Is it suggested there are any other papers?


Richard Bedford Bennett: On that it is alleged there was a conspiracy to debauch three constituencies in western Canada. I propose to place upon Hansard the record, and when that record is placed upon Hansard, I may be wrong, but my experience of the fair-minded attitude of the citizens of this country induces me to believe that they will attach the blame, not against me, but against those who did this thing.


Ross Wilfred Gray: Again I ask the right hon. gentleman: Is it suggested there are other papers?
[Mr. Bennctt.l


Richard Bedford Bennett: The letter is dated June 7, 1935-


Ross Wilfred Gray: On a point of order, the right hon. gentleman has in my opinion suggested that there are papers missing from the return brought down on the motion of the hon. member for Provencher. No other interpretation can be placed upon my right hon. friend's words. I ask that he answer.


Richard Bedford Bennett: There is no point of order there. The rules of order are plain about that. The order of this bouse was circulated-


Ross Wilfred Gray: Mr. Chairman, I do think a point of order should-


Richard Bedford Bennett: I cannot be interrupted in this way by hon. members who rise and talk about a point of order.


Frederick George Sanderson: The hon. member has raised a point of order.


Richard Bedford Bennett: He cannot raise a point of order to destroy the proceedings, when there is no possible point of order.


Ross Wilfred Gray: On a point of order, Mr. Chairman, do you rule that the hon. member for Provencher brought down to this house a complete file in relation to the matter?


Frederick George Sanderson: The point of order raised by the hon. member for Lambton West is that the right hon. the leader of the opposition is inferring that all the papers are not on the file. Is that the point of order?


Ross Wilfred Gray: Yes.


Frederick George Sanderson: I think the point of order is well taken.


Richard Bedford Bennett: I repeat, Mr. Chairman, so that there may be no misunderstanding, that the order of this house was to produce papers only from August 20, 1935, to October 15, 1935. That is what I said, and I repeat it. I hold the return in my hand. In view of the fact that the rules say that one cannot attribute motives to any hon. member, what is the point of order that is well taken?


Frederick George Sanderson: I have given my ruling.


Richard Bedford Bennett: What is it? I do not know, nor does anybody else.


Ian Alistair Mackenzie: What
was the complaint in the first instance in regard to the return?


Richard Bedford Bennett: If the Minister of National Defence had been following, he would have observed I said that on June 6 the

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hon. member for Proveneher moved for certain papers, which were brought down on June 9. Great promptitude! They are limited in the motion to those between August 20, 1935, and October 15, 1935, and no other dates.


Ian Alistair Mackenzie: What is wrong with that?


Richard Bedford Bennett: I merely recite the fact; that is all. Whereupon a member of this chamber suggests that someone is inferring something. I am not inferring anything at all. I am making a statement of fact that a motion of this house was made to produce papers, at the instance of the hon. member for Proveneher, limited from August 20, 1935, to October 15, 1935.


Ross Wilfred Gray: Let us understand it then.


Richard Bedford Bennett: And the highways to which reference is made are the Piney highway, the Sprague-Morden highway, and the Brandon-Clear Lake highway in Manitoba. Those highways have in part been completed since this government came into office, and the file contains papers with respect to them. But the motion is limited to October 15, 1935.


Norman McLeod Rogers: Subject to agreement we found when we came into office.


Richard Bedford Bennett: Certainly. I am bound to say that I have not been able to see the original file; that is in the possession of the hon. member for Proveneher.


Mr. BEAUBIEN:: I rise to a point of order.


Richard Bedford Bennett: Another point of order.


Charles-Philippe Beaubien: The right hon. gentleman has no right to impute motives to any member of the house, or to say things that are untrue. I have not the file in my office.


Richard Bedford Bennett: I inquired of the office downstairs for the original file. I asked to see it just before coming in here to-night, and I was told it had not been returned, that the hon. member for Proveneher (Mr. Beaubien), had it. Perhaps that statement was an error. I am stating the facts only as told me by the officials. I have what purports to be a copy. That is all I have been able to see up to the moment.


Charles-Philippe Beaubien: I have just sent one of the page boys dowmstairs for the file itself. As soon as I get it I shall send it to my right hon. friend.


Richard Bedford Bennett: If my hon. friend is able to send for it, he must have control over it. The official of the house in charge of the office told me within the last twenty minutes that he had not the file.


Ian Alistair Mackenzie: The file was produced as an official document of this house and any hon. member can see it.


Richard Bedford Bennett: The hon. member for Proveneher borrowed it.


Ian Alistair Mackenzie: Anyone can borrow it.


Richard Bedford Bennett: It had not been returned. I went downstairs to the office last week and I could not see it. I called to-night for it and it had not yet been returned. The Secretary of State circulated the order among the various departments. First of all, it went to the Minister of Public Works, and the reply was that there was nothing in the public works department. It then went to the Prime Minister's office and the reply was:
There is nothing on the files of the Prime Minister's office regarding this matter.
Edward A. Pickering,
Assistant Private Secretary.
Then we have the Department of Labour. I am going to place upon the record the story as it appears on this file. On July 23, 1935, the minister of public works and labour of Manitoba sent the following letter:
Department of Public Works and Labour Minister's Office Winnipeg,
23rd July, 1935.
Hon. W. A. Gordon,
Minister of Labour,
Ottawa, Ontario.
Dear Mr. Gordon: -
A large delegation interviewed the honourable premier and myself this morning in reference to the construction of a road, as a relief project, from a point four miles east of the town of Morden, thence easterly through the towns of Plum Coulee, Letellier, Dominion City, Stuartburn, Vita, Caliento, Sundown, Menisino and Piney, to the town of Sprague, an approximate distance of 115 miles.
Roughly estimated, this road will cost around $10,000 per mile, plus the construction of a bridge over the Red river at Letellier, which will cost in the neighbourhood of $125,000.
The delegates were very desirous of having this road constructed as an unemployment relief measure, and intimated that the dominion government would favourably consider same.
If you are prepared to do this as a relief measure, the province will undertake to do its part.
Yours very truly,
W. R. Clubb, Minister of Public Works and Labour
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Employment Offices
That is the first letter on the file, a letter from the minister of public works and labour of Manitoba seeking the construction of these roads.


William Lyon Mackenzie King: Is there any
answer to that letter?


Richard Bedford Bennett: None here. Under date
of July 27, 1935, there appears the following:
Department of Public Works and Labour Minister's Office
.	Winnipeg,
July 27, 1935.
Hon. W. A. Gordon,
Minister of Labour,
Ottawa, Ontario.
Dear Mr. Gordon:
Last month when I was at Ottawa discussing relief projects that might be undertaken in this province, I submitted to Mr. Dickson, deputy minister, a list of same and in which was included the project known as the Piney highway.
This road was started in 1930 as a relief project and considerable work was done in that year and continued in 1931.
The list referred to above, I understand, Mr. Dickson referred to you but in your letter of June 27 you stated that you could not see your way clear to approve of any of this work other than that on the Trans-Canada highway and the Peace Garden road.
Since my return, I have had numerous requests asking me to again take up with you the matter of the completion of the Piney highway and to ask if you would be prepared to reconsider your previous decision.
This highway begins at the city of St. Boniface and runs in a southeasterly direction through the towns of Grande Pointe, Isle de Chene, Steinbach, La Broquerie and Piney and then five miles south to the international boundary, an estimated distance of ninety miles.
The estimated cost of this work is ten thousand dollars per mile less the forty miles which have already been graded.
I would appreciate it if you would let me hear from you in this regard.
Yours very truly,
W. R. Clubb,
Minister of Public Works and Labour.


William Lyon Mackenzie King: Any answer
to that letter?


Richard Bedford Bennett: I am taking them from
the file just in the order in which they come.


William Lyon Mackenzie King: There is no
answer to that letter.


Richard Bedford Bennett: Then it was not necessary to ask. The next letter is dated August 23, 1935, and reads:
	,
Conservative Dominion Headquarters Province of Manitoba
August 23, 1935.
Dear Mr. Gordon:
I would appreciate it very much indeed, if you would kindly read the enclosed carefully. It does explain the situation, and means so much to us, and in view of the new conditions that have arisen owing to the rust and extreme heat on the crops, it might be good justification for really doing something at this time as a special consideration. There is not the question of a doubt but that if we do not do something, many hundreds and thousands of these people in these districts will be applying to the provincial and federal governments for assistance this winter.
Yours very truly,
II. H. Webb,
Director for Manitoba.
That is the next letter on the file. Attached to that is a letter marked "private and personal," written by Mr. Webb to Mr. Bennett. Copies are said to have been sent to the Honourable Wesley A. Gordon, K.C., M.P.; the Honourable J. Earl Lawson, K.C., M.P.; and the Honourable Doctor R. J. Manion, M.P. This letter is dated August 23, 1935, and reads:
The Right Hon. R. B. Bennett,



P.C., K.C., M.P.,

[Stage Direction]
Prime Minister of Canada,
Ottawa, Canada.
My dear Chief:
I have just come in from the constituencies of Lisgar, Provencher and St. Boniface particularly, and the situation at the moment is very good there politically, but it needs the necessary impetus to carry on.
I have already written to the Hon. J. E. Lawson, the Hon. R. J. Manion and the Hon. Wesley Gordon and the Hon. T. G. Murphy with regard to the two roads in these three constituencies that are vital factors to this election campaign, and they have the whole story in detail, both verbally and in writing.
In 1931 the federal government appropriated moneys for both of these roads. Both trunk highways enter the province of Manitoba, and as an unemployment relief measure, quite considerable work was done, which I think was shared by the federal and provincial governments fifty per cent each. The provincial government have or did apply again for these two roads to be carried on as an unemployment relief measure, but for some reason or other were more or less turned down as a matter of policy.
A new problem has arisen lately, which may be a good reason for reconsideration. As you know rust and extreme heat have destroyed the larger portion of our Manitoba wheat crop, and in some parts of Lisgar and Provencher especially it has created a very serious problem, and has left the farmers in a serious situation. My thought is that if your government will cooperate with the provincial government as an unemployment relief works measure,

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that work could be done on these roads that would give the farmers of these three constituencies plenty to do and help them to earn something, whereas if it is not done they possibly may appeal to the provincial and federal governments for some form of relief and for which we will get nothing, but on the other hand are perfectly willing to work themselves and use their teams and equipment. As a political measure, it assures us without any question of a doubt these three seats which we badly want to win, and which look very good for us at the present time.
Some hon. MEMBERS:: Hear, hear.


Richard Bedford Bennett: There will not be so
much "hear, hear" when I finish. The letter continues:
The Liberal federal members in these three constituencies, supported to some extent, under cover, by provincial government members are endeavouring to blame the federal government for the fact that these two roads have not and will not be built, and it has become such a strong factor politically, that a great deal rests on a favourable decision being made.
May I intervene here to point out that according to the record the Liberal candidates in those constituencies were urging that these roads should be built and complaining that the federal government was not providing the means to have them built. That is the position at the moment.


Ross Wilfred Gray: Read the next paragraph.


Richard Bedford Bennett: The letter continues:
I feel that we should play the game politically, call the provincial government's bluff, who have stated positively to delegates that they are prepared to put up dollar for dollar with the federal government in the building of these two roads as an unemployment relief works measure, and I understand, although I am not sure, that the provincial government have forwarded on letters of approval for both of these roads. They certainly did in their original letter of March or April 27, because I have a copy of it, and it was discussed at Ottawa with the Minister of Labour and the Hon. T. G. Murphy.
If the federal government would advise of participation in these two roads, it would be good politics; it would call the provincial government's bluff; it would kill the propaganda that the Liberals are carrying on at the present time; it would assure us of a victory in these three seats, and in my humble opinion, will not have cost the federal government anything, because by the time the work is organized, the election will be over, and winter will be upon us, and perhaps very little work will have been done before the end of the present financial year.
I am not for one moment endeavouring to justify that language. I did not write the letter. If I had written it-


Ross Wilfred Gray: Couple that with paragraph 11 of the agreement.


Richard Bedford Bennett: I did not write the letter. Just let me ask: Is there any member who has not received personal and private letters in which it has been urged that action should be taken because it would be good politically?


Ross Wilfred Gray: But read paragraph 11 of the agreement.


Richard Bedford Bennett: Mr. Chairman, will you be good enough to stop the interruptions?


Ross Wilfred Gray: I would ask the right hon. gentleman to read paragraph 11 of the agreement.


Richard Bedford Bennett: I think I have the floor, Mr. Chairman.


Mr.   CHAIRMAN@: I would point out to the hon. member that unless the leader of the opposition permits a question when he has the floor he cannot be asked questions.


Ross Wilfred Gray: I am very sorry, Mr. Chairman.


Richard Bedford Bennett: The letter proceeds:
The Hon. W. Gordon, the Hon. Dr. R. J. Manion and the Hon. T. G. Murphy know all about these two roads. They 'have the details, map locations and I believe thoroughly understand the situation. Our candidates are very alive to the situation, and no doubt have also been in touch with your own good self and the ministers, pointing out the actual situation and what it means. If it was not the right thing to do I would be the first to turn it down, but they are essential to the welfare of the province as a whole, running through two very thickly settled parts of the province, in fact the oldest settled parts, and there is not a road anywhere east of the Red river other than mud roads, and the people there are naturally aroused. I am not saying that it is a federal matter at all. we all know that, but as an unemployment relief works measure it is thought that something might be done, and particularly in view of the serious situation that has developed through rust and extreme heat in the crops of the farmers, and politically it means victory for us.
Yours very truly,
R. H. Webb,
Director for Manitoba.


Mr. DUFFUS:: Might I ask the right hon. gentleman what Mr. Webb is director of?


Richard Bedford Bennett: I had not known him by that title until I heard it stated the other day. But it was stated then that he was director of the Conservative organisation in Manitoba.


Joseph James Duffus: He is not personally the director of the road work?


Richard Bedford Bennett: Oh, no, he is mayor of Winnipeg and was actively interested in politics.
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William Lyon Mackenzie King: Conservative Headquarters, Director in Chief for Manitoba.


Richard Bedford Bennett: That is what I say. The The next letter is dated September 4, 1935, and is directed to Mr. W. M. Dickson, Deputy Minister of Labour, Ottawa:
Dear Mr. Dickson,-
I have received a telegram from the Minister of the Interior reading as follows:
" Regarding further works in the province of Manitoba which might be commenced for the relief of unemployment the following should I feel receive serious consideration: Construction of a highway leading south easterly from Winnipeg to the international boundary known as the Piney highway; construction of a highway from Morden eastward to connect with the Piney highway; construction of a highway from Russeli to a point near Erickson to connect with the highway leading to the Riding Mountain park; construction of a bridge known as the Lens bridge Swan river district. The provincial government has' addressed correspondence to the Department of Labour intimating their willingness to consider the construction of such highways and bridges as may be mutually agreed upon and to enter into a supplementary agreement in regard thereto." Yours faithfully,
R. B. Bennett.
It was asked why that should be sent to the deputy minister and not to the minister. The answer appears in Mr. Clubb's letter to the minister. He said that he left his papers in regard to this matter with Mr. Dickson, because, the minister being absent, it was the custom to leave these matters with Mr. Dickson so that the minister would unquestionably receive them on his return.


Charles-Philippe Beaubien: May I ask a question?


Richard Bedford Bennett: No. The next letter, which is dated September 4, 1935, reads:
Department of Public Works and Labour Minister's Office,
Winnipeg,
September 4, 1935.
Hon. W. A. Gordon,
Minister of Labour,
Ottawa, Ontario.
Dear Mr. Gordon,-
Yesterday Senator Mullins, Mr. R. Peden. of Rossburn. and the Hon. Mr. Griffiths interviewed me with reference to the proposed gravelling of the road from Russell to Clear Lake via Silverton, Angusville, Birdtail, Rossburn, Olha, Oakburn, Menzie, Elphinstone, Sandy Lake and Raclcham to Clear Lake highway.
This road, Mr. Peden informed me, had been approved by the parties interested at a meeting which he had attended. In discussing this matter Mr. Peden also informed me that Senator^ Mullins and himself had just returned from Neepawa where they had discussed the

building of this road with the Hon. Mr. Murphy. They stated that Mr. Murphy had said that if I would write you requesting that this road be approved by you, as a relief project on the usual basis, that it would be built.
If this information is correct, and your government accepts this proposition, which we submitted to you on a previous occasion and which you refused, I take it that you would be prepared to draw up an agreement embodying this project, and forward same to me for signature.
Mr. Peden requested that I give you the approximate mileage and the estimated cost of this work which is as follows:
Mileage, 76 miles.
Estimated cost, $6,000 to $10,000 per mile, depending upon width of road.
I would appreciate hearing from you at your earliest convenience.
Yours very truly,
W. R. Clubb,
Minister of Public Works and Labour.
Now no one asserts or has in this discussion asserted that Mr. Clubb was a supporter of the then government at Ottawa; no one has asserted that the Hon. Mr. Griffiths was a supporter of the government at Ottawa, and yet Mr. Griffiths, Senator Mullins and Mr. Peden, who was a supporter of the government, waited tin Mr. Clubb, as the letter I have just read, dated September 4, 1935 indicates.
Then follows on the same day, September 4, 1935, a letter from the Department of Public Works and Labour, Winnipeg, as follows:
Hon. W. A. Gordon,-
Under date of July 27, 1935, I wrote you with reference to the Piney highway and also under date of July 23 with reference to the Sprague-Morden road. To date I have not heard from you with regard to the above projects and would appreciate it if you could give these matters your attention, and oblige, Yours very truly,
W. R. Clubb,
Minister of Public Works and Labour.
The committee will bear in mind that this letter was apparently written on the same day-whether before or after it does not indicate-it carries the same date as the previous letter containing the reference to the delegation consisting of Hon. Mr. Griffiths, who was an opponent of the then government at Ottawa, Senator Mullins and Mr. Peden.
Then on September 7, 1935, three days later, there was a telegram from Mr. Dickson, Deputy Minister of Labour, to Colonel G. C. MacLean, as follows:
Reference Mr. Murphy's telegram to Prime Minister re additional dominion assistance to provincial road construction kindly wire

Supply-Labour-Employment Offices
approximate mileage and cost per mile of proposed construction of road between Russell and point near Erickson on the Minnedosa-Clear Lake highway No. 26 referred to therein. At same time please indicate principal towns through which road passes.
W. M. Dickson, Deputy Minister of Labour.
To which a reply was sent on the same day, a telegram to Mr. W. M. Dickson, Ottawa:
Replying telegram date regarding Russell Erickson road. Minister Public Works wrote Mr. Gordon September fourth and gave estimate of seventy-six miles at estimated cost of from six to ten thousand per mile. Engineers have not surveyed road so amount is approximate only. Principal towns Russell, Silverton, Angusville, Rossburn, Oakburn, Elphinstone, Sandy Lake.
Geo. C. Maclean.
Five days later, namely on September 12, 1935, we have a telegram from the Minister of Labour at Ottawa to the Minister of Public Works and Labour at Winnipeg:
Hon. W. R. Clubb,
Minister of Public Works and Labour, Winnipeg, Manitoba.
Reference your letters fourth instant Piney highway Sprague Morden road and Russell Clear Lake road. Governor in council has now approved of supplementary agreement which authorized federal assistance to construction on the above highways also certain bridges and memorandum of agreement is being forwarded at once to the province.
W. A. Gordon, Minister of Labour.
On the same date, September 12, Mr. Gordon writes a letter to Mr. Clubb, as follows:
Ottawa, September 12, 1935. Dear Mr. Clubb,-
I forward herewith copies of agreement under the Relief Act of 1935 between the dominion and the province of Manitoba supplementary to the two agreements of July 10th and 15th respectively under the same act. Would you kindly have the same executed on behalf of the province and return one copy to me together with the authority for the duly authorized minister to sign on behalf of the province.
I have duly signed the enclosed copies of agreement on behalf of the dominion and enclose copy of P.C. 2851 of the 10th September, which is my authority so to do.
Yours very truly,
W. A. Gordon, Minister of Labour.
I propose now to read the order in council which authorized the agreement, and the agreement itself:



P.C. 2851

[Stage Direction]
Certified to be a true copy of a minute of a meeting of the committee of the privy council, approved by His Excellency the Governor Gener-al on the 10th September, 1935.
The committee of the privy council have had before them a report dated 9th September, 1935,-
That is two days after the date of the documents to which I have referred:
-from the minister of labour submitting:
(1)	That parliament has enacted legislation which may be cited as the Relief Act, 1935;
(2J That clause 2 of the act provides, inter alia, that the governor in council may, upon such terms and conditions as may be agreed upon, enter into agreements with any of the provinces respecting relief measures therein;
(3) That the government of the province of Manitoba has signified a desire to enter into an agreement with the dominion under the aforesaid act respecting relief measures in the province, supplemental to the agreements authorized by orders in council P.C. 1769 dated June 28. 1935, and P.C. 2396 dated August 8. 1935.
The minister therefore recommends that he be authorized to enter into an agreement with the province of Manitoba on behalf of the dominion under the provisions of the Relief Act. 1935, in accordance with draft attached hereto.
The committee concur in the foregoing recommendations and submit the same for approval.
Signed, E. J. Lemaire,
Clerk of the Privy Council.
To The Honourable the Minister of Labour.
The next communication is, Canadian National Telegraphs, September 18, 1935:
Winnipeg.
W. M. Dickson.
Deputy Minister of Labour,
Ottawa, Ont.
Very large deputation appeared before provincial government this morning and urged that short stretch of road leading from proposed location of Piney highway to village St. Pierre be included as part of Piney highway under new supplementary agreement approved by province to-day. It is my understanding that representations have already been made to you asking that this road which is subsidiary to the Piney highway be included as part of Piney highway and on behalf of provincial government I recommend you grant this concession. Mileage six miles cost twelve thousand. Can be done within appropriation provided by agreement.
W. R. Clubb, Minister of Public Works.
Under date of September 20 we have this letter:
Department of Public Works and Labour, Minister's office,
Winnipeg.
The Hon. W. A. Gordon,
Minister of Labour.
Ottawa, Ontario.
Dear Mr. Gordon,-
With reference to your letter of September 12, 1935, in which you enclose supplementary agreement between the dominion government and the province authorized by order in council P.C. 2851, I attach herewith certified copy of
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our order in council No. 1056/1935 authorizing me to sign this agreement on behalf of the province of Manitoba, and also original copy of agreement duly signed.
Yours very truly,
W. R. Clubb,
Minister of Public Works and Labour.
Now we come to the order in council passed by the province of Manitoba, to which I direct attention, especially of those who endeavour to draw inferences and to distort the facts, because here is the basis so far as that province is concerned:
No. 1056/35
Copy of a report of a committee of the executive council approved by His Honour the Lieutenant Governor on September 30, 1935.
The Honourable the Minister of Public Works and Labour submits to council a report setting forth-
Whereas the parliament of the Dominion of Canada has enacted legislation which may be cited as "The Relief Act, 1935."
And whereas a letter signed by the Honourable Minister of Labour, W. A. Gordon, Ottawa, addressed to the Honourable W. R. Clubb, Minister of Public Works for the province of Manitoba, has been received advising that His Excellency, the Governor General in Council has authorized the Honourable Minister of Labour by order in council P.C. No. 2851, dated September 10, 1935, to enter into an agreement with the province of Manitoba.
And whereas a serious employment situation exists within the province, which necessitates the government of the province of Manitoba accepting the greatest measure of assistance which the Dominion of Canada will grant; it is therefore deemed advisable that the agreement with the government of the Dominion of Canada, as mentioned in the said letter of the Honourable Minister of Labour, be entered into.
That, Mr. Chairman, is the province of Manitoba speaking. It is not suggested, I hope, that I had anything to do with them.
And whereas a copy of the agreement duly signed by the Honourable Minister of Labour, together with copy of said order in council P.C. No. 2851 is attached hereto and marked "Exhibit A."
And whereas it is deemed advisable that the said agreement be executed and that the terms thereof be ratified and confirmed by the government of the province of Manitoba, and that the Honourable W. R. Clubb, Minister of Public Works and Labour, be authorized to carry out the terms of the agreement on behalf of the province of Manitoba and to proceed with the construction of all or any of the works.
In the recommendation of the Honourable the Minister, the Committee advise-
That the Lieutenant Governor in Council approve, and it is hereby approved, that the agreement hereinbefore referred to, copy of which is hereto attached and marked "Exhibit A," be ratified and confirmed by the government of the province of Manitoba, and that the
[Mr. Bennett.l
Honourable W. R. Clubb. Minister of Public Works and Labour, be and is hereby authorized and empowered to execute such agreement on behalf of the government of the province of Manitoba, and to carry out the terms of the agreement and to proceed with the construction of all or any of the works mentioned in the agreement, copy attached.
Certified
(Signed) J. L. Johnston,
Clerk, Executive Council
Winnipeg, Man.
September 18, 1935.
(The Honourable Mr. Bracken in the chair.)
That is the position up to that date. Now we come to the agreement, and I am most anxious that every word of that agreement should be studied, because it is the agreement which the province of Manitoba approved without any suggested variation or amendment in any way, shape or form.
Supplementary agreement re provincial highways and bridges, Manitoba. The Relief Act, A.D. 1935.
Memorandum of agreement entered into this twentieth day of September, A.D. 1935-
The "twentieth" date comes about by reason of the fact that no date was filled in, and on return of the document to Ottawa Mr. Hereford pointed out that no date had been filled in, and so he filled in the twentieth, being the date of the letter enclosing it.
Memorandum of agreement entered into this twentieth day of September, A.D. 1935 between
His Majesty the King in the right of the Dominion of Canada (hereinafter called the "dominion"), represented herein by the Honourable Wesley A. Gordon, Minister of Labour, of the first part, and
His Majesty the King in the right of the province of Manitoba, hereinafter called the "province," represented herein by the Honourable W. R. Clubb, Minister of Public Works, of the second part.
Whereas The Relief Act, 1935, empowers His Excellency the Governor General in Council upon such terms as may be agreed upon to enter into agreements with any of the provinces of Canada respecting relief measures therein and, for that among other purposes of that act, to authorize the payment out of the consolidated revenue fund of Canada of such moneys as may be necessary;
And whereas the province, for the purpose of obtaining financial assistance in the execution of measures for the relief of distress within it has requested His Excellency the Governor General in Council, in addition to the agreements respecting relief measures authorized by orders in council P.C. 1769 dated June 28, 1935, and P.C. 2396 dated August 8, 1935, to enter into this agreement and he, concurring and having approved of its terms and conditions has authorized the Honourable Wesley A. Gordon, Minister of Labour of Canada, to execute the same on behalf of the dominion;

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Now therefore it is agreed by and between the parties hereto as follows:
1.	The dominion will pay to the province fifty per centum (50%) of the amount expended by the province during the term of this agreement on the construction and/or improvement of the following provincial highways exclusive of the cost of lands and/or damages to lands namely,
(a)	A provincial highway, including the construction of necessary bridges and culverts thereon, from a point at or near the town of Russell, easterly to a point on the Brandon-Clear Lake highway to be agreed upon in writing by the parties hereto, a distance of approximately 76 miles, maximum dominion contribution three hundred and eighty thousand dollars ($380,000).
(b)	Provincial highway number three, including the construction of a bridge over the Red River at or near the village of Letellier and all other necessary bridges and culverts, from a point at or near the town of Morden, easterly to a junction with the Winnipeg-Piney highway at a point near Piney thence easterly to the village of Sprague, a distance of approximately 115 miles, maximum dominion contribution five hundred and seventy-five thousand dollars ($575,000).
(c)	A provincial highway, including the construction of necessary bridges and culverts, from a point at or near the city of St. Boniface south-easterly to the international boundary at a point approximately five (5) miles south of the village of Piney, a distance of approximately ninety (90) miles; maximum dominion contribution two hundred and fifty thousand dollars ($250,000).
It is understood and agreed between the parties hereto that the dominion will not contribute to a cost in excess of an average of ten' thousand dollars (i$10,000) per mile, in relation to any of the highway projects described in this agreement.
2.	The dominion will pay to the province fifty per centum (50 per cent) of the amount expended by the province during the term of this agreement for the construction of the following bridges over the Assiniboine river, exclusive of the cost of lands and/or damages to lands, namely:
(1)	At or near the village of Headingly, total estimated cost $30,000; maximum dominion contribution $15,000;
(2)	Between the city of Winnipeg, authority P.C. 354, dated February 12, 1936-
I have not the original, but obviously 1936 must be an error, or the document that I have here is not the original.
Clarence Decatur Howe: I have here the original, which I will send across to the right hon. gentleman if he likes.


Richard Bedford Bennett: Thanks. Here it is:
Between the city of Winnipeg, authority P.C. 354, dated February 12, 1936-
Obviously, Mr. Chairman, we had better stop this now. Here is a document produced with reference to something that occurred between two dates, one, the twentieth day of August, 1935, and the other the fifteenth day
of October, 1935. Being unable to get the original, and reading from the copy, I thought the date set out here was a typographical error; but I find now in the original return that it is given as 1936.


Ross Wilfred Gray: It is still signed by the Minister of Labour, the Hon. W. A. Gordon.


Richard Bedford Bennett: It could not have been signed by the Hon. Mr. Gordon in 1936.


Ross Wilfred Gray: But it is.


Richard Bedford Bennett: Well, then, this document cannot be accurate.


Ross Wilfred Gray: Is it signed?


Richard Bedford Bennett: The point is that I cannot proceed further until there is verification of this document. This matter has now become exceedingly serious. Here is what purported to be a return of papers lodged in the department between the twentieth day of August, 1935, and the fifteenth day of October, 1935. Not being able to get the original, and reading from the copy, I thought there was merely a typographical error, and I was willing to assume that. Now, thanks to the Minister of Transport, I have been handed the original, and I find, written in red ink, the following words in this document now produced as the original:
Between the city of Winnipeg, authority P.C. 354, dated February 12, 1936-
That is as plain as anything in the world. I cannot go further. This must be some other return.


Ross Wilfred Gray: It does not change paragraph
11.


Richard Bedford Bennett: Fraud I have not suggested; but here is a document produced, upon which grave observations were made, which bears a date in February, 1936, purporting to be a paper that was lodged in the department between August and October, 1935. That is what I have in my hand.


Norman McLeod Rogers: I have not a copy of that before me.


Richard Bedford Bennett: This is the original; I should like to hand it to the minister.


Norman McLeod Rogers: It may very well be that the agreement was amended subsequently at the request of the province.


Richard Bedford Bennett: I have been very patient and very careful not to place any construction upon it but merely to state facts. Obviously, however, I cannot proceed with something which is handed to me as the original, bearing the date February 12, 1936, when the papers-
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Norman McLeod Rogers: But that is not the date of the agreement.


Richard Bedford Bennett: No, but that is in this
document.


Norman McLeod Rogers: Yes, but-


Richard Bedford Bennett: I should like the minister to see it. Here is my difficulty now.


Ross Wilfred Gray: There is no red ink in paragraph 11.


Norman McLeod Rogers: This is a memorandum
apparently.


Richard Bedford Bennett: No, that is the original
return; there cannot be any "apparently" about it. That is the original return.


Norman McLeod Rogers: The explanation is obvious. As my right hon. friend knows, under the agreements the provinces would sometimes request that an amount be transferred from one project to another or that a project be changed, and it appears here that there is a notation in red ink, which suggests clearly to me that this project was altered. Originally it was between Tuxedo and St. James; now it has been altered so that it is between the city of Winnipeg and St. James, and the authority for that, which was subsequent to the time when this government took office, is P.C. 354, dated February 12, 1936.


Richard Bedford Bennett: But surely the Minister of Labour would be the first to say that when a return has been produced in this house, a return upon which an attack was made upon me, and a return which deals, on the face of it, with papers dated between August 20, 1935 and October 15, 1935, and when in the return there is a document dated February, 1936, it is not a matter of explanation, but a question of the file. That is clear upon the face of it. I was willing to assume good faith at once and I thought it was a typographical error, so I asked two or three times for the original, but could not get it. To-night, however, the Minister of Transport has been good enough to send it over to me, and it is clear that until this document is explained in some way I cannot proceed. I do not know whether the rest of the return is valid. With respect to that private and confidential letter, was it on the file originally or was it put on?


Norman McLeod Rogers: If the right hon. gentleman will permit me to answer both questions, I shall do so.	.


Richard Bedford Bennett: Surely.


Norman McLeod Rogers: As to the letter, it was
certainly on the file and because it was on the file it was included in the return. Second,

as to this particular agreement, I am informed that when, at the request of a province, changes are made in the description of projects such changes are entered on the original agreement which is kept on the file and with the authority under which the change has been made. Therefore there is no difficulty as to that.


Richard Bedford Bennett: But there is a difficulty, because this is the document that has been handed to me. I received a document from the office downstairs where such documents are supposed to be lodged. I was told I could not get the original, but the official said, "You may have this copy." I said, "Have you copies?" He replied, "Mr. Lyons of your office has a copy," and so I did not take one. This is the document, but what has been handed to me as the original bears the date I have indicated. I cannot proceed with a document of that kind because it throws doubt upon the validity of the whole return.


Norman McLeod Rogers: Surely that is not so. I will hand this back to the right hon. gentleman. The explanation is as I have given it. If he wishes to ignore the red ink, he will have the agreement as it was made originally; if he wishes to take account of the red ink he will find the corrections that were subsequently made, at the request of the province, in the description of the projects.


Richard Bedford Bennett: But explanations in this house with respect to the validity of a return are not admissible.


Norman McLeod Rogers: But this is accurate; this is the agreement.


Richard Bedford Bennett: I should like to have the original back now, if the Minister of Labour will >be good enough to let me have it. This is the only time I have been able to get it, thanks to the courtesy of the Minister of Transport.


Ross Wilfred Gray: Read it as it is.


Richard Bedford Bennett: The document as it stands, reads:
(2)	Between the city of Winnipeg, authority P.C. 354. dated February 12, 1936, and St. James, total estimated cost, $150,000; maximum dominion contribution, $75,000.
The word struck out is the word "Tuxedo."


Norman McLeod Rogers: Yes; it was in the original.


Richard Bedford Bennett: Well, I am saying that it is the word struck out in the original. The copy furnished me reads:
(2) Between the city of Winnipeg, authority P.C. 354, dated February 12, 1936, and St. James, total estimated cost. $150,000, maximum dominion contribution, $75,000.

Supply-Labour-Employment Offices


Norman McLeod Rogers: That is a fault not in the
return, but in the copy of the return. The original, which my right hon. friend has, has both the projects as defined when the agreement was made, and the projects as corrected subsequently at the request of the province.


Richard Bedford Bennett: The return brought down is this. It covers the highway between the city of Winnipeg, authority P.C. 354, dated February 12, 1936, and St. James. That is what it is. And what is more, when you come to the fourth paragraph you have exactly the same words:
(3)	At or near the city of Portage la Prairie, total estimated cost $80,000; maximum dominion contribution $40,000.
Now I read from the original:
(4)	Near the town of Virden (Sproats Bridge) total estimated cost-
The figures are struck through with red ink and undecipherable figures put in their place.
Maximum dominion contribution, $11,100, authority P.C. 384 February 19, 1936.
That is a week later still. Then follow:
(5) And for the construction of a bridge over Swan river at or near Lens, exclusive as aforesaid, total estimated cost $30,000, maximum dominion contribution $15,000.
(6) And for the construction of a bridge over Pine river at or near Camperville, exclusive as aforesaid-total estimated cost-
The figures $12,000 are struck out in red ink and $7,800 substituted.
Authority P.C. 384 of February 19, 1936. Maximum dominion contribution $3,400.
The figures 6,000 struck out.
It is obvious that this return is either accurate or inaccurate. I am bound by the return as it is, and it purports to deal with matters done in 1936 when Mr. Gordon was no longer minister. This document is produced as one signed by him, in response to an order of this house for papers between August and October of 1935. Surely we cannot proceed with that, until there is some verification or explanation attached to the document; for the document, copy of which is produced, is one that has to do in its present form with matters several months later; in fact, one of them is as late as February 19, 1936. Under the circumstances I ask the minister to let the item stand until such time as this document can be verified.


William Lyon Mackenzie King: Is not the
fact simply that the document produced here is the document on the file in the department? The document on file was the original document with some changes that have been
made in the customary way where an agreement is altered subsequently on the authority of some order in council. The document shows the alteration, the authority for the alteration and also contains the original wording. It does not affect the point we are discussing.


Richard Bedford Bennett: It affects the whole matter. Either this is a valid and authentic return, or it is not. Either this is a document signed by Mr. Gordon, or it is not. It is clear that Wesley Gordon did not sign a document dated February, 1936.


Norman McLeod Rogers: All my right hon. friend
need do is ignore the red writing.


Richard Bedford Bennett: I cannot ignore it because it is part of this return.


Norman McLeod Rogers: They are both there.


Richard Bedford Bennett: No; one is struck out, entirely struck out. It is elementary that in a court of law you could not proceed with such a document, and this is the high court of parliament.


William Lyon Mackenzie King: If they brought the other document, it would not be the original agreement.


Richard Bedford Bennett: There should have been attached as part of it the order in council that authorized the alteration.


William Lyon Mackenzie King: It is mentioned.


Richard Bedford Bennett: But it is not there. This document is not a document that was signed by Wesley Gordon. It is not a copy of a document signed by Wesley Gordon.


William Lyon Mackenzie King: I think it is.


Richard Bedford Bennett: It cannot be, because it deals with matters in 1936. And the worst feature is this. It is not sufficient to say that the striking out of words makes it the original agreement. That is not so. Let us at least have some measure of, shall I say, decent accuracy with respect to this matter. Here is a document produced as having been signed by W. A. Gordon. Unfortunately, I departed from a principle which I make it a rule not to do, I took a copy; and I took the trouble to say to the gentleman in charge, because I have frequently seen mistakes made in copies. " Are you sure this is a correct copy?" And he said, "Yes, it has been verified." I think he said some man named Hill was in charge. But I could not get the original; if I had, I would have looked through it and seen this change at once. But this is not the document Wesley Gordon

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signed; it is a document that was amended in 1936; that is so obvious that it does not require argument or discussion. It is easy to say, Oh, well, something else was intended; but that was the whole point.


Norman McLeod Rogers: If my right hon. friend really wants to find the document Mr. Gordon did sign, he will have no difficulty; all he need do is to ignore the red ink.


Richard Bedford Bennett: What right has the minister to say that if I want to get a document signed by Wesley Gordon in 1935, all I have to do is to strike out certain words. Surely, with his wide knowledge, he knows he cannot add to this document. It is either authentic, or it is not.


Norman McLeod Rogers: The explanation is perfectly clear. We keep on our file a facsimile of the current agreements between the dominion government and the province in question. The original document is placed on the file; if subsequently there are corrections made at the request of the province and under authority of an order in council, these corrections are entered on the agreement. The order for return asked for the papers on the file. This is a facsimile of the agreement as found on the file. How otherwise could it be included in the return? As I recall, the corrections are not material corrections; they do not touch the expenditures on the important highways in question; they touch rather the smaller amounts involved.


Richard Bedford Bennett: One is $150,000. Well,
Mr. Chairman, it is perfectly obvious that the documents produced here are not the documents that were signed by Mr. Gordon, the then minister. And the Minister of Labour (Mr. Rogers), although he was not in this house at the time, undertakes to say what is the original. I want to know which was the original. Which is the one that is not accurate? Is the rest of the return as inaccurate as this? Is the whole matter inaccurate, or only part? Those are questions which would prevent this document from being produced in a court of law and regarded as the document.
But assuming that I read the red ink, and say that these words are added in red ink-


Charles-Philippe Beaubien: The right hon. gentleman can verify the letter by his own files.


Richard Bedford Bennett: Mr. Chairman, there is
no reason why, relying upon the immunity of parliament, the hon. member should make insulting observations of that kind.


Charles-Philippe Beaubien: My right hon. friend
has tried to insult more hon. members in

this house than has any other hon. member who has ever sat in it. There is no hon. member who breaks the rules more than does my right hon. friend.


Richard Bedford Bennett: I decline to enter into
any controversy with the hon. gentleman.


Charles-Philippe Beaubien: Take your medicine.


Richard Bedford Bennett: That is in keeping with
the hon. member's usual language. I continue :
(5) And for the construction of a bridge over Swan river at or near Lens, exclusive as aforesaid, total estimated cost $30,000; maximum dominion contribution $15,000.
(6) And for the construction of a bridge over Pine river at or near Camperville, exclusive as aforesaid, total estimated cost $7,800; authority P.C. 384 of Feb. 19,	1936, maximum dominion contribution $3,900.
In paragraph (2) of the document from which I am reading, being the original return, the word "Tuxedo" is struck out and the words "the city of Winnipeg-authority P.C. 354 dated Feby. 12, 1936," are written in in red ink.
In paragraph (4) the figures "18,000" are struck out and the figures "22,200" inserted in red ink, and the words "authority P.C. 384 of Feb. 19, 1936" added in red ink.
In the third line of the same paragraph the figures "9,000" are struck out and "11,100" added in red ink.
In paragraph (6) the figures "12,000" are struck out, and there is added in red ink what appear to be the figures "7,800" and the words "authority P.C. 384 of Feb. 19, 1936," and the figures "6,000" struck out and the figures "3,400" inserted in red ink.


William Lyon Mackenzie King: It should be $3,900. My right hon. friend said $3,400.


Richard Bedford Bennett: It looks like a four. The Prime Minister is reading from a copy, and I am reading from this red ink. It is $3,900.
Paragraph 3 reads:
The dominion agrees to loan to the province an amount not in excess of one million three hundred and sixty-five thousand dollars ($1,365,000) to enable the province to pay its share of the proposed expenditures mentioned in paragraphs one (1) and two (2) of this agreement, the terms and conditions of said loan to be settled upon in writing between the Minister of Finance of the Dominion of Canada and the province.
4.	Except in such cases and with relation to such projects or parts thereof as the dominion and the province shall except in writing from the operation of this paragraph, the projects mentioned in paragraphs one (1) and two (2) of this agreement shall be executed by tender and contract. The province shall submit to the dominion, in respect of every contract relating to any of the said projects, certified copies of

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advertisements for tenders, forms of tenders, descriptions, specifications of works and the formal contracts entered into, and it shall be a condition precedent to the dominion's liability to contribute to the said projects respectively, that the Minister of Labour of Canada or his representative shall have approved in writing the formal contract or contracts for construction which relate thereto.
Bear in mind that this agreement provides that the contract is a contract made by the province, with a contractor, after public tender, and not by the dominion government. But before the contract is entered into there should be a copy of the proposal or tenders furnished to the Minister of Labour here, and he should approve before action is taken. Does that look like the dominion government being able to approve expenditures?


Ross Wilfred Gray: The dominion government
submitted this.


Richard Bedford Bennett: I make it perfectly clear that this is the usual form of tender under the agreements that had been provided, and that the province of Manitoba made this agreement with the dominion without amendment or a suggestion of amendment. Further on in the terms it provides for public tenders, and certified copies furnished to Ottawa, of every tender, and a public advertisement- not a hole and corner one-a public advertisement, and that there should be a submission to the Minister of Labour of these contracts themselves.


Ross Wilfred Gray: A	form submitted by the
dominion to the province.


Richard Bedford Bennett: I continue:
5.	The province will not make any charge as against the dominion for necessary timber, lumber, rock or gravel where such is taken from the province's crown lands other than for labour expended during the term of this agreement and/or for gravel used from property which has been bought by the province for the purpose of securing said gravel.
6.	It is understood and agreed by and between the parties to this agreement, with relation to all work done in the execution of any or all of the projects mentioned in paragraphs one (1) and two (2) of this agreement from and after the tenth day of September, 1935, as follows:
(1)	That contracts shall be let only to residents of Canada, including as such residents Canadian firms or eornorations established and operating in Canada, prior to January 1, 1935, and no others.
(2)	That contracts shall be let subject to the following conditions, which the province will enforce:
Not the dominion.
(a)	While employment shall in general be afforded in the locality of the work which is from time to time being done, such employment -51952-2501
shall not be confined to any one district, but, where it appears that unemployment is acute in any locality in the province, a reasonable number of unemployed persons shall be employed from such locality.
That was the condition, and the province was to enforce it, not the dominion. It was the Liberal government at Winnipeg. Then, proceeding from there:
(b)	No persons other than residents of Canada shall be employed.
(c)	No resident of Canada shall, with relation to his employment, be discriminated against by reason of his race, religious views or political affiliations.
There it is written in the record.


Ian Alistair Mackenzie: And moved by us, in opposition.


Richard Bedford Bennett: The Minister of National Defence makes it stronger by saying, "we moved it in opposition." And there it is in the contract to be enforced by the province, not the dominion.
(c)	No resident of Canada shall, with relation to his employment, be discriminated against by reason of his race, religious views or political affiliations.
(d)	Political favouritism and political intimidation shall alike be avoided.
(e)	The maximum number of hours of work per day per employee shall be eight.
(f)	The rates of wages paid shall be fair and reasonable and shall be fixed by the province.
By the province, not the dominion. And then:
(g)	Living conditions of employees shall be reasonably satisfactory. Provisions shall be made for proper housing, feeding, medical attention and mail facilities where same are necessary.
(h)	Only goods and materials of Canadian manufacture or production shall be used if available.
(3)	That the dominion shall be entitled to name a representative or representatives to act for it with the province concerning the operation of this agreement and the execution of the projects to which it relates. That the dominion may also appoint persons to cooperate with representatives of the provinces in supervising work being done and the employment of workers.
Not at the behest of the dominion, but by the province, the dominion reserving the right to govern the province with respect to these matters. It is so written in the contract, and the Minister of National Defence, says, "We fought in opposition that this be done," and here it is done. Here it is in the document. Then, further:
In the event of any exception being made and day labour being adopted with relation to any of the aforesaid projects, all of the foregoing provisions shall, mutatis mutandis, apply to the employment of said day labour.
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"Day labour" employed by the province, by the government at Winnipeg,-by the government in Winnipeg and by the department over which Mr. Clubb presided. Then we come to paragraph 7:
7.	The province agrees that it will maintain adequate records of all expenditures, supported by proper documents and vouchers and_ that such records, documents and vouchers will be segregated from, although reconciled with, the usual records of the province. The province further undertakes to make all or any of said records, documents and vouchers, available to the dominion for audit or examination upon request and to furnish information in relation thereto.
8.	Statements of accounts for expenditures made by the province pursuant to the provisions of this agreement shall be submitted by the province to the dominion commissioner of unemployment relief, accompanied by a certificate of the provincial auditor that expenditures have been duly made in accordance with such statements and have been or within a reasonable time will be audited by him; and such statements and certificates shall be in the form prescribed by the dominion commissioner of unemployment relief.
9.	The province shall bear its own expenses of administration with relation to any measures undertaken pursuant to this agreement, and no portion of such expenses shall be included in any statement of account rendered by the province to be paid by the dominion.
10.	It is agreed that the dominion commissioner of unemployment relief may at any time direct an inspection in connection with any measures executed or being executed pursuant to this agreement and that the province will facilitate, as fully as it can, every such investigation.
11.	This agreement shall be effective from and including the tenth day of September, 1935
The day upon which the order in council was passed; the earliest date at which it could be made after that-
-and shall expire on March 31, 1936-
That is on every agreement made under the authority of that statute. That was the end of the fiscal year. And further;
-but shall not apply to any project on which work has not been commenced by the tenth day of October, 1935.
Why? Everyone knows.


Ross Wilfred Gray: Three weeks before the election.


Richard Bedford Bennett: Yes. If it had been for political purposes, it would have been right up to the day of the election, or the day of the nomination; instead of which it was made on October 10. 1935. Why?


William Lyon Mackenzie King: What was the date of the election?


Richard Bedford Bennett: The 14th, I am told.


William Lyon Mackenzie King: Just four days out.


An hon. MEMBER:: You should remember it.


Richard Bedford Bennett: I am bound to say I do not remember. That is not one of the things with which I have charged my mind. It was very disastrous though, I understand.


William Lyon Mackenzie King: He knew the
date of the elections.


Richard Bedford Bennett: He did not see this
document; and what is more he was not there.


William Lyon Mackenzie King: He knew the date of the elections when this was drafted.


Richard Bedford Bennett: He did not have anything to do with the drafting of it, in any shape or form, nor does it depart from the general principles which governed other agreements made by the former government, as well as by this one. And, as is done with respect to some projects, a date was fixed when the time should expire, because work was not commenced when winter was coming on.


Charles-Philippe Beaubien: How did you know on October 10 winter was coming on? You are not a prophet.


Richard Bedford Bennett: In every case which had to do with these matters there was an effective date placed in the contract.


Norman McLeod Rogers: Never.


Richard Bedford Bennett: Never?


Norman McLeod Rogers: Can my right hon. friend give me one case of an agreement which required that the dominion government would not contribute to the work unless the work began on a given date? I never have known it at any time.


Richard Bedford Bennett: Well, will the hon. gentleman say he has gone through the contracts?


Norman McLeod Rogers: The right hon. gentleman said that it was customary. Tell me about it.


Richard Bedford Bennett: The minister made the statement.


Norman McLeod Rogers: I ask the right hon. gentleman to tell me.


Richard Bedford Bennett: The minister made the statement. He interrupted. Has he gone through the contracts?


Norman McLeod Rogers: I am familiar with the
agreements that have operated for a number of years, and I have yet to find one that required that the work should be started at a certain date.

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Richard Bedford Bennett: This does not say the
work should be done.


Norman McLeod Rogers: Started on a certain date.


Ross Wilfred Gray: Four days before the election.


Richard Bedford Bennett: Any work commenced
after October 10 was not to come within that agreement.


Norman McLeod Rogers: Why should it be October 10?


Richard Bedford Bennett: Why?


Norman McLeod Rogers: Yes.


Richard Bedford Bennett: Because that is the date which the minister fixed with the government of Manitoba.


Ross Wilfred Gray: A strange clause.


Richard Bedford Bennett: It was fixed by the
government of Manitoba.


Norman McLeod Rogers: The agreement was drafted here.


Richard Bedford Bennett: Could anything indicate
more clearly the unfairness of men when they are influenced by political considerations? Here is the document which was sent by the department to Winnipeg, and it was open to the government at Winnipeg to do anything it pleased them to do. Instead of making any changes, they accepted the document in its entirety. The fact that it was accepted in its entirety by two governments, one being Liberal and the other Conservative, is supposed to indicate that I conspired with somebody to do something.


Norman McLeod Rogers: The only way by which
they could get the money was by signing the agreement in those terms.


Richard Bedford Bennett: There you have an
indication of the smallness of the mind of one individual.


Norman McLeod Rogers: That was one consideration.


Richard Bedford Bennett: I knew all we had to do was to give the hon. gentleman a chance. What a pretty sight it is for the country to have the Minister of Labour rising in his place to-night and saying that all that Bracken and Clubb could do was to sign that.


Norman McLeod Rogers: That is in the agreement.


Richard Bedford Bennett: Is there anything to
show that they had to sign? What is there to warrant the suggestion of the hon. gentleman?


Norman McLeod Rogers: Because the agreement
always goes from here to the province.


Richard Bedford Bennett: Does it?


Norman McLeod Rogers: Yes; that is customary.


Richard Bedford Bennett: As a matter of fact, it
may not be. You see, I have some memory with reference to these agreements, not as to the details of any of them, unfortunately, because I have not tried to keep the details in mind. But I have a very clear recollection of this. It is absurd and absolutely incorrect to say that every proposal made by the dominion was accepted by the province. They were the subject matter of negotiation.


Norman McLeod Rogers: They were drafted here
and sent forward finally for approval.


Richard Bedford Bennett: The negotiation of the
agreement took place between the dominion and the province. The date was fixed in the interests of the public exchequer.


Norman McLeod Rogers: What is the explanation
of the October 10 clause?


Richard Bedford Bennett: It was not wise to commence expenditures when winter was beginning. There is nothing new about that. I continue:
In witness whereof the Honourable Wesley A. Gordon, Minister of Labour, has hereunto set his hand on behalf of the Dominion of Canada and the Honourable W. R. Clubb, Minister of Public Works has hereunto set his hand on behalf of the province of Manitoba. Signed on behalf of the Dominion of Canada by the Honourable Wesley A. Gordon,
Minister of Labour, in the presence of
W. M. Dickson.	W. A. Gordon.
Signed on behalf of the province of Manitoba by Honourable W. R. Clubb, Minister of Public Works, in the presence of
A. MacNamara.	W. R. Clubb.
On September 23, 1935, Mr. Hereford writes a letter to Mr. Clubb, as follows:
Ottawa, September 23, 1935. Honourable W. R. Clubb,
Minister of Public Works and Labour, Winnipeg, Manitoba.
Dear Mr. Minister,-
In the absence of the deputy minister of labour, I am to acknowledge receipt of yours of September 20 enclosing supplementary agreement between the dominion government and the province authorized by P.C. 2851, also copy of provincial order in council authorizing you to sign said agreement.
As you have omitted to date the agreement, I have dated it September 20, 1935, that being the date of your authority to enter into the agreement, and I shall be obliged if you will note this date on your copy of the agreement.
Yours truly,
Harry Hereford, Dominion Commissioner.
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That was September 23. On October 1, which it will be observed is a week later, Mr. Clubb writes to the deputy minister as follows:
On September 18, 1935, I wired ae follows-
I have just read the telegram. The letter concludes:
Inquiries were made to-day by a deputation from the district in this regard and I promised to write and ask for as early a decision as possible.
Thanking you, I am,
Yours very truly,
W. R. Clubb, Minister of Public Works.
That is all there is to it. On that state of affairs the present Prime Minister alleges a conspiracy on the part of a former Prime Minister to bribe three constituencies. Not only is it not evidence, but I am going to say more. On the basis of a letter, which so far as I know I did not see-after I came back from England I did not deal much with correspondence as I was not well-that is what is done, but I had nothing to do with these negotiations. I sent to Mr. Dickson a copy of the telegram. I got from Mr. Murphy. This whole argument proceeds upon the allegation of motives, not upon facts at all. It is doing something that the rules of this house say should not be done; it attributes motives to hon. members and says that there was a conspiracy. As a matter of fact, I did not intend to pay any attention to it; but the Prime Minister said: "Surely you are not going to let that go." I was not only going to let it go; but it struck me that the decency of Canada, the decency of the Canadian people would resent that sort of argument. Supposing all the suggestions that had been made to ministers in the form of personal letters were made public; would they be responsible?


Charles-Philippe Beaubien: This letter was broadcast to every minister of the crown.


Richard Bedford Bennett: Would they be responsible? Am I responsible for Ralph Webb's letter? Am I to be responsible and charged as a conspirator because Ralph Webb wrote a letter which was marked "personal and confidential"?


Mr. FRASER:: Your government acted upon it.


Richard Bedford Bennett: The government did not act upon it. It acted because of pressure brought by the province of Manitoba. An agreement was entered into, but who was to supervise? Who was to employ the labour?

Who imposed the condition that local labour was to be employed? It was the province, not the dominion.


William Alexander Fraser: Who originated the idea?


Richard Bedford Bennett: Since 1931 forty miles of the most important part of the road had been built. This road connected with the United States of America, and it was to have been part of the road system of the Riding Mountain park. The pressure exerted by Mr. Clubb was continuous. The records show that he had pressed for the building of these roads. Now it is said that all that pressure should go for nothing, that what should count is the fact that Ralph Webb wrote a letter and said that we would get three constituencies if money was spent, by the province, not by the dominion. That may be a good argument against Ralph Webb, but any man who would endeavour to make that an argument against me in a court of law in this country would soon know what would happen to him.


William Alexander Fraser: Ralph Webb was the director of the Conservative party in Manitoba.


Richard Bedford Bennett: Supposing he was.


Mr BEAUBIEN:: If any one put up the defence the right hon. gentleman is putting up, he would soon know what would happen to him.


Richard Bedford Bennett: But we have evidence of cases that do not depend upon inference, cases that are written in the records of the parliament of Canada. When I heard the Prime Minister talking as he was the other evening, I wonder if he thought for a moment of the hon. member for Winnipeg North (Mr. Heaps) and the hon. member for Winnipeg North Centre (Mr. Woodsworth). I wonder if he forgot when those hon. gentlemen were at Laurier House in the trying days of 1926? I have the record under my hand. He was trying to save not one constituency, not two, not three-his whole government remained in office because it was able to get those votes. Here is what the hon. member for Winnipeg North Centre said upon the matter.


William Lyon Mackenzie King: At Laurier House?


Richard Bedford Bennett: They were at Laurier House.


William Lyon Mackenzie King: I will ask the hon. gentlemen to state here if they were present at Laurier House and discussed any matter relating to politics.


Richard Bedford Bennett: I did not say. Go and ask them.

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William Lyon Mackenzie King: I say immediately that at no time did I discuss either with the hon. member for Winnipeg North Centre (Mr. Woodsworth) or the hon. member for Winnipeg North (Mr. Heaps) at Laurier House any matter referring to the program of politics in this house.


Richard Bedford Bennett: The hon. gentleman says in his letter that he discussed it with them.
I am going to read it presently. I said, "at Laurier House", because that is my understanding of what the hon. member said. But if it was not at Laurier House, it was somewhere else.


William Lyon Mackenzie King: I never discussed with these gentlemen at Laurier House any matter that related to a political program in this house.


Some hon. MEMBERS:: Withdraw!


Richard Bedford Bennett: Just one moment. I have said I accept at once the right hon. gentleman's word on that point, but I am going to read about the discussion with these hon. gentlemen.
The government of the present Prime Minister did not secure a majority of the votes in the election of 1925. It did not secure a majority of the seats in the election of 1925. It held on to office, though nine ministers were defeated, including the Prime Minister himself, and when the house met on January 7, 1926, the Prime Minister was not in his place. He had been defeated; he had no seat in this house, and the house was led by the right hon. gentleman, the present Minister of Justice (Mr. Lapointe). The question whether or not the then government would remain in office depended entirely upon the attitude of mind of a very few people. In fact, in one division the majority was one; in another the majority was two, and the majorities ran in and out. The present hon. member for Winnipeg North Centre (Mr. Woodsworth) was then in this house, as was also the present hon. member for Winnipeg North (Mr. Heaps). At page 560 of Hansard-


Arthur Graeme Slaght: Mr. Chairman, I rise to a point of order.


Mr. SPENCE:: That is all you ever do.


Arthur Graeme Slaght: The retort of the hon.
member for Parkdale (Mr. Spence) is refreshing.


Some hon. MEMBERS:: State the point
of order.


Arthur Graeme Slaght: Mr. Chairman, the point
of order is this. As I understand it, we are
discussing the estimates of the Department of Labour, and what on earth have they to do with the topic which the right hon. gentleman is at present pursuing?


Mr. ROWE (Dufferin-Simcoe):: You do not like it.


Arthur Graeme Slaght: Yes, I like it, if the hon. gentleman wants to meet me on the hustings or anywhere else to discuss it.


Mr ROWE (Dufferin-Simcoe):: I have met you before.


William Alexander Fraser: Worse for you, that time.


Arthur Graeme Slaght: It does seem to me, Mr. Chairman, that it is a woeful waste of time to be discussing this matter on these estimates. There may be a place and time at which the situation the right hon. gentleman has introduced may be discussed, but I submit this is not the time, and that he is entirely out of order.


Frederick George Sanderson: On the point of order raised by the hon. member for Parry Sound (Mr. Slaght), I am of the opinion that the point of order is well taken. This debate has gone a very considerable distance and occupied a very long time. I think the discussion of the correspondence on the file which the right hon. gentleman has introduced is perfectly in order, also the discussion of the affairs at Kingston; but when the discussion goes back to 1925 and 1926 and to what happened in this chamber with reference to the elections of 1925 and 1926, I must rule the discussion out of order.


Mr BENNETT:: Well, Mr. Chairman, the reason I discussed these matters is this. It is correct and right to refer to facts as showing that inferences drawn are unwarranted; and the statement made by the Prime Minister that I was a conspirator I am going to negative by showing that if I am, I was following his example-only his was much more so. I have the Hudson Bay Railway story. He said: "The length of the mileage depends on the number of members we get." I am going to proceed by way of illustration. In argument one has the right to use illustrations. If I am charged with being a conspirator in 1935 and can show, by documents in Hansard and letters, that in 1925 and 1926, the right hon. the Prime Minister- well, if I cannot do that I shall have to accept your ruling, Mr. Chairman, but I certainly think I have a right to refer to the matters that were mentioned by the Prime Minister of this country in an endeavour to blacken my character by showing that at least what I did was not anything comparable-
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Frederick George Sanderson: Order. If the right hon. gentleman will permit me, I call the attention of the committee, in case it has been forgotten, that we are on an item in the estimates of the Department of Labour for the administration of the Employment Offices Coordination Act, and I would ask hon. members to confine their remarks from now on to labour matters under the Department of Labour. I have already ruled on the point of order raised by the hon. member for Parry Sound, and I am still of the opinion that my ruling is correct, and that for the last ten minutes, shall I say, the right hon. leader of the opposition has been out of order.


Richard Bedford Bennett: I bow to your ruling, Mr. Chairman.


Mr. McIVOR:: I think this should be a splendid stopping place, Mr. Chairman, and time to call it quits, because as I see it, as an ordinary member, I do not think the discussion that has been going on is in keeping with the dignity of the House of Commons. We are becoming provincial. I think this would be a splendid stopping place for the discussion.


William Earl Rowe: You have given your ruling, Mr. Chairman, and while the hon. member for Fort William (Mr. Melvor) may think this is a good stopping place for the discussion that has been going on, I would point out that the right hon. leader of the opposition has been charged by the Prime Minister with conspiracy and he was asked to reply. Then, when he started to reply, he was asked to stop.


Mr. GLEN:: In my judgment, Mr. Chairman, this is not a proper time for stopping this discussion. I was hoping that the right hon. leader of the opposition would continue his argument in order to strengthen his position in regard to the letter that was written to him by Mr. Ralph Webb. The right hon. gentleman has introduced into this discussion a good many things which were not at issue; but I propose to deal with the real point at issue, and when the hon. member for Fort William (Mr. Melvor) says that this is a good stopping place, I think he might well have said the same thing to-day when the leader of the opposition was attacking the Minister of Labour (Mr. Rogers) as he has been doing for the last three or four days. This whole discussion has developed into a controversy between the right hon. leader of the opposition and the Minister of Labour. As I said before, the right hon. leader of the opposition is about to pass out of public life.


Richard Bedford Bennett: Is that in order, Mr. Chairman, under your ruling?


James Allison Glen: I am quoting statements that have appeared in the press.


Richard Bedford Bennett: The hon. gentleman's
remark was very relevant to the item, Mr. Chairman!


Frederick George Sanderson: I will ask the hon.
member to confine his remarks to the item.


James Allison Glen: I will confine my remarks not only to the item but to that which has been introduced and allowed to be discussed in this chamber. For that reason I am proceeding to deal with the speech of the right hon. leader of the opposition. I am of course interested in this particular matter because one of these roads passes through my constituency. Let me tell the leader of the opposition that before the election the Conservative candidate, Mr. Peden, who is mentioned in one of the letters as having interviewed the provincial government, stated throughout the whole of the constituency that they were prepared to make these roads but could not do so because of the fact that the provincial government were not willing that this should be done. When it was brought to his attention that the provincial government had already made the offer to build these roads, not at all with a view to the election but for the purposes of relief, then approaches were made to the provincial government; and the letters and correspondence that we now have conclusively bear out what happened. The leader of the opposition says that he-perhaps-did not see this letter. Well, it is an extraordinary fact-


An hon. MEMBER:: Oh, no.


James Allison Glen: -that the letter was written by Mr. Webb and duly received by Mr. Gordon in Ottawa, and then there was a further letter from Mr. Clubb, written on that very day, September 4, that the leader of the opposition addressed his letter to the deputy minister conveying the telegram which was sent by Mr. Murphy. If it happens that the leader of the opposition, the then Prime Minister, would take the position that on the strength of a telegram from the Minister of the Interior he had nothing to do with this project at all except that he was interested from a constituency standpoint, how is it that on receipt of that telegram from the Minister of the Interior the right hon. leader of the opposition passes over the head of Mr. Gordon, his own minister, who had charge of this particular project? One can hardly understand, and I do not think I can believe-


Some hon. MEMBERS:: Order.

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Employment Offices


James Allison Glen: -that the then Prime Minister did not know the contents of the letter that was written to Mr. Gordon, with a copy, sent to Mr. Gordon, of the original which must have gone to the then Prime Minister, who, fortified by t'he terms of that letter, authorized or rather instructed the deputy minister that serious consideration must be given to the building of these roads. Immediately the matter is completed and the project is entered into. I wish to call attention to the letter because in answer to the discussion that has taken place, Mr. Webb has made a statement from Toronto in which he corroborates in every way the statement of what he did at the election of 1935. In calling attention to his letter, I must say that I do not believe there will be found on the files of any of the departments a letter so callous and so cynical in its indifference to the people whom he is supposed to represent, as the contents of this letter reveal it to be. In my judgment it is so heinous that I cannot understand how any man can stay in public life after having given expression to it. It is dated August 23. As is usual in letters, the first sentence gives the subject of discussion.


An hon. MEMBER:: What year?


James Allison Glen: August 23, 1935. Usually the first sentence of a letter refers to the matter under discussion. In the first paragraph we find that he had:
. . . just come in from the constituencies of Lisgar, Provencher and St. Boniface particularly, and the situation at the moment is very good there politically, but it needs the necessary impetus to carry on.
That is the subject of the letter. The writer goes on further:
I have already written to the Hon. J. Earl Lawson, the Hon. Dr. R. J. Manion and the Hon. Wesley Gordon and the Hon. T. G. Murphy with regard to the two roads in these three constituencies that are vital factors in this election campaign, and they have the whole story in detail, both verbally and in writing.
In the next paragraph he endeavours to give an argument indicating why these roads should be built. He refers to them as a relief measure, and had he left it at that, the letter would have been entirely in order. In the next paragraph he speaks of the rust in Manitoba and the fact that the people there are likely to suffer and will need federal relief. That paragraph, too, would have been all right. But he comes back to the main theme of his letter, which is this:
. . . whereas if it is not done, they possibly may appeal to the provincial and federal governments for some form of relief, and for which we will get nothing. . . .
The .main theme of his letter. Then further on:
As a political measure, it assures us without any question of a doubt these three seats which we badly want to win, and which look very good for us at the present time.
He continues on the same theme throughout the letter, that these two roads have not and will not be built, and it has become such a strong factor politically that a great deal rests on a favourable decision being made. To still further strengthen the argument he says, at the beginning of the next paragraph:
I feel that we should play the game politically, call the provincial government's bluff, who have stated positively to delegates that they are prepared to put up dollar for dollar with the federal government in the building of these two roads as an unemployment relief works measure.
The writer shows that the provincial government had already applied for this and they *had been refused by the minister who had charge of it, namely Mr. Gordon, but he goes on further:
If the federal government would advise of participation in these two roads, it would be good politics; it would call the provincial government's bluff; it would kill the propaganda that the Liberals are carrying on at the present time; . . . and in my humble opinion, will not have cost the federal government anything, because by the time the work is organized the election will be over, and winter will be upon us, and perhaps very little work will have been done before the end of the present fiscal year.


James Houston Spence: We have had that letter read four times.


James Allison Glen: The hon. member may have forgotten some of it.


Archibald Hugh Mitchell: I wish we could forget it all.


James Allison Glen: Some contention was raised with regard to clause 11 in the agreement, that it must be that no contribution should be made unless the works were commenced before the tenth day of October. All right, there was the reason. The reason is that " by the time the work is organized, the election will be over, and winter will be upon us."


James Houston Spence: The hon. member has now made his point several times.


James Allison Glen: So there is no necessity for any money to be spent. Further on in the same letter he says:
The Hou. W. Gordon, the Hon. Dr. R. J. Manion and the Hon. T. G. Murphy know all about these two roads. They have the details, map locations and I believe thoroughly understand the situation.
The contention as contained in this letter is that these three seats must be won.
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I assume, therefore, that these three gentlemen would know how these three seats were to be won, and the order in council for the completion of the agreement was passed with their consent. The writer says:
Our candidates are very alive to the situation.
I can assure you they were most certainly alive to the situation, because from every platform in my constituency they pointed out that these roads would be completed only by their government. He finishes as he began:
Politically it means victory for us.
Here is the letter of the leader of the opposition, dated September 4. I call attention to the fact that this letter, addressed to Mr. Dickson, deputy minister of labour, dated September 4, 1935, is written on the same date as the letter which Mr. Clubb sent to the Hon. W. A. Gordon. Therefore the letter from Mr. Clubb could not have been received at that time, the then Prime Minister having written on that day authorizing or at least suggesting that these roads should be completed.


Richard Bedford Bennett: Mr. Chairman, I cannot permit the hon. gentleman to make that statement without directing attention to the fact that was not the case. It was merely the transmitting to Mr. Dickson of a telegram from Mr. Murphy, and it so states.


James Allison Glen: Quite. I have already referred to the fact that the Minister of the Interior could have had nothing to do with it


Richard Bedford Bennett: He had everything to do with it.


Mr GLEN:: -because this came under Mr. Gordon, the then Minister of Labour. The right hon. gentleman sent his letter under date of September 4, 1935, and on that date the letter was addressed from Winnipeg to Mr. Gordon. It also was dated September 4, 1935, the same date, so that the letter could not have been received or seen by the leader of the opposition. It was the same, date on which he sent that letter to Mr. Dickson,
I wonder whether the leader of the opposition saw the report of an interview given by Mr. Webb from Toronto, dated June 11, as reported in the Winnipeg Free Press of June 13 of this year.


Richard Bedford Bennett: I have not seen it, but there is a rule against reading it.


James Allison Glen: There is a rule against reading it, but many things have been read here and I am entitled to read this.


Richard Bedford Bennett: See what the Chairman
says.


Frederick George Sanderson: What does the hon. member propose to read?


James Allison Glen: I am going to read from the Winnipeg Free Press, reporting an interview that took place with Mr. Ralph Webb, dealing with this very matter. This is what he says:
"Tile road building which takes place before elections is the greatest method that exists for corrupting voters of this country," Col. R. H. Webb, Conservative organizer in Manitoba, said to-day. "It makes the tactics of Al Capone look like child's play in comparison.
"Premier King," he stated, "has seen fit to publicize a personal letter of mine and to ask for an investigation. I would welcome one," Col. Webb declared. "Let's investigate all confidential correspondence of all parties, particularly of Premier King's administration, and let us include all the governments in every province, not only the federal governments."
He takes in a lot of territory.
"My experience in politics, based on a number of years," he asserted, "is, that the best way to get good roads in a province is to have an election every six months."
"If there is one great need in Canada," he continued, "it is the need for good roads. And apparently governments in power and the opposition candidates, knowing that the people want roads, certainly don't hesitate to provide them and the party in power start to build before elections. The reason I say that there should be an election every six months is that the people know that as soon as an election is over the majority of road projects stop too."
All in conformity with the letter which he sent to the leader of the opposition.
"No matter what Premier King has to say," he stated, "one thing stands out. We needed roads in Manitoba and we got them. We beat the King government with their own weapons. My correspondence with Mr. Bennett was confidential. Maybe I was inexperienced in having written but all know politicians. I at least was sincere."
So that he was sincere in writing that letter in which he stated that it was good politics, and that they need not spend good money because winter would be upon them and there would be no need to spend it.
"The provincial administration who had asked for roads had done so in political partisanship with the federal Liberal party and hoped the Conservative government would not go ahead. I deemed it good generalship to fight them with their own weapons.
"In connection with promises that could do with a little investigating," Col. Webb said, "most unemployed remember the poster and advertising campaign of the present administration and the billboards telling them to 'vote for work and wages'." Ask the unemployed if they have work and wages. What about that?
"If we are going to have an investigation," he concluded, "I would welcome it. But let's investigate things from A to Z and make a real cleanup."

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On the same page there appears aa editorial calling attention to the fact that on September 18, 1935, when the Free Press referred to these roads as political propaganda, Mr. Webb stood on the platform in Winnipeg and denounced the Free Press, declaring that it was an insult to the intelligence of an ignoramus that the Free Press should call the building of these roads "good politics." I think it is well that this matter should be brought to the attention of the committee, and that for many reasons. During the whole of this debate there has been an attack upon the Minister of Labour in connection with matters in Kingston, which, in comparison with what happened in 1935, are as but a particle of sand on the seashore We have been dealing with twenty-five cans of white lead and $4 worth of rubble taken to a garage. The minister in the first instance was charged with connivance, but that charge was withdrawn and no attack was made upon him in that respect. Had the boot been on the other foot; had the leader of the opposition been in possession of such a letter as Mr. Webb's, addressed to a member of the party opposing him, one can imagine how he would have rent the heavens with righteous indignation against the government or members of the government who would allow themselves to be influenced thereby. I suggest that this matter must be brought to the attention of the committee. In my opinion the argument advanced so far by the leader of the opposition is not such as would lead one to believe that there was no knowledge on the part of those ministers of the purpose for which the roads in question were built at that time.
Now that the question of patronage is under consideration, I propose to do all I possibly can to put a stop to the practice. The question is being discussed in the civil service committee; it will come before this house, and there will then be an opportunity for members on both sides to give evidence of the virtue that is in them with respect to the question of patronage. It is a great pity that such things should happen in the country, because it makes the nation a laughingstock; nevertheless there must be a reply when attacks are made upon ministers who are endeavouring to carry out their duties as the Minister of Labour is doing. I am not very much in favour of the tu quoque argument, but the fact is that this whole discussion has been introduced by the leader of the opposition, and he, alone, is responsible for it.


Mr. POOLE:: What is the number of exservice men employed in the employment
bureaux throughout the country who are drawing one hundred per cent pension? I have no objection to their being employed, but there are so many ex-service men who are in receipt of small pensions who would be glad to have work. I understand there are others who are drawing one hundred per cent pensions and getting salaries in the department.


Norman McLeod Rogers: The officials in the employment service are appointed by the provincial governments. We have no information here as to whether or not they have a service record, but so far as the dominion government officials are concerned there are some who are dealing with handicapped ex-service men. I believe they are war veterans; but if my hon. friend will allow me to get the information for him and send it to him, instead of having the item stand, I shall be glad to do so.


Mr. WOODSWORTH:: I wish to bring to the attention of the committee a difficult situation that has arisen in connection with relief. My colleague the hon. member for Winnipeg North, early in the session, on April 28, directed attention to what he described as an attempt in our own city and in other parts of Canada to lower the standard of relief which was being given to families. He also said that there was an arrangement under which the incomes of families were being controlled even after the families had ceased to be on relief.


Norman McLeod Rogers: Will my hon. friend permit me to interrupt? Actually we are not on the item which deals with grants in aid to the provinces. We are on an item in the main estimates having to do with the Employment Service of Canada. I have no objection to having this matter discussed, but we cannot make progress if we discuss everything


James Shaver Woodsworth: As we discussed
highways as relief projects, I thought I was in order in discussing another relief matter.


Norman McLeod Rogers: Well, if the hon. member wishes.
Mr. WOODSW'ORTH:	I shall not take
very long. It is a matter dealing with administration. My colleague questioned the government as to why this policy should be pursued. The minister replied, as reported on page 2379 of Hansard for April 28, 1938:
My answer to my hon. friend is that the dominion government has not in any way brought pressure to bear upon provincial governments with respect to any change in relief scales.
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And again:
But there has been no pressure of any kind in respect of relief scales. That is something which, as my hon. friend is no doubt aware, is dealt with entirely by provincial governments in conjunction with the municipalities.
And again:
The only possible connection that might exist between the dominion government and relief scales is a clause in the agreements covering the last quarter of the past fiscal year which stated that the relief allowances should not compete, so to speak, with the prevailing wage in a municipality.
Some of us felt reassured when we heard those definite statements, and took it for granted that the responsibility for details of administration did not lie with the dominion government. I have been so informing the people who wrote to me about the matter. But there has recently come into my hands a letter written on January 26, 1938 by W. R. Clubb, minister of public works and labour of Manitoba, to Mr. Geo. F. Bentley, city clerk, Winnipeg. This letter shows the rigid control of the federal department which had been exercised for some months before the minister made those statements. It reads: Dear Sir:
As you are aware a few weeks ago the dominion government proposed some very restrictive terms which had to be complied with in the administration of relief contributed to by the dominion.
The views of the municipalities were obtained and representations urging modifications were made to the dominion authorities. The honourable Minister of Labour for the dominion government decided to what extent the requests would be agreed to. Some of the suggestions were adopted, some were not.
A revised agreement has been received, and we are informed that the dominion government requires this agreement carried out effective from January 1, 1938, in order to qualify for dominion contribution towards relief.
In order to obtain the dominion assistance towards relief it is required that we approve of this agreement and return it. It has already been signed by the dominion authorities. A copy of the agreement is attached.
Under the terms of the agreement the province must undertake to see that the municipalities carry out the provisions of the agreement.
Attention is called to section in regard to earnings while off relief. Your municipality has been included as one of the places where this will be carried out. We shall be glad to have your suggestions as to the system which might be evolved for carrying out this arrangement.
Before we can put your January accounts through for payment it will be necessary for you to have a resolution of council forwarded to me, in which it is agreed that your municipality will carry out the terms of the agreement.
Will you kindly arrange to deal with this important matter as promptly as possible.

Among the terms of the agreement I find this, in the first part of section 6:
The province agrees to establish and maintain standards of eligibility for material aid in accordance with this agreement. . . .
Section 7 reads:
The province agreed that the maximum value of material aid (which is contributable to pursuant to this agreement) given to any head of a family or other individual, of itself, or together with any additional allowances or material aid made by the province and/or a municipality, shall be less than the normal earnings of an unskilled labourer in the district wherein the recipient resides, as averaged over the year proceeding the granting of aid with account taken of average loss of time; in determining said maximum for heads of families adjustment may be made for normal earnings of dependents of employable age and of proved employability.
I am informed by the city authorities that this in effect has led to a very low standard of relief. For instance this last clause I have just read has cut assistance to some families of ten persons to $70 a month, including clothing. Therefore it would seem as if this agreement, insisted upon by the dominion government, is made a prerequisite to the province receiving grants in aid of relief; and the province in turn is being forced to insist that the provisions should be carried out by the municipal authorities. This has resulted in a lowering of the standards that ordinarily prevail at least in my own city. Paragraph 9 of the agreement reads:
To remove from the minds of recipients of material aid the fear that in accepting such work as is available they may sacrifice the possibility of receiving said aid in the future when further need arises, and to ensure that seasonal workers shall make, out of their earnings, reasonable provision for seasonal employment, the province undertakes to require all cities and towns listed in schedule A to this agreement to provide each person in those jurisdictions who is ceasing to receive material aid during the term hereof, by reason of entering gainful occupation, a statement of the rate of material aid hitherto granted and a reasonable budget of expenditures for the individual or family while the breadwinner is in gainful occupation and to further require them to obtain a properly certified statement of earnings to be filled in and signed by employers of the applicant prior to his or her readmission for material aid benefits.
This means in effect that the standard of living is controlled for the man who has been in receipt of relief, even though he passes off relief. Talk about regimentation! We have heard from the other side of the house some very strong protests against anything that would look like regimentation. But, according to these arrangements, if a family has been on relief, the government pursues them

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after they are off relief, insisting that they carry on their budgeting in a certain way. One can understand that if a family has been on relief for a considerable time, a good many household supplies may be short; they may need bedclothes and a score of things that they have not been able to purchase. But the administration follows them up and says, "No you must not purchase this. You have been on relief and you still come under our control."
I submit that is an almost intolerable position. I can understand that the department may be anxious to keep the family from again seeking relief, but I know of no sound principle which should enable the dominion government to step into the city of Winnipeg and tell a family-working on their own- how they are to spend their income. That is going too far. I know it has created a very great deal of dissatisfaction not only among the recipients of relief, but also in the city council itself. Of my own city I can say this, that they have tried their best to meet the abnormal situation by treating the citizens as generously as possible. When they come to a situation of this kind the municipality is unable to act, because of the insistence of the provincial government, and the provincial government cannot act, because of this agreement, which if not lived up to would preclude the receiving of material aid from the federal government. I wish to point out to the minister that an agreement of this kind, with the interpretation of it which has been made by Mr. Clubb, the minister of public works and labour, seems to me to be quite inconsistent with the statement which was made by the minister in this house when the maiter was under discussion earlier in the session.


Norman McLeod Rogers: Perhaps I should deal at once with the question of inconsistency. I remember that when the point was raised for the first time I made the statement referred to a moment ago by the hon. member, namely that relief scales were not controlled by the dominion government. That statement was literally correct. We do not, for instance, set a scale in Alberta, Saskatchewan, Manitoba or any other province. But at the same time we did, under the agreement to which the hon. member refers, covering the last quarter of the last fiscal year, set a maximum which would prevent relief payments from coming into competition with normal earnings of relief recipients.
It is quite possible I may not have made that as clear as I ought to have done when the matter was first brought up; but it did come up on a later occasion, and I believe I cleared it up then. That was during the
debate on the unemployment and agricultural assistance measure. Actually both that recommendation, and the one with regard to budgeting, came from the national employment commission, and it was only adopted after conferences between the officials of the dominion Department of Labour and those of the various provincial departments of labour. I will not say that all the provinces were wholly in agreement with those two proposals; but certainly it was the consensus of opinion that the adoption of that maximum, which would prevent relief from being exploited, as it were, as against work, would be a satisfactory procedure. The one as to budgeting was really designed, in a large measure, in the interests of the relief recipient, but was also designed to prevent one who received casual work from going immediately upon the relief rolls, when that casual work ended. The hon. member may say that this is imposing a hardship upon those men. It was not designed to do that. It was, however, intended to prevent what might readily have become a rather serious abuse. I shall read the recommendation from the report of the national employment commission.
-grants in aid to be made under conditions which will include the following:
(e) Observance of the principle of maintenance of incentive to accept employment^ by relating the maximum aid to actual earnings of unskilled labour in each centre or regional division, while preserving standards of health and decency;
(d)	Limitation of shelter allowances to a definite relationship with assessments and total shelter disbursements to a reasonable proportion of total cost of aid granted;
The next requirement is:
(e)	Requirement of "Cancellation of Aid" cards to provide running records of earnings permitting of prompt assessment of further need for aid, this in order to facilitate the acceptance of casual employment;
In other words, it was designed not only to help the relief recipient in his budgeting, when he went into employment, but also to make it more readily possible for him to go back on relief, if he were entitled to do so. In other words, there would be there a definite and accurate record as to what he had received while employed.


Mr. HEAPS:: It is quite possible-in fact, not only possible but likely-that under the terms of the arrangement between the government and the provinces, many individual families will become compelled to accept a lower scale of relief than they have received in the past. When this question was raised
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some time during the month of April the minister never made reference to the agreement then in existence.


Norman McLeod Rogers: I referred to the agreement a number of times.


Abraham Albert Heaps: No; at least on the particular occasion when the question was raised, as I read from Hansard-as I did, just a little while ago-there was no reference to the existence of any agreement between the provinces and the federal authority affecting the scale of relief in the municipalities.
Relief has to do with men who usually are earning low wages. In item 7 of the arrangement between the federal authorities and the province there is in effect a statement which says how much must be given to men who are on relief. It states the amount, and states further that the amount to be given on relief shall not be equal to or quite as much as a person would earn if he worked the average amount of time a labourer would work during the course of a year. Let us take the case of an average labourer, a man who may be working for thirty cents an hour, a wage which is common in these days. If he worked fifty hours a week at thirty cents an hour he would earn $15 a week. That would be the salary for a full week, or a salary of approximately $60 a month. If he worked six months in the year, his earnings would be $480. If he happened to be the head of a large family, he could not receive in relief more than he had been earning on an average during the year, or the sum of only about $40 a month during the twelve month period. The father of six or eight children under those circumstances would be compelled to live on $40 a month, and that is where the hardship arises. That is where we say there has been interference on the part of the federal authorities in connection with the amount of relief granted to those who unfortunately have been compelled to become the recipents of public relief.
I believe the federal government ought not to have interfered in the scale of relief, when relief was being given as in the past. I know of very few instances where the amounts given could in any sense of the term be called high. Early in the month of April I placed on Hansard the amounts received in Winnipeg by way of relief. I forget the exact amount, but I know it was a very small one indeed. I believe the minister or the Department of Labour has done a great injustice and a great harm to those men on relief to-day, by putting into the agreement with the provinces certain restrictions the effect of which would be to lower considerably the standard of living

of those men whose standard both in the past and at the present time has been extremely low. I am wondering, in view of the hardship which has been pointed out to the minister, if something could not be done to relieve the situation by allowing the municipalities to determine the scale of relief to be given.


Mr. MacNEIL:: Is a similar clause inserted in the agreement in force in British Columbia?


Norman McLeod Rogers: Yes; the clause was in
the agreements with all provinces. That is to say, the agreements were identical in that respect.
I may say to the hon. member for Winnipeg North (Mr. Heaps) that there is a provision for taking into account the . earnings of any other member of a family on relief. I think my hon. friend has put the case at its worst, rather than at its best. We have received some representations from the provinces with respect to the working out of this particular clause and will give consideration to them when the agreements are again considered.


Mr. MacINNIS:: When the minister was
reading from the report of the national employment commission he referred to the necessity of having a relief scale sufficient to maintain health and decency. Does the minister believe that any family can maintain health and decency on the present relief scale?


Norman McLeod Rogers: I am quite right in saying that so far as the relief scales are concerned >they are determined by the provinces, subject to that maximum which I have described. I would remind the committee that the maximum is based upon the normal earnings of an unskilled labourer in the particular locality. The working out of the whole matter is left to the provincial government. If, in the opinion of the provincial government, a particular hardship is being worked, undoubtedly representations will be made to us. As I recall it, there has been always a certain amount of flexibility.


Angus MacInnis: Does the minister think
that a standard of health and decency can be maintained with the normal earnings of an unskilled labourer? Would the minister adopt that scale for himself? If he would not adopt it, why accept it as a standard for others?


Eric Joseph Poole: Apparently the government
now sheds responsibility because of having paid a lump sum. Representations have been made by certain cities asking that the federal government should take over the whole matter of relief. Relief will never be handled in a satisfactory manner until it is centralized-

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Some time ago a lady called upon me. She had seven or eight children, and I understand her husband had been an inmate of an asylum. I believe she called on almost every member of the house. She had appealed to the local authorities, but the question of domicile had been raised. She was told that unless she returned to the province of Quebec she would not be able to obtain assistance. That seems to me a most stupid and unfair attitude to take. It should make no difference where a person resides. The fact that he is destitute should be sufficient reason for his receiving assistance. I do not know whether the minister is familiar with the case to which I am referring. This should not happen in the world's richest country.
I should also like to draw the attention of the minister to a matter in connection with the agreement entered into between the province of Alberta and the federal government.
I have not the agreement before me, but I understand the effect of it worked out in this way. Certain road work was carried on in one part of the province. There were a number of farmers in that locality who were not classified as destitute because they had equipment and horses. Most of them were actually worse off than if they were destitute, because they had had no crop for some years. Men were brought in from as far away as Calgary, a hundred miles away, to work in this locality. People in the immediate locality could not get employment under this agreement.


Norman McLeod Rogers: The control of employment lies with the province subject to the proviso that fifty per cent shall be taken from the relief rolls, or from those who are otherwise certified as being in needy circumstances. We have no control over the movement from one district to another, apart from the relief quota.


Eric Joseph Poole: That is what I am dealing with right now. There were 100 men required on this work, and there were at least that many in that particular district who required work. Men were brought from Calgary to work. I discussed this matter with the provincial minister of public works, but he told me they could not do otherwise because it was on those terms that the money was obtained. To go into this question of relief would require hours. The whole system requires overhauling because it is a disgrace to this country. An investigation was held recently in the city of Ottawa and we saw spread across the pages of some of the local papers the statement that so many people on relief had radios and motor cars. I cannot
understand the mentality of a man or woman who would deny the right of a person who has been employed at some time and who has purchased a radio to have some enjoyment from that radio when forced to go on relief. Some people seem to think the minute a man goes on relief he must give up every comfort. If a man should get employment at low wages and work for three months, when he goes back on relief his relief allowance is based on what he earned. In other words, these people are not encouraged to find employment. When they do obtain employment their condition is no better than when they were on relief.
Surely we are not so devoid of ideas in this country that we cannot change this condition. There is plenty of work to do in this country and we should devise a scheme to do it. Is there any logical reason why it should not be done? Unfortunately this whole matter has assumed a certain permanency. It is no longer temporary in character. It has been with us for seven long years. While we may be able to measure the cost of relief in dollars and cents, we shall never be able to measure the mental anguish that has been caused by this stupid policy. This policy has retarded our industrial expansion and is possibly the greatest factor in bringing on our present-day depression. It has increased the mill rate in our municipalities and has made heavier the burden upon the taxpayers. As the right hon. leader of the opposition said in one of his excellent speeches, it is only an insurance against insurrection. Before this session ends, the government should give consideration to the abolition of relief, with the exception of relief to those who are classified as unemployables. Relief should not be necessary in the world's richest country.
I think it is time the Minister of Labour (Mr. Rogers) and the Minister of Finance (Mr. Dunning) got together to issue credit in terms of public need. That would be tne best answer to this problem. That would be the one way to get able-bodied men back to work. We are destroying the greatest asset possessed by this dominion. We are shrivelling up the initiative of the men of our country. Unfortunately, in party politics members sit back persistently and say nothing because they fear they may embarrass their party. Hon. members on the other side of the house should be bringing pressure to bear upon the government to do away with relief. It is a disgrace in the terms in which it is carried on at the present time. It is making slaves of men, and it has resulted in a reduction of wages all over the country.
Has the minister any information as to the number of men who have been laid off by the
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Canadian Pacific and the Canadian National railways in the last few weeks? I understand that men have been laid off on the plea of economy. If that is true, then we should consider carefully before giving such assistance as was given the summer before last.
I have another question I should like to put to the minister. Does he know the number of blankets purchased under the scheme put into effect a year ago when the government agreed to pay part of the cost of labour for the railways? The cost of these blankets was taken out of the wages of the men, and they did not get their blankets when they were laid off.


Norman McLeod Rogers: I have no information at the moment. I shall obtain it and give it to my hon. friend under another item.


Eric Joseph Poole: I think the federal government should get together with the provinces and municipalities and devise a uniform relief scale as the first step necessary to be taken. If we recognize that relief must be continued for two years until we get an unemployment insurance scheme or there is a greater degree of employment in this country, there will be continued suffering on the part of our people until we devise a uniform scale of relief, and this question of domicile should be dealt with as one of the first and major problems. One of the great things about the unemployment insurance scheme in Great Britain is that a man residing, say, in the city of London can .move and take up his residence in Manchester and still be a beneficiary under the scheme. But here the limit of a man's activities in search of work is the distance he can walk, and that is one point that should be dealt with. If a man in Halifax happens to go to Vancouver and become destitute, if he can prove it, he should be a beneficiary of relief, and the fact that he has not resided in Vancouver for twelve months is a foolish reason for turning him. down.


Abraham Albert Heaps: I wish, to revert to the question of maximum relief and to clause 7 of the agreement between the provinces and the federal government. The minister must be aware of the fact that there have been men partly employed and even men fully employed who have been compelled to become recipients of public relief. I know instances of that kind in recent times, and if clause 7 is to be carried out according to the strict interpretation of its terms, the minister must realize the deplorable position in which cases of that kind must be. A man in that position would not earn more than $40 a month on an average, a totally inadequate sum as a basis of relief,

and, under the agreement, cases of that kind could not be dealt with in any special way at all. They would be compelled to be dealt with strictly according to the terms of the agreement; otherwise municipalities and provincial governments would run the risk of having the agreement cancelled and the federal grant stopped. I am wondering if the minister would not merely consider but try to get some understanding with the provinces for the overhauling of this clause of thr agreement to give some leeway to both provincial and municipal authorities so that they will not necessarily have to deal with the smaller family in the same way as the larger family seeking relief is dealt with.
Further, when you establish a scale of relief, its maximum tends to become the standard for all those in receipt of relief, and if a family of eight, two adults and six children, are compelled to live on $35 a month, that might readily determine the whole scale of relief to be granted in a particular area. That is something which ought to be seriously considered, and I am wondering whether the minister and his officials would not take into their serious consideration the necessity of revising that clause in the agreement to give the leeway I suggest to both the provinces and the municipalities.


Mr. HANSELL:: Are the agreements between the federal government and the provinces of a hard and fast nature, or is there any method of making slight adjustments here and there in the agreement? I have reference particularly to the agreement with Alberta in connection with road work. I recall being at a place where a road gang was at work; they were doing very fine work, and the men were apparently happy to get the work. But the agreement evidently stipulated that a certain number employed on the work must be on relief, and some possibly could be employed who were not on relief. There were openings on this work for men who were on relief. Men and some horses were required to do certain work. This was noised to an adjoining munieipalitj' that had been very hard hit and had several families on relief, and it was suggested that they needed horses and one or two men to do this work. The horses happened to arrive when I was there, in charge of a young man from a family that was on relief. The father was an old man, and he did not feel that he could go over with the horses, do the road work himself, sleep in a tent and eat in a cookhouse, so he sent over his son who was living at home, a strong, young chap, but when he arrived he was told that it was impossible

Supply-Labour-Relief Commitments
for him to get work because he himself was not on relief. He was told he could not work in his father's place. I recall going to the engineer or some official appointed by the federal authorities, but he could do nothing about the matter. I went to the M1.A. for the constituency, but he could do nothing about the matter, and what, finally happened I do not know to this day. It does seem to me that there should be some method of making adjustments in these agreements, that the agreements themselves should be elastic enough to permit of slight adjustments being made. What are the possibilities along that line?


Norman McLeod Rogers: I can only say that in the agreement with Alberta covering joint works provision was made that fifty per cent should be taken from the relief rolls or from those who were in necessitous circumstances. There was provision for those who were unemployed but who were not on relief. As a matter of fact, that agreement with Alberta was not carried out in its strict terms. I do not know if that is what my hon. friend has in mind. At all events the administration of it has to be left to the provincial authorities subject to the approval of a dominion representative or a dominion inspector, as the case might be. There is a certain amount of latitude with respect to the employment clause, as I have indicated; but my hon. friend will also realize that much may be said in the direction of making the terms of the agreement strict, in order to prevent the possibility of abuse. If you make the agreement too loose, obviously it is open to abuse.
I might point out, Mr. Chairman, that actually we are dealing with a special item in the supplementary estimates respecting relief agreements with the provincial governments, and not with the item in the main estimates for relief. I do not want to press that point too strongly except that I should like to make some progress.


Mr. PELLETIER:: Is it not true that the federal government approves the various projects which the province may undertake?


Norman McLeod Rogers: Yes.


René-Antoine Pelletier: I realize that this discussion might not come under the item before us, but the discussion has been going on for some time, and I should just like to raise this point. The federal government stipulates that a certain percentage of those employed on these projects must be relief recipients or people in necessitous circumstances. Second, the federal government must approve the project. Suppose the federal government approves a project which requires 51952-251
trucks for graveling a highway; how many relief recipients would have trucks? It is not logical to expect them to have trucks, and the result is that when the province makes its claim on the dominion government for payment the dominion government says:	You
did not employ people on relief. But it knows that it was impossible to engage people on relief because they did not have the necessary equipment. I believe that situation has arisen in several cases in Alberta, particularly in the northern part of the province, and it puts the provincial government entirely at the mercy of the federal government.
The point I should like to bring to the attention of the minister is this, that in the case of agreements of this kind being made with various provinces, I do not see any reason why some of these agreements or at least a standard agreement could not be embodied in the act authorizing the agreements, so that these things could be discussed in parliament. At the present time there is absolutely no way in which one can bring these things to the attention of the minister until the harm has been done. I suggest to him that if he would incorporate in his empowering act some standard agreement which he will put into effect with the provinces, we would then have an opportunity of knowing whether or not the thing was being properly handled from every point of view.


[Stage Direction]
Item agreed to.
Special-To provide for commitments under relief settlement agreements with provincial governments, $200,000.
Norman McLeod Rogers: Item No. 516 was allowed to stand. I believe the hon. member for Leeds asked for some information regarding the expenditures under the relief settlement agreements of the past year. The amount in the estimates for last year was $400,000, and this year the amount is $200,000, designated as a revote. I find that the amount actually spent last year under the relief settlement agreements was $147,961.67, something under the $200,000 asked for this year.


René-Antoine Pelletier: I believe that under this item we can very well discuss the question 1 took up a moment ago.


Norman McLeod Rogers: There is a more appropriate item I could mention.


René-Antoine Pelletier: "To provide for commitments under relief settlement agreements with provincial governments"?


Norman McLeod Rogers: That does not cover works, as a matter of fact.


René-Antoine Pelletier: Will the minister mention what item is appropriate?

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Norman McLeod Rogers: Yes, I will, certainly.


Richard Bedford Bennett: Is item No. 517 passed?


Norman McLeod Rogers: It is the next item.


Richard Bedford Bennett: I want to ask whether any part of the money voted has been used for the purpose of paving the roads mentioned in the agreement that we have been discussing this evening, and whether or not a new agreement was made for their completion, and, if so, how much was spent under it.


Frederick George Sanderson: Shall item No. 516 carry?


[Stage Direction]
Item agreed to.
To provide for commitments and completion of works in connection with federal contributions to provincial and municipal relief projects, $1,075,000.
Richard Bedford Bennett: Has the minister the agreement here, the new agreement?


Norman McLeod Rogers: Under the 1937 act?


Richard Bedford Bennett: No; I am referring to 1936. What was done with respect to these highways that were mentioned to-night? When was the first action taken in connection with them? The papers will show at whose request, but that is not the matter at issue just now.


Norman McLeod Rogers: Does my right hon. friend mean the highways which were included in the agreement under discussion here this evening?


Richard Bedford Bennett: Yes. It will be observed that the appropriation terminated in March, 1936. I want to know what was done in 1936 with respect to these highways, and what has been done with respect to them up to date. The papers brought down in sessional paper 107 in answer to a motion by the hon. member for Broadview indicate some of the actions, but I want to see what additional ones there were.


Norman McLeod Rogers: In the 1936 agreement:
Morden-Piney highway	
Russell to Brandon-Clear Lake highway	
Roblin to Duck Mountain and Benito	
Dauphin to Fork river and Winnipegosis	
Bridges over Assiniboine-Headingly village, Winnipeg and St. James, city of Portage la Prairie, town of Yirden (Sproats bridge), Swan River, near Lens, and Pine River
near Camperville	
Crystal City to international boundary	
Total	
Manitoba Dominion contribution	Dominion
authorized	payment
$161,044 53	$159,142 56
116,739 32	112,797 67
$37,305 50	$37,108 76
27,819 27	27,721 81
10,195 00 1,906 46	9,695 00 1,906 46
$355,010 08	$348,372 26


Richard Bedford Bennett: On what dates?


Norman McLeod Rogers: During the currency of the agreement, projects under the said agreement which were uncompleted as of March 31, 1936, and extended under agreement dated July 24, 1936.


Richard Bedford Bennett: That is up to March 31 in which year?


Norman McLeod Rogers: That would be up to March 31, 1937.


Richard Bedford Bennett: The expenditures made from October, 1935, to March 31, 1936, on these projects are the ones that I want.


Norman McLeod Rogers: I misunderstood my right hon. friend. I thought he wished to have the expenditures in subsequent years on these highways.


Richard Bedford Bennett: No; I want to see what expenditures were made after the present administration came into power up to March 
31, 1936, and then up to 1937, because there is a revote of SI,075,000 with respect to the federal share of works to be completed, and I want to see whether in respect of these Manitoba projects we were discussing, the government went on with the work, and what they paid, and when.


Norman McLeod Rogers: Under the original agreement dated September 20, and up to March 31 of that fiscal year, for the town of Russell to Brandon-Clear Lake highway the amount authorized was $380,000 and the amount spent $8,925.96.


Richard Bedford Bennett: No; the total amount authorized. That was the estimated cost of construction. So far as that agreement was concerned, it terminated on March 31, 1936.


Norman McLeod Rogers: I am giving the amount
spent in that period.


Richard Bedford Bennett: There was no estimate of the amount that would be spent in that

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time; that was the cost of the project. But that appropriation expired on March 31, 1936.


Norman McLeod Rogers: Quite, and I am giving the amount actually spent in that period-the two amounts.


Richard Bedford Bennett: No. One is the estimated cost of the project.


Norman McLeod Rogers: Well, the dominion actually spent $8,925.96 on the first road which I gave. Also:
Manitoba Dominion contribution authorized
Town of Morden to Winnipeg-Piney highway and Sprague
village	 $575,000 00
St. Boniface to international boundary and village of Piney 250,000 00 Roblin to Duck Mountain and Benito	 55,000 00
Dominion
payment


Richard Bedford Bennett: It is not actually the amount authorized.


Norman McLeod Rogers: I am simply reading from the memo I have here.


Richard Bedford Bennett: I say that is an inaccurate statement. That was the estimated dominion portion of the expenditure.


Norman McLeod Rogers: Yes, depending of course on how much work was done.


Richard Bedford Bennett: Yes, but it was not authorized.


Norman McLeod Rogers: If the work had been
completed-


Richard Bedford Bennett: It could not have been
completed by March 31.


Norman McLeod Rogers: But we were obligated
up to the amount I have mentioned here.


Richard Bedford Bennett: No. The total amount
is not to exceed that much money.


Norman McLeod Rogers: We were committed up to that amount if it had been spent. Those are the terms of the agreement. It was so reported.


Richard Bedford Bennett: No. I have read the
agreement.


Norman McLeod Rogers: Manitoba Dominion contribution authorized
Dauphin to Fork river and Winnipegosis	
$37,500	00Crystal city to international boundary line	
20,000	00Bridge over Assiniboine river-Headingly village	
15,000	00
Bridge over Assiniboine river-between Winnipeg and St.
James	
75,000	00Bridge over Assiniboine river-city of Portage	la Prairie..	40,000	00
Bridge over Assiniboine river-town of Virden (Sproats
bridge)	 11,100	00
Bridge over Assiniboine river-
Swan River near Lens	
15,000	00Pine River near Camperville	
3.900	00
Dominion payment $10,055 73 20 000 00 14,972 42
69,305 29 38,946 34
10,954 71
12,703 15 3,602 57
Total
$1,477,500 00	$270,741 16


Richard Bedford Bennett: The return says, column 2, "total estimated cost." That is the way it is put. The question I wish to ask under this item is this:	Were any of the
undertakings authorized in the agreement which was brought down not proceeded with? If so, why? That is the red ink modification, and that is what I want to bring out. The record would seem to indicate that they were all proceeded with, except two, and with respect to them there is an order in council of February 12, and one of February 19, 1936, which modified them.
51952-251 i


Norman McLeod Rogers: I will look up the orders
in council. According to the two columns I have here, all projects were proceeded with.


Richard Bedford Bennett: That is so, except that
there seems to have been a slight amendment.


Norman McLeod Rogers: In February.


Richard Bedford Bennett: I take it that that is
what the red ink explanation means-on February 12, 1936, and on February 19, 1936. Therefore all projects were proceeded with except for a slight modification with respect to two or three of them.
3962	COMMONS
Supply-Labour-Relief Commitments


Norman McLeod Rogers: That would be correct.


Richard Bedford Bennett: When were the projects
finally completed, if they were?


Norman McLeod Rogers: They have not all been completed yet.


Richard Bedford Bennett: That is what I thought.


Mr. JOHNSTON (Bow River):: I have here a letter from the city of Drumheller in regard to which I wrote the minister. I do not believe he has had time to reply. I might mention the subject matter. They say that for several months relief recipients have not been able to obtain clothing from Edmonton because all applications are returned to the relief office there pending dominion instructions. Is that correct?


Norman McLeod Rogers: We have nothing to do directly with the distribution of clothing in connection with relief.


Charles Edward Johnston: They state they are awaiting instructions from the dominion, and I was asked to ascertain the facts. The complaint is made that these miners who are about to work and who have been on relief for some time are being notified that when they start working the dominion is going to withhold a certain amount for any relief they might receive in the future, less clothing and so on. Is that true?


Norman McLeod Rogers: I am informed that this is entirely a provincial regulation. The hon. member is right when he says that I have not seen his letter. I shall be glad to secure the information and forward it to him.


Charles Edward Johnston: They state further that the federal government is demanding from the province an eleven per cent reduction in the drought area.


Norman McLeod Rogers: That does not come under this item at all. As a matter of fact, the Department of Labour has no connection at the present time with administration of relief in the drought area. That is under Agriculture.


Charles Edward Johnston: Under which item?


Norman McLeod Rogers: It will be in the Department of Agriculture.


Mr. GREEN:: When this item was up for consideration before the house adjourned the night before last, I asked the minister what public works were being undertaken in British Columbia in which this government was interested and on which work might be available for the unemployed who are sitting

in the Vancouver post office and art gallery. I understood him to say that the two main projects were the Big Bend highway and the new highway from the United States boundary to New Westminster, and he also said that these men, along with certain other classes of unemployed, would be eligible for that work. Last week I understood him to say that summer training in the special forestry camps could be undertaken by the younger men among these unemployed. He said at that time that the forestry camps had not yet been opened, but I notice from the Vancouver press that the first training camps were opened about ten days ago. As for the transients who do not belong to British Columbia, I believe the government's attitude is that they must go back to their own provinces if they wish to get assistance at all. Has any move been made to offer these men work or to offer those who are eligible training in the forestry camps, or has any promise been made that there will be work or training for at least some of them? This is of great importance, and it might help to solve the difficulty if an offer or a promise of that kind were made. Has the government made any move in that direction?


Norman McLeod Rogers: I answered my hon. friend the other day with regard to the chief works that were in prospect in British Columbia. As he has said, one of these projects was the Big Bend highway, and the other is the new highway to be constructed from the international boundary to New Westminster. There are other works in addition to that-harbour works and public works of various kinds, as well as work which is now under way in connection with the expansion of national defences in that area. Those who are single and unemployed, presently in Vancouver, and who are at the same time resident in British Columbia, would be on the same footing as others who are single and unemployed and resident in that province, so far as employment in these works is concerned. I told my hon. friend that the other day, and I cannot go beyond that at the present time.


Howard Charles Green: But the government has
in Vancouver a special representative, a Mr. Humphrey Mitchell, who has been there for weeks. Has any offer been made to these men that they may go on this work, or has any promise been made that within the next week or two they will be able to do so? May I have an answer to that question?


Norman McLeod Rogers: I believe a statement was issued by the minister of labour of British Columbia with respect to employment on

Supply-Labour-Relief Commitments
these projects when they were commenced. So far as federal government work in British Columbia is concerned, the work is conducted of course by the department concerned and is subject to the general clause with respect to preference in employment governing returned soldiers, married men on relief and single unemployed, and any work of that kind will be done subject to that clause.


Howard Charles Green: I have spoken about the
seriousness of the situation on two or three occasions, and I hesitate very much to place it before the house again, but I believe that the government and perhaps most members in this house do not realize how serious the situation is. For four weeks to-morrow there have been hundreds of men sitting in the Vancouver post office and art gallery. It is what might be called a sit-down strike.


Mr. GOLDING:: We have been told that
a dozen times.


Howard Charles Green: And you will be told it
again. The government is apparently carrying on a sit-down strike here. The net result is that Vancouver is being subjected to the most adverse kind of publicity possible. It is seriously affecting the tourist business, which means a great deal to the city. It is absolutely unfair to the citizens because they have to support the men, and there are threats of riots, there is always the fear of riots. In short, it is creating in the third city of Canada a spirit of hopelessness and the belief that there will be no action or leadership on the part of the government.
These men were cared for all winter by the dominion and the provincial governments in the regular forestry camps. They were let out, I believe, not all at once; the dismissals were staggered, which was a very good thing. But it was known, we warned the government weeks ago, that many men were losing their work in the logging camps of British Columbia and that it would be impossible to place these men in the logging camps as was done last summer. It was known that their funds would soon run out, that they would all congregate in Vancouver and that there was bound to be trouble. Yet nothing has been done; everyone is "just sitting." That situation is absolutely unfair to the people of Vancouver. Some action should be taken by the government without further delay. There is no excuse for this gap. The men were all out of the camps by the end of April, and yet the public works program does not start until July. There is a responsibility resting directly on this government; and all the more because its own commission, the Purvis commission, found that these men were the
charge of the federal government, recommended that all employables should be the charge of the federal government. Yet nothing is done.


Norman McLeod Rogers: If I might correct my hon. friend, if he will examine the text of the report he will find that is not quite what the commission recommended.


Howard Charles Green: Well, it went about that far. The problem of the transient is the crux of the whole unemployment problem. How this or any federal government can say that transients coming from the prairies or Ontario or Quebec to British Columbia are the charge of the British Columbia government or of the people of Vancouver is beyond me. This unemployment is a national emergency. It is the problem of the national government. We have here another example of the spinelessness of this government; another case of "wait and see," just drifting along. Something should be done by the government about these men in the post office and the art gallery in Vancouver without further delay.


Charles Grant MacNeil: The Vancouver rotary club was recently addressed by the secretary of the chamber of commerce of Hongkong. He recited some of the horrors he had witnessed in China. Then he concluded his statement, according to the press reporrs, by saying he was reluctant to make any appeal for funds in Vancouver, because on entering the post office he had found that Canada had a refugee problem of her own, and he saw people camped on the floor of this public building under conditions which, considering the difference in the standard of living, were worse than those in the refugee camps in China.
The minister has said that if these men disperse, they will have advantages equal to those of other unemployed in other parts of British Columbia and the dominion. I am receiving reliable information that the training courses in forestry and placer mining now being opened are not available to these men; the quota has now been filled. Furthermore. I am reliably advised that these men are now barred from any work that may arise, by reason of their connection with this affair. And that action has been condoned by the representative of the federal Department of Labour in Vancouver. These men are being blacklisted and outlawed. I suggest to the minister that not only has this demonstration on the part of the men revealed a problem which he has not lifted a finger to deal with, but he has actually condoned through his representative a procedure which outlaws these men and is likely to be provocative of serious
3964	COMMONS
Supply-Labour-Relief Commitment$
disorder. The action of the minister or his representative must be explained. The minister's representative in Vancouver is responsible in large measure for provoking and continuing this extremely embarrassing situation.


Norman McLeod Rogers: Let me answer that at once. It is certainly not true that the representative of the Department of Labour of this government has had any authority, or to my knowledge has exercised any authority, such as that stated by my hon. friend. I indicated very clearly in my last telegram to Mr. Matts and the unemployed committee that so far as youth training projects or federal public works are concerned, these men on going to their own homes or their province of origin would be upon the same footing as others in a similar position; in other words, that they were not to be disqualified for such employment as is available. I have not altered that, it certainly applies to federal works, and so far as I am aware there has been no restriction as far as joint works are concerned. Of course, on joint works we can control employment only up to fifty per cent.


Charles Grant MacNeil: Is there any truth in the
statement that the department's representative, Mr. Mitchell I understand, in association with other officials in touch with the problem, has said that these men will not now get any work that is open; that he in conjunction with other officials has determined that.


Norman McLeod Rogers: If my hon. friend will be good enough to give me the authority for his statement, I shall look into it. I should be glad to receive it privately.


Richard Bedford Bennett: At relief camp No. 1, Vancouver post office, I am informed in a letter I received that the blankets and old coats and newspapers make such a stench in that building that it is no longer used as a public post office by those who have business to transact; that it is offensive to people to go there. I remember distinctly members of the present government when in opposition made very strong claims about sanitary conditions in relief camps, and we had officers of the Department of National Health take great care with respect to that. This relief camp No. 1 in Vancouver would seem to be in rather bad condition.


René-Antoine Pelletier: Are there any sums
outstanding owing to Alberta which are being withheld by reason of some dispute as to whether the agreements have been lived up to either by the province or the federal government?


Norman McLeod Rogers: There was a matter in dispute between the dominion and Alberta which is now in the course of adjustment. Actually there was an overpayment to Alberta, and refund is being made accordingly.


René-Antoine Pelletier: How long have negotiation? been going on between the dominion government and Alberta for the payment of that sum?


Norman McLeod Rogers: For something over a year I should say.


René-Antoine Pelletier: What is the condition which allegedly has been violated by Alberta, causing the present government to withhold those sums?


Norman McLeod Rogers: My hon. friend is not stating the position quite correctly. It is rather a case of Alberta having recognized that they were under obligation to make a refund. The particular clause of the agreement that was not carried out by the province related to the fifty per cent relief quota.
Progress reported.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Friday, June 17, 1938