1939-03-29

[Stage Direction]
Mr. MALCOLM McLEAN (Melfort) presented the second report of the special committee appointed, to inquire into the operation of the Civil Service Superannuation Act, and moved that the report be concurred in. Motion agreed to.

[Stage Direction]
Mr. A. E. MacLEAN (Prince) presented the first report of the standing committee on marine and fisheries, and moved that the report be concurred in.
Motion agreed to.


[Stage Direction]
On the order for motions:
Right Hon. W. L. MACKENZIE KING (Prime Minister):: Mr. Speaker, the house will remember that the other day I stated that I hoped to be able to make a statement on foreign affairs to-morrow. I am prepared to make that statement, and would like to do so on the motion to go into committee of supply on the estimates of the Department 
of External Affairs, which have not yet been called. Thursday is a day upon which His Honour the Speaker leaves the chair without any question being put, and if I am to have the opportunity of making a statement in the manner I have suggested, which I imagine would best meet the convenience of the house, it will be necessary to obtain the unanimous consent of the house to suspend standing order 28. With the consent of the house, therefore, I move:
That standing order 28 be suspended in relation to the committee of supply with respect to the sittings of this house on Thursday and Friday the 30th and 31st March, 1939.


Mr. WOODSWORTH:: May I ask the
Prime Minister if opportunity will be afforded for general discussion?


William Lyon Mackenzie King: The procedure adopted last year, and in previous years, was to have a statement made in the first instance by the Secretary of State for External Affairs while His Honour the Speaker was in the chair, and then have the debate proceed with the Speaker in the chair. When the debate concludes we will then go into committee on the estimates of the Department of External Affairs, at which time detailed discussion can take place, as it always does, in the form of questions and answers.


James Shaver Woodsworth: It could run right over if necessary?


William Lyon Mackenzie King: Yes.


Mr. H. G. CLARKE (Rosedale):: Mr. Speaker, the Prime Minister (Mr. Mackenzie King) has stated that to-morrow he will discuss external affairs. Could he give the house any information as to conditions in Europe, as the Toronto Telegram of last night reports thirty-four members of the British House of Commons calling for an all-party government to start mobilization-


Some hon. MEMBERS:: Order.


Harry Gladstone Clarke: -of the nation's wealth, man-power and industry, in preparation for any emergency?


Mr. SPEAKER:: I think that is a question which may stand until to-morrow, when the debate will take place.


William Lyon Mackenzie King: I understand the hon. member's question is with regard to conditions in Europe. I hope to have a good deal to say on that subject to-morrow.


[Stage Direction]
Motion agreed to.

Questions

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

Mr. LOCKHART:: 1.	What property was acquired by the dominion government in connection with the Grimsby rifle range?
2.	From whom was such property purchased, and what price was paid to each individual?
3.	Has any of such property been subsequently leased ?
4.	If so, to whom, for what period and at what price?


Mr. MACKENZIE (Vancouver):: 1.	Parts of lots 21 and 22 in the township of North Grimsby, county of Lincoln, province of Ontario, containing 116-76 acres.
2.	Price paid
D. R. McIntyre	 $40,000
Percy Acres	 39,000
Jessie & J. A. Biggar		19,000
3.	Temporary licences were granted for the season of 1938.
4.	Rental
D. R. McIntyre,	from July 1 to
December	31,	1938	 $200.00
Percy Acres, from July 1 to
December	31,	1938	 250.00
J, A. Biggar. from July 1 to
December	31,	1938	 102.00


GOLD RESERVES AND CURRENCY
Mr. ROSS (St. Paul's):: 1.	By what amount, if any, have the gold reserves of the Bank of Canada been increased since October 15, 1935?
2.	By what amount, if any, has the currency of the dominion and of the chartered banks, including the Bank of Canada, been increased since October 15, 1935?
3.	By how much, if any, have the gold reserves of the United States, including banks, been increased since October 15, 1935?
4.	By how much has the currency of the United States, including currency issued by any American banks, been increased since October 15, 1935?


Mr. DUNNING:: Note.-Statements of liabilities and assets of the Bank of Canada are submitted to the Minister of Finance as at each Wednesday and. as at last business day of each month. The answers to questions Nos. 1 and 2 are based on the figures shown in the statements for the dates indicated. Under chapter 60 of .the statutes of Canada, 1935, the Bank of
Canada values its holdings of gold on the basis of the current market price for gold, that is the amount realizable from the sale of gold in London or New York converted into Canadian dollars at the current rate of exchange.
1.	Bank of Canada-gold coin and bullion:
October 16, 1935	$182,074,115 64
March 15, 1939	 201,806,430 96
Increase	$ 19,732,315 32
2.	Note.-It is assumed that in this question "currency" means notes and coins and does not include deposits. Statements of liabilities and assets of the chartered banks are submitted to the Minister of Finance as at last juridical day of each month and the answer to this question is based on the figures shown in the statements of the chartered banks for the
dates indicated.
September 30, 1935 Bank of Canada notes, total
amount outstanding	$ 85,066 837
Chartered bank notes, total
amount outstanding	 131,747,122
Subsidiary coin (amount issued to date less withdrawals)	 32,329,798
Total	$249,143,757
January 31, 1939 Bank of Canada notes, total
amount	outstanding	$161,359,891
Chartered bank notes, total
amount	outstanding	 90,088,507
Subsidiary coin (amount issued to date less withdrawals)	 35,837,671
Total	$287,286,069
Increase January 31, 1939, over September 30. 1935	$ 38,142,312
3.	Annual report of the board of governors of the federal reserve system for the year 1935 states that the total gold stock of the United States on September 30, 1935, was $9,368,000,000.
The Federal Reserve Bulletin for March, 1939, states that the total gold stock of the United States on January 31, 1939, was $14,682,000,000. The increase during the period September 30, 1935, to January 31, 1939, was therefore $5,314,000,000.
4.	The same sources state that United States money in circulation (money outside treasury and federal reserve banks) was $5,683,000,000 on September 30, 1935, and $6,653,000,000 on January 31, 1939, or an increase of $970,000,000.
Questions


RIDING MOUNTAIN NATIONAL PARK-LIGHTING PLANT
Mr. CLARKE (Rosedale):: 1.	What revenue was recei ed in each of the years 1937 and 1938 by Riding Mountain national park, Wasagaming, Manitoba, from their lighting plant, from the following sources: (a) cottage owners; (b) stores; (c) hotels; (d) garages, or any other sources other than government buildings, street lights, etc.?
2.	What amounts were paid for light supplied to the park'B office, for street lights, government buildings, etc., during each of the years 1937 and 1938?


Mr. CRERAR:: 1.	Fiscal year 1936-37, $2,296.36; (a, b, c, d) fiscal year 1937-38, $2,908.79.
(Note.-No separate record is kept of the electric consumption under the headings asked for).
2.	Amount credited to system for power used for street lighting which is at the same net rate as large consumers. Fiscal year 1936-37, $536.04; fiscal year 1937-38, $915.75. Amount credited to system for power used for government buildings, which is at the same net rate as large consumers.-Fiscal year 1936-37, $1,027.26; fiscal year 1937-38, $936.18.
NEW YORK world's FAIR-CANADA BUILDING


Mr. WALSH:: 1.	What is the estimated cost of the Canada building being erected at the World's Fair, New York?
2.	Who is the general contractor engaged to do this work?
3.	How much lumber will be used in this building?
4.	What is the cost of such lumber?
5.	Was this lumber purchased in Canada?
6.	If so, from whom was it purchased?
7.	Was Canadian material and furnishings definitely specified, as far as possible, in the contract ?


Mr. EULER:: 1.	$128,893.
2.	L. G. Ogilvie & Co., Ltd., Montreal.
3 and 4. Information not available.
5 and 6. Answered by 7.
7. Yes.


SAINT JOHN RIVER FISHERY GUARDIAN
Mr. BROOKS:: 1. Has the Department of Fisheries appointed a fishery guardian for that section of the Saint John river between Grand falls and Green river?
EMr. Dunning.]
2.	If so, who is the appointee, and how was he appointed?
3.	At what remuneration?
4.	What are the reasons for his appointment, and what are the duties?


Mr. MICHAUD:: 1.	Yes.
2.	Herbert Corbin. By ministerial authority.
3.	$2.50 per day for 3i months.
4.	Protection of trout fishery by patrolling area named, which is on the international boundary between the state of Maine and the province of New Brunswick.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. HAYHURST:: 1.	What was the total amount granted by the federal government for the construction of highways in each of the four western provinces for the years 1934, 1935, 1936, 1937 and 1938?
2.	What was the total amount loaned by the federal government for highway construction in each of the four western provinces for the years 1934, 1935, 1936, 1937 and 1938?


RELIEF, SEED GRAIN AND FEED GUARANTEES IN WESTERN PROVINCES
Mr. HAYHURST:: 1.	What was the total amount granted by the federal government in the way of relief to each of the four western provinces during the years 1934, 1935, 1936, 1937 and 1938?
2.	What was the total seed grain, and feed guarantees for each of the prairie provinces for the years 1934, 1935, 1936, 1937 and 1938?



MOTIONS FOR PAPERS


Sir EUGENE FISET (for Mr. Gauthier):: For a copy of all correspondence, letters, telegrams and other documents exchanged between the government, the Canadian Broadcasting Corporation and any other persons, associations, provincial governments or others with respect to radio programs sponsored by breweries or wineries in the province of Quebec.


Mr. HOWE:: I should like this motion to stand until the hon. member is here.
Motion stands.

Canada-United, States Trade Agreement



ORDER IN COUNCIL NO. 571

Mr. STEVENS:: That is not much comfort.


Mr. PELLETIER:: For a copy of order in council number 571, dated Marsh 2, 1932.


René-Antoine Pelletier: I have searched for this order in council, have succeeded in finding it, and have had copies of it made. With the permission of the house I ask leave to withdraw the motion.
Motion withdrawn.



CANADA TEMPERANCE ACT-REFERENCE TO COURTS

Mr. FARQUHAR:: For a copy of all letters, telegrams, resolutions or other documents exchanged between the government of Canada, the Minister of Justice, or any official of the government of Canada, and the government of the province of Ontario, the attorney general, or any official of the government of the province of Ontario, regarding the question of submitting to the courts the Canada Temperance Act in order to determine the constitutionality of that act and to determine also whether it is still in effect in the counties of Huron, Perth, Peel and the district of Manitoulin island.



BUSINESS OF THE HOUSE


William Lyon Mackenzie King: That when this house adjourns on Thursday, 6th April, it stand adjourned until Tuesday, 11th April, 1939.
Mr. J.S. WOODSWORTH (Winnipeg North Centre): Mr. Speaker, I wonder if the Prime Minister could be persuaded to give us another day. Some of us are not able to get away at week-ends; a number of us have not been home for three months, and unless the Minister of Transport (Mr. Howe) will provide us with aeroplane services I am afraid that in four days it would be quite impossible to take a trip even as far as Winnipeg and back. One more day would be a good deal of help, if it could be so arranged.


William Lyon Mackenzie King: I should be prepared to amend the motion so that it would read:
That when this house adjourns on Wednesday, 5th- April, it stand adjourned until Tuesday, 11th April, 1939.


Some hon. MEMBERS:: No.


William Lyon Mackenzie King: Well, I suggest that the motion stand so as to permit the whips to confer. If they can come to an agreement between now and to-morrow, I will put my motion to-morrow afternoon in accordance with the terms of their agreement. If they do not come to an agreement, I shall use my own discretion as to the motion to be put.
Motion stands.



TRADE AGREEMENTS


[Stage Direction]
Hon. CHARLES A. DUNNING (Minister of Finance) moved the second reading of Bill No. 64, respecting a certain trade agreement between Canada and the United States of America.	'
Walter Edward Foster: Is it the pleasure of the house to adopt the motion? Carried.


William Lyon Mackenzie King: Is this the motion for second reading? I understand some hon. members wish to speak on it.


Charles Avery Dunning: Several hon. members yesterday suggested to me that they wished to speak, and inquired as to the proper time, and I said it would be on second reading.


Mr. MANION:: Your members, or ours?


Charles Avery Dunning: No, across the way. I do not wish to have anyone taken by surprise.


Some hon. MEMBERS:: Question.


Some hon. MEMBERS:: No.


Some hon. MEMBERS:: Yes.


William Lyon Mackenzie King: I have every disposition to oblige the hon. member if it is going to help to oblige other hon. members as well. I think there is reasonableness in the request he makes, and I certainly would not oppose giving an extra day, if the house generally is prepared to concede it.


Henry Herbert Stevens: What about the rest of us who live farther away?


William Lyon Mackenzie King: Well, you will have to stay here.


Charles Avery Dunning: There is just one schedule. The schedule is the whole of the trade treaty and has already been dealt with in committee of ways and means.


[Stage Direction]
Schedule agreed to.
Bill reported, read the third time and passed.


[Stage Direction]
The house resumed from Thursday, March 16, consideration in committee of Bill No. 38, to establish a defence purchasing board-Mr! Mackenzie (Vancouver)-Mr. Sanderson in the chair.
On section 4, subsection 4-Tenders.
Mr. MACKENZIE (Vancouver):: There was some discussion, hon. members will recall, with regard to subsection 4, following the word "otherwise." This is the subsection which begins:
In respect of all contracts, the board shall wherever practicable, invite tenders either by means of advertisements in the public press or otherwise.

Defence Purchasing Board
There was some suggestion of an objection based on the possibility of tenders being invited without giving full scope to the element jf competition. In order to meet that objection, the following amendment has been suggested:
That subsection 4 of section 4 of the bill be amended by adding thereto after the word "otherwise" in line 41 of page 3 the following words "it shall be the duty of the board to ensure that tenders in respect of any contracts for the purchase of any defence equipment produced or manufactured in Canada or for the construction of any defence project are invited from every person in Canada believed by the board to be capable of performing the contract, unless for reasons of military secrecy or for other good and sufficient reasons the board is of the opinion that it is not in the public interest to invite tenders in this way."


Charles Avery Dunning: I move that amendment.


Mr. BAKER:: According to what was
passed in an earlier paragraph, should that not read, "in respect of all contracts amounting to less than $5,000?"


Ian Alistair Mackenzie: That
was disposed of.


Richard Langton Baker: Should that not also be
inserted here?


Ian Alistair Mackenzie: No.
This deals only with the question of public tenders. Some objection was raised in committee to limiting the possibility of public tenders, and this amendment is designed to meet that objection. It qualifies the powers in regard to the definition of the word "otherwise."


Mr. STIRLING:: There will be a full stop, then, at the end of the first sentence and this will be another sentence?


Ian Alistair Mackenzie: Yes.


Mr. McGREGOR:: How are these manufacturers to be notified of tenders being called? Through public advertisement?


Ian Alistair Mackenzie: That
will be, of course, within the full competence and jurisdiction of the board. They will obtain a full list of those who are competent to tender, and those will be notified directly. Where it is not done by advertisement in the public press, it will be done, I assume, by correspondence from the board.


Robert Henry McGregor: What I want to know
is, is it left to the board to say who shall tender and who shall not tender?


Ian Alistair Mackenzie: The
board is given discretion. Public tenders shall be resorted to in every practicable case;
but where there are special reasons for not calling for tenders, it will be within the discretion of the board not to call for tenders.


Mr. GREEN:: This amendment, I think,
illustrates the importance of having on the board adequate representation, particularly from the more remote parts of Canada. Incidentally, this is not the only provision which will work satisfactorily only if there is such representation. There are several other clauses to which the same consideration applies. The other evening, when the bill was up for discussion in committee before,
I understood the minister to say it was the intention of the government that the members of the board should reside in the neighbourhood of Ottawa.


Ian Alistair Mackenzie: Oh, no.


Howard Charles Green: By reason of the Trans-
Canada Air Lines, British Columbia is now as near Ottawa as is Toronto. I would ask the minister to bear that in mind. Speaking seriously, these powers of the board can be properly exercised only if the board is representative of different parts of Canada. Consider, for example, section 6, giving the board power to supervise the carrying out of contracts; section 8, paragraph (a), giving it power to inquire as to defence requirements; and section 8, paragraph (c), giving it power to conduct a survey of industrial plants.
I would point out to the minister that British Columbia is probably more directly interested in this defence problem than any other part of Canada. We are concerned particularly with the defence requirements and with the carrying out of defence contracts. Many contracts have been let on the Pacific coast, and there will be many more in carrying out the plans of the government. I would also point out that British Columbia ranks as Canada's third largest industrial province, so that the matter of an industrial survey in that province is of great importance. I should like to have some assurance from the minister that there will be on this board representation from our province.


Ian Alistair Mackenzie: I can
assure my hon. friend that every possible consideration will be given his recommendations, but I should not like to bind myself by undertaking any geographical representation on the board. The decision in the matter will be for the government as a whole and not for the Minister of National Defence.


[Stage Direction]
Amendment agreed to.
Subsection as amended agreed to.
Section as amended agreed to.
Defence Purchasing Board
[Stage Direction]
On section 6-7-Board to supervise carrying out contracts.
Ian Alistair Mackenzie: There
was an objection from the hon. member for Kootenay East (Mr. Stevens) to the word ''supervise." The suggestion is now that section 6 be struck out and another section substituted, very largely to meet the point raised by the hon. gentleman. The amendment will read:
That section 6 of the bill be struck out and the following substituted therefor:
"6. It shall be the duty of the board to take such steps as shall reasonably ensure that contracts entered into pursuant to the provisions of this part are performed in accordance with their respective terms.


Charles Avery Dunning: I move that amendment.


Mr. CAHAN:: I suggest that "steps" is not the best term to use.


Henry Herbert Stevens: "Measures."


Charles Hazlitt Cahan: "Measures" is better. What it certainly means is that this board must provide a thorough inspection and supervision during the performance of these contracts, and I think the word "measures," as the hon. member for Kootenay East suggests, is a wider term.


Charles Avery Dunning: I move that the word "measures" be substituted for "steps" in the amendment.


Grote Stirling: Does the minister propose to elaborate on that at all? Does he propose to add to section 8?


Ian Alistair Mackenzie: I have considered carefully the observations made by my hon. friend in regard to section 8. After considering the matter, I came to the conclusion that this amendment, based upon the observations of the hon. member for Kootenay East, will largely meet the views of the hon. member for Yale (Mr. Stirling) with regard to section 8. If, however, the hon. member thinks the amendment does not meet his views, I shall be glad to defer further consideration of section 8, although the opinion we arrived at was that this amendment, changing the word "supervise" in section 6, would largely meet the objections of the hon. member with regard to section 8. For that reason no amendment is at present proposed to section 8.


Grote Stirling: It appears to me to be most desirable that the board should make use of the technical officers of the Department of National Defence for the purpose of this very examination, and in the wording of section 6 as amended, and in section 8 as it is printed, no such connection is alluded to.


Ian Alistair Mackenzie: Does my hon. friend still think there should be an addition to section 8, even in view of the amendment to section 6?


Grote Stirling: I simply wish to ensure there shall be a clear understanding that the board shall make use of the services of the technical officers of the department for this very work of supervision. If the minister can assure me that that is the full intention of the government, perhaps the committee will consider that satisfactory.


Ian Alistair Mackenzie: That is precisely the purpose of the amendment.


Charles Hazlitt Cahan: This board is not independent of the department. It is under the Minister of National Defence and is, in reality, nothing more than an official of the department, and therefore it must be deemed essential, I think, that whatever the department has in the way of technical knowledge and assistance must continue to be utilized to serve the interests of that department and, incidentally, to meet the special requirements of the board. I would certainly oppose this bill entirely if it were intended to set up an independent board or bureau, such as the Canadian Broadcasting Corporation, or some others which I might name. We do not wish to repudiate responsible self-government in this country and to preclude ministerial responsibility. I have expressed myself very freely in that regard, and I shall not go into the question to-day. I do not think the Department of National Defence is under competent and qualified administration, and this bill is intended to improve the administration; but I trust that we do not intend to improve the administration by depriving it of all authority and resorting to an independent bureau which is not under the direct supervision of the minister of that department.


Mr. WALSH:: I wanted to say a few words along lines similar to those followed by the hon. member for St. Lawrence-St. George. I have watched the progress of this bill and have given it a certain amount of study, and it seems to me that we are transferring powers to a new creation referred to in general terms as the board. To my mind we are departing seriously from democratic government and democratic institutions as we recognize them in this country; we are providing ways and means for a Minister of National Defence and for a government to take refuge behind a certain creation, and members of parliament and others will find it difficult to obtain information and attach responsibility to the people who are really responsible. I know I

Defence Purchasing Board
was rather severe in my criticism of the present Minister of National Defence and of his department, and I was sincere in that criticism, but I do not think the means being adopted in this bill will meet the real objections that I had to procedures that have been followed in the Department of National Defence in the past year or two.
We cherish our democratic institutions, and I submit that this is a decided departure from those institutions. We are creating something here that is not a part of our social and economic fabric as we have endeavoured to develop it during the past fifty or one hundred years. This board is being given certain powers which I think should rest with the Minister of National Defence, with his department and with the *government. I am speaking now as an individual member; I know many of those on my own side of the house will not agree with what I am saying. But I am a firm believer in democratic principles in government, and in the responsibility of ministers of the crown in the administration of their departments, and I feel that to transfer, powers such as these from the minister and his department to this board will make it more difficult for members of parliament effectively to represent their constituencies. I do not know whether I am right or wrong in that, but that is how I feel. I have discussed this matter with other members on both sides of the house, and have found that there are members who feel very much as I do. Probably they will not express themselves as I have, perhaps I am wrong in so doing, but I have had this growing conviction and I feel that I should give utterance to it while the bill is going through. I understand that section 7 has been passed, but if you will refer to it you will notice that one of the powers given to this board-


Ian Alistair Mackenzie: We are coming back to section 7 later.


William Allen Walsh: I will mention this in passing in order to avoid the necessity of rising later on; I do not like to take part too frequently in the discussion in the house nor do I wish to delay measures which are going through. Section 7 refers to the five per cent profit on the average amount of capital employed in the performance of the contract. That is one responsibility we are placing on this board; it has to decide the amount of capital employed, in connection with which there are bound to be differences of opinion. The board is to be clothed with certain authority to decide. In the first place-I know I will be condemned by many hon.
members for saying this-I do not think the wheels of industry in this country can turn on five per cent per annum. I am thoroughly convinced of that; and I do not think it is fair to ask industry to operate effectively on five per cent per annum.


Mr. HEAPS:: What should they get?


William Allen Walsh: A reasonable profit.


Abraham Albert Heaps: What is a reasonable profit?


William Allen Walsh: What they are making from day to day in business. If my hon. friend has been in business, or knows anything about business, he knows what is a reasonable profit.


Mr. LANDERYOU:: Are the farmers making
five per cent?


William Allen Walsh: The farmers are making five per cent, ten per cent and twenty per cent as and when they can make it, the same as business does.


Some hon. MEMBERS:: No.


William Allen Walsh: If you take the average for a period of ten or fifteen years you will find that the farmer makes as much profit on his investment and his work as business has made during the past ten or fifteen years.


Some hon. MEMBERS:: Read the records.


William Allen Walsh: The records are there. We have heard so much in this house about the farmers, particularly the farmers of the west-


The CHAIRMAN:: I am afraid the hon. member is getting out of order.


William Allen Walsh: I know, Mr. Chairman, I was led out of order. I should like an opportunity to discuss farmers and business some day.


Frederick George Sanderson: I am sorry, but not under this section.


William Allen Walsh: Very well. I just want to emphasize to the minister that we are departing from democratic principles; we are departing from the responsibility of the crown and the responsibility of ministers. Then in connection with section 7 I wanted to raise my voice in protest against limiting the profit to five per cent. I do not think it is sufficient to permit industry to carry on effectively and give the work we expect it to give those who are employed.


Charles Avery Dunning: I should like to say just a word with respect to that portion of the hon. member's remarks which bear upon the section now under discussion. At the moment I need not refer to what he said in regard to section 7; we can leave that until we reach
Defence Purchasing Board

the section. With regard to democratic responsibility and the possibility of the evasion of ministerial responsibility through and by means of the creation of this board, may I point out to the hon. member that every contract let by this board must be let with the approval of the governor general in council, on the recommendation of the Minister of Finance. This means that whether he likes it or not the Minister of Finance must take the responsibility of recommending to the governor general in council the awarding of a contract which has been recommended to him by the purchasing board. I do not think that is a departure from responsible government; in fact I feel it to be a very great intensification of responsible government, at least as far as the Minister of Finance is concerned. The bill also provides that if the board deems a certain course desirable in connection with a certain piece of business, such as calling for tenders and so forth, it must report to the Minister of Finance, who must inform his colleagues.
I can assure my hon. friend that the chain of responsibility exists; that it is very definite and, moreover, it ensures responsibility to this parliament, because the only thing that occurs to me in connection with which the government could plead public interest as a reason for not informing the house of the details of every contract and every order in council, would be wholly in connection with works of secrecy such as details of fortifications and that sort of thing. I cannot conceive of any other matter of public interest which would debar this house from obtaining full information with regard to the activities of the board; because, as I say, when those activities are translated into contractual form it must be done by means of an order in council on the recommendation of the Minister of Finance.


William Allen Walsh: Is there any set-up in connection with our government at the present time that is at all analogous to the proposed board?


Charles Avery Dunning: I do not know that there is anything at the moment; the war purchasing commission during the war and the purchasing commission of Canada after the war are the nearest parallels that occur to my mind. I do not know of anything that has just the precise chain of board and ministerial responsibility contemplated by this legislation.


Charles Hazlitt Cahan: Mr. Chairman, I would like to place it on record that I think the change which has been outlined by the Minister of Finance is a reprehensible one which should not be endorsed by parliament. The Minister of Finance has a great number of departments under him now. He has more departments

under him than I think any man in his position can have the physical strength and the mental and intellectual activity to deal with properly. Now, simply because the Minister of National Defence has been found by a commission to be not quite qualified for the administration of a measure such as this-


Ian Alistair Mackenzie: I rise to a point of order, Mr. Chairman; I ask that that remark be withdrawn.


Charles Hazlitt Cahan: I am in order.


Frederick George Sanderson: I think the point raised by the Minister of National Defence is well taken. The hon. member for St. Lawrence-St. George is an old parliamentarian, and I am sure he will withdraw.


Charles Hazlitt Cahan: I was simply stating that
this board, which should be a branch of the Department of Defence, is for some reason transferred by this bill to the Minister of Finance and is placed more directly, under his control. The Minister of Finance must know that I have a high appreciation of his intellectual and physical abilities, under ordinary circumstances, but I suggest he is quite incapable of attending to this additional work of administration. It is quite unnecessary that it should be transferred to him.
I believe I am in order when I say that the Department of National Defence should be so carefully organized that it can administer the work of national defence and all contracts collateral thereto. Of course the government must be responsible. The Minister of Public Works is responsible for public works; yet the contracts he places are brought by him, with his recommendation and that of his engineers and other officers, to the attention of the government, and his official acts are authorized by order in council. But if I may say so the governmental responsibility exercised by order in council is by way of a supervisory function, after the Minister of Public Works has made his recommendation, and an authorization is given upon that recommendation.
I dislike the change, and 1 do not think it should be made. If we become engaged in war-and we must trust providence that war will not ensue-the Minister of National Defence ought to be in the primary responsible position. The Minister of Finance will find that he is so absorbed in his own work that he will have no time to assume these further responsibilities.
Let us deal with the matter now. For the sake of the country let us deal fairly with it. If we are to have a department of national defence let that department assume the

Defence Purchasing Board
responsibility which the Minister of Finance proposes to assume under the bill. Of course the Minister of Finance will have to be consulted by the ministers of various departments. He must be consulted in connection with all appropriations for public works or for assisting the provinces in dealing with the provincial matters. He must be consulted by his colleagues in charge of the various departments. He will have to be consulted now with regard to the expenditures of the Department of National Defence, and as to the necessity or expediency of such appropriations being voted from time to time. But do not let us take the foolish initiative of transferring to another department matters which fundamentally are duties of the Department of National Defence, especially when we know that no one man charged with the administration of the Department of Finance can really and effectively undertake the additional work which is being imposed upon him, and especially if we are to face the active defence of our country.


Ian Alistair Mackenzie: One would have thought from the remarks of the hon. member for St. Lawrence-St. George that in this legislation we are establishing a new principle. I do not suppose he did me the credit of reading the remarks I made on the second reading of the bill. Had he done so he would have found that I said clearly that there are two precedents for this legislation. One was the War purchasing commission and the other was the purchasing commission of Canada. In the one instance the commission reported directly to the Prime Minister, and in the other it reported to the Minister of Finance. There is in this legislation no departure in principle. It does not represent any abrupt breaking of precedent. I believe that the joint responsibility shared by the Minister of National Defence, the Minister of Finance and, as with regard to taxing powers, the Minister of National Revenue-if indeed taxing powers are necessary under the legislation-constitutes a perfect form of administrative responsibility. I do not know whether the hon. member was a member of the House of Commons when the former legislation- was placed on the statute book.


Charles Hazlitt Cahan: I was not a member of the house.


Ian Alistair Mackenzie: But my hon. friend is conversant with Canadian public affairs. I am surprised that he did not know that there is no breach of precedent in regard to this legislation. We are following what
has been done in the past in regard to ministerial responsibility. I do not think the raising of any constitutional or technical point will interfere with the functioning of the proposed board, which is supposed to carry out in the very best way and in the public interest the heavy and onerous responsibilities with which it is to be charged.


Charles Hazlitt Cahan: This board is to act as a branch of the ordinary administration of the Department of National Defence; that is its function. It is true that when we were at war and enormous contracts had to be entered into, special provision was made with respect to them in certain orders in council which now form a large volume, and some of which I helped to draft. If unhappily we become involved in a war, we shall again, no doubt, have to resort to kich war measures. But at the present time it is not necessary to resort to the War Measures Act, or to any phantom war measures act such as we have here. It is a measure to overcome a certain political difficulty which we have seen discussed in the press and otherwise.


Some hon. MEMBERS:: No, no.


Charles Hazlitt Cahan: At least, Mr. Chairman, I can refer to it in that respect. I do not wish to discuss the matter at greater length, further than to say that I am opposed to it, even though I have only one vote.


Mr. McIVOR:: I may feel like a small boy when I am discussing a question of this kind, but I must say I congratulate the Minister of National Defence upon trying not to hold all the power in his own hands. People in the north of Ireland say that two heads are better than one. Four heads must be better than two, and certainly must be better than one-much better. I commend the minister for his wisdom. If there were a member on the board from Vancouver, another from Alberta, another from Quebec, another from Ontario, two or three from the maritimes, and one more from Fort William, they would have far more wisdom than there possibly could be in one head. Certainly the minister is to be commended for his democratic action in this regard.


William Allen Walsh: There is one further point
I should like to make, and I know the Minister of National Defence will not consider I am indulging in personalities. I do feel that this is a departure. The Minister of National Defence should be absolutely in charge of every detail in connection with his department. If this board is to be created,
i390
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it should be created within the department. The master general of the ordnance should be directly connected with, if not actually the chairman of, this board; the minister would then be directly responsible. That would be better than to create a somewhat independent board, which apparently is to report its findings to the Minister of Finance, who reports to the cabinet. Why should not the board report directly to the Minister of National Defence?
I am sure that many hon. members feel as I do in this matter. If I were the minister of national defence I would consider it somewhat of a slight on myself if a board, a creature of my department, were to report to another minister of the crown. Probably the present minister does not feel that way; he is happy in his surroundings and knows cabinet and ministerial procedure far better than I. But that is how I should feel personally, and that is why I am expressing this point of view. I should want to be responsible for everything that took place within my department. I should not want any body under me reporting to another minister of the crown, who would then report to the cabinet.
Is there anything of this kind in Great Britain? If there is a board of this nature, to whom does it report, or to whom is it responsible?


Ian Alistair Mackenzie: The
procedure is the same as we are adopting here. All financial contracts entered into in Great Britain are subject to treasury supervision. This is the principle we are endeavouring to establish by this legislation.


William Allen Walsh: Is the board in England
an independent board reporting directly to the chancellor of the exchequer or the treasury board, or does it report to the minister of war or the head of the department for which it is making purchases?


Ian Alistair Mackenzie: As far
as my information goes, there is no separate board in Great Britain. I think it is all done by the director of munitions contracts who reports to the treasury officials.


Charles Hazlitt Cahan: In England they have a
contract branch in the war department which makes the contracts. These contracts are reported to the treasury board. Within certain limits they are under the supervision of the treasury. Here any department making a contract must keep within the limits prescribed by statute, and, to a certain extent, as prescribed or suggested by the finance department. I do not know that it makes

very much difference, but I should like to suggest the following wording for the proposed amendment:
It shall be the duty of the board to adopt such measures as it shall deem necessary to ensure that contracts entered into pursuant to the provisions of this part shall be performed in accordance with their respective terms.
There is a slight difference in wording, but I think it is more emphatic.


Charles Avery Dunning: It is a matter of draftsmanship.


Charles Hazlitt Cahan: I know something about the supervision of contracts of the kind. It requires a large staff of inspectors and there must be careful supervision to see that proper inspection is made before a contract is deemed to be fully performed.


Grote Stirling: I come back to the point I made before. It seems to me it would be a good thing to ensure that the technical officers of the department come in on this inspection work, if for one reason only. It would keep them au fait with the details of either the production of the munitions or the erection of the plant. It does not matter to me whether this is done by an addendum to this section 6 or by adding another clause to section 8. One can visualize the possibility of friction arising between this board and the department. If these contracts are carried out without inspection by the technical officers of the department they will not be nearly so well informed as to the product of which they are going to make use as they would be if it were produced under their supervision.


Ian Alistair Mackenzie: I just
want to repeat the assurance I gave before. I think the amended section 6, along with the last subsection of section 8, will prove quite ample to carry out what the hon. member has in mind.


Charles Avery Dunning: I move that the amendment be adopted in the terms suggested by the hon. member for St. Lawrence-St. George (Mr. Cahan):
That section 6 of the bill be struck out and the following substituted therefor:
"6. It shall be the duty of the board to adopt such measures as it shall deem necessary to ensure that contracts entered into pursuant to the provisions of this part shall be performed in accordance with their respective terms.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
Ian Alistair Mackenzie: We will leave section 7 for the moment. The other

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two sections which were not passed at the last sitting were Nos. 17 and 18 in part II of the bill.
On section 17-Governor in council may borrow for capital expenditures.


John Charles Landeryou: Section 17 reads:
17. (1) The governor in council may, in addition to the sums now remaining unborrowed and negotiable of the loans authorized by parliament by any act heretofore passed, raised by way of loan, under the provisions of the Consolidated Revenue and Audit Act, 1931, by the issue and sale or pledge of securities of Canada, in such form, for such separate sums, at such rate of interest and upon such other terms and conditions as the governor in council may approve, such sum or sums of money as may be required to provide for the payment or reimbursement of expenditures of the department, which in the appropriations provided by parliament for the department are chargeable to capital account, hereinafter called "the said expenditures."
(2) The principal raised by way of loan under this act and the interest thereon shall be a charge upon and payable out of the consolidated revenue fund.
I have pointed out time and time again that legislation is continually being introduced into this house which increases our debt and the burden of taxation placed upon the people of Canada. I have a question or two which I should like to direct to the Department of Finance, which is headed by a scientific money man. The Department of Finance and the Department of National Defence are to share the responsibility of administering this act. The question I wish to direct to the minister is this: In view of the fact that the national debt of Canada and taxation will be increased by the financial provisions of this bill, just how much further can we go in piling up our national debt? Just what limit does he place upon our ability to carry the debt burden in Canada?


Charles Avery Dunning: Mr. Chairman, I must decline to get into a general discussion of monetary principles on the section of a bill which has to do with providing a method of financing a specific undertaking. We could write books about my hon. friend's question, as he and his friends do, but I do not think any book written 'by myself, developing that subject and expressing my opinions, would be of any really permanent value because all history shows us that nothing shifts more rapidly or more unexpectedly than people's ability to carry their communal financial and economic 'burdens. All through history we have had the Jeremiahs telling each succeeding generation that the end was coming, there was no hope, the load was too heavy, and so forth. Yet each succeeding generation has
evolved methods of carrying that load or of adjusting it. Any dogmatizing by myself or anyone else as to what can or will be done in the future in relation to the debt creating or debt carrying capacity of a people would be merely the wildest of speculation.


John Charles Landeryou: Since the minister has stated that he does not intend to define any limit to the amount of national debt and our capacity to bear taxation-


Frederick George Sanderson: Order. The hon. member is out of order.


John Charles Landeryou: I do not intend to be out of order, Mr. Chairman, but in view of the fact that we are here adding to Canada's national debt, and there is nothing in my opinion that has a greater effect upon every man, woman and child in this country than monetary policy-


Frederick George Sanderson: The hon. member must confine his remarks to clause 17, which provides that the governor in council may borrow for capital expenditures. He must not attempt, under this clause, to cover the whole range of expenditures or discuss the whole monetary system.


John Charles Landeryou: I am dealing, Mr. Chairman, with the provision that:
The governor in council may, in addition to the sums now remaining unborrowed and negotiable of the loans authorized by parliament by any act heretofore passed, raise by way of loan, under the provisions of the Consolidated Revenue and Audit Act, 1931, by the issue and sale or pledge of securities of Canada, in such form, for such separate sums, at such rate of interest and upon such other terms and conditions as the governor in council may approve, such sum or sums of money as may be required to provide for the payment or reimbursement of expenditures of the department.
We are simply borrowing more money, and I am dealing with the effect that borrowing more money will have upon the tremendous debt burden which we are now carrying. I wish to refer to a statement made by a man who has made a study of this question, a statement by a banker in respect to increasing Canada's total debt.


Frederick George Sanderson: The hon. member is still out of order, and I would ask him to confine his remarks to the clause before the committee. I am sorry to have to interrupt him so often, but he must comply with the rules.	.


John Charles Landeryou: Mr. Chairman, in
respect to the borrowing of money which this section empowers the government to do, I wish to point out that our ability to pay does not keep pace with our increasing debt. If we compare 1937 with 1927-
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Some hon. MEMBERS:: Order.


John Charles Landeryou: -we find that the annual national income is less by $1,230,000,000.


Frederick George Sanderson: I would say to the hon. member that the speech he is attempting to make now might be one he could make on the budget, but he cannot make it on clause 17.


John Charles Landeryou: Mr. Chairman, I understand that under this clause we are going to borrow $29,000,000; will that not increase debt and taxation in this country? Most assuredly it will, and if I cannot express my opinion as to the effect of this borrowing upon Canada's economic well-being, then I do not think anybody can be in order in this house.


Frederick George Sanderson: The hon. member will have ample opportunity later in the session to discuss that question.


John Charles Landeryou: I do not question that, but I am now asserting my right to discuss it on this clause.


Frederick George Sanderson: Order. I have made my ruling and I ask the hon. member to abide by it.


James Shaver Woodsworth: Mr. Chairman, on the point of order, while I have no use whatever for certain monetary theories that are held by certain gentlemen to the left, it does seem to me that the hon. member has the right, under the rules, to discuss the effect of the borrowing for which authorization is sought by this clause. Surely we cannot simply crowd out theories that do not suit us. We should have some sort of fairness in applying the rules of this house, and I think the hon. member can hardly be shut off in this way.


Charles Avery Dunning: Just in support of your ruling, Mr. Chairman, and goodness knows I do not want to shut off discussion in the proper place of any monetary theory; but if we are to read the rules as meaning that on any clause of any bill which involves an expenditure of public money, because that expenditure creates a deficit which can be met only by borrowing, it is therefore in order for us to discuss the whole range of governmental finance in the manner contemplated in the budget debate or upon a motion for going into supply on Mondays or Tuesdays or into committee of ways and means on Mondays or Tuesdays-if we are to permit such discussion on any clause of any bill that spends a dollar, then obviously we shall be here forever. It is not that the hon. member for Calgary East (Mr. Landeryou) has not plenty of other

opportunities. It is that he is seeking this opportunity to develop a general broad public debt discussion, and I suggest to the hon.. member for Winnipeg North Centre (Mr. Woodsworth) that if the rules are to be interpreted in that way we can have that kind of speech on at least every bill involving expenditure that comes before the house. It is simply a question of a reasonable interpretation of the rules, and I am inclined to think that the Chairman is right in his ruling in relation to the clause of the bill we are at present discussing.


John Charles Landeryou: The Minister of National Defence in answer to a question which I directed to him the other day as to whether he was in favour of the financial policies to be pursued under this bill; said that he must be in favour of them. What did he mean by saying he must be in favour of them?


Ian Alistair Mackenzie: Res ipsa
loquitur.


John Charles Landeryou: The Minister of National Defence, who claims to be a sound scientific money man, stated in this house in 1935:
I suggest the increase of our currency by $430,000,000, which is scientifically justifiable by the appreciation of gold values, to be used for the reduction of our national debt-
Then on another occasion this sound scientific money man has referred to the control by the government of the central bank as the-


Frederick George Sanderson: Order. The hon. member must confine his remarks to the item under discussion, or I shall have to ask him to resume his seat. I have made my ruling. He has' the privilege, if he so desires, of appealing against my ruling.


John Charles Landeryou: I have no desire, Mr. Chairman, to appeal against your ruling, but I will say that the Minister of Finance has adopted the slogan of "Fire and fall back" once and for all; for he fired many volleys for monetary reform before the 1935 election, and he has now fallen back. I should have said, the Minister of National Defence.


Ian Alistair Mackenzie: I accept the amendment.


John Charles Landeryou: He fired volleys for monetary reform before the election of 1935, but since then he has fallen back into the ranks of the reactionary Minister of Finance.


Charles Avery Dunning: Mr. Chairman, on the
"reactionary" business, I have not talked about monetary reform; I have done what

Defence Purchasing Board
lay in my power to bring about sane, sensible monetary and credit reform, and what I have done will stand on the records long after my hon. friend's talk has vanished.


John Charles Landeryou: I appreciate that, Mr. Chairman, but I notice that the Minister of Finance does not agree with the policies advocated by his associate, with whom he must cooperate in the administration of this legislation.


Frederick George Sanderson: Order. The hon. member must confine himself to the item. I will not permit him, under this item, to continue to discuss monetary questions in general, and I have made my ruling.


Mr. COLDWELL:: Before the clause is
carried, may we have an explanation of just exactly what it involves. That is really what we want to hear.


Mr. LAWSON:: Before the minister rises to speak, I have been waiting for a chance to ask-it combines with what has been asked-why this method of proceeding?


Charles Avery Dunning: That is what I was going to deal with. Sections 17 and 18 comprise the financial method. As hon. members of the committee know, in every country the problem of arranging for the financing of large national defence expenditures is very difficult and serious. In the last few years, practically since the war, no expenditures for national defence have been capitalized in any manner in Canada; the expenditures have been met from year to year out of the general revenue of the year; and to the extent that a general over all deficit was created, to that extent the public debt was increased by borrowing to meet the deficit. The growing expenditures in Canada on national defence, part of them of what might be called a capital nature-that is to say they are not immediately consumable but have an ascertainable lifetime of possible service-involve that we give consideration, unless we are prepared to keep on throwing them into a general deficit and thus disguising what our real position is, to evolving some method of separating the annual ordinary expenditure on defence, on the one hand, such as for pay and allowances and materials which are consumed during the year, and on the other hand, for permanent works, such as fortifications and permanent mechanized equipment, which has a certain life. An attempt has been made in this year's estimates to separate one from the other and to capitalize those items which have a value extending over a period of years.


James Shaver Woodsworth: May I here ask
the minister how these differ from, we will say, ordinary public works as regards capital expenditures?


Charles Avery Dunning: They do not. That brings me to the second phase of my subject. I shall immediately be asked, why do you not carry out the sinking fund method with respect to the whole public debt? Most hon. members know I have many times stated that to be an ambition of mine, and one which I hold very dear. But I have also stated to the house- and I do not want to go out of order; I am dealing with the method of capitalization involved in sections 17 and 18, and that involves the sinking fund method-that I do not want to start in respect to debt generally a sinking fund which would be only a paper sinking fund. One of the tragedies of sinking funds, even in England, is that although they express the desire of parliament and of the government to set aside so much each year, it frequently happens that it is necessary to ask for a suspension of the fund for the current year. Any sinking fund which could be devised in Canada to-day for the whole of the public debt which would be within the capacity of the people to pay in addition to what we are already collecting, would not effectively deal with the problem along that line. What I am suggesting here with respect to national defence expenditures is something which I sincerely hope will be gradually spread to the other fields of which the hon. member for Winnipeg North Centre has spoken.


James Shaver Woodsworth: I was thinking, not of a sinking fund, but, we will say, the amount spent for post office buildings in contrast with payments for the carrying on of the regular postal services. The minister does not distinguish in that case, does he?


Charles Avery Dunning: Oh, yes. we do distinguish. The Public Works Department erects the buildings for the Post Office Department.


James Shaver Woodsworth: Yes.


Charles Avery Dunning: True, their value is not charged against the post office operations; but that is another reform which I hope I may be able to bring about if I am here long enough. This is away from the subject, if my hon. friend will forgive me for saying so, because the principle we are here seeking to set up is that national defence expenditures of a capital nature, arrived at in the manner I have just described, shall be spread over ten years, and that there shall be voted each year in the estimates of the Department of National Defence a sum chargeable to that year, sufficient to amortize the whole over
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the period of ten years. That is, we are setting up, in connection with national defence capital expenditures, an amortization of them on a sinking fund basis over a period of ten years. Next year we shall probably find, although I wish it would not be so, that again in the estimates the national defence expenditures will be divided between expenditures out of revenue and expenditures out of capital, and again next year there will be a sum voted out of revenue equivalent not only to the sum required to amortize over ten years this year's capital expenditure, but to the additional sum required to amortize the addition brought about by next year's estimates; and so on. So that we shall have before us in this parliament each year a full knowledge of what our capital expenditure on national defence is, spread over a ten year period, because we shall always have a tenth instalment for each year before us. Frankly, I hope to be able to expand the application of the principle as time goes on, because I am a great believer in planning a method of paying debt at the time you incur it.	*


Charles Hazlitt Cahan: I am afraid that if that ambition is to be realized, its realization will have to be postponed until wars and rumours of wars are at an end.


Charles Avery Dunning: I agree with my hon. friend, but in these matters of paying debt I believe in hitching my wagon to a star. Even though I cannot get very far with it, every step is a step in the right direction, in the recognition of the sound principle of making provision for payment on debt when the debt is created.


Charles Hazlitt Cahan: But when my hon. friend hitches his wagon to a star, he ought to take very good care that the star in its courses does not switch him off terra firma.


Charles Avery Dunning: I agree.


Major James William Coldwell: I listened attentively to the Minister of Finance. In the estimates this year there is an item, I believe about $29,000,000, capital expenditure; that is one-tenth. Does that mean that it is contemplated that $290,000,000 will be spent over the next ten years?


Charles Avery Dunning: The item of $29,000,000 is the total of the estimates of the Department of National Defence which this year are being capitalized, and in the same vote there will be found an item of one-tenth of that amount plus interest, voted this year to apply on the amortization. It is not an expansion of the vote. The vote for amortization this year is

about $3,000,000, and that is related to the $29,000,000 based on the ten years' amortization.


Major James William Coldwell: There was some confusion in the interpretation of that estimate, in the light of the statement just made.


Charles Avery Dunning: Of course, the estimate could not be intelligible without the measure we are now passing.


James Earl Lawson: Would it be correctly stating the minister's interpretation if I said that the effect of this bill, plus the estimates, is as follows: There is no limitation as to the commitments which may be taken by the government for defence expenditures-


Charles Avery Dunning: No limitation?


James Earl Lawson: Just a moment. No limitation on the commitments which may be taken next year so long as the amount payable in respect to those commitments does not exceed the vote contained in the estimates for this year, and so long as it will be repaid within the ten year period, as prescribed by section 18.


Charles Avery Dunning: The limitation on expenditures is the estimate, just as it has always been, but this law makes it obligatory to create a ten-year distribution of that portion of the expenditure which was capitalized.


James Earl Lawson: But there is no limitation on the commitment which may be taken.


Charles Avery Dunning: The limitation is the vote itself.


James Earl Lawson: The government might enter into a contract for an expenditure over the next five years, with a firm manufacturing some article of defence, which by far exceeded this year's estimate, but they can pay for it only to the extent of this year's estimates. The other limitation is that it must be repaid under this scheme within ten years.


Charles Avery Dunning: Well, the question of the extent to which a government can commit a future year's estimates by a contract entered into this year, only a small portion of which can be used this year-


James Earl Lawson: Right.


Charles Avery Dunning: -as the hon. member knows, is always a matter of difficulty in administration, particularly when you are ordering goods which you know cannot be delivered for a long time.


James Earl Lawson: And that applies particularly in defence matters.

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Charles Avery Dunning: It certainly applies to this particular class of equipment. It has, however, no relationship to the amount which may or may not be capitalized. The amount which may be capitalized has a definite limit in the vote which will come before the house by and by. The only means, so far as I know, of adequately controlling the government in making defence commitments is to have the minister state plainly, in connection with every item as he puts his supplies through, how much of future commitment is involved in the vote. This year we have gone a considerable way in outlining it in the details of the estimates. I do not know that one can be too arbitrary about it, but as Minister of Finance I have always felt it my duty to see to it that large commitments are not entered into on the basis of token payments merely, without parliament being fully cognizant of the position. That is about as far as one can go. It is very difficult administratively at times. For instance, suppose we ordered a number of aeroplanes from England. delivery of which the war office tells us can be made three years hence. Now there is merely a nominal payment to be made on the giving of the contract in the first place- say $10.000-but the total cost might be in millions. If you took a vote for the millions in the year in which the order was given it would be useless; it would be merely padding the estimates to no purpose whatsoever. The important thing is that parliament should be fully advised as to what those future commitments are in order that there shall be no running away without the authority of parliament.	t


James Shaver Woodsworth: If I may revert to my former question, I am not really clear yet as to why this particular method of finance should be employed in connection with the national defence estimates when it is not the practice in other departments where capital expenditures readily might be distinguished from current expenditures.


Charles Avery Dunning: My hon. friend will see, if he looks at the national defence estimates, that in addition to the expenditures of the department authorized this year, there is a vote which must come out of the taxpayers this year of $3,000,000 to amortize the capital portion of the expenditures previously authorized. If we applied that to every public building, every form of capital expenditure at the present time, we should have a larger amount to vote by way of instalments than we can possibly stand under the conditions that now prevail.


James Earl Lawson: Or spend during the next
year.


Charles Avery Dunning: Or provide during the
next year. We might fool ourselves by putting in a lot of these things and voting them and then find ourselves with a revenue deficit, being consequently under the necessity of boiTOwing money to retire other borrowed money, which would be a foolish procedure. I am hopeful that by this means we may get on the basis of arranging to liquidate capital expenditures as we create them. I have been rigid in the past four years in what I have admitted to consideration as capital expenditures. I have admitted as a capital expenditure nothing which had not on its face the obligation to repay in some form or other, nothing which did not appear as if it would reasonably be repaid. Then I was content to capitalize it. Even some of these might be subject to the criticism that *we might not get the money back. The advances to the farm loan are capitalized; the advances under the housing act are capitalized; the advances to the Canadian National Railways, otherwise than for deficit are capitalized. Our public buildings are not capitalized, Our Municipal Improvements Assistance Act is capitalized because we have the obligation to repay from those who received that money. That is proper and sound, but we have not capitalized expenditures on public buildings.
In answer to the hon. member for Winnipeg North Centre, I might say that if we started capitalizing expenditures on public buildings and improvements of various kinds, it would be desirable to set up this kind of sinking fund provision in connection therewith and vote the instalment each year. That is what I am trying to start in this connection. It seemed a good place to start, on the defence expenditures, and the house will have before it each year what represents one-tenth of the total amount capitalized, which must be provided each year in order to keep up the retirements.


Mr. MacNEIL:: I want to be clear as to
the method by which parliament controls commitments. I understand that with regard to housing enactments, parliament provides by statute from time to time an outside sum for housing purposes. In what respect will parliament obtain knowledge with regard to commitments made, apart from the amounts actually appearing in the annual estimates?


Charles Avery Dunning: It can only be done on
each item when each minister is putting
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through his estimates. For instance, look at page 136 of the estimates, where you will see the following item:
Training of pilots (equipment and properties) -Capital stores and equipment-
New aircraft and engines (commitments 1441,840), $1,933,160.
Aircraft spares for stock (commitments $200,000), $115,000.
The advance commitments are there shown. I do not want to lay it down as a principle that can be always followed, that you can definitely say what your advance commitments are; but that is the method of advising parliament as to what is involved in regard to commitments for future years.


Charles Hazlitt Cahan: This information is interesting; but unless parliament has authorized commitments, future payments in respect of those or any unauthorized commitments are entirely within the discretion of parliament, and when the time comes for payment, parliament must authorize the expenditure. Otherwise the contractor has to depend upon the personal promises of members of a government, which are usually effective but which are, at times, not of very much value.


Mr. DOUGLAS (Weyburn):: Could we just get this clear from the Minister of Finance. For instance, on page 135 of the estimates I find the following:
Air Force Stores-Capital-
Aircraft and engines (commitments, $2,350,000), $8,876,848.
What is the explanation of that?


Charles Avery Dunning: That is very clear. The total vote for aircraft and engines for this year is $8,876,000; but what is contemplated within that limit also involves commitments of $2,350,000 for future years. Does my hon. friend get it now?


Thomas Clement (Tommy) Douglas: Out of the
$8,000,000?


Charles Avery Dunning: No, in addition to the $8,000,000, but which cannot be expended in the year for which the $8,000,000 is asked because there are payments due under contracts which will not mature within the year, but which parliament ought to know about.


Thomas Clement (Tommy) Douglas: And which will be authorized in future estimates?


Charles Avery Dunning: Surely.


[Stage Direction]
Section agreed to.
On section 18-Amortization of sums issued out of consolidated revenue fund for capital expenditures.
Charles Grant MacNeil: Why should it be necessary to have a separate financing plan for this department?


Charles Avery Dunning: I spent ten minutes trying to explain that in a sense I am using the Department of National Defence as a guinea pig for experiment in connection with something which I believe would be desirable to extend much further in connection with capital commitments.


Charles Hazlitt Cahan: As a capital experiment.


[Stage Direction]
Section agreed to.
Section 19 agreed to.
On section 7-Maximum net profit.
James Earl Lawson: My recollection is that the last time this section was under discussion it was made pretty clear to the committee that this bill would apply only to a very limited, or should I say merely a limited, number of contracts.


Charles Hazlitt Cahan: This section?


James Earl Lawson: This section and the bill as well, as a matter of fact, because you have to link section 7 to section 4 and section 2 (b). My recollection is that the minister was going to try to give us an estimate as to the number of contracts in respect of which there would be invited tenders, the number that would be advertised for public tender, and the number that would come under the provisions of this section.
Mr.	MACKENZIE	(Vancouver):	The
taxation provisions apply to a specific form of contract; that is, under section 7 of the bill.


James Earl Lawson: I am sorry; I did not quite follow that.
Mr.	MACKENZIE	(Vancouver):	The
taxation provisions of the bill apply to section 7; that is, to contracts which cannot be let under the system of competition by public tender, or with the amendment we passed this afternoon.
Mr.	LAWSON: Yes;	we are agreed on
that, but the minister was going to try to give us an estimate as to what percentage of the whole expenditure of the department would be affected by this bill.
Mr.	MACKENZIE	(Vancouver):	My
recollection is that it was about fifteen per cent, as far as we could ascertain it.


James Earl Lawson: Fifteen per cent of all contracts?


Ian Alistair Mackenzie: For the-last two years.

Defence Purchasing Board


James Earl Lawson: Fifteen per cent would come within the limitation of this five per cent profit?


Ian Alistair Mackenzie: Yes.


Thomas Clement (Tommy) Douglas: Is that fifteen per cent of the contracts or fifteen per cent of the value of the contracts?


Ian Alistair Mackenzie: Fifteen per cent of the value of the contracts.


Thomas Clement (Tommy) Douglas: How many actual contracts would have come under this provision, since this government has been in office?


Ian Alistair Mackenzie: The total number for 1938-39, up to the end of December, 1938, amounting to more than $5,000 was 246.


Thomas Clement (Tommy) Douglas: As compared with what total?


Charles Avery Dunning: Perhaps while this information is being looked up I might point out to my hon. friend who asked the question that it is of doubtful importance in relation to what we have to look forward to under this method of dealing with purchases. It will be apparent on reflection that if the board which is to be set up is dissatisfied with the competition which results from the tender method, or if it believes for any reason that there has been collusion between the tenderers, or that prices are out of line, the board undoubtedly has the right to refuse to accept any tender and throw the contract back under the form of contract contemplated by the taxation provisions of section 7 of the bill. My hon. friend will recognize the importance of that fact.	*	.


Charles Grant MacNeil: If it is not an ordinary commodity, one specially required for defence purposes, and subsequently this article is sold for less than the price quoted to the government, will the board have power to act and reduce the price paid by the government?


Charles Avery Dunning: If I understand the
question aright it means would the government repudiate a contract into which it had entered. Of course there is only one answer to that question. If the contract was arrived at by virtue of competitive tenders then it is obvious that the terms of the contract, whatever they were, would have to be carried out. As I indicated a moment ago, if the board has any idea that it is being overcharged by tenderers in connection with any commodity it can always insist on putting the business under this section, under which there is no
doubt that profits are limited to five per cent on the capital employed. I hope I have made that clear.


James Earl Lawson: I think the minister has made it perfectly clear that the board has power to do something if it so desires, but that is a little beside the point that my hon. friend had in mind and that I also had in mind in seeking this information the last time the bill was up for consideration. The point at issue, in its final analysis, is this: I had the impression, rightly or wrongly, when this bill was brought into the house following the discussion on the resolution that in future all profits in respect of the manufacture of defence material were to be limited to five per cent. I soon discovered I was in error, that there was one exception, namely where public tenders were advertised. Then I discovered there was another, namely where there were invited tenders. The minister will realize that when we except all contracts called for by public or invited tender or all contracts limited to a small number of contractors or groups, the measure is made very ineffective from the point of view of the limitation to five per cent of the profits on defence materials. As the minister has quite frankly told us, the most that is accomplished is to limit the application of this provision to fifteen per cent of all purchases. That is the point at issue, and I think the minister's statement is hardly a complete answer.


Charles Avery Dunning: My hon. friend will
realize that many of the materials required by the Department of National Defence are used by the general public. Competition by way of tender or invited bids is real, because there is a known standard or approximate standard of price.


James Earl Lawson: Quite so.


Charles Avery Dunning: I wish only to make clear that in my opinion the tendency of the legislation is, first, to tend to force competitive bidding.


James Earl Lawson: Which I think is a good thing.


Charles Avery Dunning: Yes. Second, it places
a powerful weapon in the hands of the purchasing authority in that if competitive bidding is not satisfactory from the point of view of prices, there is another way out which is difficult of operation but which, nevertheless, definitely limits profit. I think it would be quite impossible to work out a limitation of profits scheme to apply on everything the department buys. I believe we must rely upon competition in respect of many commodities which are in general use. And of
Defence Purchasing Board

course if-God forbid-war should come and we have to consider the results of war inflation of one kind and another, outside of this measure altogether we shall have to evolve schemes for profit control which will apply not only on purchases by the Department of National Defence. I think there is no doubt we would come to that.
What we are trying to do here to to place a businesslike piece of machinery in the hands of a purchasing organization which will ensure first the maximum encouragement to competition, and, second, if competition proves to be impossible, a control of the profits of those who are doing the work. I think the bill is soundly conceived from that point of view. I know it is being criticized as being a very radical piece of legislation, the most drastic of its kind to be placed on the statute book of any democratic country. But I believe it will work. I believe it will encourage a maximum of competition, which, after all, is the best means of getting a reasonable price for commodities purchased. If the board is able to show to the government that there has been collusion, that the price level is too high and that profiteering is going to result, they can turn back to the method contemplated by section 7, and have it done on the basis of a five per cent return on capital.


Charles Hazlitt Cahan: I may be in error, but I find it extremely difficult to follow the provisions of the bill. In any case, if a contract for not less than $5,000 is awarded without competition, it would come under the provisions of section 7, would it not?


Charles Avery Dunning: No, only if it were more than $5,000.


Charles Hazlitt Cahan: I understand. Suppose a contract were for $5,500, or $6,000, or some such sum, does the hon. member think any contractor would accept a contract of that kind if, as is set forth in the subsections of section 7, there must be an examination of all his books to find out what capital has been involved in producing goods to the value of $5,500? I find these words in paragraph (a) of subsection 3:
The board may take into account in determining capital employed in the performance of a contract actual cash outlays incurred in the acquisition of patents, or licences to manufacture, but not goodwill-
And so on. That is, a contract for $6,000 would involve a possible profit of $300.


Charles Avery Dunning: The five per cent is not on the contract; it is on the capital employed.


Charles Hazlitt Cahan: But that is even more nonsensical. I am taking into consideration the cost of producing the article, as such costs

are found in a well equipped factory in which accounts are segregated and audited. But the profit obtained is not likely to be more than $300. To carry out the inquiry, the board must have production of all these accounts and ascertain how much capital is involved in the production of a $6,000 contract by a company capitalized at many millions of dollars. This inquiry would cost more than the amount represented by the entire profit. It strikes me that some other method might be used. No competent factory will take work on that basis, and unless the government takes over the factory and forces the manufacturer to do the work, it certainly will not be done.


Charles Avery Dunning: Can my hon. friend conceive of articles costing $6,000 for which it would be impossible to secure competitive tenders? I mean to say that expenditures as small as that undoubtedly will fall within the class for which it is possible to get a tender. Therefore the taxation provisions of section 7 would not apply. The difficulties arise in connection with large expenditures for expensive equipment for which it is not possible or practicable to get competitive tenders. Theoretically what my hon. friend says is quite correct, but as a practical matter I do not think it is.


Charles Hazlitt Cahan: I suggest that we deal with realities and not with absurd possibilities such as those I have suggested. I can understand that in connection with a certain contract it may be impossible to obtain tenders. I doubt very much whether there are many contracts to be awarded by the Department of National Defence for which tenders could not be obtained, if the specifications and regulations respecting the contract are clear, and if reasonable opportunity is given to factories to examine the conditions and specifications and prepare the estimates on which they are ready to proceed. I saw tens of millions of dollars worth of contracts placed in the United States and Canada during the war, and I have never yet seen a contract for munitions which could not be filled by tenders from those factories which were well equipped for ordinary mechanical production. Should not the minister reserve section 8 to see if it could not be simplified in some way in order to deal with realities?


Thomas Clement (Tommy) Douglas: I believe the people of Canada as a whole will be disappointed when they realize the full implication of this section. When the minister spoke the other day, he referred to this as being a drastic measure, and the Minister of Finance (Mr. Dunning) used the same words just a

Defence Purchasing Board
few moments ago. I think most of us welcomed the first announcement by the minister that there would be a five per cent limitation upon profits made from munitions manufacture, but we now realize that if the ratio which existed in the past continues in the future this limitation will apply to only about fifteen per cent of the total value of contracts let by the Department of National Defence. We must realize that there are three kinds of contracts which will be let by the department. First, there will be those called for by public tender. Second, there will be contracts let as a result of certain selected companies being asked to tender. Third, there will be contracts which will be given to companies who have been asked to enter into negotiation with the government. The first two categories cover eighty-five per cent of the value of contracts let by the department up to the present time, and they will not come under this five per cent limitation. Only fifteen per cent-and the percentage may grow smaller-will be subject to the five per cent profit limitation. It seems to me that this clause in section 7 is the joker in the bill because it nullifies to a large degree the value of the whole principle of profit limitation. Just the other day I came across a United States paper containing a cartoon which, at first glance,, made me proud. This cartoon showed Uncle Sam sitting at a desk, while a United States taxpayer was showing him a sheet of paper and asking him, "Have you seen this, uncle?" That sheet of paper showed that Canada intended to limit profits on munitions contracts to five per cent. I was quite proud of that cartoon except that I knew, what apparently the person who drew the cartoon did not know, that the cartoon should have said that only fifteen per cent of the value of the contracts let would be under this limitation.


Charles Avery Dunning: The hon. member would have been wrong also.


Thomas Clement (Tommy) Douglas: And that percentage may grow smaller. As the Minister of Finance said a few moments ago, the tendency is toward public tendering.


Ian Alistair Mackenzie: Does my hon. friend realize that under public tenders the profit may be less than five per cent?


Thomas Clement (Tommy) Douglas: Then there would be no harm in extending this five per cent limitation to all contracts.


Charles Avery Dunning: Except that to apply it to all would cost a great deal more than the five per cent. As the hon. member for St.
Lawrence-St. George (Mr. Cahan) pointed out, we would need another Department of Finance in order to make it work.


Thomas Clement (Tommy) Douglas: I agree that public tendering will tend to keep down profits to a fairly reasonable level. As the minister said, there are certain staple products which can be obtained by public tender, but that would not apply to the same extent to selected companies. The government may require aeroplane engines or some specialized product which is manufactured only by three or four or half a dozen companies.


Ian Alistair Mackenzie: Has the hon. member before him a copy of the amendment passed this afternoon to subsection 4 of section 4, dealing with that very point?


Thomas Clement (Tommy) Douglas: To my mind that does not cover it, although it does give the board certain power to act when it thinks there is collusion. But I am not talking about collusion; I am talking about where there are only three or four companies manufacturing a certain specialized article. In such instances, there would not be the same element of competition which would be present in public tendering. It is possible for tremendous profits to be made under these circumstances.


Charles Avery Dunning: I dealt with that a
moment ago. When the board sees that the element of competition has not been effective in bringing about a fair price level, it will be able to say, "No, gentlemen, there are only two or three of you manufacturing this particular specialty; apparently you have got together and are going to charge us so much, but we are not going to accept your tenders, we are going to give the business under the terms of section 7, on a five per cent profit basis." Surely my hon, friend sees the weapon that this gives to the board. I am quite sure that if he and I are here in a year or two, he will be wanting to know from me just how far the board has gone in preventing abuses of the tendering method. My view is that this gives to a board made up of men who are conscientiously trying to buy as cheaply as possible, a weapon which will ensure that there will be no collusion between a few producers of a specialty article.


Thomas Clement (Tommy) Douglas: I agree with the minister up to that point, but I want to see this profit limitation section being used for more than merely a weapon.


Charles Hazlitt Cahan: The hon. member should
remember that there is such a thing as income tax. There will be no profits on munitions
if new income taxes are levied.

Defence Purchasing Board


Thomas Clement (Tommy) Douglas: They did very well in the past.


Charles Hazlitt Cahan: Greater profits were made
in the production of wheat during the last war than in the production of munitions.


Thomas Clement (Tommy) Douglas: Some of the
armament firms were a long way from going broke.


Charles Hazlitt Cahan: Very few of them made money here.


Thomas Clement (Tommy) Douglas: This provision should be extended to cover the selected companies as well as the chosen companies, if we may use that phrase. Then the bill would be made much stronger, and the people of Canada would be assured that under the present basis at least forty per cent of the total value of munitions contracts would come under this limitation.


Charles Avery Dunning: If my hon. friend will
make a concrete suggestion as to how to make that work, we shall gladly consider it.


Thomas Clement (Tommy) Douglas: I made a
suggestion to the Minister of National Defence the other evening, and I shall make it again to the Minister of Finance. Paragraph (a) of subsection 9 of section 7 reads:
Contracts awarded as a result of competitive tender or subcontracts in connection therewith.
I suggest that that clause should be changed to read:
Contracts awarded as a result of public tender.
Then the only contracts to which this limitation would not apply would be those let by public tender.


Ian Alistair Mackenzie: I think
my hon. friend has misconstrued the effect of the amendment to subsection 4 of section 4, which I think meets the point he has raised. It has practically abolished selective lists except where for purposes of military secrecy it is necessary for the board to grant a particular type of contract. The point my hon. friend raised the other day was one of the reasons for drafting this amendment practically abolishing selected lists. There are only two classes of contract now: those by general tender and special contracts covered by the five per cent provision which are specially looked after under the provisions of this legislation. So my hon. friend's fears about the selected lists can be forgotten.


Thomas Clement (Tommy) Douglas: I have not a copy of the amendment before me, but I listened carefully when it was being read and

I was not aware that it had that full effect. Does the minister mean to say that there will be no selected tenderers from now on?


Ian Alistair Mackenzie: May I read the amendment again:
That subsection 4 of section 4 of the bill be amended by adding thereto after the word "otherwise" in line 41 of page three the following words, "it shall be the duty of the board

It is obligatory.
"-to ensure that tenders in respect of any contracts for the purchase of any defence equipment produced or manufactured in Canada or for the construction of any defence project are invited from every person in Canada believed by the board to be capable of performing the contract, unless-
This is the only proviso:
"-for reasons of military secrecy or for other good and sufficient reasons the board is of the opinion that it is not in the public interest to invite tenders in this way."
So for the purposes of this legislation the objection of my hon. friend disappears.


Charles Grant MacNeil: It is still possible, even with that amendment, for the board to decide to ask for tender's from within a limited field, and if tenders are invited from within a limited field in that way, the five per cent limitation will not apply. There is still that category to which this five per cent limitation will not apply.


Ian Alistair Mackenzie: Yes;
discretionary power is vested in the board to deal otherwise for reasons of military secrecy or for other good and sufficient reasons, but their first duty is to invite tenders from everybody capable of tendering.


Charles Grant MacNeil: The position has been made very clear with regard to commodities in general use, 'but we must contemplate articles being required for which this government and possibly other governments are the only purchasers. This point was referred to in the report of the committee presided over by Doctor Skelton, and I understand -that -their report suggested various methods of control with regard to such contracts. If the government contemplates the purchase of an article for which they and possibly other governments constitute the only market in Canada, and tenders are invited from within a limited field, it seems to me that further control should be exercised with regard to that particular type of contract. That is why I suggested to the Minister of Finance that it might foe feasible to have in such contracts a penalty clause providing that after the contract is made and the order placed with a particular firm, if it

Defence Purchasing Board
sells this particular article to other governments at a lower price than that quoted the Canadian government-


Charles Avery Dunning: I did not understand the suggestion before.


Charles Grant MacNeil: -the government should have power to secure redress in that regard.


Charles Avery Dunning: That suggestion is excellent. It is in some contracts to-day. It is a good suggestion as a general principle.


Thomas Clement (Tommy) Douglas: The amendment which the Minister of National Defence has read does not, I think, remove the selected lists of tenderers. It merely provides that all persons who are capable of manufacturing a particular article shall be invited to tender, to make sure that there will not be a restricted list. But subsection 4 provides:
In respect of all contracts, the board shall, wherever practicable, invite tenders either by means of advertisements in the public press or otherwise.
Then it goes on to say that the selected list must 'be a wide list. I cannot accept the minister's statement that the amendment removes the selected list.


Charles Avery Dunning: If it is known to everybody that there are only ten producers of a given article in Canada, what would be the use of putting in all the press a public advertisement inviting tenders from them? All we can do is to ensure that we get all those producing an article to compete in supplying the department. Any other method of inviting public tenders through the press would be very expensive and utterly useless.


Thomas Clement (Tommy) Douglas: I am not
suggesting that. I am simply pointing out that the Minister of National Defence is hardly correct in saying that his amendment removes the selected lists. It merely ensures tenders from all of them, but there are still the three classes of contract.


Charles Grant MacNeil: I think this second group should be dealt with by the five per cent limitation.


Charles Avery Dunning: The hon. member puts on it an interpretation that I cannot see at all.


Charles Grant MacNeil: Where manufacturers of a particular article have formed one common agency and are pooling their resources with regard to filling a munitions contract, how would you deal with it? You might answer, invite all those engaged in the field to tender. But it may be quite obvious that they are in agreement as to how they will deal with government business, and therefore
competition would not enter in that event.
I could refer to a specific instance. What, then, is the objection to putting some form of profit limitation in such contracts?


Charles Avery Dunning: In just what form? How can you express it?


Charles Grant MacNeil: By another five per cent limitation where tenders are invited from a limited field, and where for obvious reasons they combine and pool their resources to deal with government business, and therefore have control of prices. There is no competition there, and why should not those in that category be subjected to the five per cent limitation?


Charles Avery Dunning: If their resources are
pooled, that results in only one tender, does it not? Quite obviously the awarding of business could not in such instances be by competitive tender. Under the bill as it at present stands, a situation like that would undoubtedly result in a resort to the five per cent control clause as the only clause. Has my hon. friend given full weight to the statement I made a little while ago as to the weapon which this places in the hands of the board to ensure that competition is honest competition? What my hon. friend is after, and what I am after, is to ensure that competition is honest competition, and not. collusion for the purpose of extortionate profits. I am going to proceed on the assumption that the men on the board will be both honest and able. I believe they will be as honest as the hon. member for Vancouver North or myself. I believe that they will endeavour honestly to buy supplies for the Department of National Defence as cheaply as they can. Now then, have we put into their hands sufficient in the way of authority, sufficient in the way of weapons, if you will, to enable them to accomplish their object? I can say this, that if one year from now it turns out that we have not, we shall be prepared to come back and strengthen the legislation. But I am not prepared to write into the law a lot of theoretical stuff which will prevent it from functioning at all.


Charles Hazlitt Cahan: You are doing it pretty
well.


Charles Avery Dunning: My hon. friend thinks
we have gone too far in that direction already, and perhaps others do. At any rate this is an honest effort to put into force what I described a little while ago as the most drastic method of profits control yet devised anywhere, so far as I know, in connection with the purchases of war material.
Defence Purchasing Board


Charles Hazlitt Cahan: I do think that part of section 7 might be reconsidered. I should like to have some expert cost accountant look over that section, and in four or five lines draft what is really intended by the bill. I think we all know what is intended, that the manufacturer, when manufacturing a product worth $5,000 or more, receives the actual cost of competent, effective production. It is upon that cost of effective production that his profit should be based, that is, something over and above the actual cost of competent, .efficient production. I do not know, but I think that I could sit down with the minister and draft a clause more clear and concise and definite. Instead of the promise which the minister has just made, if he would make a promise that next year he will introduce an amendment to this section which would be clear, definite, sensible and businesslike, I should be better pleased. To my mind it is not equitable, and I do not think that it will work in the case of men honestly engaged in the production of war munitions or other products.


Mr. GRAYDON:: May I seek one little item of information? If a contractor's price is too high, and the board decides to apply the provisions of section 7, what is the next step?


Charles Avery Dunning: I do not understand what my hon. friend means by "the next step."


Gordon Graydon: If the provisions of section 7 are applied, relative to the five per cent maximum profit, what is the next step the board must take with regard to that contract? You cannot force a bidder to take the contract.


Charles Avery Dunning: No. My hon. friend
assumes a situation that I referred to a few moments ago, as something which possibly might happen. Tenders are received, and they are all, in the opinion of the board, outrageously too high. They are thrown out. The board then starts afresh to find a contractor who will produce the item under the provisions of section 7.


Charles Grant MacNeil: One point which concerns me very much in discussing this bill is as to what extent it restricts the operations of middlemen or agencies. That was the great difficulty with regard to the last war. The prime minister of the day had to deal very sternly with those who attached themselves .to the Department of Militia and acted as middlemen for manufacturers or groups of manufacturers. Should there not be a provision here that wherever possible the department or the board should deal direct with 
the manufacturer? I notice that the minister denied an allegation which recently appeared in the Winnipeg Free Press, that Mr. Ross, of Montreal, had established an agency in Canada for a type of aircraft engine specified by the department, and it is stated that commissions had been collected or may be collected up to $180,000 or possibly 8250,000. I will not go into that at length, because the minister has denied it. He may desire to comment on it at this time. But the allegations are rather serious. In the light of that statement, made by a responsible writer, in the Winnipeg Free Press, should there not be included in this bill some specific reference to the operations of middlemen such as are now collecting, it is claimed, huge sums from the department, and have nothing to do with the direct production of material?


Mr. POWER:: Can the hon. member not dig up any more garbage somewhere?


Ian Alistair Mackenzie: I am very glad that my hon. friend has brought up the article. I want to quote one or two extracts from it to show that it is absolutely similar to other falsehoods which have been spread recently with regard to the department.
The writer says:
Towards the end of 1936 the Minister of .National Defence decided that only Bristol engines would be installed in the aircraft purchased for the Royal Canadian Air Force.
Again he says:
The decision of the minister of defence to enforce the installation of the Bristol engine m all aircraft purchased for the Royal Canadian Air Force must have been founded on good reasons which he has not since divulged.
The fact is that the minister made no such decision. The Royal Canadian Air Force is using nineteen different types of engines, only four of which are made by the Bristol Engine Company. The minister could not possibly make any such decision, since the type of engine depends upon the type of aeroplane used. If the minister or anybody else in the department were to order a certain type of engine to be installed in an aeroplane designed for a different type of engine, in all probability the aeroplane would not fly. When the air force adopts a certain type of aeroplane ir. has to use the engine for which the air frame was designed.
Again the writer says:
The use of the Bristol . . . was almost exclusively in aircraft which operated rarely in climates similar to that seasonably prevalent in Canada. United States experts question whether it has been tested sufficiently for service in these colder climates.

Defence Purchasing Board
The fact is that aircraft powered with Bristol engines have been thoroughly tested in Canada during the winter season for the past three years, and the results have been completely satisfactory. This writer to which my hon. friend referred also says:
The Bristol company sent a- representative to Canada in 1936 to inquire into possible agencies, but the' Bristol company was suddenly advised that that gentleman had closed a contract after seeing the ministry of defence, who had agreed that the agency for the Bristol should be given to Frank Ross, of Montreal, and his associates.
The fact is that the Bristol company selected this agent in Canada more than ten. years ago, and that for the purpose of carrying on the agency a company was incorporated on July 5, 1928. The same interests which owned that company have from that date until now conducted all and any Bristol business in Canada. The Canadian company, I am informed, has thirty-three shareholders, and no one interest has more than ten per cent of the shares of the company.
The writer further says:
Two other aero engines comparable with the Bristol and actually manufactured in Canada have for years been used in Canadian aircraft, military as well as civil. One of these makes of engines powered the high altitude "Flying Fortress" built by Boeings and turned over to the United States army air corps only two weeks ago. .	.	. The Bristol engine costs
around $12,000. The comparable engines made in Canada, giving employment in Canada, cost some $4,000 less than the Bristol. Purchases of either of these Canadian aero engines of comparable merit with the Bristol would have saved the people of Canada $630,000 on the order of 150 engines.
The fact, Mr. Chairman, is that, with the exception of an experimental effort made by the Canada Car Company within the last year and a half on a light engine, no aeroplane engines are manufactured in the Dominion of Canada. That is the type of falsehood with which we are confronted in these public comments.
The United States-built "flying fortress" is powered by a Cyclone engine, a type which is made in the United States, but not in Canada. Only the number of Bristol engines required to power and provide spares for the aircraft which are designed around the Bristol engines have been or will be purchased. Some engines have been purchased in advance of delivery of the aircraft in which they are to be installed, upon the recommendation of the technical officials of the department, in order to have a reserve, without risk of cancellation due to
emergency conditions in the country of manufacture. The department is carrying only twenty-five per cent of spare engines whereas during the war it was found necessary to carry 200 per cent and 300 per cent of spares.
There is no commission at all paid by the Department of National Defence. Any arrangement made by the agency in question is made direct with the Bristol Engine Company in England, and the prices paid, excepting Canadian sales tax and freight charges and so forth, are exactly the same prices as are quoted to the air ministry in London.
All I can say, Mr. Chairman, is that the writer of this scurrilous article is the same gentleman who wrote a former article which the honorary air advisory committee of Canada repudiated and condemned, through Air Marshal Bishop and his associates on the committee, as false and scurrilous and fictitious.


Charles Grant MacNeil: May I ask the minister why it is necessary in this instance to have an agency in Canada? Would it not be possible to deal direct with the manufacturers of these particular aircraft engines? The returns tabled recently show that the department is purchasing rifles from the Enfield rifle factory in Great Britain without an intermediary of any kind. The servicing of the rifles and things of that nature can be undertaken within the department. Would it not be possible to deal directly with the manufacturer of these engines instead of through the Canadian agency, and undertake the servicing necessary under the auspices of the department?


Charles Avery Dunning: We are getting an awful lot of this apparently deliberate attempt to sabotage public confidence in the department,-


Charles Grant MacNeil: I am asking a question.


Charles Avery Dunning: -these strings of lies which my hon. friend has quoted in his statement.


Charles Grant MacNeil: I merely asked a question.


Charles Avery Dunning: I am not now criticizing my hon. friend; I am trying to answer him. I just rise to remark that I am wondering if it is not desirable that we take some rather strong measures with respect to such statements as the minister has just referred to, which cannot do otherwise than weaken the
Defence Purchasing Board

confidence of the Canadian people not only in their government but in the institution of government as such. If there was even a scintilla of truth in them, why, then, we ought to be out. What should be done to a man who scatters that kind of garbage through the press of the country at a time like this? I feel very strongly about it.
As to my hon. friend's last question, the minister has just said plainly that the particular engine to which reference is made is sold to the British government at exactly the same price as it is sold to the Canadian government after making allowance for sales tax and freight. If that is so, of what importance is it to us whether the aircraft engine manufacturer in England chooses to have a Canadian agent to run his business?


Mr. LAPOINTE (Quebec East):: It is
none of our business.


Charles Avery Dunning: It is our business merely to get a fair price. The way in which the manufacturer does his business is no concern of ours so long as we get a fair price; and, as the minister pointed out, this particular concern appointed agents in Canada as long ago as 1928 and have the same agents to-day. Should we take the view that we would not buy their goods because they had a Canadian agent? From my point of view, I prefer to see people abroad, doing business in Canada, operate through Canadian concerns. I believe it is good business for Canada, provided always that we do not get stuck on the price as a result; and in this instance, as the minister . stated, the price at which we get the goods is the same as the price paid by the British government in England, after making allowance for sales tax and freight.


Mr. COLD WELL:: About which there
has been a good deal of controversy in Great Britain. Perhaps the British government is paying too much for these aeroplanes.


Clarence Decatur Howe: We value your opinion on
that.


Thomas Miller Bell: I said perhaps; I do
not know.


An hon. MEMBER:: "Perhaps."


Charles Avery Dunning: There is too much
" perhaps."


Mr. MARTIN:: Why say these things?


Charles Gavan Power: Why not have the courage
to say what you mean?


Thomas Miller Bell: When a commission is
paid to Canadian firms and we could obtain the articles without having to pay the commission, we ought to buy them without that commission. With regard to what has been said in reply to the hon. member for Vancouver North, it seems to me that there was an innuendo. When statements of the kind published in the Winnipeg Free Press appear in newspapers, I submit that the hon. member for Vancouver North, or anybody else, is justified in rising in his place and basing some questions upon such statements, coming from a newspaper which is known throughout Canada as a Liberal publication and a supporter of the government of the day, and the editor of which, as is pointed out, is on the Rowell commission.


Mr. GOLDING:: Did the editor write the
item?


Major James William Coldwell: No, but the editor is
on the Rowell commission, and the paper supports the government of which the minister is a member. W'hile it is true that the editor does not write these articles, at the same time the editor does take responsibility for such articles as appear in his newspaper. Indeed, if an article appears and is libellous, the editor and publisher of the newspaper is sued, as well as the author. I do not think we need generate any heat about these things.


Charles Avery Dunning: If men's honesty is being attacked one can expect them to resent it, and the Minister of National Defence has every right to resent it.


Major James William Coldwell: I quite agree, but when it is said that attempts are made to sabotage the department, I know nothing of such attempts. We are not attempting anything of the kind, but we are trying to bring to the attention of the house matters in connection with the department, so that if later on it is important that the people of Canada should have every confidence in the. department and what it is doing, we may be sure that confidence will be justified. I think we are fulfilling our function as a part of the opposition in trying to ensure this.


Paul Joseph James Martin: Does not the hon. gentleman think that, in view of the general discussion on these matters, and our desire to preserve the strength of this parliament, the hon. member for Vancouver North might have asked the minister his view of the article

Defence Purchasing Board
before getting up and making use of it in the house with the obvious inferences that follow from it?


Thomas Miller Bell: No, I do not think so, because the statement upon which the hon. member for Vancouver North based his question had been made publicly throughout Canada, and if I were minister of national defence I would welcome a question that
would enable me to say what the Minister of National Defence said a few moments ago.


Thomas Clement (Tommy) Douglas: Are we dealing with the section clause by clause?


Frederick George Sanderson: We are on subsection 1.
Section stands.
Progress reported.


[Stage Direction]
At six o'clock the house adjourned, without question put, pursuant to standing order.