1939-05-24

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Mr. THOMAS REID (New Westminster, for Mr. MacLean, Prince) presented the second and final report of the standing committee on marine and fisheries, as follows:
The standing committee on marine and fisheries begs leave to present the following as its second and final report.
Your committee has had under consideration an order of reference dated Thursday, March 2, 1939, viz:
That Bill No. 15, an Act to amend the Fisheries Act, 1932, together with the proposed amendment of Mr. Neill thereto, be referred to the said committee.
The committee has held twelve meetings and has heard three witnesses, including representatives of the Department of Fisheries.
Your committee has agreed to recommend the adoption of Bill No. 15 with the following amendment: Insert after the word "obstruction, in line 3 of 57A (1), the words "which he deems necessary for the public interest."
In connection with Mr. Neill's amendment, your committee recommends that the question of salmon trap-net fishing in the Sooke area be referred to a royal commission forthwith for investigation and report, and that the following be embodied in the order of reference to the commission:
To fully investigate and hear evidence under oath, and to determine and report, whether

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or not it is in the public interest that trap nets for the capture of salmon should continue to be authorized in the Sooke area, British Columbia, i.e., between Beachy Head and Sombrio Point along the southwest coast of Vancouver Island, such investigation and report to have regard to all such points as in the judgment of the commission require consideration and without restricting the generality of the foregoing to include the following:
1.	Destructiveness of trap nets from the standpoint of conservation and/or depletion, as compared with the use of other varieties of fishing gear.
2.	Feasibility of successful operation of other types ol fishing in Juan de Fuca straits and waters of and adjacent to the Sooke area, keeping in view, among other things:
a.	Nature of waters, specially exposed or otherwise.
b.	Tidal and current conditions.
e. Unusual phosphorescence, if any, in water.
d.	Proximity of international boundary.
e.	Fog, prevalence of sharks, etc.
3.	The significance of continued operation of trap-net fishing in the Sooke area in relation to the possible reintroduction of trap nets in the State of Washington.
4.	Whether or not unemployment is accentuated by the operation of trap nets in the Sooke area.
Your committee further recommends that all parties wishing to do so be allowed to attend and give evidence, and that all transactions and evidence be recorded and obtainable by the public.
Your committee wishes to express its appreciation of the assistance and ready cooperation received from the officials of the Department of Fisheries.
A copy of the minutes of proceedings and evidence taken by the committee is tabled herewith.
All of which is respectfully submitted.

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Mr. MALCOLM McLEAN (Melfort) moved that the third and final report of the special committee on the Civil Service Superannuation Act be concurred in.
He said: The special committee on the Civil Service Superannuation Act has made a report, which has been before the house for some time, in pursuance of studies of that question made by the committee during the present session and by a similar committee during the last session of parliament. I am going to deal very briefly with some of the changes recommended, in order that they may be perhaps a little more clearly understood than they would be from a reading of the report itself.
Recommendation No. 1 asks that every contributor whose compensation does not
exceed SI,200 per annum, with less than ten years' service at the time of his separation from the service, or his legal representatives, have a return of contributions made, which is not possible at the present time if the service is under ten years.
The committee asks that every contributor, regardless of length of service, if dismissed for political partisanship, shall be eligible for a return of the contribution made. An important change recommended is that the right to elect under the statute of 1927 be reestablished for a period of one year from the date on which the amending act receives the royal assent. A good many civil servants represent that they either did not have sufficient notice or did not clearly understand the provisions at the time, and your committee thought that they should be given a further opportunity to be transferred from retirement to the superannuation fund. It is recommended that provision be made to allow each person who is a contributor, but who failed to elect to make contributions in respect of past non-contributory service, to make such contributions now in respect of the whole or any part of such service. Contributors who were not able to pay their portion of arrears before they came under superannuation received fifty per cent of the time allowance from the government at that time without payment, but it is thought wise now to give them an opportunity, by paying their arrears, to earn and ultimately to receive superannuation for the rest of that time upon payment.
Recommendation No. 4 asks that provision be made for counting active service overseas during the great war, which cannot now be counted, subject of course to certain restrictions. Certain men who left the civil service of Canada on leave at the beginning of the war were given credit for their service overseas. At a later date that terminated and many men who had been in the civil service before the war are not now eligible to count their time overseas for benefits. New employees who joined the service after the war have not been able to receive credit for time overseas. All organizations of returned men have made representations for many years urging that such service be allowed as a matter of fair play and justice, the principle of which is established in connection with the mounted police and, I believe, one other branch of the service; and your committee has decided to recommend that a change be made.
I am not going to deal specifically with some of the minor recommendations that do not involve either an important principle or a large number of contributors or a large
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amount of money. I come then to recommendation No. 6, which asks that provision be made in the statute for the compulsory retirement from the public service of every contributor on attainment of his sixty-fifth birthday without provision for extension of service, subject to the proviso that this amendment shall not become operative until two years after the date the amending act receives royal assent; and recommendation No. 7 asks that provision be made in the statute for retiring any contributor on account of age on his attainment of his sixtieth birthday. The cost in the one case would be very small and in the other a little higher. For years it has been felt in and out of the civil service that there should be a compulsory retirement age, which has been set here in the recommendation at sixty-five, with the proviso that two years shall elapse before the change becomes effective so that it shall not bear harshly upon anyone. The committee was of the opinion that ultimately this provision might not cost the service anything but might possibly bring about a saving in the retirement from the service of men who have passed the age but who for various reasons wish to be kept on. Provision for retirement at the age of sixty, if it is implemented, as is intended, will provide that under certain circumstances contributors may apply for and be given permission to retire, and that it may be more or less optional at or after the age of sixty.
Recommendation eight asks that provision be made in the statute to render prevailing-rates employees eligible to become contributors, subject to designation by the governor in council on the recommendation of the treasury board of the various classes and individuals to be so rendered eligible. There are a large number of men employed in the service throughout the country at prevailing rates. For many years they have been trying to become eligible and to earn superannuation. They have not been able to do so, with the result that many men having no provision for the future are kept on to an age and under conditions when in many cases they are not thoroughly efficient. By this change it is believed that the service will benefit to a great extent. It may be that at the beginning it will not be found feasible to include all classes of these prevailing-rates employees and therefore that provision was inserted, that certain contributors and classes should be designated. This should have a wholesome effect on the service, particularly as regards the employees concerned.
Recommendation No. 9 asks that provision be made in the statute to empower the

governor in council, on the recommendation of the treasury board, to admit as contributors employees of the Canadian Broadcasting Corporation who had previous service under the Canadian radio commission or elsewhere in the public service of Canada. This is a minor recommendation dealing with about seven or eight employees of the broadcasting corporation, who for some reason or other were not allowed to come under superannuation, and until such time as the Canadian Broadcasting Corporation has a superannuation scheme of its own, a certain hardship is being wrought on these persons.
Recommendation No. 10 is an important one, because it is intended to prevent the arising in the future of some of the problems that exist at the present time in the service in connection with superannuation matters. It asks that provision be made in the statute to render temporary employees occupying positions of continuing indeterminate duration eligible to become contributors subject to designation by the governor in council on the recommendation of the treasury board of the various classes and individuals to be so rendered eligible. At the present time and for many years back there have been continuing indeterminate duration employees in the service. They have not been permanent and have not been called upon to make contributions to superannuation, retirement or other funds. If and when they do become permanent, as many of them do in the course of years, there is no accumulated provision whereby they can receive full benefits of superannuation. They have either to pay in a lump sum or to pay in instalments their contribution for the years during which they were temporary, even though their work was continuing and in reality permanent, which means that a considerable burden is placed upon them, and spread over years it amounts to a good deal of money. If they did not make that contribution they were in the past eligible to receive fifty per cent from the service, which was given by the government. We make another recommendation in that regard, asking that such free service be discontinued in the case of employees who do not choose to subscribe their own fifty per cent payment. This provision will ensure that in the future there will be no such class of employees in the civil service. All who will be there will be making the same contribution. In the event of their not becoming permanent employees, and therefore eligible under the superannuation act, their contributions will be returned to them on separation from the service with the appropriate interest. If they become

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permanent, their contributions will be transferred to the superannuation fund.
No. 11 asks that provision be made, by amendment of part II of the Civil Service Superannuation Act and the Retirement Act, to require each temporary employee, on appointment to a position of continuing indeterminate duration, or to a position for which the remuneration is prevailing rates in the public service, to pay contributions to the retirement fund.
Under this provision, if any such temporary employee should become a contributor under the superannuation act the amount of his contribution to the retirement fund will be transferred to the superannuation fund. But otherwise the amount of his contribution with interest will be returned to him or his legal representative on separation from the service. I assume practically all hon. members know that there are in the service a certain number of men who have been in it for a long time but are still classed as temporaries-the common phrase used to describe them is "temporary permanents." Some have been in the service ten, fifteen, twenty years without having been able to make any provision for superannuation; therefore when they become permanent they are faced with that long arrearage of service, the contributions for which amount to a burdensome figure. It is to meet that condition that these two provisions are recommended.
In No. 12 we ask that provision be made for transferring the balance at the credit of superannuation fund No. 2 to superannaution fund No. 5. On March 31, 1938, the balance at the credit of fund No. 2 was SI,823,596. There are only thirty annuitants drawing superannuation from that fund and two contributors still to be retired. That is an old fund set up some forty or more years ago. It is not now being subscribed to except by those two contributors. The amount at its credit is considerable; by transferring that to superannuation fund No. 5, which is the one now in effect, there is no possibility of increasing the load on the present fund No. 5 or of any injustice being dome, because the income from that
81,800,000	will be more than sufficient to take care of the present thirty annuitants and the two contributors still to be retired.
In No. 13 we ask that provision be made in the statute for transferring from the retirement fund to superannuation fund No. 5 the contributions of employees who automatically become contributors under the superannuation act. That is, in the event of one of our earlier recommendations being adopted-that an opportunity for election be given again for a period of a year or such other time as par-71492-2801
liament may decide-that automatically their contributions to the retirement fund be transferred to the superannuation fund.
In No. 14 we ask that provision be made for crediting superannuation fund No. 5 with interest at a rate to be fixed by the treasury board. My understanding is that this is being done now, in effect, but by regulation; we are asking that it be made statutory so as to remove any doubt.
No. 15 asks that provision be made in the statute requiring contributions to be made from the effective date of a contributor's appointment, reclassification or increase of salary, rather than from the date of the instrument authorizing the same. In many cases, I think in all cases, an employee coming into the service has to wait for perhaps six to twelve months before he is made permanent, and sometimes he is reclassified or appointed to a permanent position. We ask that contribution be made from the date on which the employment or change in classification is made effective, rather than the date on which the civil service commission issues a certificate, which may be six to twelve months later.. It is not very important, but it will be of some value.	*
No. 16 asks that provision be made in the statute requiring persons hereafter appointed to positions exempted from the operation of the Civil Service Act, or to temporary positions, which have in either case been designated under the statute, to furnish the same evidence of health as is now required of persons appointed to permanent positions under the Civil Service Act. There are from time to time under all governments, and have been in all years since the superannuation act was set up, occasions on which persons were brought into the service as temporary em ployees. They may remain there one year or five years or longer, and then, either by civil service commission action or by order in council, become permanent employees. We believe that in order to protect the superannuation fund and the treasury as well, the same evidence of health should be required from such temporary employees on their first appointment as would be required if they were going into the permanent service.
Very interesting evidence was presented to the committee by a medical officer from the Department of Pensions and National Health indicating the incidence of illness and consequent loss of time in the civil service. Hon. members would find it interesting to compare the figures set forth therein with that of some large industrial corporations. I am sure that we can be reasonably satisfied that the
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civil service employees are not taking too much advantage of the provisions governing absence through illness without certificate, and that the general health of the service has shown a decided improvement, particularly since certificates of the Department of Pensions and National Health have been asked for.
No. 17 provides for the discontinuance of the superannuation allowance to a dependent child if such person marries before attaining the age of eighteen years.
No. 18 seeks to authorize the treasury board to direct payment of benefits to a person other than the annuitant where the annuitant is not capable of looking after his affairs, and for some other reasons.
No. 19 asks that a change be made to render the right of any contributor incontestable after contributions by him have been accepted during a period of at least three years. This would bring the practice under the superannuation act more in line with insurance practice at the present time. There have been a few cases where errors have been thought to have been made, and where the status of certain persons now in the service and paying to the superannuation fund is in doubt.
No. 20 seeks to authorize the treasury board to discontinue any benefits to a contributor if, subsequent to the granting of such benefits, it is established to the satisfaction of the board that the contributor was guilty of misconduct as defined in the act while employed in the civil service; and in such case to approve of the payment of such benefits in whole or in part to persons dependent upon the contributor for support.
No. 21 asks that provision be made to limit the counting of past non-contributory service of any new contributor, or of any additional past non-contributory service allowed to any present contributor under the amending act, to such service in whole or in part as that in respect of which the contributor elects to pay contributions. If the contributor does not elect to pay his share for past service, then we suggest that the government should not give the fifty per cent free to any new contributor.
A simple change is asked in No. 22: that provision be made to extend the definition of "dependent" to stepmother, stepfather, or widow of a contributor who might now be ineligible for benefit.
Following that we ask for the repeal of subparagraph (c) of subsection 2 of section 9 of the act, which at the present time prevents the widow of a contributor who married after he had attained the age of sixty from receiving any compensation.

In No. 24 we recommend a change that is quite far-reaching in principle, and which the committee believes will do something to allay friction or perhaps jealousy in the minds of some who are at present in the service. It asks that provision be made to limit the superannuation allowance which any new contributor shall be eligible to receive to the maximum sum of $4,200 per annum, and in consequence to provide for an adjustment of contributions in respect to the foregoing limitation. The highest figure ever given to any official of the government service under superannuation was $8,400. It is felt that that sum might well be reduced, that a better feeling would exist in the service if such a wide disparity were done away with. Consequently of course contributions must be required only on the basis of the maximum provided in this case, which would be $4,200.
A very far-reaching change is recommended under paragraph 25, as follows:
That provision be made in the statute to require new contributors to make contribution at the following rates, namely:
Salary	Contribution
$1,200 and under	 5 percent
Over $1,200 and not exceeding
$1,500	 54 percent
Over $1,500	 6 percent
This would apply to male employees only; female contributors would continue to pay the present rate of five per cent per annum, regardless of their	salary.	The	reason nochange is recommended	in	regard	to female
employees is that as a rule they enjoy lesser benefits; for instance they seldom leave dependents, as many male contributors do. The evidence given before your committee did not make it possible to state with absolute certainty the cost of superannuation, but from all the evidence that was presented your committee believe that cost to be somewhere between 11 and 12 per cent. That belief is reflected in the change here recommended. As a matter of fact some suggestion was offered that it would not be inequitable to raise the rate even for present contributors, but your committee did not make any recommendation in that connection, the only recommendation being with respect to new contributors or to present contributors who will be offered advantages which they do not enjoy at the present time.
Paragraph 26 of the report asks that provision be made in the statute that any new contributor who has over ten years' service and whose position is abolished shall be granted an allowance equal to two-thirds of the allowance he might have been granted if at the date of the abolition of his position

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he had been retired on account of age or ill-health. This is inserted to deal with a practice which I am glad to say is not common, by which an employee, perhaps wishing to get into some other business, or to get married, or for some other reason, who has not the length of service that would enable such contributor to be retired and receive the fud amount of superannuation in the ordinary way, very often asks, or brings pressure to bear, to have the position abolished, in which case he or she becomes eligible for the full amount of superannuation which has been earned. We believe that by reducing the superannuation payable to two-thirds of the full amount, that practice will be very materially checked.
Paragraph 27 asks that provision be made in the statute to authorize the granting to any new contributor who, having served in the civil service for ten years or upwards, is retired on account of inefficiency, two-thirds of the superannuation allowance which he might have been granted if at the date of his retirement on account of inefficiency he had been retired on account of age or ill-health. This is in line with the previous recommendation, and deals with a situation which is somewhat troublesome in certain departments where employees have become inefficient. If there is no provision for retiring them with superannuation, human nature being what it is and heads of branches and departments being what they are, it is very difficult to secure such retirement. If this provision were made, under which two-thirds of the superannuation possible in the event of retirement for ill-health would be made available, then your committee felt this difficulty might be remedied.
Mr. REID:: If I might ask my hon. friend a question, was the committee given any figure as to the number of civil servants being retired for inefficiency?


Mr. McLEAN (Melfort):: I would not likj to answer that question categorically. My impression is that a few have been retired for inefficiency, but it is not an easy matter to retire men or women for inefficiency after years of service, if no superannuation is available to them or if the superannuation is so small that it would be of no value. So your committee thought it would be well to make this recommendation.
I have taken more time, Mr. Speaker, than I thought would be necessary in order to offer these interpretative remarks in regard to some of the more important phases of the report. I move that the report be concurred in.


Mr. A. A. HEAPS (Winnipeg North):: I
am in favour of this report in a general way, and its importance can be easily gathered from lhe fact that it will affect approximately
50.000	employees of the government. However, there is one aspect of the question to which the hon. member for Melfort (Mr. McLean) did not refer, except indirectly. It is intended to give extended benefits to a very large number of those employed by the government. I am in hearty agreement with that;
I think we should try to bring under the superannuation fund every person working for the government, and I believe that has been the purpose of the committee, which has done its work fairly well. I should like to say a word or two, however, in regard to the fund itself. The hon. member for Melfort made no mention of the status of the fund, as to whether or not it is solvent, and what is likely to be the situation when these additional benefits accrue to those who will be entitled to them if this report is adopted. I hope before that is done we may have from the government some statement of policy and some indication as to whether it is their intention to implement this report by legislation at the present session of parliament. Personally I hope they will. Committees have been working on this matter for several sessions. ' They have called many witnesses, heard a great deal of evidence and spent much time on the question. I believe the civil service are anticipating that at this session the government will implement the report by the necessary legislation.
If my memory serves me aright, the amount to the credit of the superannuation fund at the present time is approximately 858,000,000. That is a fairly large sum of money, but in my opinion, after listening to the evidence submitted to the committee, it is questionable whether or not the fund ia solvent. Personally I have great doubt as to its solvency. We were told in the committee that whether or not it was solvent the government were behind it and, that being so, it was bound to be solvent. The very fact that the committee has recommended that persons who subsequently enter the employ of the government and come under the superannuation fund should be required to make a larger contribution to the extent of one-half or one per cent, is an indication that the fund at present is not on a sound actuarial basis. I should like to have seen the fund thoroughly examined by competent men. No doubt we have competent men in our department, but I should have liked that question

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investigated and the fund put on a proper, sound, scientific basis so that we would not be told at some subsequent time that it is not on a sound footing. I should like the mover to have informed the house as to the anticipated contributions the government would have to make in order to keep the fund on a sound basis and to provide the benefits set out in the report which I hope we are about to adopt. No mention has been made at all of this aspect of the question, but I suggest it is important. If we are to give benefits to an additional 15,000 employees in the employ of the government, we should have some idea of what the cost will be. I believe that point has not been touched on in the report. In my estimation-and I believe the view is held by some members of the committee and by some of the government experts who worked on the question- if we are to put this vast number of civil servants under the superannuation fund and extend to them the benefits of that fund, it will involve a large capital expenditure on the part of the government to keep the fund on a sound basis. What the approximate amount would be, I cannot say; but I do feel we should have some estimate from the committee on that particular point.
I feel, too, that when these additional members of the civil service attain the benefits mentioned in the report, within a reasonable time

probably two or three years-there ought to be a survey of the fund to see how it is operated. On that point we have heard nothing from the committee.
These are the few remarks I wanted to make this morning. Personally, however, I hope the Minister of Finance (Mr. Dunning) will intimate to the house this morning that the recommendations of the committee are likely to be implemented at this session by legislation. As I said a moment ago, large numbers of employees of the government have been looking forward to this report for a number of years. Now that the report is before the house, unless it is accepted by the government and implemented by legislation, thousands of civil servants will be greatly disappointed.


Mr. A. W. NEILL (Comox-Alberni):: Mr. 6peaker, I should like to congratulate the hon. members of the committee and its chairman for this excellent, useful and practicable report. If implemented it will remedy grievances and injustices, and perhaps certain inequalities, from which civil servants in these days and for many years have been suffering. They had almost despaired of having any 
action taken on their behalf. Other hon. members and myself have appeared before committees from time to time in years gone by, and in many cases the result was a mere stalling report. In some instances the matter was referred to officials who had nothing at all to do with it, and in other cases there was the statement that there was not time to consider the matter. But this is a real, practical and comprehensive report, dealing without fear or favour, apparently, with a lot of cases.
I am particularly interested in paragraph No. 8, which states:
8. That provision be made in the statute to render prevailing rates employees eligible to become contributors subject to designation by governor in council on the recommendation of the treasury board of the various classes and individuals to be so rendered eligible.
I presume that that will apply to and cover a class which for many years has been overlooked, namely, the masters, mates, officers and petty officers on board government boats. That is certainly a very necessary thing and I am sure it will be appreciated.
I have only one note of criticism to add with respect to the whole report-and possibly my criticism arises from the fact that I do not sufficiently understand it. Paragraph 21 is as follows:
21. That provision be made in the statute to limit the counting of past non-contributory service of any new contributor or of any additional past non-contributory service allowed to any present contributor under the amending act to such service in whole or in part as in respect of which the contributor elects to pay contributions.
Let us assume that certain employees are receiving $90 a month, as some of the men on the steamers do. We will say that they have put in thirty-four years. Under the old act they could come into seventeen years' superannuation without making any payment. If they elected to come in for the whole period they had to pay the arrears. I believe that was a proper procedure. But if I read this aright it will mean that any man coming in now will have to pay up, in full, the whole sum, a procedure which he would be quite incapable of doing, and he would thereby be prevented from coming in at all. It may be that the paragraph in the report is subject to the clause now appearing in the present act whereby a man or woman who wishes to pay up his or her arrears is permitted to do so by making monthly payments, which would carry over not only their period of service but after their superannuation. If that is to be understood it would be satisfactory. But

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if it is, as I fear it is, it would mean that it would have to foe taken care of in some way, or it would not be of much value to some people.
I join with the hon. member for Winnipeg North (Mr. Heaps) in impressing upon the government the necessity of taking steps, even this late in the session, to implement the report. If necessary they could do so by legislation, or if the Department of Justice rules that it may 'be done by order in council or through the Civil Service Act, a pronouncement should be made so that the people concerned may have their long anxieties set at rest so far as their future is concerned.


Mr. J. J. McCANN (Renfrew South):: Mr. Speaker, the detailed explanatory remarks of the hon. member for Melfort (Mr. McLean) in presenting the report and moving its adoption do not call for additional observations upon my part, as seconder. I wish to point out merely that the government, as the largest employers in the country, should at all times find it to its advantage that proper protection be given to its employees.
During the sittings of the committee and in the preparation and presentation of the report we considered and studied the superannuation schemes of a large number of industrial concerns in Canada. No doubt in the report we have incorporated some of the better recommendations and practices of those industrial concerns. Speaking a few moments ago the hon. member for Winnipeg North (Mr. Heaps) referred to doubts that were in his mind as to whether the fund was insolvent. I have taken the stand throughout the deliberations of the committee that the contribution made by employees was a deferred payment of salary, and that that part of the contribution made by the government was a bonus. I believe that is a fair way of looking at it. Any employee who has given good service throughout the years and has been a contributor to superannuation, whether or not he has been an employee for less than ten years, should have that money returned to him when he quits the service. That will be done, if the report is implemented.
I took the stand also that so long as the credit of Canada is behind the superannuation fund it is not at any time, nor can it be declared, insolvent, so long as the country is solvent. Whether or not a separate fund is set up and the money in that fund put into separate securities, earmarked and kept apart for this particular purpose of superannuation
does not make a great deal of difference. It is being administered by the Department of Finance and the treasury board has complete supervision ow it. Recommendations must be made when amounts of money are to 'be taken from the fund. There has never been any question in my mind with reference to its solvency.
I do not believe it was the duty of the committee to make a note in the report as to what the increased costs might be in the event of implementing the different provisions. If and when legislation is brought down enacting some of the recommendations, I have no doubt the minister in charge of the bill will be in a position to give details with respect to any added costs there may be.
I ask that hon. members study this important report, and I urge the government to implement the recommendations contained therein, if possible this year. The government is the largest employer in this country and we owe a duty to those in the civil service who have been waiting for years for the benefits they would receive as a result of the implementation of these recommendations. I hope the necessary legislation will be passed at this session.


Mrs. MARTHA LOUISE BLACK (Yukon):: Mr. Speaker, I want to congratulate the chairman of this committee upon this voluminous and carefully considered report. As hon. members on the government front benches know, for many years we in the Yukon have felt that a grave injustice has been done to the civil servants there. These civil servants are required to contribute on their salary and living allowance. For a time those who retired received superannuation on the basis of their salaries and living allowances, but due to the caprice or whim of an official in the department this was changed without any warning or excuse.


Mr. ILSLEY:: When was it changed?


Martha Louise Black: I think in 1927. It was thoroughly dishonest and corrupt. That practice was continued by the Conservative government. WThen I made a similar statement in the house before, the former leader of the Conservative government corrected me. I did not catch his remark at the time, but I told him afterwards that two wrongs never make a right. Because one government did this to the civil servants was no reason why another government, even a Conservative government, should carry on the practice. I have tried to be entirely independent and impartial. These men who paid in on both
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salary and living allowance looked forward to receiving superannuation on the same basis, just as anyone would who had paid into an insurance company.
I know of one very sad case, that of a civil servant who has been retired. This man has
an invalid wife, and an invalid daughter, and instead of receiving about $72 per month, as he should, he receives less than $50. The doctors ordered him to take his family out of the country because of the cold weather. It was very difficult for him to do this. I have hoped against hope that at some time the government would see fit to remedy this injustice. There are only a few civil servants in the north and they have rendered good service. Anyone who has lived in the north knows the prices that must be paid for everything. When I consider the prices asked by the fruit stands in Ottawa. I cannot help but think of what we in Yukon must pay for the few luxuries we have. How would hon. members like to pay $3.50 to $5 for a watermelon? How would they like to pay from $1 to $1.50 for a pound of cherries? We should have some luxuries, and our civil servants find it very hard to get along. I beseech the government again, as I have before by letter and by word of mouth, to remedy this injustice. I believe the recommendations in this report will help to a large extent, but there is still much more that can be done.


Mr. N. J. M. LOCKHART (Lincoln):: Mr. Speaker, I desire to say a word or two in connection with the splendid presentation by the chairman of this committee, of which I happened to be one of the humble members. I concur in what was said by the hon. member for Winnipeg North (Mr. Heaps), that it was disappointing that the committee did not get full and adequate information as to the exact actuarial standing of the superannuation fund. However, I appreciate that because of the way in which this fund has been handled over a long period of years it might be difficult to give this information at the present time. I believe that the members of the committee did their best. The officers of the department cooperated in every way, and every effort was made not to break faith with those who have contributed over a long period of years. We also endeavoured to take in as many as possible of those who did not elect to come under the superannuation act when the opportunity was afforded some years ago.
The committee has made no effort to change the basis of superannuation, leaving it as it is provided for by the old act on a ten-year basis. I think by and large across the country,

salaries are generally considered on a five-year basis. I mention this so that hon. members of this house may give the matter due consideration when the report is being discussed fully. Along with other members of the committee I do hope that the government will consider this report most seriously. I concur in the suggestion by other hon. members that the recommendations should be implemented, if possible at this session. However, I would point out that this report is of particular significance to thousands of civil servants across Canada, and I should not like to see it dealt with too hurriedly. I believe this report will more or less establish the basis for which civil servants have been waiting many years.
I join with all members of the committee in expressing my appreciation of the manner in which the committee was conducted and I appreciate having been given the opportunity to serve on it. I urge that full consideration be given by the house to all the details of this report, and other amendments which may be suggested by the departmental officials.


James Lorimer Ilsley: Mr. Speaker, if no other hon.
member desires to speak, I should like to say a few words on behalf of the government. I think everyone recognizes that this is a very able, thoughtful and extensive report. However, if its recommendations are fully implemented, it will be a most costly report. I do not suppose it would prove a service for me to give the house an estimate of the total cost of carrying out all these recommendations, but if maximum advantage is taken of the recommendations by all civil servants in Canada, it will mean a considerable additional annual cost to the government.


Mr. CAHAN:: What would the cost be?


James Lorimer Ilsley: After deducting the increased contributions, the additional annual cost to the government is estimated at $1,533,500. It is estimated that the applications for arrears would cost nearly $15,900,000. These are the estimates which have been placed in my hands. The government has no objection to the house adopting this report, but it is most far-reaching. According to the information I have, it will mean placing from 15,000 to 20,000 temporaries under the superannuation fund. This will mean a considerable drain on the fund, which of course is not self-supporting.
I am not now referring to the solvency of the superannuation fund, but it should be remembered that the government is assumed

Questions
to contribute as much as the contributor. Therefore, an additional 15,000 to 20,000 contributors would mean a considerable expense.
I am aware that no government should look at this matter purely from the standpoint of cost to the taxpayers, but the government must have some regard for that and must consider these recommendations with that in view.
There are a number of factors which I might mention. One recommendation is that the option of transferring to the superannuation fund be given to those who have elected to remain contributors to the retirement fund. There are 4,900 persons who will possibly take advantage of this. Periods of election were given some years ago, first from 1924 to 1925, next from 1925 to 1926, and then from 1926 to 1927. These contributors did not avail themselves of the right to elect during that period. If the house adopts this report, and I have no particular objection to the principle if hon. members wish to approve it, they will be giving these persons the right again to come under the superannuation fund. If they pay up their arrears and take advantage of the benefits, a very heavy obligation will have to be assumed in this connection by the government.
Of the twenty-eight recommendations in this report, many have numerous ramifications. I do not think that this is the time or the place for me to go into them. The government can give no undertaking at the moment to implement the report at this session. It will have to give consideration, perhaps extensive consideration, to just where all these recommendations lead. It might be that if parts of the report were _ adopted by legisl* tion at this session important changes would be made. Apart from that I do not know that I can say anything at this time. If the house adopts the report the government will have to reserve the right to take a little time for consideration and not bring in a bill at this session.


[Stage Direction]
Motion agreed to.


Mr. W. A. WALSH (Mount Royal) moved:: That Bill No. 145, an act for the relief of Lucy Violet Siggins Hopson, be now read a second time and referred to the standing committee on miscellaneous private bills.


Mr. SPEAKER:: By leave of the house.


Mr. LAPOINTE (Quebec East):: When did this bill come back from the senate?


Walter Edward Foster: Yesterday, and was read a first time.


Ernest Lapointe: Very well.
Motion agreed to on division.



QUESTIONS

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

Mr. CAHAN:: 1.	On what date was John E. Pitt appointed returning officer for the electoral district of St. Lawrence-St. George, under the provisions of the Dominion Elections Act, 1938?
2.	On what date was Mr. Pitt first notified of his said appointment?


Mr. RINFRET:: 1.	Mr. John E. Pitt, appointed returning officer for the electoral district of St. Lawrence-St. George, pursuant to section 8 of The Dominion Elections Act, 1938, by His Excellency the Governor in Council on January 19, 1939 (P.C. 160).
2.	Mr. Pitt was first advised of his appointment as returning officer by the chief electoral officer on January 23, 1939.


CANADIAN AND UNITED STATES WHEAT MARKETING POLICIES
Mr. CHURCH:: 1.	Did the government or any officer thereof receive any request from Honourable H. A. Wallace, federal Minister of Agriculture of the United States for a conference regarding the orderly marketing of wheat of the two countries' exportable surplus? If so, on what date, and what reply was made?
2.	Will a copy of all letters, papers, correspondence, telegrams and all other documents connected therewith be tabled?


Mr. EULER:: Perhaps I may make a brief verbal reply to the question of the hon. member for Broadview (Mr. Church) as to whether any conferences nave been held between the United States and Canadian officials with regard to wheat marketing policies. There has been only one conference, and that was held in August of last year. It arose by reason of the fact that there was some sort of gathering of agriculturists at that time at Macdonald College, Quebec, and the officials of the United States department of agriculture, together with the under-secretary for agriculture, took advantage of the occasion to meet some of the officials of the Canadian

Questions

government to discuss wheat marketing policies. The under-secretary of agriculture of the United States discussed wheat prospects in that country and the market outlook in view of world wheat conditions, and requested and received from the Canadian officials information as to the practice of marketing wheat in this country through the wheat board, the guaranteed advanced price, and the offering of wheat constantly for sale at competitive prices. The officials from the United States then, described their own problem and intimated that possibly they might work along the same lines with regard to the marketing of wheat. No commitments were made. I do not know that I can add anything to what I have said.


Mr. PERLEY:: What date was that?


William Daum Euler: That meeting was held on August 25, 1938.


Walter Edward Foster: Answered.


ONTARIO CORN GRADING AND INSPECTION
Mr. HOMUTH:: 1.	Is there a corn grading or inspection branch or office in either of the counties of Essex or Kent?
2.	If so, what persons are employed in such branches or offices?
3.	What salary does each such person receive?
4.	What is the total cost of the branch or office?
5.	How many cases of corn were inspected and/or graded during the years 1937 and 1938?
6.	What was the revenue from such branch or office?


Mr. EULER:: 1.	Inspection office, Chatham, Kent county, opened September 1, 1938.
2.	Q. C. Moffat and G. Caron.
3.	Q. C. Moffat, grain inspector, $163 per month; G. Caron, grain sampler, $110 per month.
4.	$4,210.23 from September 1, 1938 to March 31, 1939.
5.	26 carloads since office opened until March 31, 1939.
6.	$209.


Mr. EULER:: 1.	Fiscal years
1932		
1933		
1934		
1935		
1936		
1937		
1938		
1932		
1933		
1934		
1935		
1936		
1937		
1938		
Domestic exports $174,043,725 184,361,019 288,582,666 290,885,237 321,556,798 407,996,698 409,411,682 $ 8,890,776 6,562,273 7,930,034 10,989,314 12,934,902 13,856,794 19,365,960



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. BROOKS:: 1.	Has the federal government through grants-in-aid, or through any other means, assisted in the construction of municipal public buildings in any town or municipality in the Dominion of Canada during the last three years?
2.	If so, what are: (a) the names of such towns and municipalities; (b) nature of buildings; (c) amounts contributed by the federal government?
3.	Were contributions made jointly on a percentage basis with the provincial governments?


AUTOMOBILE IMPORTS-SHIPMENTS FROM UNITED STATES THROUGH CANADA IN BOND
Mr. HOMUTH:: 1.	Has the Department of National Revenue granted the right to ship automobiles in bond through Canadian territory from Detroit to Buffalo and/or other eastern United States points?
2.	If so, is it permissible for anyone to act as carrier, or has this privilege been restricted to some individual or company?
3.	If the latter, what is the name of such individual or corporation?
4.	How many automobiles have been transported in bond from Detroit to Buffalo and/or other eastern United States points?
5.	How many automobiles have been imported into Canada in each month of the present calendar year?
6.	What is the total value of such automobiles ?


Mr. RINFRET:: Return tabled.



EXPORTS TO UNITED KINGDOM AND SOUTH

[Stage Direction]
AMERICA, 1932-38 Mr. HYNDMAN:
1.	What were the total exports from Canada to the United Kingdom during each of the fiscal years 1932 to 1938 inclusive?
2.	What were the total exports from Canada to the South American countries during each of the above years?
[Mr. Euler.j


[Stage Direction]
On the orders of the day:
Mr. T. A. THOMPSON (Lanark):: There was tabled in this house yesterday a report with

United States Wheat Subsidy
reference to the refusal of the tariff board to impose an excise tax upon vegetable oils.


Mr. DUNNING:: My hon. friend is wrong. The tariff board did not refuse.


Thomas Alfred Thompson: The British Board of
Trade-I stand corrected. In the appendix to votes and proceedings is a letter from Sir Thomas Inskip, Secretary of State for Dominion Affairs, to the Hon. Vincent Massey, High Commissioner for Canada in London, in which he states:
If any other suggestions could be put forward which would not have the same difficulties from our point of view, we should, of course, be very ready to consider them.
Has the government any suggestions to make in the interests of the dairying and live stock industries of this country?
Hon. CHARLES A. DUNNING (Minister of Finance):	As I indicated yesterday,
I anticipated that there would be a desire to discuss on some occasion-probably when the house is resolving itself into committee of supply, or on some appropriate item-the correspondence which I tabled and which is incorporated in the votes and proceedings of May 23. Of course, the measure of hope held out in the last paragraph of Sir Thomas Inskip's letter is one of the possibilities which we have not yet had an opportunity thoroughly to explore. The tariff board report on the matter, which resulted in the recommendation which has been declined, is quite voluminous, and it may be that a study of it will reveal some alternative possibility. I cannot see it at the moment. But I would point out to my hon. friend that the existing trade agreement with Great Britain comes up for reconsideration in 1940. That at any rate will offer opportunity for broad negotiations on any of these matters. I cannot, I think, go any further at the moment.



ROYAL VISIT


[Stage Direction]
On the orders of the day:
Mr. GORDON GRAYDON (Peel):: Before the orders of the day are called, I should like to make an inquiry of the acting leader of the government, supplementing a question raised by the hon. member for Wentworth (Mr. Lennard) on February 10. In view of the signal service being rendered during the royal stay by the militia, ex-service men and 71492-2814
others in forming guards of honour, protecting strategic points and performing many other important services, wrill the government consider the striking of a special royal visit medal for issuance to those who have thus played their part in this historic event?


Ernest Lapointe: I can assure my hon. friend that the question is receiving due consideration.
I agree with him as to the signal service which has been rendered by the men to whom he refers.



UNITED STATES WHEAT SUBSIDY


[Stage Direction]
On the orders of the day:
Ernest Edward Perley: I desire to direct a question to the Minister of Trade and Commerce (Mr. Euler); I wish I had had it before me when the minister made his statement in answer to the question of the hon. member for Broadview (Mr. Church). It is based on a report in the Wall Street Journal of May 22, which is in the reading room. The report is that secretary of agriculture Wallace made an announcement of an increase in the subsidy to the wheat farmers, particularly the farmers of the great western plains. The report goes on to give a statement of the prices. It will mean to the farmers 87 cents on No. 1 at Minneapolis and 86 on No. 2.


Walter Edward Foster: Order. The hon. member is not putting a question but making a speech. What is the question?


Ernest Edward Perley: The question is this. When the Minister of Trade and Commerce, the Minister of Agriculture (Mr. Gardiner) and the government were considering the grain bills passed in this house, particularly Bill No. 63, had they had any information from, or any communication with, Secretary Wallace implying that the United States government was likely to take steps to increase the subsidy?


Walter Edward Foster: That is not a proper question.


William Daum Euler: I have no objection to
answering the question. As a matter of fact the government had no interview or understanding with nor any information whatsoever from the United States government with regard to the matter, as suggested by the hon. member. I may be mistaken, and perhaps I should not say this, but what I read in the
Houses oj Parliament

newspapers was to the effect that the United States government were discontinuing their subsidies, and what the hon. member has read to-day from the Wail Street Journal comes as news to me. The government had neither information nor understanding such as the hon. gentleman suspects, if I may say so.



HOUSES OF PARLIAMENT


[Stage Direction]
On the orders of the day:
Mr. T. L. CHURCH (Broadview):: I wish to offer the government a suggestion. During the recess, will the acting leader of the government (Mr. Lapointe) be kind enough to consider making some other arrangements, from the fire and public health standpoint, for those who use the other chamber on such occasions as the opening of parliament? My suggestion is that we might utilize this house pro tempore as a senate chamber, our house to meet in the railway committee room or in the senate, on the day parliament opens or on other pro forma occasions. This building cost $18,000,000; but look at the galleries in the senate. There is only one exit and entrance and they are a fire trap. We had a fire once before and we have not learned anything since. I suggest the senate meet here and that the curtains could be removed temporarily to create more seats and afford accommodation for five times the number of people. The other day our members could not even enter the senate while some who were not entitled to be there at all took their places. I do not think it is fair to see ministers of the crown unable to get in while others have to try to climb up on benches, porches and other places as porch climbers to see.


Walter Edward Foster: Order.


Thomas Langton Church: They were climbing up on the railing and other posts. I saw a member of the Cooperative Commonwealth Federation and other members climbing up and hanging on to get a good place, or a second's view while there was a large section of the House of Commons out in the corridor. I repeat, it is undignified when we could provide accommodation pro tempore here. I submit that the government should consider a reform like this during the recess.


Ernest Lapointe: The government will be
pleased to consider the remarks of the hon.

member, but I might point out to him that it is much worse in Westminster; yet no one thinks of it as a disorderly scene. It is rather a tradition that it should be so.


Mr. POULIOT:: The leader of the opposition had his foot on the clerk's table.



ROYAL SOCIETY OF CANADA


[Stage Direction]
On the orders of the day:
Thomas Langton Church: There is another matter I want to mention and protest against. I notice that at the annual meeting yesterday in Montreal of the Royal Society of Canada a leading government official, the dominion archivist, Doctor Gustave Lanctot, made one or two questionable references in his address. He said that Quebec was the stumbling block which saved Canada from the national suicide of annexation. So it is, but there are eight other provinces as well with it.
Some hon.. MEMBERS: Order.


Walter Edward Foster: The hon. member is not putting a question.


Thomas Langton Church: These remarks, and another attacking American justice and foreign affairs by the dominion archivist, one of the leading officials of the government, is a reflection upon the American people. It is ill-advised, mischievous and ill-considered. In my opinion he ought to be recalled home from the royal train.



INCOME WAR TAX ACT

[Stage Direction]
Hon. J. L. ILSLEY (Minister of National Revenue) moved the second reading of Bill No. 142, to amend the Income War Tax Act.
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Sanderson in the chair.
On section 1-"Taxpayer."
Jean-François Pouliot: I have a request to make of the government. There are some good-natured people who sometimes look after the children of others, although they do not follow the regular form of adoption. I have in mind a gentleman who took charge of one of his nephews. The mother was in poor circumstances and the child had no one to care for him. This gentleman spent a good deal of money on the nephew's education. I wonder if it would not be possible to give him an exemption on that account. I have been in touch with the officials of the income tax

Income War Tax Act
branch in this matter. If the uncle had not taken charge of the nephew in the first place the young lad would not have been so well brought up and he would have been a charge on the country. The local authorities would have had to pay for him. His uncle incurred that expenditure, paid for his education and took proper care of him. Would it not be possible to exempt persons in such circumstances? I hope to receive a favourable reply, because the matter deserves every consideration.


James Lorimer Ilsley: This qustion has been considered at various times over a period of years, but no government has seen its way clear to extend the provisions of the act to cover such a case as the hon. gentleman has mentioned. However, I have no objection to giving further consideration to his representations. That is as far as I can go.


Jean-François Pouliot: Thank you.


[Stage Direction]
Section agreed to.
On section 2-"Personal and living expenses."
Mr. LAWSON:: I have not a copy of the Income War Tax Act before me and I do not know exactly what this means.


James Lorimer Ilsley: The effect of this section is to make it impossible for taxpayers to deduct as a business expense the expenses described in section 2, (r) (i), that is the expenses of properties maintained by any person for the use or benefit of any taxpayer or any person connected with him by blood relationship, manage or adoption, not maintained in connection with a business carried on bona fide for profit, and not maintained with a reasonable expectation of profit. There are certain wealthy taxpayers in Canada who carry on gentleman farming operations or own stables and establishments of that sort which apparently are not carried on bona fide for profit and are not maintained with reasonable expectation of profit. In the operation of these enterprises they incur losses, sometimes very heavy losses, and thereby minimize their taxable income to a considerable degree. It is thought that that particular type of expenditure should be regarded as coming under the personal and living expenses of the taxpayer. This section accomplishes that end.


James Earl Lawson: As the act stands, if a taxpayer has an income from an industry, is he authorized to deduct from that income the losses incurred in operating or the expense of maintaining a farm? One is secondary income, the other is primary.


James Lorimer Ilsley: The deductions that have been claimed are from secondary income. The primary income must be taxed without any such deductions, but when we move into the class (b) or secondary income these deductions have been claimed from secondary income.


James Earl Lawson: Then what is the second
phase?


James Lorimer Ilsley: The second phase is to cover a somewhat different situation. The circumstances contemplated are these: if for example a taxpayer sets up a trust, transfers his property to the trust and makes a provision that the trustee must apply certain income or make certain payments out of the trust year by year for insurance premiums on the life of the settlor, the proceeds of the insurance policies to go to the settlor or to persons connected with him by blood relationship, mariage or adoption. This section now makes it clear that those insurance premiums are payments on behalf of the person and are included in his personal and living expenses. That is the effect of the section,


James Earl Lawson: I do not yet see the point. At the present time if a man makes a trust settlement whereby he retains any benefit or control over that trust, then the income from the trust, no matter who may receive it, I understand is still assessed as the personal income of the settlor.


James Lorimer Ilsley: It is now. It is not received by the settlor, that is the trouble.


James Earl Lawson: But whether he receives it or not it is still taxed to him as income.


James Lorimer Ilsley: This section is to make it clear that that is the case.


James Earl Lawson: What section covers these trust settlements?


James Lorimer Ilsley: Section 11.


James Earl Lawson: Would the amendment mean this: Suppose a settlor has set up a trust. Under that trust someone other than himself gets the benefit, the income from it. The settlor has divested himself of control over the capital of the trust. Let me assume that the trustees, for the benefit of the cestui que trust under the trust agreement, decide to place insurance upon the life of the settlor, the benefit to go to the beneficiaries under the trust. They use the income from the trust for that purpose. Somebody pays taxes on that income as it stands to-day, either the cestui que trust or the settlor. Would this section make those premiums taxable again as against the settlor?
446S
Income War Tax Act


Mr. ROBICHAUD:: There is another section dealing with that.


James Lorimer Ilsley: The gross income of the trust is not taxed. It is the net income of the trust that is taxed-that is, the income after these premiums are paid. Unless the person who gets the benefit of these premiums Is taxed, they are not taxed. But the settlor Is the man who gets the 'benefit of these; he is just taking an indirect way of insuring his life for his children.


James Earl Lawson: Yes, I see. Let us say the trust is for the benefit of children, and that it has a gross income of $10,000 a year. Under the present act if the trustees saw fit to place insurance on the life of the settlor for the benefit of the children who are also beneficiaries of the trust, and paid out $2,000 a year in premiums, that $2,000 a year would be exempt from taxation?


James Lorimer Ilsley: That is right. They are taxed on the net.


[Stage Direction]
Section agreed to.
Sections 3 to 5 inclusive agreed to.
On section 6-Interest on succession duties.
James Earl Lawson: I should like an explanation -of this section.


James Lorimer Ilsley: The explanation opposite the ^section expresses it precisely. The section previously read:
5. "Income" as hereinbefore defined shall for ;the purposes of this act be subject to the *following exemptions and deductions-
Interest paid in respect of succession duties or inheritance taxes.
And claims were made in respect of the interest of many past years, in one year. That is, an estate or taxpayer might pay ten years' interest in one year, and claim that as a deduction from the income of that year. This is contrary to the general principle of the act. It is simply the interest paid in the year, in respect of the year, that should be allowed.


James Earl Lawson: Is it not going to be allowed In the previous year? This provision as I see it at the moment touches only estates. It .-strikes me offhand as being terribly unfair. Let us look at the thing from a practical standpoint, as to what happens. At the moment I have a case in mind where the man died in 1936. In due course, and with dispatch, the executors make application for probate. The succession duties branch, in order that the executors may administer the estate, .require a deposit either in cash or in the
iMr. Lawson.]
form of a bond, on account of succession duties. That is done, but nevertheless a contest exists between the succession duties branch of the province and the executors as to the amount payable for succession duties. It is now May of 1939; that contest is still proceeding and it may be a matter of another six months before there is a final determination. When it is settled there is going to be interest on the amount ultimately payable, from one year after the date of death. Surely it is unfair. The executors of the estate have no control over the matter. They are not justified in simply surrendering to the succession duties department and paying any amount that may be demanded. In the interests of the people for whom they are trustees they have to contest the claim, and it must be borne in mind that the succession duties situation is neither pleasant nor easy in Ontario at the present time. When the matter is finally determined the executors will have to pay interest on the amount ultimately determined. The province gets that benefit, but according to this section the dominion comes along and says, " Oh, the income from the estate is not what you beneficiaries actually receive; it is what you actually receive plus whatever interest you pay Ontario on the succession duties. It is true that you never received it; you had no control over it, but we are going to say you did."


James Lorimer Ilsley: That is not the way it will work at all. In the case mentioned by the hon. gentleman the interest accruing each year on the succession duties would be allowed as a deduction in respect of that particular year.


Mr. STEWART:: But it may not be paid in that year.


James Lorimer Ilsley: The interest eventually paid can foe allotted to the year in which the interest was earned. That is what this section says:
Annual interest accruing within the taxation period in respect of succession duties or inheritance taxes.
This prevents a person claiming as a deduction in one year the interest accruing for several years. The interest must be deducted from the income for the period during which the interest accrued. That is all it says, and that is the general principle of the act.


James Earl Lawson: That is not what this says, as I read it. Let us take section 6 of
the act:
In computing the amount of the profits or gains to be assessed, a deduction shall not be allowed in respect of-

Income War Tax Act
Then we have this amendment:
Annual interest accruing within the taxation period in respect of succession duties or inheritance taxes;


James Lorimer Ilsley: Section 5 is the section.


James Earl Lawson: Oh, I beg your pardon. That makes a vast difference. That is why I could not follow the minister at all.


Thomas Langton Church: I should like to ask a question in connection with the interest charged on income tax, and this is the only section on which 1 can ask it. I should like to find out from the minister the various interest rates charged by the government on all income tax. I think they amount to usury. This government borrows money for its own purposes at two-thirds of one per cent. Why should it charge the people, under this and all the other sections, a high rate of interest on deferred payments, amounting to usury? In the second place, what about the time of payment? I suggest that after the winter, when people have not the money with which to pay their coal and other bills, is the wrong time to collect; a later month would do. I believe there should be more divisible payments such as the municipalities have. There should be easier terms of payment and less interest and other charges.


James Lorimer Ilsley: Two years ago, I think, the rate was reduced from six per cent to five per cent, and the penalty interest was reduced from four per cent to three per cent. I think that is as far as the government can reasonably be expected to go.


Thomas Langton Church: It amounts to usury.


Hugh Alexander Stewart: I should like to follow up the question of the hon. member for York South. Assume the case of a dispute between an estate and the succession duties office covering a period of three years. At the end of that period interest is charged for two years and six months, or whatever time the law allows under the succession duties act of the province. The income tax has been paid in previous years; we come to the third year, when a deduction has to be made covering the entire period. We cannot deduct the full amount in any one year. We have paid the income tax for the two previous years. Is it possible to get a rebate covering the interest paid during those first two years, which cannot be deducted in the third year, though the income tax has been paid?


James Lorimer Ilsley: There is a limitation section which would make it difficult if the facts
were as stated by the hon. gentleman; but it is very easy to prevent the limitation section from applying, by the taxpayer simply reserving his rights. The taxpayer knows he has not paid his succession duties; he knows he is going to pay them some time or other, and in making his return he only needs to make some claim for a deduction in respect to succession duties. Then two or three years later, whenever he reaches a settlement, he can obtain a deduction in respect to that particular year. Because of that one year limitation he has to reserve his rights.


Hugh Alexander Stewart: If he does not make
that reservation in his return he has lost his right to get any relief?


James Lorimer Ilsley: That is right. Everyone is
in the same position.


Hugh Alexander Stewart: That does not make it
right. A wrong is all the greater if we are all done an injustice.


James Lorimer Ilsley: I do not admit that it is
a wrong. People must be a bit alert in making out their returns.


Hugh Alexander Stewart: I would say they must
be very alert and must anticipate many things they can hardly be expected to foresee or know. Disputes with the succession duties office cover a long period of time, and their attitude is so arbitrary and in many cases so unreasonable that no executor can anticipate what is going to happen. He should be able to get an adjustment within six months, but he has to await the pleasure of that office. They keep him dallying around, and even though he has made a deposit they allow him no interest on it. In the end they make their valuation on an arbitrary basis; he has to pay a large amount of money and apparently can get no relief.
Let us assume that the succession duties office of Ontario, or of any other province, comes along after a period of ten, fifteen or twenty years, after an estate has been wound up, the succession duties paid and a receipt obtained for them. They say, "We are going to reopen and revalue this estate," as they have done. They increase the value, increase the duties, apply interest for ten, fifteen or twenty years and on top of that impose penalties. What is going to happen by way of getting a rebate of the interest that has been paid or has to be paid on this basis? Is the limitation to apply there, and will the department say, "I am sorry, but we cannot do anything for you?" How could a man possibly have anticipated, when making his in-
Income War Tax Act

come return in a case of that kind, that the succession duties branch was going to come along after ten years, reopen the estate, revalue it, charge interest on it and exact penalties? A person would have no reason to anticipate that action. We will say that it might amount to a million dollars.


James Lorimer Ilsley: But surely that is not our
responsibility. If a province acts arbitrarily the dominion government cannot be asked to make up the loss or the disadvantage.


James Earl Lawson: That is not the point.
At the present time the dominion government comes in arbitrarily and says, "We are going to do the same as the province; to the devil with the taxpayer."


Hugh Alexander Stewart: The dominion says, "We are hot going to make you any allowance at all, although you have to pay the interest." And then this particular province takes the tax based upon income tax returns made during these years-the same province.


James Lorimer Ilsley: The hon. member apparently thinks that the interest between 1920 and 1930 would be a proper deduction from the income of the year 1938-39. But that does not appeal to me as being a proper deduction. It is not a deduction from the income of 1938 or 1939; but it is the interest paid during that year that is a proper deduction.


Hugh Alexander Stewart: Will assessments be reopened? Will there be a deduction, an allowance or a rebate over the period of five or ten years back? Or is a person entirely shut off by the limitation?


James Lorimer Ilsley: He is shut off.


Hugh Alexander Stewart: I thought so, and I think it is very unfair.


James Lorimer Ilsley: If we went back and opened up income tax returns for the last twenty years because of everything that someone might discover, we would be opening them up all the time. That is the reason for the limitation.


James Earl Lawson: But you are opening them for ten years because the government takes the notion to do it. You go back ten years and open up cases where assessment has been made?


James Lorimer Ilsley: Yes.


James Earl Lawson: You do it, but the taxpayer cannot do it.


James Lorimer Ilsley: The information is in the hands of the taxpayer, not in the hands of the government.


Hugh Alexander Stewart: In this case the information is not in the hands of the taxpayer at all. He has given all the information and has acted in good faith in the whole matter. Then it is reopened, after it is supposed to be closed.


James Lorimer Ilsley: His quarrel is with the province that reopens it, not with us.


Hugh Alexander Stewart: His quarrel is with this government, that is taking income tax from him, when he is compelled out of this income to pay interest.


James Lorimer Ilsley: I do not know whether it is out of income or not.


Hugh Alexander Stewart: Where else would it come from?


James Lorimer Ilsley: It is out of his money.


Hugh Alexander Stewart: It is out of his income.


James Lorimer Ilsley: Or capital, or both.


Hugh Alexander Stewart: It is out of his income, and if he could show for that year that he paid the interest for that particular year he would get a deduction.


James Lorimer Ilsley: Yes.


Hugh Alexander Stewart: Then why should it not be possible for him to go back over the years and get a refund?


James Lorimer Ilsley: That is a different question.


The CHAIRMAN:: Shall section 6 carry?


James Earl Lawson: I do not suppose it is
worth while to bring this matter to a vote, but I certainly wish to go on record as strongly opposed to this provision, and I think it ought to be given a great deal of consideration before it is passed. It is unfair to people who have no control over the situation. I have in mind at the moment an estate where the mother of the deceased, who was entirely dependent upon the deceased for support, will receive a comparatively modest annual income. There will come a time when three or four years' interest will have to be paid to the succession duties branch in Ontario, on some amount of money, when that amount of money is ascertained. What is paid will be deducted from the income of that widowed mother. And the same thing will apply to the child, who is now twelve years of age and is being maintained in school through a trust fund. The widowed mother and the child of the

Income War Tax Act
deceased are to be asked to pay income tax on income they never received, never could receive and never will receive. It is entirely contrary to the principle of this type of legislation.


[Stage Direction]
Section agreed to.
On section 7-Limitation of salary deduction.
James Earl Lawson: Has consideration been
given to the question whether or not nonresident investment corporations would be excluded from the operations of the section by the words "unless such non-resident pays tax thereon under this act"?


James Lorimer Ilsley: It applies to all of them.


James Earl Lawson: Does it apply to nonresident-owned investment corporations?


James Lorimer Ilsley: Yes.


James Earl Lawson: Some few years ago, with a view to bringing foreign capital to this country, we enacted provisions in our Income War Tax Act relative to non-resident-owned investment corporations. As a result a good deal of foreign capital came to this country, based on the provisions of the act as it then stood. The dominion obtains a tax on the income of a non-resident-owned investment corporation, and I imagine the total amount obtained annually is substantial. By reason of a non-resident-owned investment corporation having power to pay out its funds to non-residents in the form of directors' salaries, and so on, rather than in the form of dividends, a great deal of foreign capital was induced to come to this country. It would seem to me that this enactment would simply reverse the position we took in 1935 or 1936. As the government gets the tax anyway, no matter in what form a non-resident-owned investment corporation pays out its income, I can see no reason for making this amendment applicable to non-resident-owned investment corporations.


James Lorimer Ilsley: 
James Earl Lawson: Oh, no.


James Lorimer Ilsley: The people who bring their money here to invest in non-resident-owned investment corporations bring their money here to keep. This is not a high-salaried field.


James Earl Lawson: Let us be honest and frank about it. As I have said, our reason for enacting provisions in the Income War Tax Act with respect to non-resident-owned investment corporations was to induce a large amount of capital to come here from the United States. The action was taken at a time when President Roosevelt in connection with his new deal operations was enacting legislation in the United States and pyramiding taxes to the point where people who had money wanted to take care of it. With that in mind, with the desire to get money in Canada, we enacted provisions with respect to non-resident-owned investment corporations. When we did that we decided the rate of tax we wanted to get on the money, and we fixed that rate under our act. The government of this country gets the same amount of tax, irrespective of whether a non-resident-owned investment corporation pays out its money in salaries, dividends or directors' fees. It does not matter how the money is paid out.


James Lorimer Ilsley: I do not understand that. We tax the income at half the corporate rate. If the company pays $100,000 to its president in New York, it has an effect on the income.


James Earl Lawson: The income of a nonresident-owned investment corporation is determined not by what it pays out but by what it takes in. The rates for a non-resident-owned investment corporation are half the corporate rates for a domestic corporation.


James Lorimer Ilsley: But on the net income.


James Earl Lawson: Is it on the net?


James Lorimer Ilsley: Certainly.


James Earl Lawson: All I have to say is-


James Lorimer Ilsley: I thought it was.


James Earl Lawson: As a matter of practical demonstration, I have in mind a non-resident-owned investment corporation whose solicitor wanted deliberately to pay out money in the form of salaries and not in the form of dividends. This was not done with a view to taking any money away from the government of Canada; they simply wanted to do it in that way in order to get money into the hands of non-residents in another country for their tax benefit in that country. That nonresident-owned investment corporation has never deducted the salaries which it has paid before paying the tax here.


James Lorimer Ilsley: I shall have to go into that; I am afraid it is a surprise to me. I thought we taxed, and the commissioner tells me that we taxed, the net income of these companies. If a salary of $100,000 is paid, that would cut down the income to that extent and we would get that much less tax.
Income War Tax Act


James Earl Lawson: I quite agree that under our present act that $100,000 could be paid out to a non-resident in salary and deducted as an expense of operation before the tax was received by the government, but I do not think that that is what happens in practice. In fact the non-resident-owned investment corporation pays the tax before paying out any money in the form of salaries.


James Lorimer Ilsley: My information is to the contrary, and I am surprised to hear that.


James Earl Lawson: Except what is paid to a book-keeper or someone of that kind.


[Stage Direction]
Section agreed to.
On section 9-Limit of deduction.
James Earl Lawson: Would the minister give a specific instance or an illustration as to just what this amendment will apply? It strikes me that this is another amendment like 32b which we had last year. We were told in the House of Commons that that meant one thing; then the minister stated in the newspapers that it meant another thing, and later the commissioner came out with a statement that it meant something else. I do not think many of us are certain yet as to what 32b does mean.


James Lorimer Ilsley: The trouble with 32b was in the understanding of members of the house; there was no difference between the commissioner and the minister as to what it meant. I was entirely unable to see why there should be any misunderstanding as to what 32b meant.


James Earl Lawson: If I had time to go upstairs and get the file I could read both statements and leave it to the committee to consider whether there was any misunderstanding.


James Lorimer Ilsley: They agreed absolutely.


James Earl Lawson: Could the minister give an illustration of what set of circumstances this is designed to meet?


James Lorimer Ilsley: I have some examples here for the purpose of answering this question, but perhaps I had better give it in my own words. A company may have a non-taxable income of $1,000,000, which non-taxable income would be income derived from dividends paid by Canadian corporations which had themselves paid income tax. These dividends would not be taxable again as income in the hands of the receiving corporation. The company has a taxable income of $1,000,000, which taxable income might be made up of interest on bonds or profits from industrial, commercial or financial undertakings. From those two
f Mr. Ilgley.]
sources of income, the company has a gross income of $2,000,000. Let us assume the expenses of operation are $750,000.


James Earl Lawson: Say $1,000,000 and make it simple.


James Lorimer Ilsley: The company has expenses of operation totalling $1,000,000. With a gross income of $2,000,000, this would leave a net income of $1,000,000. In the past this company would come to the commissioner of income tax and say, "The $1,000,000 we have in income is non-taxable income and therefore we owe you nothing." This amendment makes that practice impossible. The amendment is based upon the theory that part of the $1,000,000 expense would probably be incurred in earning the non-taxable income as well as the taxable, and therefore there should be an allotment of expenses to the non-taxable and taxable incomes.


James Earl Lawson: On what basis?


James Lorimer Ilsley: On the basis set by the minister.


James Earl Lawson: Is the minister to have discretionary power to set the basis, or is it to be as the non-taxable is to the taxable?


James Lorimer Ilsley: It is not ratable. The resolution had it ratable, but I moved to have that struck out. It would not be fair in many cases. This is one of those sections which are most undesirable from my point of view, but I do not know in what other way it can be done. Undoubtedly the principle is right and I think it will have to be left to someone, probably the minister, to allot the expenses between the two kinds of income.


James Earl Lawson: I am not so sure that the principle is right. It may be right in some cases, but I do not think it would be right in others. Let me give an illustration. I know a company which has thirty-seven subsidiaries, every one of which is an operating company, some making money and others losing money. Those that make money pay a tax. The parent company is also a large operating company, doing a larger business than the consolidated business of the thirty-seven subsidiaries. The parent company receives dividends from some of the subsidiaries which have already paid the tax, and this income is non-taxable. In the case of the parent company I admit that an infinitesimal part of some book-keeper's time may be taken up in connection with the dividends from the subsidiary companies, but I venture to suggest that not more than one per cent of the overhead expenses of the parent com-

Income War Tax Act
pany could be referable to the operations of the subsidiaries. Is it worth while bringing this in in connection with such a company? Has the minister in mind certain companies where the overhead expenses of the parent company for the benefit of subsidiary companies is very substantial as compared with the overhead for its own operations?


James Lorimer Ilsley: There are cases. In the case mentioned by my hon. friend, if one per cent was found to be the proportion of the cost of earning and collecting the taxable income, one per cent is all that would be allotted. There would be no injustice. It is essential that these discretionary powers should be given. Hon. members of the house have paid tribute to the commissioner, and I think it is widely conceded that he exercises his powers quite fairly.


James Earl Lawson: We all agree with that.
At one o'clock the committee took recess.
The committee resumed at three o'clock.


Thomas Langton Church: The last three lines of section 8 are:
Where general expenses are incurred to earn both taxable and non-taxable income the minister shall have power to apportion the said expenses.
The point I wish to make is that no minister of the crown should have these powers and prerogatives under a bill such as this, a revenue bill. Parliament is thereby delegating to the minister certain powers under which the regulations he makes will have the force of law. This clause delegating power to the minister is similar to one of the sections which was condemned down at Washington, where after an elaborate senate inquiry it was found that, by such a provision in their bill, many millionaires had escaped income taxation altogether. It is not necessary to give their names, but millionaires and their companies worth hundreds of millions of dollars were able by this route to evade payment of income tax. I make no reflection upon the minister, or upon his able, painstaking and capable deputy, Mr. Elliott. But it seems to me that very few concessions are given to the small man; and in my opinion a national revenue committee of the house should be set up to go into this whole question of national revenue and of the powers of the minister and the delegation to the minister of the right to make rules and regulations along these lines. The committee might inquire into all kinds of sources of additional revenue, irregularities, exemptions, tax evasions, tax dodging, and all that. Further,
there should be incorporated into the statute amendments to make the committee's findings effective. I believe that if a national inquiry were to be held into this question in Canada, as was done at Washington, it would be a national calamity to read about.
No minister of the crown should be given the powers contained in the latter part of this section. I regret that this bill was brought down in the dying days of the session, when there is no time for a proper and adequate discussion of national revenue in all its forms and methods. Revenue and income are the most important things we have, and there should be some more modern way of debating so important a subject than the stereotyped process of bringing in at the end of a long session a bill of many sections along these lines. I repeat that I hope a proper independent inquiry for all Canada will be held to find out who is paying and who is not, and into all methods and practices. I should like to have from the minister some reply to indicate what is being done.


James Lorimer Ilsley: I dealt just before one o'clock with that point of the minister's discretion. I said that I was sorry to see in this bill sections which add to the minister's discretion, but there is no way I can think of by which they can be avoided. When we first drafted this resolution we provided for a ratable, a proportionate, distribution of expenses between non-taxable and taxable income, but on reexamination it was found that that would be unfair, that it was entirely too inflexible. The experience of the department has been that the very persons who complain about the extent of the minister's discretion, when they are confronted by an inflexible rule, hold up their hands in horror and say, "That leads to unfair results; something must be left to discretion, to the judgment of the official,"-the minister, in this case.


James Earl Lawson: In the first place, I want to correct something I said this morning with respect to section 7. I was in error, apparently, in what I had to say with regard to nonresident-owned investment corporations. We had presented to us this morning a bill, nearly every clause of which had not 'been suggested either by the budget speech or by the resolutions in ways and means committee, and several provisions of which amount to straight increases in taxation under the Income War Tax Act; therefore we are trying to struggle through the bill without having had an opportunity to give it previous study.
With respect to section 8, the one specifically before the committee at the moment, I am
Income War Tax Act

soijry that I have to disagree with the hon. member for Broadview and to agree in large measure with the Minister of National Revenue. From my short experience in that office I realize that the Income War Tax Act simply cannot be administered without a wide measure of discretion in respect of many matters. But although I am not objecting in principle t.o the conferring of a discretionary power, the minister cannot in the exercise of that discretion run contrary to some definite principle which may be stated in the act. This brings me to a specific discussion of the section now under consideration.
During the adjournment I had an opportunity to sit down and do a little thinking, and I worked out what I think will be an example of how this will operate. If I am not correct I shall be glad to have the minister correct me.
I am going to take the example of a company which has five subsidiaries. I will call the parent company, company A and the subsidiaries, V, W, X, Y and Z. Each of these subsidiaries is carrying on a similar line of business. Each one annually files a return; and let me assume they have a profit and are paying income tax. What is left of their income after payment of tax goes to the parent company A. Under the present law that income, having been taxed once in the hands of the other company, and being taxed again when it is distributed by the parent company to the shareholders, is exempt from taxation as income in the hands of the parent company. Now, the parent company carries on a business similar to that of the five subsidiaries, and for the purpose of the business of the five subsidiaries it is necessary to have in the head office of the parent company, and associated with it, four officials. The specific duties of these four officials relate in a small measure to the parent company and in a large measure to the five subsidiaries. No deduction is made for their salaries when the income tax return is made by the five subsidiary companies. Let me assume their aggregate salaries amount to $20,000 a year. What result will we get after this legislation is passed?
In the first place let me assume that the income passing from the five subsidiaries to the parent company, and which is non-taxable income in the hands of the parent company, is $100,000. Let me assume that the parent company at the present time from its own operations has an income of $100,000, and that the expense, including the salary of the four officials most of whose time is spent looking after the general affairs of the subsidiaries, is $80,000. At the present time the parent company is paying income tax on a taxable

income of $20,000; the subsidiaries are paying income tax on a taxable income which after payment of the tax is $100,000. How is the minister going to exercise his discretion once this section goes through? It is my submission that he must exercise it in one of two ways. If the minister says, because the gross income of the parent is $100,000 and the net income of the subsidiaries is $100,000, therefore the expenses of the operation of the parent company should be divided fifty per cent to each, the result will be that the parent company will have to pay on a taxable income of $60,000 instead of $20,000.


James Lorimer Ilsley: I cannot follow the arithmetic. That first way is out-or it may be out.


James Earl Lawson: Well, we shall see. Be
careful that I do not confront you with a past decision. Let me assume that the minister takes the only other course which, so far as I can see, is open to him. He says: No, the fair way to exercise this discretion is as follows. Because the aggregate salaries of these four officials is $20,000, and because their time is devoted almost entirely to the subsidiaries, their salaries should be set aside as against the non-taxable income. By reason of that you automatically reduce the expenses of the parent company from $80,000 for the year to $60,000, and thereby you automatically double the taxable income of the parent company, from $20,000 a year to $40,000 a year. Does the minister follow my figures? If I am correct in that, what are you doing in the result?
I admit that there are in this country those who think that double taxation in respect of the same money is justifiable. Personally I do not; I never have, and I have no hesitation in saying so, no matter who likes it or who does not.


Hugh Alexander Stewart: It is triple in this case.


James Earl Lawson: I think that the principle of taxing money in the hands of the corporation and then taxing it over again in the hands of the shareholders is wrong. Income should be taxed once, and once only. The resplt of this proposed legislation is that, no matter how fair the minister tries to be, no matter in what way he exercises his discretion, part of that income is taxed three times. True, the third taxation is by the indirect method of taking some of the expenses of the parent company and saying, "This should be set aside against the non-taxable income."


Charles Avery Dunning: They never were expenses of the parent company.


James Earl Lawson: When I took the illustration of five subsidiaries I took a small com-

Income War Tax Act
pany; but the corporation I have in mind has, I venture to suggest, more than fifty subsidiaries. Their principle of operation has always been this. They charge no expenses to the subsidiary-


Charles Avery Dunning: But they should.


James Earl Lawson: Wait a minute. They
cannot, for this reason. To. do that you would have to try to segregate that portion of the time of the four executives of the parent company which is devoted to the interests of the subsidiaries and then charge against the subsidiaries a proportion of their salary and have these men receive their salaries in fifty pieces, fifty cheques, from fifty subsidiaries. The thing is simply not reasonable or feasible, but for the purposes of operation of their subsidiaries it is essential to have these four officials in the head office. No matter how the minister exercises his discretion, if this subsection is passed the net result will be to triple taxation on a part of the earnings of the combined subsidiary and parent companies. I do not care how the discretion is exercised, that will be the result. The parent company has an income of, say, $100,000 from its subsidiaries, which is therefore non-taxable, and the parent company earns from its own operations, in exactly the same business as the subsidiaries, another $100,000 gross income. The parent company's expenses of operations are $80,000 a year, but included in this $80,000 are the salaries of four officials.


Charles Avery Dunning: That is the point.


James Earl Lawson: But most of their time
is devoted necessarily to the operation of the subsidiaries.


Charles Avery Dunning: Why should they not
be charged to the subsidiaries?


James Earl Lawson: For the simple reason
that it is a cumbersome method of doing it. Let me answer the minister's question with another:	Why should this government pass
a law which would make it necessary for business concerns to charge to subsidiaries a proportion of salaries which are payable in the head office for people who work in the head office, and have the subsidiaries pay these people their salaries in fifty pieces if there are fifty subsidiary companies?


James Lorimer Ilsley: So that the companies will
not be able to avoid paying taxes on taxable income.


James Earl Lawson: But they are not avoiding paying taxes on taxable income. How are they doing so?


James Lorimer Ilsley: By charging to taxable
income expenses incurred in earning nontaxable income.


James Earl Lawson: The reason it is nontaxable income in the hands of the parent company is that it was taxable income in the hands of the subsidiaries. You have already had your tax on it.


Charles Avery Dunning: If there is expense in
connection with it, that should have been deducted before the original tax was determined.


James Earl Lawson: Granted; and if that were done you would get the same result as you are getting now. In other words, this government is now receiving income tax from the subsidiaries without deducting the expenses of four officials in the head office, and to that extent the tax it is getting from the parent company is reduced; but it is still getting a tax. Why pass legislation the result of which is to require that a large corporation, four of whose executive officials are now being paid salaries by the parent company, shall split up their salaries into small pieces and have each subsidiary contribute to those salaries?


James Lorimer Ilsley: There is no difficulty about that.


James Earl Lawson: It may not be difficult to
the minister, but it is difficult to the company; and it is absurd to ask a large enterprise to issue fifty separate weekly or monthly cheques as the case may be, from fifty separate and distinct companies.


William Daum Euler: They could issue one cheque and charge the right proportion to each subsidiary.


James Earl Lawson: That would be simple if
they were making a consolidated return, but they are not making a consolidated return; they are making individual returns. If these companies were making a consolidated return for income tax purposes, I agree that it would be very simple; but they are not. If they made a consolidated return they would have to pay an extra two per cent-17 per cent instead of 15 per cent-and to avoid that they make individual returns. Is it fair? Is there any reason why the government should put business in this country to that additional trouble and expense if the minister is going to exercise his discretion along the line he indicates?


Charles Avery Dunning: The hon. member has stated one hypothetical cane: nav I put
Income War Tax Act

another. I have not worked it out as he has put it. He has made out a case for inconvenience. as I see it. I must make out a case for necessity, the necessity for this change. Instead of the proportions which he took, assume a parent with a laTge non-taxable subsidiary income, a parent who, having watched very carefully the mechanics of the operation of this law, has found that if it charges to itself the expenses of officers and overhead, which really are concerned with the subsidiaries, it thereby escapes a charge against income, 'because that income is nontaxable, having been taxed once. My hon. friend assumed an ordinary industrial case. If you take the minimum of industry and the maximum of investment, you can readily visualize why it is that the income tax administration requires some means of checking what really amounts to the transferring of subsidiary expenses to the parent.


James Earl Lawson: Let me take the minister's illustration and follow it up. The minister takes the case of minimum of industry and maximum of investment. Will he not agree with me that in the head office of that parent company the only work required to look after the investment income would be the time of a book-keeper in entering that income into the ledgers and books of the parent company? If its industrial operations are part of its enterprise I think the minister will agree that the overhead would be tremendous as compared to the mere overhead of collecting investment income.


Charles Avery Dunning: Surely, that is the whole point.


James Earl Lawson: If that is the whole point, as the overhead for the industrial phase, which is the minimum, is the large proportion of the overhead, is it not right and proper that the expense of that overhead should be charged against the income of the parent company, which is taxable?


Charles Avery Dunning: Wherever the expense is incurred, there it should be taxed.


James Earl Lawson: If that is so, what do you accomplish by this section, if the situation is as the Minister of Finance outlined it?


Charles Avery Dunning: We are going to see, with respect to a parent which is small in operation industrially speaking but large in ownership of investment income, particularly in the form of dividends-because the same thing does not apply if it is interest income; my hon. friend knows that-


James Earl Lawson: Right.
[Mr. Dunning.;


Charles Avery Dunning: -that it shall not be possible, shall I say, to inflate the volume of expenses which may be charged against taxable income. That is a means of preventing the inflation of that book-keeper into a much larger expense than merely a book-keeper.


James Earl Lawson: But you already have power to do that under the act. The income in the hands of the parent is non-taxable because the subsidiary has already paid taxes in respect to that income.


Charles Avery Dunning: That is right.


James Earl Lawson: If you now propose to take a part of an expense actually incurred in the head office and set that over against nontaxable income so that it cannot be deducted as an expense against taxable income, are you not in truth and in fact collecting more tax from that corporation?


Charles Avery Dunning: I do not see that.


James Earl Lawson: Well, I am sorry to say I cannot see otherwise. You are in effect collecting triple tax, because by setting some expenses over against non-taxable income you are increasing the taxable income of the parent company and thereby in effect, in my opinion, taxing the same money three times.


[Stage Direction]
Section agreed to.
On section 9-Limit of deduction.
James Earl Lawson: This in my opinion is
another instance of increasing taxation by the method of introducing a bill of this kind. This section is so involved that I have great difficulty in following it; will the minister explain what its effect will be?


James Lorimer Ilsley: Let us assume that we are dealing with a taxpayer who is a resident of this country and who has an income of 8100,000, of which $25,000 is derived from a foreign source-say the United States, although it would apply to any foreign country. Canada imposes an individual income tax on the income of $100,000. But the United States has imposed a tax on $25,000 of that income in the country of origin. By one of the sections of the Income War Tax Act, I think section 8, a taxpayer when he comes to pay his income tax to us is entitled to a credit of the tax that he has paid in the United States up to the amount of our rate. The question arises, what is our rate? Our rate varies, depending upon the size of the income. And we have said that we take the average rate here-


James Earl Lawson: Excuse me; that is what I do not understand. I understand the min-

Income War Tax Act
ister when he tells me what the law now is. Would he start again from there on?


James Lorimer Ilsley: We take the average rate
as opposed to the rate in the top of the bracket or at the lower end of the scale. For instance, it may be that the rate paid on the $25,000 in the foreign country is more than the rate-


James Earl Lawson: More than the tax which would have been payable in Canada?


James Lorimer Ilsley: More than the tax that
would be payable at the average rate in Canada.


James Earl Lawson: I cannot find "average rate" anywhere in here.


James Lorimer Ilsley: Let us read the section:
Subsection 2 of section 8 of the said act is repealed and the following substituted therefor:
(2) Such deduction shall not exceed the same proportion of the tax otherwise payable under this act as that which the taxpayer's net income from sources within such country (that is the foreign country) bears to his entire net income from all sources-


James Earl Lawson: I do not think the rest touches the subject.


James Lorimer Ilsley: -without taking into account the exemptions


James Earl Lawson: Now what does that mean, what the minister has just read?


James Lorimer Ilsley: Perhaps I had better let that go until I get a little further explanation. The principle of the section is that the taxpayer claims that he has a right to take the rate applicable to the last $25,000 of his income, and we say he cannot take that. But I shall have to take a specific case and give it a little later. It is very complicated. Shall wye let the clause stand?


James Earl Lawson: Let us see whether the minister and I agree on what the present law means. As the law is now, if I have an income from a foreign country, the tax upon which income in Canada is $90, but there has already been $100 deducted from me in the foreign country, I then pay no tax on that income in Canada. Are we correct in that? In other words, at the present time, having computed the Canadian income tax payable on my whole income I am entitled to deduct from that tax the tax I paid upon any portion of that income in a foreign country, with a limit. The limit is that I cannot deduct more than the tax I would have to pay in Canada if I had not paid in the foreign country.


James Lorimer Ilsley: Yes, but the dispute arises just there; what is the tax on that $25,000 in this country in the case I put?


James Earl Lawson: I have been dealing with tax, not income.


James Lorimer Ilsley: I do not want any misunderstanding. The taxpayer is likely to say that the tax on that $25,000 is very high in Canada, because you must take the tax at the top of the scale. We say, No, you cannot do that, you cannot take the tax at the top. The tax on the last $25,000 may be thirty or forty per cent. He will therefore say the tax in Canada was more than $100 and therefore he must have the whole $100 allowed as a credit against the tax in Canada. To that we say: No, you do not take what you would pay on $25,000 at the top bracket; we take in that case one-quarter of the total tax you pay, and we say the Canadian tax is twenty-five one hundredths.


James Earl Lawson: The minister is now dealing with the new proposal?


James Lorimer Ilsley: Yes.


James Earl Lawson: I was trying to get an agreement on what the law now is.


James Lorimer Ilsley: I think the hon. gentleman has correctly stated the law as it is, but I am showing the disputes that may arise and have arisen as to the extent of the credit that the dominion government is obliged to give that particular taxpayer under the law as it now stands without this change. The taxpayer will submit that his Canadian tax on the $25,000 is high, perhaps thirty or forty per cent, because he assumes that the $25,000 is his top $25,000, the last that he earned, the amount that takes him into the high bracket. We are just as much entitled to say it is the first $25,000, but that would not be fair either. If that were the case his Canadian tax might be only $10, and we might give him credit for only $10, which might not be fair. The only fair thing is to put the average tax at the proportion of the total tax that the foreign earned income bears to the total income.


Mr. VIEN:: But is it necessary that we should go to that extent? Our interests in Canada are what the Canadian taxpayer has received from his foreign investments; and irrespective of the laws applicable with respect to income tax in that foreign country, would it not be fairer to say that the net result of any investment we have in that foreign country will be merged with my domestic income, and then, after all the deductions that have been allowed in that foreign country, I will
Income War Tax Act

be taxed on the basis of the net income resulting from my investment? I may be all wrong in my interpretation of the wording of this section, but I am afraid it is going to work havoc with the Canadian taxpayer. Irrespective of the foreign law, it seems to me what the Canadian government should be interested in is the net income the Canadian taxpayer received in Canada. Therefore, if the income from foreign investments has been allowed certain deductions in foreign countries, we should not be interested or concerned in correcting those deductions. We should simply take the net result to the taxpayer in Canada, merge that with his domestic income, and then apply the general schedule.


Mr. STEVENS:: But, Mr. Chairman, if that plan were followed in the case outlined by the minister the Canadian taxpayer would be penalized to a greater extent than under the suggestion made by the minister. Obviously the 825,000 income from a foreign country would be taxed in the lower brackets of that country, but when added to his 875,000 earned in Canada he would be open to taxation in this country on the basis of 8100,000. But if I understood the minister correctly this means that instead of the department allowing him a deduction only on the lowest bracket, namely the rate on 825,000, or granting him the privilege of putting it in the highest bracket, the rate on 8100,000, they propose to strike a compromise between the two and allow a deduction equal to the rate on say $50,000. It is quite conceivable that if the course suggested by my hon. friend were to be followed the taxpayer would receive a lower credit than he would obtain by striking an average.


Thomas Vien: Is that correct?


Henry Herbert Stevens: That is what I gathered from the remarks of the minister.


Thomas Vien: I did not understand it in that way.


James Lorimer Ilsley: If I followed my hon. friend correctly, he has in mind that we may not allow' as much as is paid in the foreign country. I shall have to go over this again; I find difficulty in following hon. gentlemen because they start from new and unthought of points of view.


Henry Herbert Stevens: Stick to your total income of 8100,000, with $25,000 coming from a foreign country.


James Lorimer Ilsley: I shall go through this explanation again. If I understood him aright the hon. member for York South was correct in the proposition he laid down, that if in

respect of the foreign earned income the taxpayer must pay a tax of $100, we give him a credit of 8100 here, but that credit shall not be greater than the amount of the Canadian tax on an income of 825,000. But then the question arises, at what rate? The Canadian tax varies. If he had only $25,000 his tax rate here might be very low, and therefore he would not get a credit of 8100.


Thomas Vien: If I may interrupt the minister at this point, is it not a question of deduction rather than a question of rate, under section 9?


James Lorimer Ilsley: This is a deduction of tax, not a deduction from income.


James Earl Lawson: That is why I cannot understand what the rate has to do with it.


James Lorimer Ilsley: It is a method of getting at the same result; it is a way of coming to the conclusion expressed in the section. To go over the case again, the income from all sources is $100,000, with $25,000 earned in the United States.


James Earl Lawson: That is, a gross income of $25,000 earned in the United States?


James Lorimer Ilsley: Yes.


James Earl Lawson: Before the United States has made any deduction for tax?


James Lorimer Ilsley: Yes. Let us say there is a tax in the United States of $100. That figure may be totally unrelated to an income of $25,000; I do not know, but we will say the tax is $100. Our law says that when he comes to pay his income tax here he is to have that $100 deducted from the tax he pays us. It is not a deduction from income; it is a deduction from the tax, but the deduction shall not be more than the tax Canada would have imposed on that S25,000. The question then arises, how much tax would Canada have imposed? Well, it depends upon whether you consider that to be his first $25,000 or his last $25,000, whether it is at the bottom or the top of the scale. The taxpayer will come along and say it is at the top of the scale. The rate at the top is high; the tax here would have been $150, we will say, and therefore the taxpayer says he is entitled to credit for the entire $100. We may say, "That is not so. You are entitled to credit for only $10." What we say here, however, is that we will take what I described previously as an average rate. That is not strictly technically correct, but that is what it comes to. We say we will take the proportion of that which the income earned in the foreign country bears to the total income from all sources. We will

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take that proportion of the tax and say that is the tax Canada would have levied on the $25,000.


Thomas Vien: But will not the result be that the deductions allowed in foreign countries may be reduced with respect to the Canadian income tax, more than otherwise would be the case?


James Lorimer Ilsley: Correct.


Thomas Vien: Why should not the deductions that are allowed in foreign countries be allowed for income tax purposes in this country?


James Lorimer Ilsley: Section 8 makes it clear that that is not the law. The rates may be high in foreign countries. We do not allow foreign countries, by putting up their rates, to take all our income tax away from us. The deduction can be only up to the tax that Canada would impose; otherwise we should be at the mercy of foreign governments.


Thomas Vien: But would not the better way be, with respect to a Canadian taxpayer, to take the net results of his foreign income?


James Lorimer Ilsley: Of his Canadian income?


Thomas Vien: A Canadian taxpayer receiving income from foreign investments should declare to the Canadian collector the net results of his foreign investments, as part of his income. Would that not be a much fairer basis than by dickering with the deductions allowed in foreign countries?


James Lorimer Ilsley: I do not think so.


Thomas Vien: My opinion is that the Canadian government should be concerned only in this way: "Here is a Canadian taxpayer; what is his net income?" And if all that income, instead of being from foreign investment, were from domestic investment, that income shall be taxed under the schedules provided under the Canadian law respecting income tax? That is my view of it. I would say, irrespective of what other countries prescribe in respect of deductions: "What is the net result to you as a taxpayer from your foreign investments?" Then if the yield from the foreign investment or the net result is so many thousand dollars, those thousands of dollars involved are merged into the Canadian income.


James Lorimer Ilsley: That is double taxation.


Thomas Vien: Would that be the result?


James Lorimer Ilsley: Yes, both countries would be taxing, and it would not be fair.


Thomas Vien: I do not see it.


Jean-François Pouliot: Leaving aside all legal cobwebs, may I ask the minister if the purpose of the law is not that of encouraging investment in Canada?


James Earl Lawson: No, it is to take more money out of the income tax payer.


James Lorimer Ilsley: That feature is now in the act, of course, and especially in relation to the non-resident-owned investment corporation.


Frederick George Sanderson: Shall section 9 carry?


James Earl Lawson: No. The minister told us he was going to allow the section to stand until he could give us an explanation we could understand.
Mr. ILSLEY': This is the best I can do with it. What is not clear now?


James Earl Lawson: If I might be permitted to use the vernacular, I would say that it is still just as clear as mud. Let me try to take a concrete illustration. We will say that I am an income tax payer and that in making up my income tax I am paying on a taxable income of $4,000. I tried to make a rapid computation while the minister was talking to the hon. member for Outremont, and my computation leads me to these figures: On the first $2,000 I pay two per cent, or $40 tax. On the next $1,000 I pay three per cent, or $30, making a total, so far, of $70. On the next $1,000 I pay four per cent, or $40.


James Lorimer Ilsley: Would the hon. member give the amounts again?


James Earl Lawson: I am trying to do this in my head. We begin with the assumption that I have a taxable income of $4,000, of which $1,000 accrued in the United States. I received only $900 from the United States because they have taken $100 from me in taxation. Hon. members will note that I am getting down to a simple illustration, and have discarded astronomical figures. When I come to make up my Canadian income tax I say I have a taxable income of $4,000, do I not?


James Lorimer Ilsley: Yes.


James Earl Lawson: Although in fact I have received in my own hand only $3,900.


James Lorimer Ilsley: Correct.


James Earl Lawson: The tax is two per cent on the first $2,000, which is $40.


James Lorimer Ilsley: Yes.
44S0
Income War Tax Act


James Earl Lawson: Then, the tax is three per cent on the next $1,000, or $30, making a total, so far, of $70.


James Lorimer Ilsley: That is correct.


James Earl Lawson: Then my tax is four per cent on the next $1,000, or $40, making a total of $110 I have to pay in taxes.


James Lorimer Ilsley: Yes, that is correct.


James Earl Lawson: I have made up my income tax and it shows I have to pay an income tax of $110 to the Canadian government. But I say I have already paid $100 in taxation in the United States. Under the present law how much can I deduct from the $110?


James Lorimer Ilsley: It would be $27.50.


James Earl Lawson: All right.


James Lorimer Ilsley: Under the present law, do
you say?


James Earl Lawson: Yes, under the present law.


James Lorimer Ilsley: And we say this is a clarification of the present law.


James Earl Lawson: Excuse me, but under the present law what may I deduct from the $110 because a foreign country, the United States, has taken $100 from my income?


James Lorimer Ilsley: As we interpret the law, $27.50.


James Earl Lawson: And how does the minister arrive at $27.50?


James Lorimer Ilsley: One thousand over four
thousand, or one-quarter of $110.


James Earl Lawson: With the law as it is at present.


James Lorimer Ilsley: That is the law at present, as we interpret it; and this section does not change it, but declares it.


James Earl Lawson: Do you say we are about to pass a section which does not change the present law at all?


James Lorimer Ilsley: It does not change the present practice, and we think it does not change the present law.


James Earl Lawson: Then it seems to me we have had a lot of discussion for nothing, if that is so. May I have the assurance from the minister that in the administration of the income tax grants in the past-we will take the tax year 1937, because we have not yet had a chance to assess 1938-that was the basis on which credits were allowed for deductions on incomes from foreign sources?


James Lorimer Ilsley: Yes, the hon. member may have that assurance; that is correct.


James Earl Lawson: And the minister says that all he is doing in this section is to declare what the law already is, as administered by the department?


James Lorimer Ilsley: Yes, we are making it clearer that the present practice will be the law from now on, and we think it has been the law in the past.


James Earl Lawson: Then if that is so it does seem to me a pity the minister did not say so about 12.30 this afternoon.


James Lorimer Ilsley: This section was not before us at 12.30 this afternoon. It has been before us only in the last fifteen minutes.


James Earl Lawson: No, it was before the committee at the lunch hour adjournment.


Frederick George Sanderson: No.


James Lorimer Ilsley: Not this section.


James Earl Lawson: Probably I am mistaken about that.


Thomas Vien: My view is that if in the United States I have an income of $15,000 and deductions are being made from that income, under the law of the United States, which brings the taxable revenue to $10,000, I should not be penalized in Canada to the extent of saying that if the income had been earned in Canada, instead of there being a deduction of $5,000 there would have been one of only $2,000, and that therefore the taxable income in Canada instead of being $10,000 should be $13,000. I do not believe the income earned by a Canadian taxpayer in a foreign country should be penalized in Canada to any greater extent than it is being penalized in the foreign country in which it is earned. In so many words, if I understand section 9 correctly it means that if in Canada on an income of $15,000 a deduction of only $2,000 would be allowed, but in United States where such income is earned a deduction of $5,000 is allowed, for Canadian income tax purposes the income would be $13,000 instead of $10,000.


James Lorimer Ilsley: It does not really give a deduction from income at all.


Thomas Vien: Then I must confess my complete imbecility in understanding section 9, because that section does not apply to rates at all. It applies to deductions.


James Lorimer Ilsley: No, to taxes.

Income War Tax Act


Thomas Vien: I speak with all due deference, but if the deduction in the United States is $5,000-


Henry Herbert Stevens: It would be plainer if the hon. member used the term "tax in the United States.''


Thomas Vien: The bill speaks of deduction.
Mr, STEVENS: That is after it comes over here, that is deducting the United States charge.


Thomas Vien: I understand that point. If I am wrong, I want to be corrected. My understanding is that if I have a certain income in the United States or in any foreign country, under section 9 I am entitled to a certain deduction from my income for income tax purposes, but that I shall not be allowed for the purposes of computing my income tax in Canada a greater deduction than such income would have been entitled to under Canadian law. If I earn a certain income in a foreign country it seems to me that for the purposes of the Canadian income tax I should be entitled to the same deduction that is allowed in the foreign country.


[Stage Direction]
Section agreed to.
On section 10-Payment in respect of right to use of works whether copyrighted or not.
James Earl Lawson: As I understand it, this is increasing from two per cent to five per cent the tax on all remittances made from this country to foreign countries in respect of motion picture films.


James Lorimer Ilsley: Correct.


James Earl Lawson: Is a similar deduction made by the British government in respect of moneys remitted from Great Britain to the United States in connection with United States motion picture films exhibited in Great Britain?


James Lorimer Ilsley: I have not that information.


James Earl Lawson: Does the United States
impose a tax of this kind on moneys remitted by firms in the United States to Great Britain in connection with British films shown in the United States?


James Lorimer Ilsley: I have not that information either.


James Earl Lawson: I presume there is no
precedent so far as taxation of this kind is concerned, and that we are paving the way for a new avenue of taxation.


James Lorimer Ilsley: Oh, no, not at all. For years we have taxed rentals and royalties at five per cent.


James Earl Lawson: Here you are not taxing rentals or royalties; you are taxing the whole remittance, which might include capital cost and everything.


James Lorimer Ilsley: We are taxing rentals for films.


James Earl Lawson: For years we have taxed royalties and rentals, but in this amount there is included capital costs. When the original section of this act was passed provision was made for a five per cent deduction as against royalties, and so forth, because it was not possible to determine that proportion of the total remittance which represented royalties. You placed a tax in this case of two per cent on the whole or five per cent of forty per cent, rather than five per cent on the whole. I have not time or I should like to read to the minister the declaration made by the Minister of Finance in 1936 when he stated clearly that the reason a two per cent deduction was allowed on films was that only a proportion of it represented royalties. In this case we are deducting five per cent of the whole and are creating a precedent for the United States with respect to British films and for Great Britain with respect to United States films.


[Stage Direction]
Section agreed to.
Section 11 agreed to.
On section 12-Personal corporation dividends.
James Lorimer Ilsley: I have an amendment to suggest to this section, to strike out the word "gains" in line 26. The subsection reads:
When the total income earned by a personal corporation since its incorporation has been taxed against and received by its shareholders, any further dividends declared and paid by such a corporation out of capital gains shall not be liable to taxation in the hands of the shareholders.
The intention of the amendment is to cover dividends declared out of capital.


Mr. CARDIN:: I move accordingly.


Mr. McCUAIG:: Is not this amendment
inconsistent with the original act? The original act states that dividends shall be deemed to be paid out of income, whereas the amendment says dividends "declared and paid out of capital."


James Lorimer Ilsley: We are dealing with personal corporation dividends. We do not
Income War Tax Act

authorize; we simply say that after all earnings are distributed and taxed, any further dividends declared and paid out of capital shall not be liable to taxation in the hands of the shareholders.
Mr. MeCUAIG:	The original act states
that dividends declared and paid shall be deemed to be income, and here it is stated that dividends are paid out of capital. How can they be paid out of capital when the first part of the section states that dividends declared and paid shall be deemed to be paid out of income?
Mr. ILSLEY; From what section is the hon. member reading?
Mr. MeCUAIG: Section 21, subsection 6 of chapter 97, revised statutes of Canada, 1927.
Mr. ILSLEY; That subsection refers to a date more than anything else. The subsection reads:
Dividends actually declared by a personal corporation after the thirty-first day of December, one thousand nine hundred and twenty-four, shall be deemed to be paid out of income earned after said thirty-first day of December, one thousand nine hundred and twenty-four, so far as the same is available and to that extent shall not be liable to further taxation in the hands of the shareholders.
What is inconsistent in the amendment proposed? The amendment simply says that once you tax all the income of a personal corporation, you cannot keep on just because a division of assets takes place in the form of a dividend. That is the effect of the amendment, and I do not see any inconsistency; certainly no practice is authorized which is inconsistent with the practice now being carried on.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
On section 13-"Unreasonable payment to non-resident affiliates."
Charles Hazlitt Cahan: I suggest that the minister should lay down in this section some basis upon which the taxpayer may ascertain what is deemed by the law reasonable and unreasonable. It says in line 35 and the following lines that:
. . . such payment may, for the purposes of determining the income of such person, be adjusted by the minister to a reasonable basis-
What is a "reasonable basis?" Does it depend entirely upon the judgment of the minister? And if there is a reasonable basis which is to be followed, in such case should [Mr. Ilsley.l
not the reasonable basis be established by the act rather than be left to the discretion of the minister?


James Lorimer Ilsley: The only test I can suggest is the one which is expressed in the earlier part of the section, which refers to payments which are not in conformity with similar payments made by other persons in the same kind of business. Or we could take out the words "or which is unreasonable," which I am prepared to do.


Charles Hazlitt Cahan: I believe the provision would then be somewhat clearer.


James Lorimer Ilsley: I will ask my colleague to move the deletion of the words "or which is unreasonable" in section 13. Perhaps I shall think of some other test later, but I cannot now.


Mr. POWER:: I so move.


Charles Hazlitt Cahan: Would that not involve the striking out of the words in line 37 which are to the same effect,-"a reasonable basis"? I understand of course that "an amount which is not in conformity with similar payments made by other persons in the same kind of business" is a fair guide, because the minister can ascertain what similar payments are made by other persons in the same kind of business. But if you strike out the words "or which is unreasonable" in line 35, I suggest that there should be some change also in lines 37-38, in which appear the words "a reasonable basis."


James Lorimer Ilsley: I understand that, yes.


Mr. TAYLOR (Nanaimo):: Could the minister use the expression, "or which grossly exceeds the average of such payments"?


James Lorimer Ilsley: I do not think that that would add very much to it; and I do not like the word "grossly," either, because it is inexact. I am trying to think of some wording which will meet the point suggested by the hon. member for St. Lawrence-St. George. I wonder whether "the foregoing basis" would be sufficient.


Charles Hazlitt Cahan: Yes. That makes it quite clear, I think.


James Lorimer Ilsley: Would the word "accordingly" be better?
Such payment may, for the purposes of determining the income of such person, be adjusted by the minister accordingly.


Charles Hazlitt Cahan: I would agree to that.


James Lorimer Ilsley: I think that would do it.


Charles Hazlitt Cahan: That refers back to the case established in line 35.

Income War Tax Act


James Lorimer Ilsley: Yes, I should think so. The section would then read as follows:
Where any person carrying on business in Canada pays to a non-resident as price, rental, royalty or other payment for the use of any property or reproduction thereof, or for any right, an amount which is not in conformity with similar payments made by other persons in the same kind of business, then such payment may, for the purposes of determining the income of such person, be adjusted by the minister accordingly unless he is satisfied that the payor and the recipient are not associated, controlled one by the other, or controlled by the same interests.
The amendment is. that the words "to a reasonable" in line 37 and the word "basis" in line 38 be struck out, and the word "accordingly" substituted therefor. My colleague the Minister of Pensions and National Health will move accordingly.


Charles Gavan Power: I so move.


Mr. ESLING:: If a man puts 3100,000
into a building in Ottawa for the purpose of securing revenue or rentals, and remits $10,000 by way of rental receipts, surely he is subject to a five per cent deduction. In what respect does the remittance received from the rentals of these films differ from any other investment in Canada?


Charles Hazlitt Cahan: The purpose of this section, I understand, Mr. Chairman, is to prevent collusion.


James Lorimer Ilsley: Yes.


Charles Hazlitt Cahan: That is all. You are
simply taking a means here of preventing collusion between the payee and the recipient.


James Lorimer Ilsley: What is the hon. member's
difficulty? I do not know that there is any particular difference between these and other remittances. What makes the hon. gentleman think that there is?


William Kemble Esling: I was just referring to the
report of the Department of Trade and Commerce. It shows the rentals received by these various film agencies, sixty-three in number, which are controlled by the picture producers in the United States, as the report says to be $8,500,000. They deduct, as the report shows, $1,060,000 for wages, as they put it, and then from the balance they deduct thirty-five per cent to cover expenses of distribution of these various agencies, all of which are controlled by the picture producers in the United States. Then they remit the balance, having a clear clean sheet, as profits practically from the rental of these films. Why should there be any deduction? No
matter how small a remittance an individual makes he must pay the five per cent, but here is a big producer remitting $4,000,000 or $5,000,000 to the United States and the government is so much concerned, so generous in its deductions. It says to this producer, "Instead of paying five per cent, you need pay only two per cent." That is what it amounts to.
Mr. ILSLEY. We have changed that to-day.


William Kemble Esling: But does not this section help them?


James Lorimer Ilsley: This section does not help them.


[Stage Direction]
Amendments agreed to.
Section as amended agreed to.
On section 14-"Transfer of the right to income."
James Earl Lawson: What is intended to be accomplished by this proposed1 amendment which is not already accomplished by subsection 3 of the same section?


James Lorimer Ilsley: This deals with the transferring of income without transferring property.


James Earl Lawson: That answer may seem obvious, but does not subsection 3 already cover that?


James Lorimer Ilsley: No.


James Earl Lawson: Possibly I could shorten the question. Is this proposed to meet the decision in the Malkins case, which was appealed from British Columbia to the exchequer court?


James Lorimer Ilsley: This section is not concerned with that case. The amendment is to prevent the evasion of tax by transferring the right to revenues. The other section which the hon. gentleman has in mind does not serve that purpose. Section 32 is the main section on transfers to evade taxation. It reads:
Where a person transfers property in trust and provides that the corpus of the trust shall revert either to the donor or to such persons as he might determine at a future date or where a trust provides that during the lifetime of the donor no disposition or other dealing with the trust property shall be made without the consent, written or otherwise, of the donor, such person shall nevertheless be liable to be taxed on the income derived from the property transferred in trust or from property substituted therefor as if such transfer had not been made.
Avoidances are attempted or actually practised by transferring the right to income.
Income War Tax Act


James Earl Lawson: Without giving the property to the trustee.


James Lorimer Ilsley: Yes.


James Earl Lawson: Was it held that that was outside subsection 3?


James Lorimer Ilsley: The Department of Justice says that the present section 32 does not prevent transfers of that kind.


[Stage Direction]
Section agreed to.
Section 15 agreed to.
On section 16-"Exemption of metalliferous mines."
Louis-Prudent-Alexandre Robichaud: The phraseology in the third line is inaccurate. It speaks of any metalliferous mine "which comes into production after the first day of May, 1936, and prior to the first day of January, 1943." As it stands there it applies to something in the future. It should be "which came or may come," and so on.


James Lorimer Ilsley: The phraseology suggested by the hon. member would undoubtedly be correct if this were a new section, but it is an amendment to an old section. There can be no misunderstanding about what is meant. The section has been on the statute book since
1936.


Louis-Prudent-Alexandre Robichaud: When the old act was passed it related to something in the future. I do not think the same words should be used now in reference to something three years back. Of course, it will be understandable.


[Stage Direction]
Section agreed to.
On section 17-Capital expenditure allowance.
James Lorimer Ilsley: There is an amendment. After the word "Canada" in line 40, there should be inserted the words " during the said period."


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
On section 18.
James Earl Lawson: This section provides that all amendments in this bill shall apply to the taxation period 1938 and all taxation periods ending in that year. There are corporations whose fiscal year ends, say, March 31, 1938, and the period for which they are then making a return commenced on the first day of April,
1937.	They are affected by this amendment and so is every corporation who had a fiscal period ending anywhere in 1938. The Minister

of Finance attempted to answer my objections in the case I stated to-day in which the parent company was paying as part of its expenses the salaries of four officials who were looking after the affairs of subsidiaries. He said that all that you have to do to meet that situation is to remove them from the payrolls of the parent company and put them on the payrolls of the subsidiaries. The income tax returns having been filed and the books closed for the fiscal year that ended in ,1938, even possibly as far back as January 31, 1938, how will you go back now and transfer those salaries to the subsidiaries? It cannot be done, and that is the point I was trying to make when that section and two or three others were before the committee. The same thing applies to the other sections that we were discussing-the three sections which increase taxation, the one about foreign dividends-


James Lorimer Ilsley: The returns covering last year have just been filed and are subject to adjustment. This is the practice. It has been argued against by every opposition and persisted in by every government since I have been in the house.


James Earl Lawson: To do what?


James Lorimer Ilsley: To make income tax changes applicable to the year for which returns have just been filed.


James Earl Lawson: I am merely illustrating the impossibility of doing what the Minister of Finance suggests could be done in fairness to taxpayers; I say it cannot be done. The money has been paid, the books are closed, the returns have been made.


James Lorimer Ilsley: Some adjustments may be possible.


James Earl Lawson: That may be as a matter of administration.


[Stage Direction]
Section agreed to.
Frederick George Sanderson: Shall I report the bill?


James Earl Lawson: I want to make one or two general comments with respect to this bill. I made a statement in this house in discussing the budget as to the quantum of taxation being collected by this government. I took occasion to point out that they have been the greatest tax collectors in the history of Canada. Some hon. member on the other side, following me, took occasion to point out that there were no tax increases in the budget of this year. I should like to pause here to make it clear that although no tax increases were indicated in the budget of this year, the

Income War Tax Act
net result of this bill is further to increase the taxation upon the people of this country, by sections 6, 8 and 9 of the bill if not by others. Amendments of the kind contained in this bill, constituting changes in the income tax, excise or other tax statutes, should be clearly set out in the budget proposals of the Minister of Finance. They should not, as in this case, come as a whole series of amendments affecting taxation imposed upon the people, tied on to one single thing mentioned by the Minister of Finance in his budget and to one single resolution that went before the ways and means committee, having to do with the proposed exemption from taxation in respect of construction costs. It is important that it be recorded in Hansard that though we were led to believe that the net result of the budget proposals would be a reduction in taxation to stimulate construction through the amendments to the Income War Tax Act contained in this bill, the government is making a valiant effort to take out of other income tax payers the contemplated reduction in taxation affecting those who embark upon new construction.


James Lorimer Ilsley: The sections the hon. gentleman referred to were Nos. 6, 8 and 9. Section 9 makes no increase in taxation; it is a clarifying section. The hon. member criticized me for not stating that at the outset, but it was stated in the explanatory note opposite the section. Moreover, it conforms to the practice in other countries.
On section 6, limiting the allowable interest on succession duties to one year, we had considerable debate. But this section merely brings the matter of succession duty interest into conformity with a principle that is applied universally, namely that the interest allowed shall be the interest accruing in the year of taxation.
Section 8, regarding the allocation of expenses, is I think so manifestly fair that it could hardly be regarded as a substantive measure for the increase of taxation. It is an administrative provision more than anything else, preventing companies from deducting from income expenses which were not incurred in the earning of that particular income.
I do not know that these sections justify the conclusions to which the hon. member has come. I do not know that the conclusions to which he has come are so very damaging to the government, but in the interests of accuracy I think I should say that the statement that the government has increased taxation by this bill is not justified.


James Earl Lawson: Let me see how inaccurate I am. I shall not deal with the matter in detail, because I do not want to take up time in repetition. But let me take the minister on as to his first statement. He says the amendment contained in section 6 providing for deduction of annual interest only is in conformity with the practice. I hesitate to say it, but I doubt very much whether any such practice ever prevailed in the income tax branch of the Department of National Revenue. Let me say why. The statute specifically provided to the contrary.


James Lorimer Ilsley: I said the principle universally applied, not of course the practice in this particular instance.


James Earl Lawson: Let me deal with the section. The section which is now in the act is being repealed. Section 5, subsection 1 of the Income War Tax Act now provides:
"Income" as hereinbefore defined shall for the purposes of this act be subject to the following exemptions and deductions-
(1) Interest paid in respect of succession duties or inheritance taxes.
By this amendment you do not propose to allow all interest paid in respect of inheritance taxes or succession duties, but only that portion of .the interest paid accruing due within the year in which the payment is made. If anyone suggests or expects me to accept the suggestion that that amendment is merely to make our statute conform to the practice, then I am sorry to say I cannot accept it.
Bill reported.


Walter Edward Foster: When shall the said bill be read the third time?


Some hon. MEMBERS:: Now.


James Earl Lawson: Can this bill be read the third time now except by consent of the house?


Walter Edward Foster: By leave of the house. I thought there was no objection.


James Earl Lawson: I am sorry; I am objecting. I may want to say something on the third reading of the bill.


Walter Edward Foster: Next sitting of the house.



EXCISE ACT AMENDMENT

[Stage Direction]
Hon. J. L. ILSLEY (Minister of National Revenue) moved the second reading of Bill No. 143, to amend the Excise Act, 1934.
Motion agreed to, bill read the second time, considered in committee, reported, read the third time and passed.
Special War Revenue Act

[Stage Direction]
Hon. J. L. ILSLEY (Minister of National Revenue) moved the second reading of Bill No. 144, to amend the Special War Revenue Act.
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Sanderson in the chair.
On section 1-Excise tax of three per cent on duty paid value.
Charles Hazlitt Cahan: Does this merely impose the excise tax of three per cent on the duty paid value only upon chose articles which enter under the general tariff?


James Lorimer Ilsley: That is correct. It is now limited to goods imported under the general tariff.


Hugh Alexander Stewart: What is the estimated loss of revenue through the abandonment of this tax?


James Lorimer Ilsley: It is estimated in the budget speech to be $14,000,000.


[Stage Direction]
Section agreed to.
Section 2 agreed to.
On section 3-^Schedule III amended.
James Lorimer Ilsley: There is an amendment to be moved to this section consequential upon a change in the customs tariff. There was a change in item 209b, a nicotine item, and the amendment is to make this section conform to that change. That is an exempt item, and the wording must be changed. The exemption is enlarged.


William Daum Euler: I move:
That subsections (4), (5) and (6) of section 3 be renumbered as subsections (5), (6) and (7), and the following be inserted as subsection (4):-
"(4) Item 209b and the enumeration of goods therein contained under the heading 'Customs tariff items' in the said schedule are struck out and the following item and enumerations are substituted therefor:-
'209b-Nicotine; salts of nicotine; preparations containing nicotine in a free or combined state, for dipping, spraying or fumigating, n.o.p.' "


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
Section 4 agreed to.
James Lorimer Ilsley: There is an amendment to be moved now, in relation to a tax on matches when put up in packages of less than one hundred. It is a minor matter, to correct an anomaly that exists at the present time.

There appear to be two rates of taxation on matches when put up in packages of thirty. This is more or less a clerical matter; in some way or other they overlap, so that two rates are applicable to that particular number.


Hugh Alexander Stewart: Does this amendment
make the rates uniform, no matter what may be the number?


James Lorimer Ilsley: It does exactly that.


Henry Herbert Stevens: And clarifies it?


James Lorimer Ilsley: Yes. I have the explanation here, but it is a very minor matter.


William Daum Euler: I move:
That the act be amended by inserting the following as section 1 (and by renumbering the following sections accordingly):
"1. Subsection two of section seventy-six of the Special War Revenue Act, chapter one hundred and seventy-nine of the revised statutes of Canada, 1927, as enacted by section eleven of chapter fifty of the statutes of 1932-33, is repealed and the following substituted therefor:
'(2) When matches are put up in packages containing not more than fifty matches and not less than twenty-six matches, each, the tax shall be payable at the rate of three-eighths of one cent for each package, and when matches are put up in packages containing not more than twenty-five and not less than twenty-one matches each, the tax shall be payable at the rate of three-sixteenths of one cent for each package, and when matches are put up in packages containing less than twenty-one matches each, the tax shall be payable at the rate of three-twentieths of one cent per package'."


[Stage Direction]
Amendment agreed to.
Section 5 agreed to.
On the title.
Mr. McNIVEN:: Does binder twine
imported from Holland still carry the three per cent excise tax?


James Lorimer Ilsley: I believe that is one of the most favoured nations.


Donald Alexander McNiven: It did bear that tax
until this year, in any case.


James Lorimer Ilsley: By the bill we have just put through, the special excise tax applies only to importations under the general tariff.


Henry Herbert Stevens: Which are very small.


James Lorimer Ilsley: Yes, and all importations
from Holland come under the intermediate tariff or most favoured nation rate. Therefore the three per cent would not be imposed.
Bill reported.


Walter Edward Foster: When shall the bill be read the third time?

Salt Fish Board


Charles Hazlitt Cahan: I do not wish to object to this
bill being now read a third time, nor do I wish to enter upon any discussion of the merits or demerits of this amendment for the repeal of the existing three per cent excise tax on the duty paid value of goods. We have discussed the matter already, and certainly grave differences of opinion arose during the budget discussion as to the merits of this amendment. All I wish to suggest is that when the bill is given third reading it be voted "on division," indicating that the difference of opinion still exists.
Mr. ILSLEY moved the third reading of the bill.
Motion agreed to on division, and bill read the third time and passed.



CUSTOMS TARIFF

[Stage Direction]
Hon. CHARLES A. DUNNING (Minister of Finance) moved the second reading of Bill No. 141, to amend the customs tariff.
Motion agreed to, bill read the second time, considered in committee, reported, read the third time and passed, on division.


[Stage Direction]
Hon. J. E. MICHAUD (Minister of Fisheries) moved the second reading of Bill No. 130, to provide for the constitution of a salt fish board.
Charles Hazlitt Cahan: Would the minister give an
explanation?


Alan Webster Neill: Is the minister in charge of
the bill not going to make an explanation? I wish to speak, but courtesy is usually extended to him to make his explanation first.


Charles Hazlitt Cahan: Otherwise the minister cannot reply, he ought to make his explanation now.


Ernest Lapointe: He has
the right of reply. This is a substantive motion.


Abraham Albert Heaps: Explain the bill.


Mr. MICHAUD:: I have no objection to
making an explanation, although I believe that most of the necessary explanation was given when the resolution upon which the bill is based was accepted by the house. I would point out again, however, that under the bill it is intended to provide for the
constitution of a board to help the export of salt fish from Canada. It is well known to those who live in the provinces adjoining the Atlantic coast that most of the fishermen are interested in processing their fish by salting it for market and export purposes. Compared with the total production, only a small quantity is consumed in Canada. Most of it is exported to foreign countries.
In the last few years the countries to which we used to export fish have been difficult to deal with. For instance, at one time Italy offered a valuable market for our fish from the north shore of New Brunswick and the Gaspe coast, but to-day Italy is completely lost as a market for fish. All this has taken place as a result of conditions over which we have had no control and which at the present time would be difficult to correct. Spain at one time absorbed considerable quantities of salt fish, but to-day, for reasons over which we have no control, the markets in Spain have been absolutely closed to our fish.
In past years South America and the West Indies offered a market for the great part of our salt fish, but, for reasons better known to some other hon. members, our facilities for marketing in South American countries are not as good as they were. In many of those countries our products have been removed from the market, and the opportunity to sell our fish has been greatly reduced.
We have been able to market a considerable quantity of salt fish in the West Indies, but, as is well known, the purchasing power of the people of the West Indies is low, and our fishermen do not obtain a return sufficient to cover even the cost of production, which in recent years has been dropped to a very low point.
Our fishermen have been unable to export the product of their labours and have not succeeded in obtaining returns sufficient to support themselves and their families. As a result they are asking the government for help.
Another factor worthy of consideration is that of the competition from foreign countries which have established organized methods of marketing, through governmental or semigovernmental agencies, and have also bonused the processing and export of their dried fish. With all these factors to contend with, the house can readily see the difficulties our fishermen have to meet.
Some may contend that the fishermen should change their methods and revert to the production of fresh fish. However, fish

Salt Fish Board

is perishable product which cannot be kept very long. Along the north shore of the St. Lawrence, on the Gaspe coast, on the north shore of New Brunswick, in Prince Edward Island, on the east and west coasts of Nova Scotia, and around Cape Breton, the people live in small villages where there are no facilities for keeping fish fresh. At one time these people were able to live upon the returns of their fishing operations, but to-day they cannot sell their fish. Those who are fortunate enough to find an agency through which to dispose of their catch find that the return is not sufficient to support themselves andi their families. For years those connected with the fishing industry or those interested in the welfare of these people have tried to find means of coping with this situation. Suggestions have been made which have been carefully looked into and studied.
In 1938 the fisheries branch of the Canadian Manufacturers' Association, eastern division, held a convention at Lunenburg, Nova Scotia, and passed a resolution on September 12, 1938, containing the following paragraph: In the sections of coast not favoured with rapid transportation facilities affording access to fresh fish markets, salting, drying and pickling is the only means of taking care of surplus catches. Without a reasonably profitable outlet for fish in salted and dried state, there can be no general prosperity, even in a modest way, in the fisheries of the Atlantic coast. Much of the distress in many fishing districts in eastern Canada can be ascribed directly to the decrease in salt fish production and the low prices due to conditions in the foreign markets for such fish.
The fisheries committee of the Halifax board of trade has always taken a keen interest in the welfare of the fishermen and in the industry generally.


Mr. FINN:: I do not think so.


Joseph Enoil Michaud: This committee has made recommendations during the course of the year, one of which was worded as follows:
It being obvious that a large number of our Atlantic coast fishermen are not in a position to market their production in a fresh state for domestic consumption, we are of the opinion that help to the fishermen must mostly be found through an effort to rehabilitate the export dried fish trade.
We have received representations from associations of fishermen in many parts of the eastern provinces. I have one dated April 19, 1939, from the fishermen's association at Caraquet, New Brunswick. This is a district where in the past large quantities of the best quality fish were produced and exported. This letter is in French, but my translation is:
We have still more than 600 quintals of dried codfish on hand, and we respectfully ask you to be kind enough to help us to market them. 
The northern part of New Brunswick used to produce large quantities of dried fish and the people were relatively prosperous when they could market their fish. The fishermen of Shippigan, New Brunswick, passed a resolution on February 8, 1939, containing the following:
Whereas many fishermen have not yet been able to sell their fish and have still large quantities on hand, we ask you to be kind enough to dispose of same.
The fishermen around Lower Caraquet, New Brunswick, used to be prosperous and produced large quantities of dried fish. The following letter was written on their behalf on February 21, 1939:
I am sorry to state that the conditions of our poor fishermen have not been improved since last year, although, on the whole, the catch has been satisfactory; however, prices were very low and a fairly large number of our fishermen have yet notable quantities of their fish on hand, without any prospects for sale in sight.
I have endeavoured to show by these quotations what is in the minds of these fishermen. I should like to quote now from a letter written by an individual fisherman at Bathurst, New Brunswick. This is dated April 6, 1939, and reads in part:
We are cod fishermen and our codfish taken last fall is still in our hands, unsold.
He concludes by asking the department to sell his fish. In view of the many requests received, the department felt that the time had come to organize some body to help these people. Therefore it was decided to recommend to the house the constitution of a salt fish 'board which would be made up of men expert in the business. Their duty will be to investigate and report upon the marketing of salt fish in export trade and to explore the possibilities of opening up new markets. They will advise and recommend to the minister a plan or plans for the exporting of salt fish. They will study and recommend various methods of curing, packing and marketing fish to meet the requirements of consumers in foreign countries, and they will generally direct the processing and marketing of salt fish. The board will also give assistance to these people in the form and manner that may be deemed expedient, but not exceeding twenty-five per cent of the market value of the fish at the time of export. To meet such cases as I have already stated to the house, the board may also act as agent for individual fishermen and producers to export their fish for them and pay over to them the returns.
I have already said that in my humble opinion this board is necessitated by the needs of the fishermen. On account of the location

Salt Fish Board
of these people, the conditions under which they have been 'brought up, and the conditions under which they are now living and trying to operate, and because of the competition they have to meet in foreign markets from countries that have already in existence boards such as we are trying to organize,
I feel it is the simple duty of this parliament to approve the suggestions which are. 'being made by the department and to pass this legislation.
It might be said that this board should take in all the fish trade-fresh as well as salt fish. Well, 'it might 'be an advantage to the individual fisherman if the government would undertake to sell all the fish which is being taken out of the ocean. But we feel that the fresh fish branch of the industry is not meeting so much competition as the salt fish branch. In fact, fresh fish caught in. Canada is sold, first in the local market, then in the United States or Great Britain; this applies mostly to all varieties of fresh fish including canned salmon, halibut, and frozen salmon from the Atlantic coast. In those markets our exporters and dealers in fresh fish do not meet the same amount of competition as dealers in salt fish have to face in foreign countries.
We have been helping indirectly in many ways the fresh fish industry. We have tried to increase consumption in our local markets; we have tried, by negotiating agreements and canvassing markets with the object of obtaining preference for the product of our own industry, to increase the volume of export to foreign countries. To market all the fish through a government agency would be difficult if not impossible of accomplishment and would simply add to our predicament by inducing people to catch more fresh fish at a time when there are more than we can handle or market.
Therefore we feel that, by removing the pressure from the fresh fish industry, by regulating the flow of export of our salt fish, we shall assist indirectly but materially the fresh fish business and bring about the prosperity of those engaged in the industry.
For these reasons I believe that the proposition which is now placed before the house is a fair one. It is a modest one, but I believe it will meet the immediate requirements of those whom under the circumstances it is intended to help.


Alan Webster Neill: I am sure the house will appreciate the action of the minister in yielding to our requests that he should give us the information which he has just put on the record. Certainly it would 71492-2821
have been unfortunate if we had had to debate the matter with nothing before us but the bill itself, and the somewhat vague resolution. His remarks help us to understand the situation. They were full of information, and appropriate.
Nevertheless, I find some difficulty in reconciling the bill with the resolution on which it is based. The resolution dealt with certain general remedies which it indicated, and also suggested that assistance might be given. In speaking to the resolution the minister stated:
It is intended to provide a limited amount of money to enable the board to carry on its work, and provide some assistance to the fishermen who cannot make enough out of their industry. . . .
And so on. The idea, of course, was to help out the fishermen, who, as we know, are in dire need. It was a worthy picture, and very desirable that we should give this assistance to this class of men who, I am afraid, are trying to hang on to a dead or a dying industry.
One supposed from the remarks made by the minister when the resolution was under discussion that it would apply to all Canada, although the answer he gave to hon. members from Vancouver-North, South, and East, I think-made us doubtful on that point. But the minister assured us that nothing would prevent the possibility of British Columbia- or the Pacific coast, which is the same thing- participating. The bill, however, puts the matter in a somewhat different light. It seems to me that it is a complement, or a supplement-I do not know which you would call it-of an item which has since appeared in the supplementary estimates:
612. To provide for assisting the salt fish branch of the fishing industry, $800,000.
That is reasonably close to a million dollars. Perhaps I am looking at the matter from the wrong point of view, but on the face of it, it looks to me that the purport of the bill is one of straight bonusing of the maritime fishermen by giving them $800,000 this year less the cost of administering the money; and apparently it leaves the Pacific coast out of the picture. When the resolution was before the house the minister said, in reply to the hon. member for Vancouver South (Mr. Green):
It is not the intention of the government to make this board exclusive in any way. It is not intended to eliminate the possibility of extending the operations of the board to the Pacific coast.
Again, in answer to a further question by the hon. member for Vancouver South-
Is it intended that the act shall apply to the Pacific coast?
Salt Fish Board

-the answer given by the minister was:
The salt fish of the Pacific coast can come under the act; it is not intended to exclude it.
Further on he 6aid:
There is nothing in the bill-
He had the bill in front of him, no doubt; we had not.
-to exclude British Columbia or to prevent it from being represented. There is nothing definite about it, either.
Then the hon. member for Vancouver South asked where these three men constituting the board would come from: would they all come from the maritimes? The minister replied that he did not know. Let us look at the bill itself, page 2. It reads:
The headquarters of the board shall be at the city of Halifax-


Robert Emmett Finn: Hear, hear.


Alan Webster Neill: -in the province of Nova Scotia.
Later on, in section 8, it provides for the appointment of an advisory committee or committees. Under these circumstances why not be frank about the matter and say that this is a bill wholly for the advantage-the necessary advantage, I do not question it for a moment-of the maritime fishermen, and that if it succeeds, possibly in another year Pacific coast conditions will be taken in also? But why camouflage it and suggest that there is nothing to hinder us from coming in under it, when we find that the board is to have its headquarters in the city of Halifax? I doubt not that the members also will come from that neighbourhood. I do not want to raise the question of the east against the west; I do not think I have been in the habit of doing that in this house; but it does appear to me to be in line with the whole policy of the fisheries department as at present constituted, not only for this year but for years past.
My mind runs to the annual grant of $160,000 put through under the alleged auspices of chapter 74 of the Revised Statutes of Canada, 1927, the title of which is, "An Act to encourage the development of the sea fisheries and the building of fishing vessels." The purpose is to aid the fishing industry of Canada; that is all. I am not leaving out any pregnant part of the act; that is the purpose for which it was passed a number of years ago. Under that act $160,000 is spent on the Atlantic every year in litte useless dribs and drabs here and there, one fisherman getting 18.75, somebody else $11, and so on. That is supposed to encourage the deep-sea fisherman.

But, are there no such fishermen on the Pacific coast? I have brought this question up time and time again in years gone by, but it has always excited so much the ill will of hon. gentlemen from the maritimes, and therefore I abandoned it, their support to the government being more numerous than that from British Columbia. Their argument has always been, "We will do it anyhow." I have never heard any more potent argument put forward than that.


Mr. POTTIER:: Is it not a fact that this
$160,000 is simply the proceeds of an amount paid by the United States for benefits they received on the Atlantic coast?


Alan Webster Neill: The answer is, no.


Robert Emmett Finn: I do not wish to interrupt,
but I suggest that any hon. gentleman taking part in this debate should speak loud enough to be heard and his language properly interpreted. I am not referring to the hon. member for Comox-Alberni (Mr. Neill). He is all right.


Alan Webster Neill: I do not want to have my
line of argument diverted.


Vincent-Joseph Pottier: You will hear from me
when you have finished.


Alan Webster Neill: I shall be happy to hear
what the hon. gentleman has to say. I may explain, in courtesy to him, that there was a sum of money granted by the United States, but it was put into the consolidated revenue fund of Canada, and any money that goes into that fund is absolutely lost in the sense that it is no longer earmarked for any specific purpose. It becomes a part of the general funds of Canada. That is a postulate in law with which we are all familiar. Years after that money was put into the consolidated revenue fund-not immediately but years after-the government passed the act to which I have just referred, to encourage the development of the sea fisheries and the building of fishing vessels. I quote:
The governor in council may authorize the payment, out of the consolidated revenue fund of Canada, of an annual grant not exceeding $160,000, to aid in the development of the sea fisheries of Canada, and the encouragement of the building and fitting out of improved fishing vessels and the improvement of the condition of the fishermen.
That has absolutely no reference to the previous transaction to which the hon. gentleman refers. I know, of course, that is the argument to which they cling. They figure the payment at three per cent, representing

Salt Fish Board
interest on the money paid by the United States; but the only trouble is that is not what happened. The money was not set aside at all for the purpose which hon. members from the maritime provinces suggest. If it had been it would have been indicated in 1874, but it was either in 1878 or 1879 that there was passed the act to which I have alluded. As the money was put into the consolidated revenue fund, I repeat, it lost its identity as much as if one threw a cup of milk into the ocean, and therefore hon. members from the maritime provinces cannot argue that they have any rights in connection with that money. I am sorry I introduced such a belligerent subject, because I know how it affects my hon. friends. The inborn knowledge that they are wrong makes them all the more sore. I remember even the Hon. Mr. Rhodes getting upset, and he was a man of genial temperament. But this is only in line with the policy of "The mari-times first, British Columbia nowhere."
We have seen a grant of $500,000 in recent years included in the estimates for the aid of destitute fishermen, but I do not believe that any of it reached British Columbia. I wish to be fair to the minister. I asked him last year whether any portion of that $500,000 would go to British Columbia, and he said that if the provincial government asked for it they would get their share, but that the province had not done so. I asked what amount would be appropriated for British Columbia in that event and he mentioned the sum of $50,000. Fifty thousand dollars was to be our share out of half a million; yet we provide more than fifty per cent of the fisheries wealth of Canada. Then we find this year this $S00,000, in regard to which British Columbia is again to be very much the unwanted stepchild.
The minister may say, as in fact he did say, that the need of the maritimes is greater than ours. That may be true in a certain degree, but he also said in answer to one of the Vancouver members that our output in dollars of salted fish was something like half a million while that of the maritimes was three millions. Does not that very fact suggest, not that we do not. need attention but that we do need some consideration in this direction to help us to develop an industry which is producing only half a million while the maritime provinces are producing three millions? Owing to the long haul from the Atlantic the sale in British Columbia of maritime salted fish is verv small. It has to come by train, and it is really sold only to a few people who, to gratify a personal taste, can
afford what is almost a luxury, a high-priced article. But if we went into the salt fish business in British Columbia and were given some of the encouragement which this bill indicates will be given on the other side oi the continent, we might build up a trade in a similar class of fish; and as the fish would be produced and processed locally, we could sell it at a price within the reach of people with smaller incomes. In this way a considerable trade could be built up to the advantage of British Columbia-which, by the way, is a part of Canada-and it would take hardly one cent from the industry in the east. In fact, it would be supplementary to and not competitive with that industry.
The minister will no doubt say there is nothing to prevent us from coming under the act. No; on paper there is nothing to prevent us. but we won't. Anyone who reads the bill will agree with me. The board is to be set up at Halifax, and we are 4,000 miles away. Can one imagine this advisory board making representations on our behalf? The men will, of course, be locally appointed. The minister himself said that they must be experts in that particular line of business, and no doubt we shall see men from that part of the country appointed to the board.
These are matters that make British Columbia begin to get a little doubtful whether we are in confederation at all or just outside it. The members from British Columbia are not even allowed to decide among themselves, so to speak, matters with which they are thoroughly familiar from their local knowledge-and our local knowledge must be admitted. We had the humiliating spectacle the other day of being outvoted in the fisheries committee by members from the maritimes who turned up only when there was danger of a vote being taken. Their absence on many other occasions practically precludes th>'- having any intelligent grasp of the situation.
Another objection that I voiced before when the resolution was under discussion-is, why not take in all fish, including fresh fish? I do not know any bill which could so easily lend itself to taking in both branches. The board will have agents trying to drum up this salt fish market; probably they will use the agents of the Department of Trade and Commerce in the countries alluded to, Cuba, the West Indies and so on. Well, if they happened to come across an opportunity-for, after all, when one is calling on people interested in salt fish, it is easy to say a few words on the other side of the industry also-these agents might well be of real value to the maritimes by being able to introduce or influ-
Salt Fish Board

ence business or interest people and find an outlet not only for salt but for fresh fish.


Joseph Enoil Michaud: Does my hon. friend think it would be practicable to export fresh fish to Cuba?


Alan Webster Neill: No, absolutely not, but Cuba was not the only place I mentioned. We have trade agents in a great many places, for instance New York. I only instanced that, saying that when such an agent was pushing the sale of salt fish he might readily, having come in contact with fish agents and dealers, find an outlet for some fresh fish as well.
The minister said he was not inclined to go into that aspect because we have produced too many fresh fish already, more than we can readily market. Is that not the purpose of the bill, because we are producing more salt fish also than we can readily market? Here is a point to which I do not think the minister paid attention. There is a trend to-day, and has been for the last few years, away from salt fish to fresh fish. The greater facilities of transportation by fast trains, aeroplanes and the like, and the discovery within recent years of a new method of freezing by which fish can be kept in incomparably better condition than they used to be, all tend to get away from salt fish to the sale of fish in the fresh state, in the same way that there has been a tendency for many years to get away from the horse-drawn vehicle and use the machine. Instead of trying to sweep back the ocean, by putting forward a bill to develop a horse-drawn-car industry so to speak, would it not be better for us to take knowledge of the drift of events, to see that the trend is towards fresh fish, to direct and control it, not ignore it until we find ourselves left out on a limb, but control and direct the trend so that as the change comes bit by bit we shall be able to switch from the salt fish industry as it dies or gets less, into the fresh fish end of the business and so benefit all our fishing industry? For that reason alone the bill should read "fish" instead of "saltfish" alone. I am not asking this for British Columbia alone, it might be of real benefit to the development and increase of the fresh fish industry of the maritimes.
To come to the bill itself, the resolution said that the purpose was to give assistance to producers of salt fish for export. I emphasize that, "producers of salt fish." But if one reads the bill itself, does it say "producers"? Not a bit, it says "exporters." Section 6 states that the board may give assistance to "exporters" of fish. Not to producers. The 
resolution said "producers," and it is the producers we are interested in, is it not? But the bill itself is confined entirely to exporters of fish. An hon. gentleman behind me says it is a printer's error, but it is repeated twice in the same section.


Louis-Prudent-Alexandre Robichaud: " Produce " instead of " producer."


Alan Webster Neill: Well, my hon. friend can make his own explanation. The minister did not find fault. It says " the assistance given to any exporter." The exporter is a middleman.


Joseph Enoil Michaud: Read the definition of " exporter " in section 2.


Alan Webster Neill: (d) "exporter" means a person or a cooperative group of fishermen owning fish which is afterwards exported in a salted state. . . .
And so on. It is the old, old gag that we so often hear from our friends of the Cooperative Commonwealth Federation, but in this matter I feel like sympathizing with them, that any government department always seems to take the side of the big interests rather than the small man. I wonder why it is.


Joseph Enoil Michaud: It is not so in this instance.


Alan Webster Neill: We find the Nova Scotia trawlers given preference, the British Columbia trap owners given preference, and now the maritime exporters are to be the centre of the picture, but not the producer. The resolution said "producer," but now it is not the producer, it is the exporter. I wonder what my hon. friends from the prairies would say if we had given a bonus on wheat but confined it entirely to the middlemen, the elevator companies, instead of the producer. And no matter what my hon. friend behind me may say, there is only one meaning of the word " producer," that is the man who produces the wheat or fish as the case may be.
The way I read this-I may be wrong- is that the purpose of the bill is to give a bonus of 25 per cent to the salt fish exporters; the exporters only. Mention is made of other lines of investigation, but it is evident that the outstanding feature is the 25 per cent bonus, especially in this year of jubilee, otherwise an election. The minister might well argue that he is not alone in this policy of bonusing. It is true; we have gone on a bonusing spree. It is like a man taking opium or some opium derivative, it puts him in a fine, happy condition for the time being, but by and by he needs another shot, soon an increased dose, and so it goes. The bonus

Salt Fish Board
system is something the same, but it has one additional worse feature. The dope fiend exhibits a dreadful example and warning to his neighbours; but in the case of the bonus it is the other way about, it has a seductive note. When an individual or an industry or a class has been getting a bonus without working for it, the neighbouring class or perhaps some other industry says, " Me too! Why can we not have a bonus also?"
The opponents of this government brand it as a " do-nothing " government. I do not share that view, I think they have done many worth while things. But they might well be described as a " bonusing " government, although I admit that bonusing was not unknown to the previous government, and its increase is probably due to the natural increase in demand rather than the fact or perhaps as well to the fact that there is an election coming on.
Conditions in the maritimes have been bad for years, so why is it only now discovered what the trouble is and what the remedy should be? We bonus many things; we bonus coal, the coal movement in my district is bonused; we bonus wheat, butter, cheese, and now we are going to bonus the fish industry or part of it. We have bonused the manufacturers by means of the tariff, and there are other bonuses that I have forgotten. Bonusing is getting to be so common in the world now that all nations are probably forced to it, in the same way that Great Britain, having built up a great nation on free trade, had to abandon it simply because of the pressure of the whole world erecting tariffs. Bonusing is a fairly easy although only a temporary solution of any problem caused by the loss of markets, and in an election year it is calculated to be popular for the moment. But it bears some relation, and a fairly close one, to keeping people on relief. To devise a real and permanent solution is a much longer and harder problem, for both the minister charged with formulating the policy, the officials who have to carry it out and the people who have to be trained in new and better methods of production and processing, and possibly, in some instances, required to remove themselves into some other line of activity. But that is the only permanent method. Bonusing is an easier way; getting something for nothing will make them happy for a little time. But then comes the day when they want more. Next year they will want more bonus, and so on. Once they have tasted the rich gravy of a bonus, there will be a persistent demand for the maintenance and increase of that flow of easy money, and the cold shoulder will be turned on the harder
methods of finding different forms of marketing and adapting oneself to different methods of producing, processing and so on.
I have before me a well prepared article, upon which I congratulate the Minister of Trade and Commerce (Mr. Euler), written by Mr. W. F. Fraser, Canadian trade commissioner, on conditions in Jamaica. A great many of these reports contain just a few generalities and figures one can get out of the year book, but this report is chock-full of useful and valuable information. I understand that Jamaica is a crown colony; the government have established a marketing division. They operate a refrigerator unit where they box and ship on behalf of the growers a large variety of tropical fruits and vegetables. Originally this was an experiment, but it has been so highly successful that it is being made a distinct branch of the government. Further on, it is said that they are going to establish a plant for the production of dried milk, and they are taking steps to provide that the government will be able to fix by law not only wholesale and retail prices for the product but also the prices to be paid by the factory to the dairymen. That smacks of the soviet idea, yet this is good old Britain. I mention this only as an illustration of a better policy for us to adopt than simply to hand these men a bonus of a few dollars for the time being.
Let us now look at the machinery under the bill itself. This is to be just another board or commission, and it seems to me, speaking subject to correction, that this is the fifth board or commission we have set up this year. I would suggest that for every two commissions or boards we appoint, the government should be required to cut out one cabinet post, with the idea that there will be less work for the cabinet to do with these boards and commissions in operation. Pretty soon we are going to have commissions running Canada; they are running a great deal of it now. I am always against commissions and boards if they are divorced or separated from government responsibility. I would have no objection to leaving the Minister of Fisheries (Mr. Michaud) in charge of this matter; then he would be responsible to parliament. But when, in connection with railway matters and many others, we ask a minister for some information, he is in a position to say, "I am sorry, but this is run by a commission. All I can do is pass on your remarks and if the commission feel like answering they will do so." I do not like that system.
Let me refer to sections 3 and 4 of the bill. How familiar it all sounds; how often we have
Salt Fish Board
COMMONb
heard it. It is provided that there shall be a board, to be known as the salt fish board, to consist of three members appointed by the governor in council, one of whom shall be chairman, another will be vice-chairman and the third will be the audience. Each member shall hold office during pleasure; they are not to be appointed by the civil service commission; their salaries will be fixed by the governor in council; two members of the board will form a quorum; the headquarters shall be in the city of Halifax, and of course they will have power, with the approval of the governor in council, to employ such technical or other officers, clerks and employees as may be necessary. This is another good opportunity for giving political preferment to friends. Here is another department to be built up round this board or commission. As I said before, you give a man a job and right away he wants somebody to help him do it.
We must remember that this is all to be for the salt fish end of the industry only; they are forbidden to touch the fresh fish industry at all. It is easy to knock, and I believe the man who knocks should be in a position to suggest something in place of what he complains about. This is what I suggest: Have your board, certainly, but have it located at Ottawa. Let it be composed of permanent officials already under salary, one representing the fisheries department, one representing the trade and commerce department and the third representing the finance department. It will not cost anything for their salaries, and they will be able to find time to attend to this work. It will not cost anything for stenographic or clerical assistance, because already we have plenty of officials to do the work. It will not cost anything for rent, light or fuel. It will be found that in Halifax they will be building or renting offices to accommodate this board. Then appoint your advisory committees. The bill provides that such advisory committees shall be paid their travelling expenses, but no salaries. I agree with that, but let me suggest that they be paid only their reasonable travelling and living expenses. Let there be none of this nonsense of paying a man $20 a day for living expenses, and having him come on the platform boasting of what he was doing for the good of the country and the love of God, without salary, when actually he was receiving $20 a day or over $7,000 a year, more than he would ever get in his life at any other occupation. Do not do that. If your practical men are not sufficiently interested to give their advice without receiving more than their travelling and living expenses, they are not very much 
use. Let there be a central board here, with one committee in Halifax and another in Vancouver. The cost would be very small, and I believe the work would be well done.
The bill provides that the advisory committees shall consist of five members, two of whom shall represent the fishermen-producers, and three, the dealers or exporters. Do it the other way round; have at least three producers and only two dealers or exporters. Believe me, the dealers have enough connections with which to take care of themselves; do not worry about that. These committees could do good work. For instance, with a treaty under negotiation or the adjustment of a treaty coming up, they would be able to give useful, valuable information. Perhaps, if there had been local advisory committees before the treaty was negotiated with the United States we would not be in such a muddle in connection with vegetable oils, because they could have given the necessary information in time to have had the matter adjusted. Let us have the board run from Ottawa, and as I said before, let us include fresh fish. No one would be injured, certainly not the maritimes, and both coasts might receive material benefits. It would be far cheaper and would do away with any tendency to build up another department round this board.
I hesitate to vote against this bill. I will not vote against it, because it promises immediate aid to these fishermen who, as we all know, are in unfortunate circumstances. But it will involve a large expenditure and very unnecessary official machinery, and seems to hold no promise of permanent improvement in the lot of the fishermen except to encourage them to look to another year in the hope of getting a bigger and better bonus, which I believe is calculated to undermine their morale rather than to encourage them to go on and try to help themselves. To test the point with regard to fresh fish when we are in committee, I propose to move that the word "salt" be struck out, so that both the title and purpose of the bill will cover fresh as well as salt fish throughout the dominion.


Vincent-Joseph Pottier: I desire to make a few references to the remarks of the hon. member for Comox-Alberni (Mr. Neill) and then continue with my own remarks. In justice to the situation, however, I think I should particularly comment on the hon. member's references to the bounty. The story of the bounty paid on the Atlantic coast is an old one and, I believe, is well known to all persons who have given

Salt Fish Board
any study to the matter. Under the treaty of Washington the United States was given greater benefits than Canada received, and in 1879 the sum of $5,500,000 was paid to the English government, of which $1,000,000 went to Newfoundland, and $4,500,000 was paid into the Canadian treasury, of which amount $500,000 was recognized as expenditures incurred by the Canadian government. In 1882 a statute was passed, and the discussion that took place in the house at that time, as contained in Hansard, clearly indicates that this amount of $160,000 was the interest on the money in the consolidated revenue fund which had been paid in exchange foT the rights that had been lost on the Atlantic coast.


Alan Webster Neill: Can you produce Hansard in a court of law?


Vincent-Joseph Pottier: I say Hansard shows
definitely what was the situation. The discussion at that time indicates the purpose of the resolution and the bill, and there can be no question about the truth of my statement. Then the hon, member said that as he understood the bill the exporters who were to receive the assistance might be taken to mean those who buy and export fish in large quantities. That is not the meaning under this measure as shown in paragraph (d) of section 2, where we find these words:
(d) "exporter" means a person or a cooperative group of fishermen owning fish which is afterwards exported in a salted state, whether dried, boneless, pickle cured or otherwise processed.
In other words, an exporter is a person owning fish which is afterwards exported in a salted state. The fisherman himself, if he exports that fish or prepares to export it, is under this measure an exporter.


Henry Herbert Stevens: How many of the maritime fishermen who produce salt fish export the fish they produce?


Vincent-Joseph Pottier: Not many, I will agree; but this bill provides for that. I would Tefer the hon. member to paragraph (c) of section 6 which gives the board power to make agreements with any exporter. In other words, it may make an agreement with any fisherman to export his fish. So that under section 6-


Henry Herbert Stevens: That is the nigger in the woodpile.


Vincent-Joseph Pottier: It is the nigger to this extent, that it is there for the benefit of the individual fisherman.


Vincent-Joseph Pottier: Well, that is the way I understand the bill, and if it is not there for that purpose we wil hear about it because I intend fighting for the individual fisherman.
. Mr. STEVENS: We will hear about it, then.


Vincent-Joseph Pottier: That is what I understand the bill to mean, and so far as I am concerned that is what it will mean.


Henry Herbert Stevens: But it is not in the bill.


Vincent-Joseph Pottier: I say it is, and it cannot mean anything else. I wish to clear up any confusion in the matter connected with the suggestion that the bill covers only exporters. The fact is that it covers the individual fisherman who wishes to export fish. The board will do it for him.


James Lorimer Ilsley: The person who has the fish does not himself have to export it, in order to be an exporter. Any person who has fish which is afterwards exported, no matter by whom, comes within the definition.


Joseph Enoil Michaud: And is entitled to the benefit of the legislation.


James Lorimer Ilsley: And the bill is most carefully drawn for that purpose.


Vincent-Joseph Pottier: There can be no question that it was drawn carefully.


Henry Herbert Stevens: We shall see when we come to the committee stage.


Vincent-Joseph Pottier: The hon. member for Comox-Alberni, in his reference to bonuses, said they were popular but not effective. I only say that is the way in which the people in other countries of the world have taken our markets away from us. The only means we have of getting them back or of holding them is by using the same methods. No one likes the idea of government money being paid out to individuals, but it is the only method left and most certainly it is the one we must use. I was pleased to hear the hon. member is going to support the bill, and I assure him that hon. members from the maritime provinces will appreciate his vote.
I shall make no reference to fresh fish because I believe that ample opportunity will be afforded when the suggested amendment has been moved, when the bill is in committee. With respect to the bill itself, in my opinion section 6 is the important section and the one which will be effective immediately. It provides for assistance to owners of fish up to 25 per cent of the value of the fish at the point and time of export, and in


Henry Herbert Stevens: Oh, no.

Salt Fish Board

addition it gives power to the board to sell salt fish for any individual who wishes to export. I think this section covers the pith and substance of the bill.


Walter Edward Foster: I suggest the hon. member should not discuss the sections seriatim on the motion for second reading. At this time he ought to discuss the principle of the bill.


Vincent-Joseph Pottier: I shall not take time to discuss the sections, but would point out that, generally speaking, the bill will give assistance to fishermen and enaible them to compete in foreign markets.
As I understand this legislation, it is breaking new ground so far as federal legislation is concerned. It is a measure taken to ensure Canadian fisheries a position in the salt fish markets of the world. We are now taking cognizance of world changes which have, been gradually straining free commerce and trade among countries. That free exchange of products which in former years used to take place has now become impossible because of various countries endeavouring by means of bounties and subsidies to push their exports into other countries.
I believe one cannot fully appreciate the effect of a bill without considering briefly the development of the salt fish industry in the maritime provinces. It must be remembered that the salting of ground fish, in particular, was Canada's first industry, and that no branch of employment has engaged our people for as long a period. The first inhabitants who came to our shores settled on the land for the purpose of salting fish. The development of the industry can be divided briefly into four periods, the first of which extended from 1497 until about 1600 when people from the old country carried the products of our coastal waters back to Europe. The second period extended from about 1600 to about 1732 when the French and English settled on the lands adjoining the Atlantic coast for the purpose of drying their fish. During that time markets in Portugal, Spain and the West Indies were developed. From 1732 until about 1920 there was a rise and fall in the salt fish industry. From 1920 until the present time we have found ourselves in a rather vicious circle, when countries have been trying to gain access to markets they lost during the war, and have made intensive efforts to capture markets which previously we had held.
I have before me some figures of production in Nova Scotia in the second and last periods.
I have the figures in five-year periods and, without going into too much detail, I shall

refer to a few of them. In 1869 our production stood at 464,000 hundredweight. That production gradually increased until about 1886, when we were producing 791,000 hundredweight.


Charles Hazlitt Cahan: What was the value?
Mr. POl TIER: I have not those figures, but I would say they would be worth about $4 or So per quintal. However, I am not sure as to the exact amount. Production gradually decreased until about 1936, when we were producing in Nova Scotia 117,000 hundredweight, or about one-sixth of the peak production in former years. The Canadian production of dried cod in 1889 was
896,000	hundredweight, and by 1937 this had dropped to 296,000 hundredweight. There was a gradual decrease as the years went by. The reasons for the increase in production up to 1888 were: first, the inauguration by the dominion government of a protection fleet which prevented United States vessels from fishing in Canadian territorial waters in the period 1870-1872; second, lack of employment in other industries in the period 1873-1879; third, the payment of a bounty to fishermen authorized under an act passed in 1882 and, fourth, the accessibility of such markets as the British and Spanish West Indies and the United States.
The reasons for the decline which occurred after 1886 were: first, the change in the method of transportation from sailing vessel to steamer; second, the rise of the sugar beet industry in Europe which seriously affected the West Indies trade in cane sugar, thereby lessening the purchasing power of those islands; third, the effectiveness of tariffs in foreign countries against fish; fourth, due to the boom in construction which took place in the New England states, larger numbers of our people went to that part of the country; fifth, there was also the loss of a considerable part of the domestic market for dried cod on account of the improvement in refrigerating methods and processing which made fresh fish more readily available to our own markets; sixth, there was the effectiveness of competition from the salt cod industries of foreign countries. This last reason for the decline began to be evident about 1922, and this competition has been more intensive since then. When the minister introduced the bill a few days ago he referred to this period, and I agree with the remark he made at that time with regard to the foreign competition.
Because of the different causes for the decline in production to which I have referred,

the self-contained fishing communities which used to be found all along the shores of the maritime provinces are disappearing. The back-bone, so to speak, of the fishing industry has gradually disappeared, and as a result we have the conditions that are present to-day. Two things occurred when this decline in production took place. The people were forced to find something to do in order to eat and carry on. Many of them went into the fresh fish industry, and further, lobster fishing was developed in a number of districts. Unfortunately, the equipment necessary to carry on lobster fishing is more costly than that necessary in ground fishing.
To bring the picture to my own constituency, the production of dried cod in Yarmouth county in 1871 was 96,8il quintals; 'by 1891 this had decreased to 34,729 hundredweight, and by 1931 there was no production at all. This is perhaps an extreme example of the trend in the dried codfish industry, but it shows what is happening all along the line. The production in Shelburne county in 1871 was 48,835 quintals; by 1881 this had increased to 128,949 quintals, but by 1931 the production had dropped to 2,15b nundredweight. In Digby County from 16.227 quintals to 469 hundredweight. Unfortunately, as this decline in production occurred, the salt fish industry in Nova Scotia centred in two areas. This had a double effect upon the outlying districts which were dependent upon this type of fishing. The two districts in which the salt fish industry settled are Lunenburg and Halifax. I do not criticize the people of these districts at all for endeavouring to gather round themselves that part of the salt fish industry which still remained.
Even when one looks at the declining process he cannot see the whole picture in so far as the outlying parts of the province are concerned. Perhaps I am trying the patience of the house when I repeat myself, but I want to make it quite clear that two things happened. The decline in the salt fish industry was approximately from five to one, and what was left of the industry centred in two areas. It can easily be seen what effect this had upon the people in the outlying districts who were dependent upon this type of fishing. They suffered greatly. In order to complete the thought I have in mind and enable hon. members to see the extent of the production in Canada compared with that in other countries, I should like to give the world figures of various producing countries. The production by countries for 1935-36 was as follows:
71492-283J
Supply-Post Office
Quintals
Newfoundland	 1,400,000
Norway	 750,000
Faroe islands	 300,000
France	 800,000
Iceland	 1,000,000
Canada	 250,000
Great Britain	 200,000
I will complete my remarks to-morrow.
On motion of Mr. Pottier the debate was adj ourned.
At six o'clock the house took recess.
After Recess
The house resumed at eight o'clock.

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



POST OFFICE DEPARTMENT

[Stage Direction]
275. Departmental administration, including amount required to pay allowances to typists, grade 1, employed cutting stencils, in accordance with regulations approved by order in council, $557,220.
Thomas Reid: While complimenting the new Postmaster General (Mr. McLarty) on the occasion of these, his first estimates-


Mr. MacNICOL:: He needs sympathy
instead of compliments.


Thomas Reid: -I should like to draw his attention to one matter which affects, I think, most people in the west if not in the east, namely, the purchase of rural mail boxes. In British Columbia anyone who desires rural mail delivery must first of all put up four dollars. These mail boxes are manufactured by a firm in the province of Quebec. I have before me a catalogue showing mail boxes as supplied to United States citizens in the state of Washington. These are regulation boxes supplied under authority of the postmaster general of the United States, and can be obtained there at a cost of $1.95 each. Upon examining both makes of box, which I did before I left, I believe that the United States mail box is better than the Canadian, in that it has, at least, more gadgets on it; yet it costs less than half the price. I urge upon the new Postmaster General that he look into the matter. In these days of stress four dollars is a good deal of money for most people to have to put up before they can obtain their mail by rural delivery.


Mr. MARTIN:: Does the hon. gentleman want him to look into the boxes?
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Thomas Reid: I want him to look into the matter. I have drawn his attention to the fact that in the United States mail boxes are procurable at less than half the price required here, and I do not understand why this should be so, or why one firm should supply mail boxes throughout Canada and, having a monopoly, charge that amount. It is high time that the matter was looked into.


Jean-François Pouliot: I am glad to follow the same line as that of the hon. member for New Westminster: in the first place, to congratulate the new minister and extend to him our best wishes. He deserves them, because he has a difficult department to manage so as to give satisfaction to the people who expect so much from the royal mail. With regard to the other observations made by the hon. member for New Westminster, the Tory party has been famous for post office scandals.


Mr. HARRIS:: On a point of order, the hon. member is not speaking from his place in the house.


Jean-François Pouliot: Well, I am here just to be in front of my hon. friend and to get inspiration from his smiles. In the Tory party-


Joseph Henry Harris: On a point of order, the hon. member is not speaking from his seat.


Jean-François Pouliot: -there was a serious scandal connected with the purchasing of materials for the Post Office Department. Under the Borden government occurred the famous padlock scandal-padlocks for mail boxes-and during the last administration there was the scandal of the stovepipe mail boxes-a tremendous scandal. I do not know what the profit made by the contractor was, but I know it was enormous. The box was made of a piece of stovepipe, closed at both ends. Something was paid for the invention. There was a shutter which could be raised or lowered or pushed to the side; it was a patent which gave much value to the famous stovepipe mail box invention. I hope that the department is not purchasing any more mail boxes from that contractor. It would be a good thing to have just as much publicity for the purchasing of mail boxes as there is for mail contracts.


Ernest Edward Perley: I desire to make one or two suggestions relating to this item, the administration of the department. Is the minister considering putting back under the Civil Service Act appointments of postmasters where the post offices have an annual revenue of less than $3,000, instead of leaving them under the present system of patronage? I

believe that if that change were made it would result in more suitable appointments and conduce to better and more efficient service.
There is one other item to which I would draw the minister's attention. I believe there are a great many instances in which contracts for rural mail delivery expire-


Hon. N. A. McLARTY (Postmaster General):: Would the hon. member be kind enough to bring up that matter under the item of rural mail and air mail service? I imagine that there will be some discussion then.


Ernest Edward Perley: Yes, because there is that item. I thought the matter should be raised under the general administration vote.


Norman Alexander McLarty: I suggest that it be
raised under item 279. I have no objection to dealing with it now, except that I imagine there will be some discussion when item 279 comes up, and it might save time if the matter were dealt with then.


Ernest Edward Perley: Another matter which I wish to draw briefly to the minister's attention is the dismissal of the postmistress at Birch Hills. I have had some communication with the minister, including on one occasion a personal chat. However, the reasons given for the dismissal are not satisfying, and I have been asked to bring this matter up when the estimates were before the committee. I have here the reports made on the post office by the inspector. Everything was found to be in pretty good order. I have also several letters which I shall not take time to read, but I gather that there is no valid reason for the dismissal of the then postmistress, Miss Mitchell, except that it was more or less a temporary appointment, because she was carrying on after her father's death. I would ask the minister to go over this whole matter again, make careful inquiries of the inspector, and reconsider the position of this woman, who evidently thinks she has been unjustly dealt with. As I understand the situation, ten or twelve patrons complained because Miss Mitchell had her mother and brother assist her occasionally in the post office. There are, however, three hundred patrons of the post office, and of the ten or twelve who complained, three, I believe, were applicants for the job. I do not think so small a number of protests should have received the consideration which evidently was given to them; it would appear that the woman was giving good service and general satisfaction to more than two hundred of the patrons. All I want to do is to bring the matter again to the attention of the minister

Swpply-Post Office
and ask that he reconsider it and see whether Miss Mitchell could not be reinstated.


Norman Alexander McLarty: I shall be glad to look into the matter. Could the hon. member advise me approximately when the dismissal occurred?


Ernest Edward Perley: I can give that information to the minister. I have some letters.


Norman Alexander McLarty: I shall 'be glad to get it. With regard to the suggestion of the hon. member for New Westminster (Mr. Reid),
I understand that the boxes are purchased by tender. I shall, however, look into the matter and see whether they can be more economically obtained.


Thomas Reid: Tinsmiths and others in British Columbia have informed me that they would be pleased to supply the boxes at half the present cost.


John Ritchie MacNicol: I notice in the details on page 160 of the estimates that three draftsmen are mentioned as being employed by the department. What do they do?


Norman Alexander McLarty: They are engaged in drafting in connection with mechanical equipment used in the city post offices, and in the preparation of post office maps.


Abraham Albert Heaps: For some years I have
suggested to previous Postmasters General that there should be something of a businesslike statement from this department. We seem to be going through the estimates this year in the same old way without any conception of what the annual revenues and expenditures are. I have not yet had an opportunity to go through these estimates carefully, but I suggest that both for the sake of the post office and in order that we may have an intelligent understanding of the working of the department the minister should explain the operations of this branch of government in the last year from the point of view of revenues and expenditures. The committee would in that way obtain a better idea of the true state of affairs than by taking the estimates item by item as we have done in the past.
Mr. McLARTY': For some years I have heard the hon. member suggest that the Post Office Department might with advantage prepare a statement which would more nearly coincide with that prepared by the ordinary public or private utility. Sitting in a place which was perhaps less prominent but often more comfortable, I thought his suggestion was quite reasonable and fair, and the question I had in mind when first appointed as
Postmaster General was how far we could go along that line, being anxious indeed to comply with the request that had been made. But I found this difficulty. If one endeavoured to analyse operations into an effective balance sheet there would be so much approximation that its value as a balance sheet would be largely lost. Let me give two illustrations of the difficulty with which we are confronted. Take the matter of the postage stamps used on cheques in lieu of excise stamps. Some years ago, when the excise tax was first imposed, excise stamps were required to be put on cheques and postage stamps could not be used. This, however, was found to be a definite inconvenience to the public, and consequently the regulations were altered to permit of the alternative use of postage stamps. I have discussed the matter with various officials of the department, and I find that there is no practical way, without public inconvenience, of determining the exact amount of revenue which the postal service receives as a result of the use of postage stamps on cheques.


James Samuel Taylor: Could it not be done by embossing the cheques themselves?


Norman Alexander McLarty: That is done, elsewhere,
I believe, but in view of the varying amount of stamps required on cheques in Canada that method would not afford a complete answer.


Abraham Albert Heaps: They do it in Great Britain.


Norman Alexander McLarty: I believe there is a
uniform tax rate on cheques in Great Britain. We have a graduated scale.
Take, again, the question of rentals. The Post Office Department does not pay rentals to the government or to the public works department on buildings which are occupied by the Post Office Department. The question might readily arise as to the appropriate rental which it should pay on the buildings occupied. As the committee knows, post offices throughout Canada, federal buildings, have been built not only for the utilitarian purpose which they serve as a medium for the department to conduct its business, but also to gratify the natural civic pride of the communities in which they are situated. Should the post office fix a rental based upon an investment where the building is more elaborate than it need be for postal services, or should it pay a rental based simply upon the appropriate amount required in order to afford adequate postal facilities?
I give these two illustrations to point out to the hon. member for Winnipeg North that any balance sheet would be an approximation.
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Without, however, putting it in the form of a balance sheet, we have the estimates on various matters except the amount which the post office obtains in the way of excise on cheques, which we cannot possibly obtain without inconvenience to the public, and we should be glad to give any figures or departmental estimate of what these amounts are.
I do not say it would be impossible, but I am afraid it would be very costly. For example, I went into the question of how this is calculated in the United States. There, I believe, they have a most thorough analysis of postal revenues. They have a cost ascertainment commission which works thoroughly. A subdivision is made, and one can get practically any estimation that is required. But the difficulty is the cost. The staff work required to be done by that commission to obtain its report costs, I am advised, in excess of SI ,000,000. I am not suggesting that we cannot do the same thing in Canada, that we cannot comply with the request which the hon. member has made so often; but I suggest that it might be a question whether the balance sheet when obtained would be worth the cost of preparing it. For the benefit of the hon. member however, if there is any figure which we can put in the balance sheet, subject to the explanation that it is only approximate and only an estimate, I should be only too glad to give it to him.


Abraham Albert Heaps: I am not at all anxious to have the department incur the expense of preparing what might be considered a perfect balance sheet, but I do desire to have some approximation to show the state of affairs in the department. The two illustrations which the minister has given are not altogether a satisfactory explanation. He speaks of rentals on buildings occupied for postal purposes. I fully realize that sometimes post office buildings are put up where they are not really required, and in communities where they were never called for by the department. I realize further that post office buildings are often made more ornamental than buildings used for ordinary commercial purposes, but we can allow for that in any balance sheet brought down to show the workings of the department. On the other hand, as regards stamps used on cheques to-day, which are shown as revenue to the Post Office Department, we can get an approximation. We can get an approximation, for instance, if we take the last year in which revenue stamps were placed in post offices; that would give some idea of the amount, and we could take that as the best authority we could get. What the amount was I do not know, but I think it could be

easily ascertained from the Department of Finance for the last year in which we issued excise stamps to place on cheques. But even if we did not go further in that regard, what I should like to know is what the post office revenue is for a year, what the operations cost for a year, and then strike a reasonable balance sheet to show whether during that period the post office paid its way or whether there was a loss.
So far as rentals of buildings are concerned, I think the Minister of Public Works (Mr. Cardin) a year or two ago made out some scale of rentals which he said could be charged to the Post Office Department. There is no reason why a utility like the post office should not be run, to a certain extent at any rate, the same as any other utility operated by a public body, and have an approximate balance sheet at the end of the year.


Norman Alexander McLarty: The revenue for the fiscal year 1937-38 was 842,998,000. I omit the hundreds. The revenue for the fiscal year 1938-39 was $43,130,000. The net revenue was $35,546,000 for the year 1937-38, and for the year 1938-39 it was estimated at S35,535,000. If you give the figure on the basis that has been heretofore shown in the annual report of the Post Office Department it would show a total excess of revenue over expenditures of approximately $1,300,000. If you break that down on the basis on which the estimates were broken down two years ago when the post office estimates, instead of being divided into civil government and outside service of the post office, in other words charging the headquarters to the Post Office Department, which was not done until the estimates of last year, on that basis a surplus of $99,618 is left. That does not include rentals. The approximate figure for rentals, subject to the remarks I have previously made, is, according to post office officials, $3,077,300. Then, if you charge against that the value of franking privileges, the estimated expense of operating post office savings banks, the estimated cost of free conveyance, of newspapers, the estimated postage value of franked provincial government documents, the estimated postal value of literature for the blind, you have an offsetting item of $1,090,600.
I do not think I can be any more definite than that, unless the hon. member has something specific in mind.


Abraham Albert Heaps: In the item of revenue I suppose the minister includes the revenue from stamps used for placing on cheques.


Norman Alexander McLarty: Yes, we include that in our revenue.

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Hugh Alexander Stewart: In addition to the items of expenditure which the Postmaster General has given to the committee, there might well be included fuel which is purchased through the public works department, and also certain supplies and equipment which are provided for in the estimates of the public works department.


Norman Alexander McLarty: I am told that is all
included, both coal and equipment, in the rental figures estimated as I say as to what would be appropriately payable if the post office were standing on its own feet.


Hugh Alexander Stewart: Perhaps it is in the figures the minister has given, but I point out that these are purchased and paid for out of the estimates of other departments than the post office.
There are very few items in the estimates of the Post Office Department. I should like to ask the minister one or two questions, and I am sure that even if they may not be strictly appropriate under this item, he will be pleased to give us the information.
There was a recent reduction of 50 per cent in the charges for special delivery of letters. What is the revenue derived from that source? Of course that revenue is entirely derived from services in towns and cities; I do not believe we have any special delivery in rural districts. It occurred to me that this service is very valuable, one for which those receiving the service should be willing to pay the small amount that was charged. What led to the reduction being made? Is it the idea that a larger number of letters would be sent by special delivery if the charge were cut in half, and so additional revenue received? It would appear to me that if a reduction could have been made in the general rate of postage rather than for special delivery service, which is available only for towns and cities, it would be much more in the interest of the public.


Norman Alexander McLarty: The purpose of the reduction in the charge for special delivery letters was, as the hon. member suggests, to bring about an increase in business. I regret I have not before me the figures to show the remarkable increase that followed on the reduction. I believe, speaking from recollection, the increase in various cities ran from 65 per cent to 187 per cent. There was a definite increase. I do not suggest that this is entirely as a result of the reduction in the charge, because at about the same time there was an increased use of air mail special delivery service.
The figures for special delivery can hardly be fairly compared with what would happen
in case of a reduction in the general postage rate. The figures are rather small-


Hugh Alexander Stewart: There is, I fancy, a wide spread between them.


Norman Alexander McLarty: For instance, for the year ending March, 1938, sales of special delivery stamps were approximately $38,508. I think my hon. friend will realize that the comparison would be a little far-fetched. What we are trying to do, however, is to improve the special delivery service, and we are taking steps to do that and to broaden its use as far as possible.


Mr. HAYHURST:: First I should like to congratulate the new minister upon his appointment to this high office. The post office comes in contact with the public more perhaps than any other department, and we need at the head of this department a man with the human touch and personality that characterize the present head.
I have had correspondence from all the universities of Canada and all the great libraries regarding a resolution which I had on the order paper concerning the reduction of postal rates on library books. I wish to thank the minister for carrying out the proposals which have been made for many years by the libraries and the universities to lower the postal rates on books so that the public could get books from the libraries through the mails at a cheaper rate. I should not like to read all the letters I have received; they might make the minister think he is the all-important personage in the cabinet, but I have received many congratulatory messages from heads of universities and others, and as a humble member of the House of Commons I feel quite honoured to receive these letters from such eminent persons of such high educational standing in Canada, who recognize that the Postmaster General has done something for the reading public.
It is well known that if our people are to understand and make use of the new knowledge that is available in the world to-day they must be able to read about and understand the problems facing them. Books have greatly enlarged our horizons and given us a new field of joy truly marvellous in its richness. In imagination humanity can now reach out and travel the world over; through science we can obtain glimpses of knowledge hitherto unknown. I am not going to deliver a speech on this subject; I do not suppose the minister would like me to do so, but I should like to say a few words at this time because I feel that the service which has been rendered in this way should be recognized by all members
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of the house, irrespective of party, because human knowledge must go on.
When Rowland Hill first introduced the idea of penny postage into the British House of Commons it was treated as a joke, but it has become an enormous success. The progress of reform has gone on when people have seen what was wrong and been determined to set the wrong right. People thought penny postage a joke because it would not be profitable and therefore would be a bad thing for the government, but they found that through the reduction in postal rates much greater use was made of the post office, and consequently a better understanding was developed throughout Britain. If democracy is to live, the masses of poor and, in many instances, ignorant people at the bottom of society must have an opportunity to have the best that is in them trained and strengthened, so that they may worthily take their place in this wonderful world. In this day and age it is a disgrace for anyone to grow up in ignorance; and while we strive to provide better schools, commodious public libraries, museums, beautiful picture galleries and cheap books, we should also strive to place a knowledge of these things in the hands of our people. Step by step more and more people have gained the right to share the government; step by step more and more people have come to read good books as they have been made available. We cannot develop democracy without education, and if we expect our people to govern themselves we cannot keep them eternally ignorant. So I think this departure under the new minister, in the lowering of postal rates on library books, deserves the commendation of every member of this House of Commons; and on behalf of the universities of Canada, those in charge of the various public libraries and the library societies of every province, the schools, teachers and all those in any way affected by this change, I sincerely congratulate the minister and trust that more and more people will take advantage of this opportunity which has been made available by the Postmaster General.


Norman Alexander McLarty: I appreciate very much the kindly commendation of the hon. member for Vegreville. Might I suggest, since there is so much glory going round, that some should be reflected on the hon. member, in view of his honest and sincere efforts to obtain this reduction.


Mr. DONNELLY:: When the minister was estimating the cost of the postal service, he referred to the fact that the Post Office Department did not pay rent to the Depart-

ment of Public Works for government buildings used as post offices. In that connection I should like to ask the minister whether the Post Office Department pays for the lighting, heating and caretaking of such buildings or whether the Department of Public Works meets these expenses as well; and also whether that would be taken into account in estimating the cost of the postal service.


Norman Alexander McLarty: The post office does not pay public works for these services, but in the round amount of rentals which is estimated in the previous figures the cost of these services is calculated.


Mr. COLDWELL:: I should like to associate myself with what was said by the hon. member for Vegreville. I was approached in this connection by a number of teachers' organizations across the country, and although I have not received any eulogistic letters of thanks to pass on to the minister, I took the opportunity of expressing my thanks to him in person not so long ago. I believe this service rendered by the post office will be deeply appreciated by all classes of our citizens who can avail themselves of it, and particularly on behalf of the teachers who have approached me during the past few months I want to join my hon. friend in expressing my appreciation of this change.


Norman Alexander McLarty: I thank the hon. member.


Mr. GREEN:: What is the situation with regard to postage meters? I understand the government grants a licence for the whole of Canada-


Norman Alexander McLarty: I might suggest to my hon. friend that this would come under the next item. I do not want to restrict discussion in any way, but his question properly comes under that item.


[Stage Direction]
Item agreed to.
276. Post offices, including salaries and other expenses of headquarters and staff post offices and supplies and equipment for revenue post offices, $15,484,810.
Howard Charles Green: I should like an explanation of the operation of the postage meter machines. I believe one company has a licence for the whole of Canada; that this company is the Canadian subsidiary of a United States company, and that it rents out these machines to individuals. I understand also that the business is growing all the time and in due course will become a very big business. It does seem that we are allowing a vested interest to grow up in connection with a public service.

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Norman Alexander McLarty: The Post Office Department does not sell or rent the metered machines. Any company that makes such machines which will meet with the approval of the Post Office Department can rent their machines to any company approved by the Post Office Department. In other words, the Post Office Department merely approves the particular machine, and it will approve any machine that comes up to its standard. It is not a case of one company enjoying any monopoly.


Howard Charles Green: Is it not a fact that at the present time only one machine has been approved, namely that manufactured by the Canadian Postage Meters and Machines Company Limited, which, as I have said, is really just a subsidiary of a United States company? Why cannot Canada carry on that business herself?


Norman Alexander McLarty: I believe it is a fact that only one company is now supplying meters, and that only one company has submitted machines for approval. It is a world-wide company which sells meters not only in Canada and the United States but in Great Britain, Germany and other countries.


John Ritchie MacNicol: Is that the way in which the meter or stamp-vending machine is handled in Great Britain? I refer to the machine that is seen in stores and other public places.


Norman Alexander McLarty: I am advised it is handled in exactly the same way.


John Ritchie MacNicol: The machines have the words " post office " right on them.


Norman Alexander McLarty: In Canada and in Great Britain postage meters are purely a rental proposition.


John Ritchie MacNicol: I am surprised to hear that.


Howard Charles Green: Is there any possibility of the government doing that business itself?


Norman Alexander McLarty: I imagine that to go into the manufacture of those machines would be a wide extension of the powers of a department, the fundamental purpose of which is to sell postage stamps and transport mail.


Howard Charles Green: Does the minister know how many machines are in use in Canada?


Norman Alexander McLarty: I am afraid I have not that information, but I shall be pleased to obtain it for the hon. member.


James Samuel Taylor: Does the minister imply that the stamp-vending machines found
over post office boxes in the old country are not in the possession of the Post Office Department?


Norman Alexander McLarty: I was referring to the postage meter machines which are rented in the same manner here as they are in the old country. That was my answer.


John Ritchie MacNicol: I was referring to the stamp-vending machines.


Norman Alexander McLarty: I am advised that the Post Office Department has nothing to do with stamp-vending machines.


John Ritchie MacNicol: On a holiday, such as to-day, with the exception of making a purchase in hotels where can a person buy a postage stamp? The branch post offices are closed. I went to one to-day and found that I could not buy a stamp. But in Great Britain stamp-vending machines are found on all prominent corners, and whether or not it is a holiday, a person desiring to buy a stamp puts the necessary amount in the machine and receives his stamp. I have tried it on many occasions. Do I understand the minister to say that in the old country these stamp-vending machines are not under the control of the Post Office Department?


Norman Alexander McLarty: We have none of the street stamp-vending machines in Canada if it is to them that the hon. member is referring. I understand that at one time they were tried in Toronto, with rather unfortunate results. The Post Office Department have none of them in Canada to-day.


John Ritchie MacNicol: Why were they unsuccessful in Toronto?


Norman Alexander McLarty: Because of climatic conditions, and the slugs put into the machines.


Howard Charles Green: The minister understands that I was referring to the postage meter machine?


Norman Alexander McLarty: Yes, and I gave my answer on that understanding.


John Ritchie MacNicol: Perhaps this would be
an appropriate place to ask a question I have in mind in connection with the origin of demands for post offices. For instance, some time ago prominent articles appeared in the newspapers with respect to Tweed, Ontario. Apparently they do not want a new post office in Tweed, and yet it has been foisted upon them. Where does the demand for a post office originate?


Norman Alexander McLarty: The construction of post
offices is purely a matter for the Department of Public Works. In the event of the con-
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struction of a public building, the Post Office Department advises the Department of Public Works as to the amount of space which will be required for postal services in the new building. But fortunately the Post Office Department does not have to worry about the purchase of any land or the construction of any building.


John Ritchie MacNicol: But surely that ought
to come under the Postmaster General. We know he has been having considerable trouble in connection with the building at Tweed, and that may be only one of a score. If one looks at the estimates he will see provision for the building of one hundred or two hundred new post office buildings throughout Canada. I am anxious to find out who makes the demand for these buildings.


Norman Alexander McLarty: The buildings so often
referred to as post offices very often contain other departments of government as well. I can assure the hon. member we have nothing to do with the construction or the erection of post offices or the purchase of land or sites which, I understand, is the basis of the controversy which has been widespread in connection with Tweed.


John Ritchie MacNicol: In the event of the Post Office Department not wanting a new post office, do they have to take it?


Norman Alexander McLarty: Not so far as this department is concerned.


Abraham Albert Heaps: Does the Department of
Public Works create a post office building and hand it over to the Post Office Department?


Norman Alexander McLarty: If postal facilities are not available we would unquestionably make a recommendation to the Department of Public Works stating that we require space. But so far as the construction of the building, or anything of that kind is concerned, that is entirely under the control of the Department of Public Works.


Abraham Albert Heaps: May I put it more definitely: Does the Department of Public Works erect in any community a post office which has not been requested by the Post Office Department?


Norman Alexander McLarty: I think it does, because
of the fact that other departments may require housing more than the Post Office Department. Consequently, if a public building is to be erected under those circumstances it would be normal to house the post office in it.


Abraham Albert Heaps: Does the Department of
Public Works make inquiries from the Post Office Department as to whether or not they require facilities in a certain area? This matter has been discussed in the house, and I dislike going over it again. I thought the matter had been adjusted.


Norman Alexander McLarty: Necessarily there must
be a certain amount of cooperation between the departments. I do not know that I can give the hon. member a sufficiently definite answer. I know of several instances where the Department of Public Works have advised us that a federal building was being constructed and have asked what space we would require. On the other hand, if we feel that we require additonal postal facilities we would make the necessary recommendation to the Department of Public Works. I do not think there is the definite dividing line the hon. member has in mind.


Abraham Albert Heaps: It is true that there may be no definite dividing line, but I have the impression that there is not a definite cooperation between the Department of Public Works and the Post Office Department, so far as the erection of public buildings is concerned. I speak with a definite thought in my mind on the point. What I wish to say is that when it comes to a question of erecting a post office, only one department should have the say, and that department should be the one headed by the Postmaster General-not the Department of Public Works. I am trying to help the minister, and not to put any obstacle in his way. I know hon. members who may want some sort of monument in their respective districts will go round to the Department of Public Works and have something erected. As a result the department may erect a building for postal and other facilities which may not be required. Sometimes those buildings are not required, but they give to members or other persons a certain amount of pleasure. In many instances those buildings are only white elephants, so far as the department is concerned.
A few moments ago the minister gave the committee figures showing rentals being paid by the Post Office Department. I believe the figure he gave was a staggering amount, well over $3,000,000, or about ten per cent of the total revenue of the department. That is a fairly high figure. But what I do wish to see is a measure of cooperation between the Department of Public Works and the Post Office Department. There should be a clear and definite understanding that no building will be erected in so far as the Post Office

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Department is concerned until that department has given full approval and there is a definite requirement for postal facilities in the area.


John Ritchie MacNicol: The Postmaster General is very genial this evening, and I am sure if he continues in that mood he will get his estimates through rapidly. In the case of Tweed, was it the Post Office Department or the public works department that got into trouble there in connection with the site and building?


Norman Alexander McLarty: I am afraid I shall have to look that up. I cannot say offhand whether we did or did not recommend improved postal facilities. There are a number of instances where they initiated the matter, and there are other instances where we initiated the matter, but I cannot say at the present time into which category Tweed would fall.


Mr. BARBER:: I should like to bring to the attention of the Postmaster General (Mr. McLarty) something which may seem to be trivial, but which is really of great importance to the people in a certain community in my district. This has to do with the mutilation of the name of a post office which has been in existence for over forty years. The name is Whonnock, which is the name of an Indian reservation in that locality. According to a memorandum which I received, the department took upon itself on March 9 last to change the name to Whonock, with one "n." This changes altogether the Indian meaning of the word. A short time ago I received a petition signed by, I believe, about 100 per cent of the residents in this district protesting against this change and urging that the old name be used. I presented this petition to the department, and have received certain reasons for this change. The last one is that no objection was raised. How could the people make any objection when they did not know anything about the matter until the change was made? Another reason given was that representations had been received, I believe from the surveyor general of British Columbia, to the effect that the legal spelling of the name was Whonock. It was also said that the geographic board had something to do with the change. I think anyone who has lived in a community for a number of years will agree that the residents should have something to say about the name of the community. For instance, the district in which I reside is called Chilliwack, an Indian name. The spelling used by the municipality, which is the spelling that was used in the early days, is Chilliwhack. When the city was incorporated some ten or fifteen years ago, the people saw fit to leave out the "h" in the spelling, and it is Chilliwack. They would resent the changing of that name by this or any other department of government.
I am sure if the department decided to take one "t" from the spelling of Ottawa there would be considerable trouble. Another reason given for this change was that the railroad company had taken out one "n" in spelling the name of their station. What a private corporation does should have nothing to do with the matter. The railroad is looking for business from that community, and it is up to them to judge whether it was wise to make that change. I know that the community resent it.
So far as the legal angle is concerned, it is stated that in the brief submitted to the Rowell commission the name was spelled with one "n." I got in touch with the director of Indian affairs to-day, and he told me that the name of this particular reserve has been spelled with two "n's" as far back as the history of the Indian department in British Columbia goes. As I said at the beginning, this matter may be considered trivial, but it is not trivial to these people.
In the petition presented by these people they protested against the action of the Post Office Department in changing the name from Whonnock to Whonock, claiming that it was neither necessary nor correct. They respectfully ask that the Post Office Department be instructed to retain the original Indian name with the two "n's." I just want to leave this with the minister. I have already presented the case, I think quite fully, to the officials of his department, but so far no action has been taken.


Norman Alexander McLarty: I understand the officials of the department acted largely on the representations of the geographic board and the surveyor general. I shall, however, endeavour to make a study of Indian nomenclature and then give consideration to the matter.


Harry James Barber: I want to impress upon the minister that this matter is considered very important by the people in the district.


Norman Alexander McLarty: I do not wish to make light of it.


Harry James Barber: I do not think the geographic board or any other of these officials should step in in that way. I am sure there would be considerable protest if the name of Ottawa, or of some other community which
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had been in existence for forty or fifty years, were changed. It is my opinion that the Post Office Department should take the advice of the people in the community in which the particular office is situated.


Ernest Edward Perley: No doubt the Postmaster General is aware that on the recommendation of the acting postmaster general there was placed in the estimates of the public works department last year an item for the purchase of a building at Sintaluta, Saskatchewan, for post office purposes. The building which they had in mind was a former bank building, and I think the amount in the estimates was $3,500. It would have been a splendid buy so far as the department was concerned. I should like to know if the purchase has been completed or, if not, the reason for the delay.


Norman Alexander McLarty: The purchase of a building would be under the public works department.


Ernest Edward Perley: Would the minister give the matter his attention?


Norman Alexander McLarty: I shall be glad to.


James Samuel Taylor: In connection with the observations of the hon member for Fraser Valley (Mr. Barber), I should like to know whether the Post Office Department takes its cue from the surveying departments of the various provinces. I do know that the cartographers branch in British Columbia has for some years been correcting the names of places throughout the province and as far as possible preventing any duplication. It has been encouraging the use of original native words and spellings where this can conveniently be done. Is any understanding maintained between the survey departments of the provinces and the post office for these purposes?


Norman Alexander McLarty: I believe that the Post Office Department, before making any change of name, endeavours to obtain not only information from the geographic board and the surveys branch, but all other information available.


Martha Louise Black: I wish particularly to thank the department for the change in name they made in a very small postal division in the Yukon. The name was mentioned as the pronunciation called for, but it was not spelled correctly; and upon representations, the department very kindly spelled the name correctly.


John Ritchie MacNicol: I notice on page 161 of the estimates that apparently we have only one postmaster, grade 10. In what city is that postmaster?


Norman Alexander McLarty: In the city of Hamilton.


John Ritchie MacNicol: Has an appointment been made of postmaster at Toronto?


Norman Alexander McLarty: In Toronto the district director is also postmaster, the post office being grade 12.


John Ritchie MacNicol: That is a new grade,
then. On page 161 there is not any grade 12 office mentioned.


Norman Alexander McLarty: It comes under the district director and inspection service.


Mr. McDONALD (Souris):: Before the item is passed, I wish to put in a word for the smaller salaried employees. There are men working in the Post Office Department who get as little as $60 a month. I know of one married man in that situation, and I think we all realize that no married man can live in the city of Ottawa on $60 a month. The man I have in mind has been on the temporary staff for eight years, and if he does not get a permanent appointment within two months he will be out of a position. Possibly I should be blaming the civil service commission, because I understand that civil service regulations govern these matters. I am not finding any fault with higher salaried employees of the Post Office Department, because I believe that the department is run better than, or at any rate as well as, any other department of the government. I hope the present minister will be able to do something to help these low salaried employees.


Norman Alexander McLarty: It is the civil service commission that sets the salaries for the employees of the Post Office Department.


John Ritchie MacNicol: I should like to ask about the mail service on St. Clair avenue, Toronto. May I inquire under this item?


Norman Alexander McLarty: Yes.


John Ritchie MacNicol: The minister has had a letter on the subject from the St. Clair Avenue Business Men's Association, which is made up of business men from, I believe, where Bathurst street crosses St. Clair, to as far west as Silverthorn avenue, a distance of about two miles. These business men represent a district which has become one of the most important business centres m the city. They have been complaining that on Saturdays they are not able to have their registered letters delivered to them before the banks close at the noon

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hour. If these letters were delivered earlier, business men could make their deposits before the banks close at noon. They also complain that these letters which they do not get on Saturday are not delivered until Monday afternoon. They ask for three mails a day instead of two, and a Saturday delivery before twelve o'clock. Has the matter been brought to the attention of the minister?


Norman Alexander McLarty: The matter is at present under investigation, and the representations of which the hon. member speaks will be considered before a decision is arrived at.


Mr. HARTIGAN:: For a number of years Glace Bay has been looking for an extension of its town delivery. It is a large mining centre, with a population of about thirty to thirty-two thousand, and there is a partial system now installed which is working very well. Glace Bay is one of the best revenue producing cities which the department has. I understand the reason why the system has not been extended is that quite a number of the people have not fitted their doors with slots or receptacles in order to get the mail. I want to take this opportunity to point out to the departmental heads as well as to the minister that the people of Glace Bay have been promised this mail service for so many years that they have almost given up hope of getting it; and while quite a number have put in the slots or receptacles necessary for containing the mail, a great many others have not. I do not think it is fair to withhold the service from those who have equipped their doors, and I believe that if the department were to instal this service, say, any time to-morrow, those who have not equipped their doors to receive mail will do so within two or three days. They realize that the central portions of the town are efficiently served in this respect, but they say, " What is the use? We won't get it." I appeal to the minister to have the system installed, and I will guarantee that these people who only need to be convinced will certainly instal with alacrity their part of the equipment.
Mr. McLARTY; My understanding is that the only reason why the delivery system has not been installed was that it was required that fifty per cent of the residents along the route would instal slots in their doors. The purpose of the requirement is obvious. Without it, the mail carrier has to go round to the back-door; this results in inconvenience and delay in the mail, and it is unfair to those who do instal equipment. This is a matter in connection with which the department has
to observe some rules. We shall be glad to give consideration to the representations of the hon. member.


David James Hartigan: There is one other angle I should like the Postmaster General to bear in mind. As he must know, a great number of people in a large mining community are not so greatly interested in receiving their mail. It may be convenient for some of these people who receive only periodicals and an occasional letter to call at the main post office and get them: at the same time these people are depriving the vast majority of a daily delivery of mail. As I have said, if the department would instal the service and deliver the mail to those who have already equipped their doors with receptacles, the others would follow suit within a day or two.


Mr. MASSEY:: There is a matter regarding superannuation which I should like to- bring to the minister's attention. Does he wish it brought up at this time, or would he .prefer that it be mentioned on another item?


Norman Alexander McLarty: Would it be peculiarly referable to the post office at all?


Denton Massey: That was the point I wanted to bring up. It is in connection with the post office. I do not wish to refer to any particular case, just to the general question of the superannuation of post office employees.


Norman Alexander McLarty: I think the hon. member might as well do it now.


Denton Massey: It is well known, I believe, that if any postal employee is for any reason dismissed for cause or dismissed as a result of some crime, and is imprisoned therefor, he loses his superannuation. I have in mind one or two particular cases, but I do not wish to refer to any name. This matter is, of course, statutory at the moment and the minister has no control; nevertheless it is worthwhile bringing it to his attention in view of the hardship caused dependents of an employee. After all, a misdemeanour on the part of an employee of the post office, punishable by a gaol sentence, is a serious matter. None of us will deny that. But when a man has served the Post Office Department for twenty or thirty years, and is within a few years of superannuation, and then for some reason or another he commits a crime and is incarcerated, his family are the ones who suffer and not himself. There have been such cases, as the minister knows. I do not wish to call attention to any one in particular, but I have drawn to the minister's attention certain cases and he has given them every
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possible consideration for which the families concerned are grateful, as I assure him I am.
At the time I discussed the matter with him this session he said he would take it into consideration with the thought perhaps of seeing what might be done to rectify a situation which would cause undue hardship to the family of a man who had been gaoled for a crime such as removing from the post office table an envelope containing money. A man may be with the post office as long as twenty-five years; he may have a wife and children; he is in mediocre circumstances, and as a result of some sudden temptation he removes an envelope and puts it in his pocket. He is sentenced to three years. He loses his superannuation-not only his superannuation, but all the money he has paid into the fund. It is lost to him for cause, it is true, but his family are the innocent victims. I have in mind one or two cases where there were several children. The father is removed from the family; there is no breadwinner; the mother may not be capable of working owing to some physical incapacity, and she finds herself destitute because her husband no longer earns any money and his superannuation is gone. All the money that he has paid into the fund over a period of years is lost not only to himself but to his wife as well. I was wondering whether the minister, after consideration of one or two particular cases, had any statement to make as to what progress he had made in this matter.


Norman Alexander McLarty: Offences of this sort do
not relate pecularily to the post office. They come under the Civil Service Superannuation Act, in connection with which there has been an investigation by a committee of this house for some time. The committee has since brought in its report. After all, it is not a matter that is referable to the post office as such. I greatly appreciate the hardship that reflects itself on the unfortunate family of the man who has been guilty of misconduct, but that is something which comes under the statute. In the administration of the Post Office Department my powers are strictly limited by acts of parliament I am here in an administrative capacity, and it is the duty of the house to make any amendment it deems desirable.


Denton Massey: I am sure the minister
does not misunderstand the spirit in which I have brought up this matter-


Norman Alexander McLarty: Not at all.


Denton Massey: -or the particular cases I had in mind. He went out of his way to

see what could be done, and those who were interested appreciated this as much as I did.


Norman Alexander McLarty: I regretted that I could
not do anything.


Denton Massey: I understand that fully, but the minister will agree that a case of this sort might arise more readily in the Post Office Department than in any other. Here men are handling large sums of money daily, and the chances of such an occurrence are greater in the post office than in any other department. I wished to bring the matter to the attention of the committee and of the ministry as a whole because there does arise at times a situation which is grossly unfair to the unfortunate family concerned.


[Stage Direction]
Item agreed to.
278. Railway mail service, $10,345,690.
Mr. DEACHMAN:: My recollection is that about 1920, at the time of the union government, the railways received a substantial advance in rates for carrying mail, and while other payments to railways for freights and express have declined sharply since then as a result of truck competition, there is apparently only a small decline in the amount allowed the railways for mail service. I suggest, although it might look like robbing Peter to give something to Paul-


Paul Joseph James Martin: Why not give it to Paul?


Robert John Deachman: If it were Paul Martin I would, gladly. I suggest it might not be a bad idea to see that this payment be made to conform to what might be called a reasonable remuneration for the service rendered. I do not see why we should continue a payment which might have been justifiable at the time it was established in the days of extremely high rates, but which is out of line with present conditions. Another question: Is anything being done with regard to the carrying of mails by trucks instead of by railways? In some places the service might be better.


Norman Alexander McLarty: I shall be glad to consider the suggestion.


William Allen Walsh: Will the minister explain the contracts with the railway companies?


Norman Alexander McLarty: The rates in connection with mails are set by the governor in council. There is no contract. The present rates were fixed by order in council in 1922. In March, 1921, a hearing before the board of railway commissioners was held and the rates were subsequently raised. But there is no contract.


William Allen Walsh: Has there been any diminution in the amount of mail carried by the railways since the inception of the air mail service ?


Norman Alexander McLarty: It is a little early to say. There is no decrease in the authorizations for space on the railways and there has been no decrease in the quantity of second-class mail carried by the railways. The volume of such second-class mail in the last three years has been:
1935-	36
1936-	37
1937-	38
Pounds
108,000,000
121,000,000
124,000,000
The trans-Canada air mail service was inaugurated such a short time ago that it would be difficult, to determine at this early date the effect on the first-class railway mail service.


William Allen Walsh: How much was paid in the last year to the Canadian National Railways and the Canadian Pacific for mail service?


Norman Alexander McLarty: For the year 1937-38 the total paid to the Canadian National Raillways was 82,969,000, and to the Canadian Pacific Railway, S3,589,000.


William Allen Walsh: Over a million dollars more paid to the Canadian Pacific than to the Canadian National-


Norman Alexander McLarty: Not a million dollars. Roughly, S600,000.


William Allen Walsh: -despite the fact that during the past year we had a deficit on the Canadian National Railways of approximately $54,000,000 which had to be paid out of the public treasury. Also we have to take into account the fact that the Canadian National Railways serve a very much larger territory than the Canadian Pacific, having a few thousand more miles of line, yet we have this discrepancy. It does not appeal to me as good policy or good economy on the part of the post office. There may be some good and sufficient reason for it. I am not sufficiently versed in the details to know; but I wish the minister could give this committee any good and sufficient reason that exists for the difference between the amount of business given by the government to the Canadian National and the Canadian Pacific, having in mind the fact that the Canadian National has more mileage in Canada than the Canadian Pacific and other facts of that kind.


Norman Alexander McLarty: The same question arose in my own mind when I saw the larger figure paid to the Canadian Pacific. So far as the post office is concerned, in the carriage of mail
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it must use that system which best serves the needs of the postal service. The fact is that while, as the hon. member has pointed out, the Canadian National has more mileage, the territory it serves is less densely populated, and consequently the mail carried is considerably less than that carried by the Canadian Pacific. The hon. member will realize that the Canadian Pacific, being the earlier road, to a large extent covers the more populous areas of the country. There is no discrimination so far as I can ascertain; it is simply a matter of using the facilities which best serve the postal needs of the people.


William Allen Walsh: Seeing it is over ten years since the postal rates were established between the government and the railways, does the minister consider the time opportune to have a further reference to the transport board with a view to arranging new rates or another contract and saving money to the government?


Norman Alexander McLarty: That, of course, was the point raised by the hon. member for Huron North (Mr. Deachman); I think it is a matter that should receive consideration in view of the factors he mentioned.


Robert John Deachman: I am sure if my hon. friend will review the condition that existed prior to the 1921 arrangement he will find that the rates at that time were very much lower than they are to-day.


Norman Alexander McLarty: That is quite true.


Robert John Deachman: Speaking purely from memory, I think that so far as general traffic on the railways is concerned, the rate now is lower, at least J cent or more per ton mile on the average, than it was at that time. And of course every hon. member who has any business with railways knows that express rates have been dropped materially because of bus and truck competition.
In regard to the other matter, I agree with my hon. friend that the only way for the post office to approach the problem of distribution of mail carriage between the two railways is to consider it from the point of view of the interests of the service. We cannot pick favourites, despite the fact that one happens to be a government owned railway. The primary object of the Post Office Department is to give the quickest and most efficient service possible, and let the railway which is able to provide that service secure the business, to which it is justly entitled under the circumstances.


Howard Charles Green: Has there been any re-grading of the railway mail clerks? We under-
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stood last year a plan was on foot to re-grade these men. Has it been carried out, and what is the nature of the change?


Norman Alexander McLarty: That is presently under consideration. It is before the commission at the present time, and I understand the officials of the postal department a^e meeting with them next week.


Howard Charles Green: Can the minister give any idea of the nature of the re-grading?


Norman Alexander McLarty: It would be hardly fair before a final conclusion has been reached. There have been three or four alternative suggestions, and it is with the hope of working out the one which will be most appropriate that the meeting is taking place. I would prefer not to give details until a final conclusion has been reached. We are hopeful that this will be reached in the immediate future.


[Stage Direction]
Item agreed to.
279. Air and land mail services, $9,004,049.
Thomas Alfred Thompson: For several years I have called the attention of the Postmaster General to what I consider a great hardship to the rural mail carriers in Canada. When a rural mail carrier is required, the position is advertised, tenders are asked for, and the position invariably goes to the lowest tenderer so long as he can procure two sureties satisfactory to the department. The contract is made for four years. At the end of that time the man who has the patronage of the riding, the member if his party is in office, or the defeated candidate if the party he supports is in office, is asked whether he will recommend renewal of this contract or whether it should be put up for tender. Here is a man who four years ago purchased a horse, cutter, buggy, harness and equipment. He now finds his contract is put up for tender; someone underbids him, and he is left with his horse and equipment, or car as the case may be, on his hands. No one objects to a government appointing its friends to positions. That is quite right. But when the man who takes that public position, ceases to be a partisan, and gives faithful and loyal service, I have always contended and contend to-day that he should not be removed except for cause. The man who has the patronage of the riding cannot say who is to get the mail contract, but he has the right to ask to have it put up for tender. And the carrier is underbid and ruthlessly thrown out of a position in which he has given faithful service.
Mail is delivered, in the cities also, but a different plan is followed there. When appli-
[M\ Green.]
cations for postmen in cities are invited, the salary is stated. The department select the man they consider most competent to discharge the duties of that position.


Norman Alexander McLarty: The commission selects him.


Thomas Alfred Thompson: Yes, the commission. In the country, however, they are asked to compete against each other, and then they have no security in their position, for the contract expires at the end of four years. I would ask what I have asked on several previous occasions, that the rural mail carrier be placed in the same position as the city mail carrier. I do not think there should be any discrimination 'between them. These rural mail carriers are rendering a splendid service to the country, and there should be some stability about their positions.
I would suggest that a fair way to deal with the matter would be to place a value per mile on each route. Some routes can be run more economically than others. Some routes are along the highways, where the snow is kept ploughed in the winter and the road is kept in perfect shape. Generally these highways run through the more thickly settled parts of the country, and on those routes the mail can be delivered more cheaply than on country routes where the roads are not kept in the same condition. Put a value of $40, $45 or $50 a mile on these routes, according to their condition; invite applications for the position, stating what the salary will be, as is done in the cities. Then let the civil service commission select the man they consider most competent to discharge the duties of that office. I believe this change should be made.


Ernest Edward Perley: The hon. member for
Lanark has covered the situation I tried to bring up under item 275, and I believe he has pretty well outlined what I wanted to say. I think a great injustice is being done some of our rural mail carriers, particularly in Saskatchewan where during the last two years many contracts have been thrown open at the end of the four year period. I know of men who have been carrying the mail for six or seven years, whose contracts were renewed four years ago. When those contracts expired this year, however, new tenders were called for and these men were thrown out. The hon. member for Lanark, however, has dealt with the matter so thoroughly that I need not say any more along that line.
I notice a considerable increase in this vote, and I wonder if the minister could break down that increase as between the air and

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land services. Would he also give us the cost of rural mail deliveries for the last three or four years, in order that we may see whether any part of this increase is accounted for by the rural mail service?


Norman Alexander McLarty: Does the hon. member
mean the increase this year in the air and land services, or the total increase.


Ernest Edward Perley: The increase this year,
because so far as we are concerned we do not know whether it is in connection with the air or land service.


Norman Alexander McLarty: The increase in the appropriation for mail service by air is $519,400, and for the land service, $242,274.


Ernest Edward Perley: That is for the rural mail delivery?


Norman Alexander McLarty: The rural mail delivery would be included.


Ernest Edward Perley: That is the increase?


Norman Alexander McLarty: That is the increase this year.


Thomas Reid: While I endorse the remarks of the hon. member for Lanark, there is one other aspect of this matter that I do not think has been touched. We now have the treasury department interfering in the prices paid on these rural routes. I had this situation drawn to my attention last fall. The treasury department raised objection to the continuation of one rural route, stating that since another route in the same constituency was being carried on for something like $35 a mile, they would refuse to allow a further contract for the other rural route because it was costing $41 a mile. There is something seriously wrong in that situation. We have a new minister in the department, and I would suggest to him that now is the time to take a club to the treasury department, before he gets too seasoned in office. If he does not deal with them the situation never will be altered. In good faith the Post Office Department calls for tenders and, as the hon. member for Lanark pointed out, the tender goes to the lowest bidder, very often at a price far below cost. That policy having been adopted, however, why should the treasury department step in and say that because one man has taken a route at $35 a mile, another man fifteen miles away will have to take his route for $35 also? I do not know how many hon. members have had this situation drawn to their attention, but I know it was .brought to mine and I made up my mind that I would air this grievance on the floor of the house. It is the treasury department that is doing this, not the Post Office Department. We have
growing up in this country a higher officialdom which, if it is not controlled to some extent, will become our very masters. I warn hon. members to protest on every occasion against interference by the treasury department. In 1933 we had this department interfering with the pensions of the returned men, when they did not know the first thing about the individual pensioners. We now have them interfering in rural mail contracts. I urge upon the minister that now is the time to assert his authority, and that once a contract has been let, that price should be maintained.


Mr. TOMLINSON:: During the last three years I have listened to certain remarks by my hon. friends to the left concerning the opening of certain contracts by members supporting the government, suggesting that this was rather a drastic step to take and that probably politics were mixed up in it in some way. The insinuation has been there.


Mr. HOMUTH:: It is quite true, too.


William Rae Tomlinson: I said last year, and I repeat, that so far as I am concerned in my own riding I have never carried on any such tactics, in connection with rural mail routes, as were carried on between 1930 and 1935. I know of one contract that was let, the amount of which was increased each year without new tenders being called. That is in the records of the department, and that took place under the Conservative government.


Mr. SPENCE:: That was generous treatment.


William Rae Tomlinson: Yes, it was generous treatment on the part of the former Postmaster General.
Passing from that, however, and without any desire to play politics in connection with this matter of mail contracts-keeping away from politics altogether-I should like to say a -word on behalf of the rural mail carriers of Canada. We hear very little about these people, yet I believe they are closer to the rural home life of our country than perhaps any other employees of the dominion government. We have approximately 4,500 employees operating these routes at a total cost, in round figures, of $2,700,000. I have obtained figures showing the cost per mile from December, 1922, to December, 1937. I shall not place all the figures on record, but I believe it would be sufficient to say that on December 31, 1922, the average cost per mile on mail routes was $41.37, and that this amount gradually decreased until on December 31, 1937, the average price was only $32.47, or a drastic reduction of about $9 on what might be described as very small contracts yielding small remuneration.
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Of course to-day contracts are let by tender to the lowest bidder, unless, in the opinion of the department, the lowest tenderer is not in a position to carry out the contract. Naturally those people who received contracts in the good days between 1920 and 1930 received reasonable remuneration, 'because very few desired to tender. But from that date forward many persons in rural communities have suffered from a scarcity of cash and have been willing to tender on mail contracts at ridiculously low figures. For instance, I have information before me concerning a route in the vicinity of Port Elgin, running a distance of twenty-four miles, the contract price for which is $385 a year.
The mail contractor cannot carry out his contract and make a profit under such circumstances. To-day the rural population want a proper mail service. In the cities the mail carriers take the mail from the post office stations to the doors of the citizens. To-day rural communities demand the same service, and they are entitled to it. In the cities the mail carriers are under the supervision of the civil service commission and receive a stated salary, whereas the mail carriers in the country operate under a tender system. If they tender low and obtain a contract they are unable to make a profit and do not give the same efficient service they would give if they received reasonable remuneration.
The Postmaster General and his department are to be congratulated upon their desire to accommodate rural communities. We now find that they do not hold closely to the stipulation providing for six persons to a half mile, but have been reasonable in the matter and have shown a disposition to serve the people, regardless of distances. In my view that is the proper attitude to take.
I have heard several suggestions as to the amount per mile which should be paid mail contractors. However, I must be frank enough to say that from the information at hand and the agenda forwarded to me by the mail carriers' association I am unable to satisfy myself as to the exact amount that should be paid. In connection with mail contracts there are many circumstances which must be considered. One must take note of the roads, as to whether the route would be along a highway on which snow ploughs would operate or on the back roads where those services would not be given.
I believe the minister should consider appointing a committee of some kind, composed of members of the House of Commons or officials of the department, some of the mail contractors and heads of associations, to make a thorough study of the matter, in an
rMr. Tomlinson.]
effort to arrive at a satisfactory settlement. I say that because I do not think the demand for mail carriers will return to the state in which it was between 1920 and 1930. I would ask that the minister give my humble suggestion his usual careful consideration. Probably, if that attention were given to the matter we might give assistance to some of the mail contractors who are endeavouring to carry out their contracts, but who find that their remuneration is not great enough and that, therefore, they are unable to give the service they would desire to give.


Hugh Alexander Stewart: Mr. Chairman, this question is not a new one. In fact it is a perennial, and successive governments have never been allowed to forget it. It is one beset with some difficulties, but I do not believe it is insoluble. We begin with the generally sound principle that tenders should be invited for public services. It is pretty hard to get away from that principle. I do not believe, however, that a comparison of mail services in rural and urban districts is a fair one, because mail delivery in the cities is a full-time job. It comes under the civil service commission, and there is no difficulty in fixing a rate. The service in rural districts, however, calls, in many instances, for only a part-time job. Lengths of routes vary, and conditions of roads and other circumstances vary from one route to another. These factors present difficulties in arriving at a standard rate, if we are prepared to depart from the principle of tendering.
I believe, however, and I have suggested that it is not beyond the ability of the Post Office Department to classify these routes under four or five headings, taking into consideration mileage and other conditions. On some routes the hours of the day are of importance, and vary from those on other routes. On some routes the mail carrier derives revenue from carrying passengers or from other services he may render. All these factors complicate the situation. If, however, we are prepared to depart from the principle of tendering, I believe we could make a fairly equitable classification and arrive at a fixed standard rate. If we do that, then the question would arise, How are we to make these appointments if we depart from the principle of tendering? There would be the question of who would get the contract at the rate of $45 a mile. I suggest that the matter should be turned over to the civil service commission in order to eliminate the undesirable and unsatisfactory element of patronage.
Having started out on the sound principle of inviting tenders, where do we go wrong, if we are wrong? I submit that we go wrong

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when at the expiration of the contract after four years, the Post Office Department communicates with the sitting member or the defeated candidate, even though no complaint has been made, and asks, "Should we put this up for tender?" The department is responsible for introducing the temptation of patronage. Conditions are satisfactory; the mail service is regular; the patrons make no complaint, but the Post Office Department comes along and says, "Here is an opportunity for some patronage."


Mr. McKENZIE (Lambton):: How can there be patronage when the contract must go to the lowest tenderer?


Hugh Alexander Stewart: The putting up of the contract for tender is where the patronage comes in.


Robert McKenzie: The awarding of the contract is where the patronage comes in.


Hugh Alexander Stewart: My hon. friend does not realize that the inception of the patronage is the suggestion that the contract should be put up for tender. As I said, the department comes along in the form of a tempter. The less experienced one is with patronage, the more inclined he is to surrender to temptation. In most instances the contract goes to the lowest tenderer, but not always. Sometimes the suggestion is made that the man cannot carry out his contract, that he is not the right type or that he cannot give the necessary surety. An inspector goes round and interviews the sureties, and possibly the suggestion is made that the price is too low.


William Rae Tomlinson: Is that not quite right?


Hugh Alexander Stewart: No, I do not think so. The inspector may suggest to the sureties that the price is too low, that they had better go slow and be careful. The result is that the lowest tenderer does not get the contract. I suggest that one of two things should be done. Classify these contracts under the headings I have suggested, and once a contract has been awarded fairly to the lowest tenderer and the service is satisfactory to the Post Office Department, the contract should be continued on that basis. The department knows whether the rate is reasonable and fair. Why cling to this delusion of patronage? Why communicate with either the sitting member or the defeated candidate to ask his opinion whether the contract should be put up again for tender?


Sir EUGENE FISET:: He ought to know.


Hugh Alexander Stewart: Not better than the Post Office Department. In many instances the officials of the department know just as well.


Eugène Fiset: The hon. member should talk sense.


Hugh Alexander Stewart: I am sure that when my hon. friend was deputy minister of a department he felt he knew as much about the way to run that department as any member.


Eugène Fiset: I had no such contracts to deal with.


Hugh Alexander Stewart: It would not have made any difference if you had.


William Rae Tomlinson: Was there no patronage when you were in power?


Hugh Alexander Stewart: If it will conciliate my hon. friend, I am willing to apply my remarks to both parties. I think my appeal applies with the same force to the one party as to the other. That is where we get off the track. I suggest that so long as the service is satisfactory, so long as the contract has been awarded under a tender, the department should not go out of its way to seek new tenders and to cause all this friction, trouble and dissatisfaction that arise from putting these contracts up for tender so frequently. It often results in the injustice referred to by the hon. member for Lanark (Mr. Thompson). A man may have purchased an equipment which is left on his hands, and probably the difference in the contract price is only $10 or S25. There cannot be a great difference in the tenders for a rural mail route. This practice causes heart-burnings and a sense of unfairness. I think all this can be overcome in a large measure by the Post Office Department. Once a contract has been awarded on the basis of a tender, it should be continued until some good reason is found for terminating it. When a change is made simply on the request of the sitting member or the defeated candidate, it does not matter which party is in power, the injustice is just as great.


Jean-François Pouliot: The hon. member for Leeds (Mr. Stewart) knows I have the greatest respect for him. When he was Minister of Public W'orks in the former administration he was one of the few able ministers of the government. He looked after his department carefully. I brought some cases to his attention, and in some instances the guilty parties had to refund money they had taken. One time when he was attacked by some of my colleagues I thought the attack was unfair and I told him so afterwards. I did not say anything at the time because I did not want to be hard on my colleagues. I have always had the greatest respect for my hon. friend.
But he gave all his time to his department; he never looked across the fence into the department of the Postmaster General. He
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kept within the boundaries of his own department; he did not go across to his neighbours, and I did. Therefore I know better than he what happened in the Post Office Department during the five years the Bennett government was in power. My hon. friend must remember the time when I came into the house with a weekend bag filled with files of papers showing the injustices that had been done to poor honest people in my constituency. Perhaps to the great surprise of my hon. friend he will learn now what happened during the memorable five years the superman was in power with the assistance of one in the department of the post office who was not a superman. Some extraordinary things happened. I may tell my hon. friend that ninety per cent of the contracts which were held by respectable Liberals were turned over to intriguing Tories on the recommendation of the defeated candidate. I see he is much surprised at that, but those are the facts and the records are there.
Let us consider the whole question. In the first place, the Post Office Department is not a revenue department; although it has some revenue, it is a service department. The main purpose of the department is to give good service to the people and to provide mail deliveries as frequently as it is possible to do so. My hon. friend knows that in his constituency and in the constituencies of other hon. members there are very few post offices that show a surplus when the amounts paid to the postmasters and other expenses are deducted. This is done in order to give the people who live far away some opportunity to receive their mail regularly. I have the deepest sympathy for those who live at a considerable distance from railway or steamboat service, who are far in the woods or the back country, and who are anxious to receive news, business letters or communications from their friends and relatives; they should be given a good service.
The first point to consider in relation to mail contracts is the organization of the delivery of mail throughout Canada. Sometimes it is difficult to persuade the department to accept our views regarding better service at some particular point. I am ready to admit that the hon. member for Leeds knows the postal conditions of his constituency at large much better than anyone in the Post Office Department, even the district superintendent, who does not know them so well. Of course my hon. friend visits his electors; he is personally acquainted with them; he knows the distance a mail carrier has to go in carrying mail bags and fulfilling his other duties as mail carrier. When his

party was in power and he was Minister of Public Works. I never heard him express such views as he did to-night. He knew his electors just as well at that time as he does now; and then he was all-powerful with the mighty. I am sure that if he had made any suggestions to Mr. Bennett, that gentleman would have listened to him before listening to Mr. Sauve- as anyone would have done, and as anyone would do still. What astonishes me greatly is that my hon. friend, when he was in a privileged position during five years to have his marvellous system organized, never thought of doing it; but now he tries to suggest a thing which he knows very well will never be done, because if it had to be done it would have been when he was in power. .


David Spence: You can change any system.


Jean-François Pouliot: We can improve a system.


David Spence: You change it by improving it.


Jean-François Pouliot: 
Thomas Alfred Thompson: The system is wrong.


Jean-François Pouliot: The system is not wrong
from the department's point of view. It is wrong in that the people themselves are not reasonable and cut their own throats. I may tell the hon. member for Lanark what I said to his distinguished colleague the hon. member for Leeds. He was a supporter of the late government; why did he not change the system then?


Thomas Alfred Thompson: May I tell my hon.
friend that I brought it to the attention of the government at that time, and I received an answer that they were satisfied it should be done, but, going through the depression as they were then, they did not think it was wise to add the extra expenditure. That is the reply I got.


Jean-François Pouliot: Yes. And of course my
hon. friend was pleased with that answer.


Thomas Alfred Thompson: No, I was not.


Jean-François Pouliot: I am sure he was rebuked by his leader. It was seldom that he received such a courteous reply.


Thomas Alfred Thompson: I think the hon. member should withdraw that remark.


Jean-François Pouliot: That was his general
practice.


Thomas Alfred Thompson: It was not. Absolutely not.


Jean-François Pouliot: I am glad that the hon.
member was an exception.
I want my hon. friends to understand the point. There is no price fixed by the Post Office Department; and during the several years that I have been a member of parliament it has not occurred once that after the establishment of a route, or the organization of a mail contract, was decided upon, the price was found to be too high.
There should be some education of the Canadian people in order that those who in the past have made tenders which are too low will not repeat their mistake in the future. It is easy for any man in the country to evaluate his services as a mail carrier, to estimate what it may cost him, the value of his work, and so on, and submit to the department a reasonable tender. My first point is that it is not the Post Office Department but the people themselves who are to blame in that
regard-not all of them, but a few who do not charge what the service is worth, and who think afterwards that they can go to the member and get a substantial increase. Every hon. member knows that is the way it goes.
With regard to a fixed price, the hon. member for Leeds has an ingenious system; he suggests that the awarding of contracts be made by the civil service commission. That is marvellous. I never thought the civil service commission could do so well. Let us suppose for a moment that there is a fixed price of S40 a mile, which is a fair price. From what my hon. friend says, I understand it is his view that everyone who now has a contract should have it renewed unless there is cause for cancellation. There is a new contract to be awarded. There are 12,000 post offices in this country, and in not a few instances there are many services involved-rural routes, ordinary mail carrying, and so on. How will the commission deal with the matter? My hon. friend knows that at the present time the civil service commissioners have so much to do that they cannot peruse the files, and when there are reports of examiners they read only the report of the chief examiner. They have not even the time to read the record of experience of the different candidates. Is it desirable to give them more work? What would they do? They would not even read the report of the chief examiner if that were done.
Theoretically it is all very well to say that we have enough patronage, that we should get rid of patronage and turn the matter over to the civil service commission where everyone would get a square deal. But my hon. friend knows very well that for contracts for Gaspe, Charlevoix-Saguenay, Temiscouata, and anywhere else, there is no one who can inform the civil service commission as to which candidate should be given the contract. Everybody in the community, whether it be a parish, a village or a township, will send in a tender for S40. My hon. friend knows that at least one-half of the population would do so. If there is a fixed price for mail contracts one-half of the population will tender. The population of Canada is ten million-six million in the cities and four million in the country- and the civil service commission would have at least two hundred thousand or three hundred thousand applications for mail contracts throughout the dominion. I challenge my hon. friend to say that there is anyone in the country who would not consider a mail contract at $40 a mile. Everybody would in his constituency, in mine, and in every other, and a choice would be impossible.
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If members of parliament assume the responsibility of recommending to the Post Office Department either to renew a contract or to ask for tenders, they assume a great responsibility because the contracts are not awarded according to their recommendation at all. And that is the only thing they do. They are on the spot; they know everything about the matter, and that saves the country a great deal of money.


Harry James Barber: What about the defeated candidate? He does it to-day.


Jean-François Pouliot: The defeated candidate is supposed to know the constituency better than anyone in the post office or in the civil service commission.


Miss MACPHAIL:: Not better than the elected member.


Jean-François Pouliot: Sometimes, yes. I make an exception of my hon. friend, but not of all hon. members.


Major James William Coldwell: But the electors do not think so.


Jean-François Pouliot: That is a respectable point of view with which I may differ. The awarding of the contract must be done by somebody, and if the member of parliament has a say about it it is because in the eyes of the electors he is responsible for much more than he does. He renders a public service entailing self-sacrifice, and if the Post Office Department finds that in some constituencies where the member is not a supporter of the government it should be done by the defeated candidate, that is a matter for their judgment,. In my own case it was done for five years by the defeated candidate, and on general principles I did not complain so long as he did not do any injustice; but when he did wrong, it had to be redressed. And there were so many wrongs that they had to be redressed often.
But my hon. friend complains of the defeated candidate. There is something else to be said in that regard. If the constituency is represented by someone who is not a supporter of the government, at any rate he is a vigilant member and he can keep an eye on what is done by the defeated candidate and take advantage of that fact on any occasion. The hon. member for Leeds, the hon. member for Rosetown-Biggar, and the hon. member for Grey-Bruce have enough political acumen to bring before the house anything that is not in accordance with their sense of justice, and in that case the member of parliament is in a much better position than the defeated candidate, because the defeated candidate has a responsibility which that elected member has

not. If something goes wrong people can complain about the actions of the defeated candidate, so that the defeated candidate, in such circumstances, has the whole responsibility and must bear all the opprobrium of what is done.


Hugh Alexander Stewart: He has no responsibility.


Jean-François Pouliot: The hon. member for Leeds is not always treated like a defeated candidate in the Post Office Department, and therefore he should not speak so much of defeated candidates. I will not press that point because I am very fond of him. I have a soft spot for him.


Hugh Alexander Stewart: Where is it?


Jean-François Pouliot: But he knows that I know, and it is just because he knows that I know that I speak along these lines. Let us be frank.


Hugh Alexander Stewart: Hear, hear.


Jean-François Pouliot: The system is not perfect; we all admit that; but it is not as bad as it is made out to be, and what is wrong with it cannot be imputed to the Postmaster General but only to people who are not reasonable enough to submit decent tenders. That is all. I trust that no one took seriously what the hon. member for Leeds said jocularly about appointments of mail carriers by the civil service commission. He is too well-informed to mean it.


Hugh Alexander Stewart: Just a word in reply to the hon. member for Temiscouata. First, I must thank him for his kind references to myself. They were so extreme, I was going to say, that they almost embarrassed me. I am glad, however, to get them because they are so rare.


Jean-François Pouliot: I meant it.


Hugh Alexander Stewart: I assume my hon. friend is sincere in everything he has said. I did not expect, however, to have such a striking argument in support of my contention. I could not have cited an illustration as strong as the one he has given. He speaks of a constituency with which he is familiar and says that all these contracts were terminated and changes made. That is just what I say is wrong and should not be, and I am sure he says the same. It is for the purpose of making that impossible that I make this argument to-night. I hope the conditions he has described have not prevailed in many constituencies; if they have, the need for remedy is much greater than I thought it was. I can tell him of at least one constituency in which no such policy was followed.

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I think he magnifies the difficulty of having appointments made by the civil service commission. All these appointments would not be made at once. They would not be renewed from time to time; they would be permanent, and the number of appointments the commission would have to make in any one year would be very much limited. So I think he over-emphasizes the difficulties. There are difficulties in any method we adopt, but I say that the present method results in unfairness to a large number of people who are giving good public service, and tends to develop and perpetuate the undesirable feature of patronage which the hon. gentleman himself has illustrated to the last degree in describing the conditions that developed in his own constituency.


Jean-François Pouliot: I was not responsible for it.


Agnes Campbell Macphail: I am sorry I was not in the chamber to hear the presentation of the hon. member for Leeds. I do not know what his plan is, but I know from experience in Grey-Bruce that under economic conditions existing to-day, when a rural route is opened for tender a great many tenders are submitted, and very often a person who has never driven a rural route tenders lower than those who have had experience. A person who does not know what the cost of upkeep will be but who is driven by economic need puts in a tender below the cost at which it is possible to maintain a family in decency or even the conveyance necessary for carrying the mail. Then, when they get well into the contract, they realize that they have made a mistake, but it is then too late to do anything about the matter. And that repeats and repeats. I do not know that this is true, but I judge that the cost is lowered to the department as time goes on; but it is lowered at the expense of the people. How can we expect other employers to pay reasonable wages if a government department pursues a policy which, as time goes on, makes the living of rural mail carriers more and more precarious? I am convinced that something must be done about rural mail routes.
There are other difficulties which arise, certainly have arisen in my constituency, which I do not intend to make public, that still further lessen the amount left to the carrier himself. So I urge upon the new Postmaster General, who is a man of mental vigour, to try to work out some plan or policy that will give something approaching justice to the people who carry his majesty's mails. The condition cannot remain as it is. It is simple and easy to say, as I have heard it said in this committee many times, that the people
themselves are to blame. That may be true, but they do not know how much they are to blame until they are so far in that they cannot get out. Then, if a contract is opened again for tender, the thing is just repeated. So there will have to be something done about the rural mail carriers in Canada. There will have to be some sort of zoning, because in districts where there is heavy snow it is a much more costly and arduous task than where there is easy wheeling, as country people say, the year round.
I do not want to go into the patronage business; it is a nasty business and would take much time to deal with fully, but I do hope to see the day when the elected member is the people's representative in every sense of the term. I have been member for Grey-Bruce now for almost eighteen years, and in nearly all that time I have seen a defeated candidate, sometimes one who lost his deposit, in absolute control of running the business of that constituency. If that is democracy I am mistaken. I do not think it is; it is a misuse of the term. Such things as that bring democracy into ill repute and make even its friends wonder whether it is worth while struggling to preserve.
If the whole matter can be handled by the civil service commission, that might be one way out. If it cannot, it is time and past time that defeated candidates ceased to look after the business of the people in the constituency. I think the day will come when parties do not mean what they mean to-day and the control through the defeated candidate as we know it to-day will cease to exist. That time certainly should come, because such a condition is far from being the beautiful thing that we want to think democracy is. I urge upon the new Postmaster General consideration of the need of the rural mail carriers and entreat for them his interest.


Mr. ISNOR:: As this item covers air mail-


Norman Alexander McLarty: Would my hon. friend allow the rural mail section to be heard first, and then deal with the air mail? There may be others who want to say something on the rural mails.


Mr. FURNISS:: There is no question which comes before the house in which rural members are more interested than rural mail delivery. They are constantly asked for extension of routes or to have new routes established. I have listened to the debates in this committee on every occasion since 1936. I believe I have listened to the hon. member for Lanark on every occasion. He said to-night that he had repeatedly urged upon the Postmaster General the necessity of doing

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something for rural mail carriers. I have been curious to know just how interested he was in the matter during the time the government of which he was a supporter was in power, from 1930 to 1935.


Thomas Alfred Thompson: Just as interested as I am at the present time.


Stephen Joseph Furniss: I took the trouble to look up Hansard for these years, and I did not find a single occasion during those five years when he ever suggested anything to the Postmaster General on behalf of the rural mail carriers, or any denunciation by him of the contract system, notwithstanding, as 1 understood from an hon. member this winter, that it was a pre-election promise of the Conservative party that something would be done on behalf of the rural mail carriers if that party were returned to power. I think it was Erastus Wiman who said once that if a man were fooled once it was the other man's fault, but if he were fooled twice it was 'his own fault. I do not think the rural mail carriers are going to be fooled again by election propaganda such as that.
Coming back to the question of rural mail carriers, I have had some experience both in extensions and having routes established, and in some instances where routes were put up for tender. The hon. member for Grey-Bruce said that in many instances the route was under-bidden by someone who knew little or nothing about the cost. That may be so but I have in mind one or two routes in my riding that were put up for tender for good cause, and the lowest bidder in both instances was the man who had held the route for years before. In one instance he held it at, I believe, $94S and bid it in at 1480. In another instance he had held the contract for years at $781, and he bid it in at 8400 and in both cases the next lowest tender was for $700. Those men knew what it cost to run that route. I do not say that they did not take it too cheaply, but if they did, it was their own fault.
I have in mind, as well as the plight of the rural mail carriers who are in many instances underpaid, the condition of the farmers along the route who are served by the carriers and who are also underpaid, by no choice of their own.
I believe if the system were changed and put on a $40 per mile basis, as suggested, that a great many people will never enjoy rural delivery where as under the contract system new routes would be established, and further that many routes now being operated must of necessity be abandoned because the service would not warrant the increased cost of delivery.
[Mr. Furniss.l
I have assisted in having several routes established in my riding. Each time an application was made an inspector was sent in, who went over the route and ascertained the number of patrons per mile. If the number were not up to the required standard he would ask the sponsors of the route to guarantee a price at which the route could be carried on, and if that price were within reason the route was advertised for tender. I have in mind two particular routes, one of which went at $20 a mile and the other at $25. If a price of $40 a mile had been set, neither of these routes would have been established, nor would any of the routes in the thinly settled parts of my riding. Whatever the minister has in mind concerning this matter, I hope he will not set a price so high that it will be prohibitive so far as the more thinly settled portions of my riding and others in the northern part of Ontario are concerned.
Most of these routes are only part-time jobs. I have in mind the route that serves my home. It was operated for some twenty-four years at $800 a year, and is about a twenty-five mile route. The man operating it was a farmer, a building contractor, an agent for builders' supplies and so on, and there were in the village other men, practically on the verge of relief, who wanted a chance to tender on the contract. So, in justice to those who wanted a chance to bid on it, I asked that the route be put up for tender. The contract was let at $600 a year, and it has been operated at that price for two years. On different occasions I have asked the contractor if he was satisfied, and he said he was perfectly satisfied with what he was getting. So I think in connection with many of these routes that were let twenty-four or twenty-five years ago, when wrork was plentiful, there can be no complaint if other people, who find themselves up against it, want a chance to bid. I believe they should be given a chance to tender on the route.
That is all I desire to say at the present time. I think it would be a mistake to change the present system. So far as patronage goes, I do not think the rural mail delivery system will ever be further from patronage than it is at the present time. In each instance the contract goes to the lowest tenderer. It has been stated to-night that this is not so in all instances, but this has happened on every occasion in my riding, and there has been no interference whatever on my part with departmental routine.

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Mr. BROOKS:: I desire to endorse much
of what has been said with regard to rural mail carriers. I come from a distinctly rural constituency in which there are a great many of these public servants. I do not endorse what has been said in a political partisan manner to-night, nor do I intend to enter into any controversy along that line. I am sure every member of this house could rise in his place and give personal experiences with regard to patronage, taking up a great deal of the time of this committee. As I understand, however, that is not the purpose' of this discussion, which is to see if any assistance can be given the rural mail carriers, having regard to those whom they serve.
The first consideration in the carrying of his majesty's mail should be the service that is given the public. I know that in many instances, although a rural mail carrier may be popular on his route and give splendid service, when the contract expires the route is put up for tender and he loses the position to someone else who does not always give such good service. I do not consider this to be in the best interests of the public. When we have good rural mail carriers, there should be some system under which these better men might be retained. We speak of the system under which these men carry on. The mail carriers in the cities are civil servants. I am satisfied that if their positions were put up for tender every four years we would have the same vicious practice in the cities that we have in the country districts. If it is fair that the city mail carriers should be under the civil service commission; if the public is given better service under this system, it seems to me some system which would be just as satisfactory could be worked out for the country districts. As the hon. member for Grey-Bruce said a moment ago, the time will come when we shall have to work out in connection with the rural mail delivery some system that will be more satisfactory not only to the carriers but also to the public whom they serve.


Thomas Reid: Would the hon. gentleman be in favour of putting under the civil service commission the 12,000 men who are doing this work at present?


Alfred Johnson Brooks: I am not suggesting any particular system; I am saying that the present system is not satisfactory to the rural mail carriers themselves. It is not fair, and I do not think it is in the best interests of the public. Whether they should be put under the civil service commission; whether the rate should be set at so much a mile or whether a commission should be appointed to look into the matter and work out a better system is
something that will have to be decided. Some years ago I was a rural school inspector, and I know something of the hardships which these men endure during the winter. I used to admire the tenacity with which they stuck at their work and served the public in all kinds of weather, and I believe this government and the country should give careful consideration to this question. The matter is brought up every year; hon. members on one side twit hon. members on the other about not having done anything when they were in power, but that is not going to solve the problem. This must be a problem, judging by the fact that year after year members of all political complexions bring up this question; and if it is a problem, it is our duty as a parliament to try to solve it in some way that will be satisfactory to the people concerned and to the general public.


Robert McKenzie: I have no desire to delay the passing of this item, but I want to commend the Postmaster General for having extended to the rural mail carriers the holidays of which they were deprived. I think that was coming to them, because they do their work satisfactorily and give good service in all kinds of weather and over all kinds of roads.
I am inclined to think the hon. member for Lanark and the hon. member for Leeds, in speaking about the patronage system, must have had in mind some previous administration, because my experience has been that when a route is advertised it goes to the lowest tenderer. Any member who would willingly want to have a tender opened under those conditions is just asking for trouble; that is all. I cannot think of any man who would want to do it. I was also surprised at the devious routes through which the hon. member for Leeds weaved round. I never thought of those ideas at all.


Hugh Alexander Stewart: The hon. member has not had the experience I have had.


Robert McKenzie: My experience is that the Post Office Department has insisted on giving contracts to the lowest tenderer, if he is capable and efficient.
I believe, however, that the tender system is not satisfactory. In many ways it is not fair. Some mail carriers going out of the same postal stations and doing the same work do not receive the same rates per mile. It may be urged that this is the fault of the carrier. That may be so, in some respects, but we must not forget that some mail carriers have been carrying mail since the inception of the service, and that contracts have been renewed every four years without

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variation. The carriers who have been operating for some time have satisfactory contracts. Then, through sickness, death or for some other cause-political, if you like-vacancies occur and, through advertisement, cheap contracts are obtained. There should be some method of standardizing rates throughout Canada. I am sure the officials of the Post Office Department are aware of the circumstances, and that they have been giving the matter serious consideration. I have heard this question threshed out before by rural mail carriers' associations, who had no thought of political affiliation at all. I know the department has been giving the matter consideration. I am inclined to favour the suggestion of the hon. member for Grey-Bruce to the effect that a committee of some kind should study the matter impartially and submit a report. Perhaps action of that kind would go a long way towards arriving at a satisfactory solution of this problem.


Mr. TUSTIN:: Mr. Chairman, I do not wish to take up the time of the committee at length but desire merely to join with hon. members who have spoken on behalf of rural mail carriers, and to urge upon the minister the necessity of endeavouring to do something to rectify conditions as they are to-day.
One point, however, that I should like to bring to the attention of the minister, is that I believe in Canada many persons are being discriminated against. In the cities the mail carriers bring mail to the homes two or three times a day. In the rural parts of the country the rural mail carriers bring mail once a day to the homes. But there are many people located in the small towns who are discriminated against, inasmuch as they have to go to the post office to get their mail. In many instances they have to walk a mile or a mile and a 'half to the post office, and back. Not only that, but in those offices boxes are rented to persons residing in the community.
As I see it, the discrimination is that those people have to walk great distances for their mail and, in addition, have to pay box rental. It may be urged that they are given a service, in that they may enter the office at any time and take their mail from the box. I would point out to the minister, however, that the post office staffs in those communities benefit greatly by that system. If those boxes were not used by the general public, there can be no doubt that in all post offices in towns the staffs would have to be considerably increased. I would suggest that the minister consider doing away with charging fees for boxes in small towns.


Gordon Graydon: I know the minister wishes to make a statement before the committee rises, and for that reason anything I shall say will 'be brief. It is obvious from the discussion that 'has taken place to-night and that which has taken place on previous occasions in committee, that all is not well so far as the rural mail couriers in Canada are concerned. It has 'been suggested in some quarters that the low pay received by rural mail couriers in many instances amounts to a national disgrace, and I believe that is a suggestion to which some hon. members in the committee would readily subscribe.
I have some confidence in the new Postmaster General who, for the first time, is piloting his estimates through the committee. I think he might be able to put a very fine feather in his cap if he firmly rejects the advice of people to appoint a commission to deal with this urgent problem. Already we have had too many commissions in Canada. There is too much delegation of authority to other people. I should like to see the Postmaster General the first one in this government-and he would be almost the first-to tackle and solve an important problem in our Canadian affairs. May I suggest that he tackle at once the problem of the compensation of rural mail couriers? A successful solution* of this problem would bring to him the thanks and gratitude of the people of Canada.


Major James William Coldwell: Representing a rural constituency, I should like to endorse the sentiments expressed by some other hon. members. I believe the contract system of letting mail contracts often works a great hardship on the man who gets one. On many occasions people take those contracts for less than the amount for which the work could be decently done, and I should like to see the Postmaster General devise a new way of appointing the carriers.
While I am on my feet I should like to endorse the sentiment expressed earlier by the hon. member for Grey-Bruce. Sometimes dismissals and replacements work hardships on people established in communities. I have in mind two instances in my own constituency, one at Delisle and the other at Tessier.
I know that in each instance a hardship was worked on people who had given some favourable service to the government of Canada. In a reply he brought down, the Postmaster General was frank enough to say that there had -been no complaint, but that the change had been made on the recommendation of the defeated candidate in the constituency.
I would suggest that the whole matter of the

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appointment of rural mail carriers 'be looked into, with a view to devising a system which would give them fairer remuneration.


Mr. PURDY:: From the number of hon. members to my left who have spoken to-night it would seem that history is going to repeat itself. Perhaps I might draw the attention of hon. members to a little bit of ancient history.
I have in my hand a publication of August, 1930, entitled, The Rural Mail Carrier. It starts off very nicely in these words:
The King government has refused to deal fairly with the rural mail carrier.
And then at a later point, in bold type:
King and Veniot oppose relief. The King government, including both Mr. King and Mr. Veniot, voted down Mr. Guthrie's amendment for fair pay to rural mail carriers, the vote being 160 to 70.
Every Liberal voted against the amendment; every Conservative voted for it.
The rural mail carrier must look to the Conservative party for relief.
And then there is this peculiar note at the bottom:
Printed by the Runge Press Limited, 126 Queen street, Ottawa, for Confederation Publishing Company Limited, 140 Wellington street, Ottawa, in the interests of the Liberal-Conservative party.
Then, I have before me figures showing the amounts paid by the government for rural mail carriers in 1930. On December 31, 1930, the average rate per mile was $39.93. It will be remembered that the Conservative party took office in August, 1930.


An hon. MEMBER:: The Liberal-Conservative party.


Gordon Timlin Purdy: They smell the same, anyway. Let us see how the rural mail carriers had to look to the Conservative party for relief. By December 31, 1935, one would naturally expect the figures to be greatly increased, but what do we find? Instead of there being an increase, it was down to $33.99. It. looks as though history was trying to repeat itself. However, while you may be able to fool our people once, you cannot fool them the second time.


Thomas Langton Church: The post office is a public utility, and the complaints made by various hon. gentlemen are not new by any means. Down to 1896 this department had a deficit every year, and it has been varying since. It is a public utility, and as such it should provide service for the public. This service should be run from the commercial aspect. Other public utilities like the telephone and express companies and others have regulatory bodies. In the early days of the cheap light and power movement in Ontario the same 71492-2841
principle was proposed, namely, to give more service at less cost. I know the minister is not unmindful of the hard lot of these rural mail carriers. The city of Toronto took steps to improve conditions along this line. They undertook the improvement of roads in the counties of York, Ontario, Peel, Halton and Simcoe, as well as the Hamilton-Toronto highway which enabled the post office to motorize part of their service.
I believe a system of bonuses, subventions or subsidies could be applied to some extent to these rural mail delivery contracts. The minister has been a most courteous and painstaking minister, and I think he should consider a means of raising some revenue to provide these additional services. For example, newspapers are carried as second-class mail, and this service has been given at a loss for many years past. Many of these papers are merely trade journals. Something should be done to increase revenues so that a fund would be available from which some of these contracts might be taken care of, with the cooperation of the municipalities. I can remember when rural mail delivery was first put into effect by the late Postmaster General, Mr. Lemieux. At that time $4 a year was charged for the boxes. I can remember the first service at St. Thomas.
This service should be administered from the commercial aspect. The postmen in the city are not working under proper labour conditions. I can see little improvement in the lot of the rural mail deliverers since the days of Cowper in 1647 where he describes one of these unfortunate workers who deliver the mail over rural England as one who comes as the herald of a noisy world, whistling as he goes, light-hearted messenger of joy to some and messenger of grief to others. Perhaps something can be done by way of improving the roads with the cooperation of the provinces. Some of the provinces are spending a great deal of money on economical and uneconomical roads. Some effort should be made by the post office to get some relief for these rural mail carriers who are suffering such untold hardships.


Norman Alexander McLarty: Perhaps I may say a word or two in connection with the discussion that has taken place with reference to rural mail delivery. I do not think it is necessary for me to repeat what has been said by so many hon. members about the unquestionably unsatisfactory conditions that have arisen out of the competitive system during the last decade. Since my appointment as Postmaster General I have given more consideration to this problem than to any other. On two occasions I received representations from the
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executive of the rural mail carriers' association. The claims they presented were reasonably and ably presented, and I only regret that I cannot give to-night a definite solution of the problem. Several hon. members, the hon. member for Leeds (Mr. Stewart) in particular, have referred to the difficulties that meet one at every step when an effort is made to get away from the tender system to establish some measure of permanency and to try to stabilize the length of routes under conditions existing in Canada. They are many and numerous, and I do not think it would be of any advantage to the committee if I went into the details of the particular objections to this or that solution. All I can do is assure the committee that I shall endeavour in every possible way to arrive at the most satisfactory solution.


Howard Charles Green: Could the minister give us the figures relating to the different air mail routes in Canada for the last fiscal year?


Norman Alexander McLarty: The number of air mail routes is thirty-eight, covering a distance of 14,180 miles.


Howard Charles Green: During other sessions the Postmaster General has placed on Hansard detailed statements of each of the routes. I should like to know the rates paid per mile per pound on the different routes.


Norman Alexander McLarty: On all thirty-eight?


Howard Charles Green: It would be satisfactory if a statement could be placed on Hansard.


Norman Alexander McLarty: That could be made available, and I shall endeavour to place it on Hansard.


Howard Charles Green: Is the northern air mail carried at a profit?


Norman Alexander McLarty: I take it my hon. friend refers to the bush mail. I believe it is carried at some profit in some instances.


Howard Charles Green: Does the post office limit air mail contracts in the north to companies that have a licence for a particular route, or is there open bidding?


Norman Alexander McLarty: The licence system is new, but in the future we will be limiting contracts to those having licences. I cannot say that the Post Office Department has done that last year because there were then no route licences issued.


Howard Charles Green: The complaint is made by many firms in the flying business in the north that the department is allowing under-bidding. For instance, a company will have an air mail contract and be giving satisfactory service over a certain route. When the contract expires and a new contract is called for, some

other company which may have just opened up over-night will put in a lower bid. The result is that rates are forced away down. As the minister stated, the post office is making a substantial profit on this northern air mail service. I believe Canada is the only country in the world where a profit is made on an air mail service of this type. I suggest to the minister and the government that there should be an inquiry into the whole situation from the point of view of the national interest in the development of flying in the north.
I should like to know if the minister would have any objection to giving power to the board of transport commissioners to set fair rates for air mail. I do not believe that board has this power now, but a similar board in the United States, known as the civil aeronautics authority, were given similar powers last year. I have here an article which appeared in the New York Times of April 16 citing a decision of this authority on air mail rates, and I should like to read two paragraphs. This is a ruling of the civil aeronautics authority in the United States. I think it is important to Canada that the situation should be looked into. The statement is as follows:
In announcing its decision-
That is, the decision as to the air mail rate.
-the authority pointed out that under the formula prescribed by the civil aeronautics act, iiiail rates must be compensatory-
That is the key word.
and must assure the "stable economic development of the carrier to meet the needs not only of the foreign and domestic commerce and the postal service of the United States, but also the needs of national defence."
"Ihe development and encouragement of air transportation through an air mail rate which takes into consideration the general factors of the public interest, as set forth in the act " the authority went on, "require that the ratemaking provisions of the act shall be administered in such a manner as to expedite and not retard the attainment for air carriers of an economically sound and stable condition."
I think this bush flying is of such vital importance to Canada that the whole situation should be looked into as quickly as possible by the government.


Norman Alexander McLarty: I think I can answer that in one moment. I agree with the hon. member. It is a matter which has been receiving consideration. The Postmaster General cannot derogate from the right of the Post Office Department to fix the mail rates; but in connection with the first contract falling due,
I have asked the transport board to advise us as to what would be a fair and proper rate for air mail service compared with express service, taking into consideration all the other factors.

Salt Fish Board


Denton Massey: Just before the item is
carried-*


Some hon. MEMBERS:: It is eleven
o'clock.


Frederick George Sanderson: Order.


Denton Massey: May I make just one suggestion to the minister? We have inaugurated this year a new mail service which is of great importance. The next item deals with stamps and matters of that sort; and if we can discuss on that item anything in connection with the air mail we can pass this item to-night.


Norman Alexander McLarty: Certainly.


[Stage Direction]
Item agreed to.
Progress reported.
At 11.05 p.m. the house adjourned, without question put, pursuant to standing order.
Thursday, May 25, 1939