1940-06-24

[Stage Direction]
House of Commons debates
[Stage Direction]
Monday, June 24, 1940

Mr. SPEAKER:: I have the honour to lay on the table of the house a recommendation from the civil service commission regarding the permanency of three long-term temporary employees of the House of Commons-Miss L. A. Kearns, Miss I. A. Boyce and Mr. L. C. Hill.



PRIVATE BILLS


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Bill No. 50, respecting a certain wharf of Saguenay Terminals Limited-Mr. Dubuc.

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Mr. D. C. ABBOTT (St. Antoine-West-mount) moved the first reading of Bill No. 51, respecting the incorporation of the Quebec and Montmorency Railway Company.
Mr. HANSON (York-Sunbury):: Explain.


Mr. ABBOTT:: This is a bill to incorporate a company known as the Quebec and Montmorency Railway company, to acquire the
railway property operated by the Quebec Railway Light, Heat & Power company. For some years the latter company has operated a tramway system in the city of Quebec, and a railway line from the city of Quebec to cap Tourmente, a distance of about thirty miles along the north shore of the St. Lawrence river. The operation of the tramways division differs from that of the railway division, and it is desired to segregate the two properties.
As explained in the explanatory note to the bill, the terms and conditions of any acquisition by the Quebec and Montmorency Railway company will be subject to the approval of the board of transport commissioners and the governor in council, in the manner provided by the Railway Act.
Motion agreed to and bill read the first time. QUESTIONS
(Questions answered orally are indicated by an asterisk.)



PRODUCTION AND EXPORTS OF CANNED VEGETABLES

Mr. LACOMBE:: 1.	Wliat was the value of vegetables canned during each of the years 1937, 1938, and 1939?
2.	Wliat was the value of such products exported during the same years (a) to the United States, (b) to the United Kingdom?


Mr. MacKINNON (Edmonton West):: 1. Consumption of vegetables in the fruit and vegetable preparations industry, 1937 and 1938.
Fresh vegetables-
Asparagus, Canadian	
Asparagus, imported	
Beans, green or wax, Canadian.. ..
Beets, Canadian	
Carrots, Canadian	
Corn, Canadian	
Peas, green, Canadian	
Pumpkin, Canadian	
*Spinach, Canadian and imported.. Tomatoes, Canadian and imported Other fresh vegetables, Canadian.. Other fresh vegetables, imported..
1938	1937
	Cost		Cost
Quantity	Value	Quantity	ValuePounds	$	Pounds	$1,896,408	150,277	2,810,388	265,834145,354	13,060	171,299	15,15011,964,343	252,259	11,766,748	246,8931,841,357	19,195	1,706,622	23,0554,920,281	43,246	4,802,608	49,815102,650,832	501,133	113,684,448	561,56278,318,163	1,033,608	36,681,156	837,4264,834,087	13,049	7,950,635	21,4163,160,508	35,263	3,069,553	40,313422,455,670	2,302,534	487,173,177	2,803,52321,040,303 145,825	310,8781 3,643 1	21,767,077	391,704
Only small quantity of "imported" reported by less than 3 firms. 95826-64

Questions

1. Consumption of vegetables in the fruit and vegetable preparations industry, 1937 and 1938
-Concluded
1938	1937
Other vegetables-
Dried vegetables, such as beans, peas, etc.,
Canadian	
Dried vegetables, such as beans, peas, etc.,
imported	
Vegetables in brine, Canadian	
Vegetables in brine, imported	
Tomato pulp and puree	
Note: Figures for 1939 are not yet available.
Quantity
Pounds
Cost
Value

Quantity
Pounds
Cost
Value

16,157,097	372,105	16,354,112	594,765
873,150
831,812
958,729
9,671,437
33,234
18,806
57,185
274,943
1,374,372
1,327,678
657,424
8,717,028
61,178
35,464
36,727
239,352
2. Exports of canned vegetables to United Kingdom and United States during the calendar years 1937, 1938, and 1939.
Countiy	1937	1938	1939United Kingdom	
82,246,756	$2,618,607	$3,595,984United States	
204	19,099	122,754



MOTIONS FOR PAPERS


Mr. DIEFENBAKER:: For a copy of all correspondence, telegrams, petitions, complaints and other documents in the possession of the Post Office Department relative to Mabel Mitchell, former postmistress at Birch Hill, Saskatchewan, dated within two years of her registration and appointment of her successor.



RECRUITING IN QUEBEC

Mr. ROY:: For a copy of all correspondence, letters, ielegrams, memoranda and other documents Exchanged between the premier of the province of Quebec, or other provincial ministers, and the Prime Minister of Canada or other federal ministers or officials of the Department of National Defence or any other federal department, relative to the request of the premier of Quebec that no recruiting of volunteers be made from among the sons of farmers in the province of Quebec.



JOHN INGLIS COMPANY-DISMISSAL OF WALTER CAMM

Mr. GILLIS:: For a copy of all correspondence, letters, telegrams, memoranda and other documents exchanged between the Department of Labour and any other person or organization, between January 1, 1940, and the present time, relating to the dismissal of Walter Camm, on the matter of labour organization in the John Inglis Company plant of Toronto.



WAINWRIGHT NATIONAL PARK


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On the orders of the day:
Hon. GEORGE BLACK (Yukon):: A
report appears in the Ottawa Journal of this morning to the effect that the government has had destroyed 3,000 buffalo, more than 1,000 elk, 500 moose and 500 deer which had been in Wainwright national park. Is that report correct? If so, why were the elk, moose and deer not released to form an addition to the wild life of Canada?


Hon. T. A. CRERAR (Minister of Mines and Resources):: The report is correct. The buffalo, elk, moose and deer which were in Wainwright national park were destroyed some months ago. I did not get the last part of my hon. friend's question.


George Black: I asked why the elk, moose and deer had not -been released. I can quite- understand why the buffalo or bison should be destroyed, but the moose and deer are natural to Canadian wild life and I should like to know why they were not released.


Thomas Alexander Crerar: An opportunity was given to various public bodies possessing parks or other facilities to secure any of these animals they might wish before the destruction took place. The destruction of the animals in Wainwright national park was made necessary by the fact that they were badly infected

The Budget-Mr. Ralston
with tuberculosis. There are several other parks in which we have buffalo, elk, and other animals. For instance, in Riding Mountain park there is probably the largest herd of elk on the North American continent. It was not thought desirable or necessary to turn these animals loose, because they would have had to be transported to some place where they could find a living. At any rate, this action was not taken.



MOUNTED POLICE


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On the orders of the day:
Mr. P. C. BLACK (Cumberland):: I should like to ask the Minister of Justice (Mr. Lapointe) if the Royal Canadian Mounted Police office at Pugwash is being closed. If so, is this being done on the instructions or with the permission of the government? The people of this country were reassured recently that this force would be increased, not diminished. It might be noted that Pugwash is a large shipping point.


Right Hon. ERNEST LAPOINTE (Minister of Justice):: I have asked for a report about this matter and I shall be pleased to give my hon. friend an answer to-morrow.



THE BUDGET


Hon. J. L. RALSTON (Minister of Finance) moved:: That Mr. Speaker do now leave the chair for the house to go into committee of ways and means.
He said: Mr. Speaker, I rise to my allotted task to-day with a sense of heavy responsibility. This budget is being delivered at the most critical hour in history. The Hun is hammering at the gate. Backed by almost incredible weight of mechanized power, he has operated with cold-blooded ruthlessness. He has violated every principle of the law of nations. He has overrun one after another of the democratic countries of Europe. He has brought our gallant ally France to her knees. At this very moment the enemy of mankind stands with naked sword at the threshold of Britain herself.
For the first time in a thousand years the world has been made to realize that a new "Dark Ages" may not be the figment of a wild imagination. The incredible has indeed happened. Europe, the fine flower of western 95826-64*
culture, is threatened with the blight of barbarism. All the things we hold dear-the democratic way of life, the Christian ideal, these age-old tenets of human relationships, fair dealing, justice, and brotherhood are threatened with destruction by those who would shut the gates of mercy on mankind.
We know now only too well that we are paying the price of long years of wishful thinking. There is no doubt that all of 'us in the democratic countries, governments and peoples alike, have been blinded to the stark potentialities of force and evil. Fortunately, at last, I believe, our eyes are opened and we see clearly. And if we do, it is not too late. For no one and no event can shake my conviction that in the long run truth must triumph over falsehood, good over evil, justice over might.
Obviously, the message which I must bring to-day cannot be a pleasant one. I come to you to collect part of the price to which I have referred. Nor can I be dogmatic or definitive in the proposals I make. We live from day to day-indeed, from hour to hour- and our plans must be subject to change in the light of new circumstances.
In dealing with specific measures, we have had to take into account a multitude of unusual facts and factors. Again, in determining the magnitude of the aggregate burden to be imposed upon the Canadian people, we have had to weigh many conflicting influences and to form a judgment as to how far we could go at the present time without setting up adverse factors which would tend to defeat some of the very objectives we are trying to reach. There will, I am sure, be those who will think that I have not gone far enough and probably those who will contend that I have gone too far. Still others will differ with me on details of specific measures. All that I can say is that I have spared no pains to ascertain the relevant facts, to weigh the merits of various measures and proposals, and to reach conclusions in the light of the supreme emergency which faces us to-day.



ECONOMIC AND FINANCIAL REVIEW

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Before coming to my budget forecast for the current fiscal year and the tax changes I recommend, you will expect me to review the economic and financial events and policies of the first nine months of war. To make it as concise as possible I shall limit myself to a discussion of factors which give the setting for, and determine the principles underlying, the measures which the government has to propose.
The Budget-Mr. Ralston
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In the first war budget of last September, my colleague, the Minister of National Revenue, who delivered the budget speech, laid down the broad principle of the government's policy of war finance. "We believe it is the part of wisdom," he said, "to follow as far as may be practicable a pay-as-you-go policy." Events which have happened since, and particularly those of the last few weeks, have not detracted from the wisdom of that policy, but rather have reinforced the need for a vigorous effort to apply it in every possible way.
The general policy was elaborated further as consisting of two parts: that appropriate to an initial period of quietness and hesitation, and that suitable for a second period in which rising business activity and expanding income had acquired momentum.
In the initial period of the war in which business was expected to be hesitant, if not actually depressed, the appropriate financial policy was declared to be one which would facilitate the expansion of national income and the drawing into employment of our full man-power. In order to ensure that out of rising incomes increased revenues would begin to flow to the government for the financing of the war, certain excise taxes, chiefly on luxuries, were levied, and moderate increases were imposed in the personal and the corporation income taxes. The increases in income tax were payable only after the close of the fiscal year and therefore would have a relatively slight effect in curtailing purchases by consumers. Furthermore, in order that uncertainty might be removed and that business firms might begin to adjust themselves to the war conditions, the outlines of a new and heavy excess profits tax were announced.
These new or increased taxes were not designed to provide immediately for any large part of our heavily increased expenditures. It was also specifically indicated that our initial borrowing operations to provide part of the funds to cover the inevitable deficit in this early period would probably be of a very short-term character, so as to promote the immediate expansion of productive activity. In harmony with this same point of view, it was emphasized that while the magnitude of the new burdens thrust upon us would make it imperative to do everything possible to conserve our resources and to economize on any expenditures not urgently needed in the national interest, nevertheless it would be "penny wise, pound foolish" to curtail expenditures so suddenly and so drastically as to aggravate seriously the unemployment problem before the stimulating

effects of our war expenditures and of foreign purchases in our markets had acquired real momentum.
The initial period of quietness and hesitation, it was felt, would be of relatively short duration and would be followed by the second period during which increasing business activity, expanding production and rising national income had acquired momentum. While perhaps starting slowly, this advance would accelerate under the pressure of war orders from ourselves and our allies until gradually our economy would approach a state of full employment of its labour, capital equipment and material resources. As this second stage developed, certain modifications of financial policy would be called for. Thus it was stated that as business activities increased and idle workers were reemployed, the resulting larger incomes would necessarily become subject to heavier taxation for the purpose of ensuring that the increase in our national income was largely diverted to war needs instead of being disbursed in increased personal consumption and private investment. For the same reason, borrowings from the savings of our citizens and genuine economies in normal governmental services not urgently needed in war time, were indicated as appropriate for this second period.
In accordance with the declared policies, the government made its first financing in the form of a short-term banking operation which was definitely expansionist in character. This was a loan of $200 million arranged with the banks in November, 1939, on the security of two-year notes at a rate of two per cent. It will be recalled that of this amount $92 million was used to repatriate Canadian securities held in London. This gave the United Kingdom a substantial supply of Canadian dollars which was used to purchase Canadian foodstuffs, raw materials and war supplies.
This borrowing from the chartered banks was facilitated by appropriate monetary policy. Between August and November, the Bank of Canada's assets increased by approximately $107 million as a result of the purchase of securities and the increase in the value of its gold and foreign exchange reserves. This provided cash to meet the enlarged public demand for notes in circulation and to increase the cash reserves of the chartered banks by $33 million.
With this increase in cash reserves, the chartered banks were enabled to increase their total Canadian deposits by approximately $306 million. In the same period, they increased their current loans by approximately $147 million, mainly to finance the large wheat crop, and added to their net holdings of securities by $158 million.

The Budget-Mr. Ralston
Thus, financial and monetary policy accorded with the declared intention to facilitate in the initial period an increase in business activity and an expansion of national income.
By the middle of January it became apparent that business had acquired sufficient momentum to justify going to the public for a loan out of savings. We therefore offered our first war loan in the form of 3^ per cent twelve-year bonds callable by lot during the last five years. Very careful preparation had been made for the campaign and the success of the loan was even greater than we had expected. Of the total subscriptions of $375 million we allotted $200 million to cash subscribers, and $50 million to subscribers who desired to convert their holdings of one of our issues which was to mature on March 1st. It was particularly noteworthy that there were over 178 thousand individual cash subscriptions to this loan and that out of that number more than 121 thousand were for amounts of $500 and less. This result was made possible by the nation-wide cooperation of institutions and individuals and, above all, by the united and enthusiastic support of the Canadian people as a whole.
Even this January borrowing was to a considerable extent expansionist in character in that it converted into government expenditures a considerable amount of idle bank savings. However, the number of small subscriptions and of arrangements made by employees of industrial firms for the purchase of bonds by instalments is convincing evidence that a surprising portion of the subscriptions represented new savings out of increasing incomes.
Passing over one or two financial operations of smaller magnitude for refunding purposes, I come to a further major step in our borrowing operations, namely, the inauguration of our war savings certificates programme on May 27th. These certificates are issued in small denominations for the purpose of facilitating regular savings and contributions to Canada's war effort by persons of moderate and small means. Supplemented as they are by war savings stamps in the denomination of 25 cents they enable all of our people to take some part in Canada's war work while at the same time acquiring the habit of thrift and building up a "nest egg" for the contingencies that may lie ahead. Unlike our periodic war loan campaigns, the sale of these certificates and stamps involves a steady effort which will produce a continual stream of funds, even more important in its influence that the actual amount of money itself. The campaign has involved a vast amount of preparatory and organizing work, and I express now our sincere
appreciation of the unstinting help and support being given by patriotic citizens, organizations and business firms throughout the country. You will be interested to know that not a cent of commission is being paid to the postmasters, banks, financial institutions and commercial organizations which are selling these obligations, and the citizens who are organizing and sustaining this project both at headquarters in Ottawa and throughout the dominion are giving their services voluntarily.
Turning now to general business conditions, there is one respect in which the business forecast made by the Minister of National Revenue last September has proved to have been unduly conservative. The fact that the results were better than he forecast was, I really think, due, at least in considerable measure, to the effectiveness of the policies which were promptly adopted. The stagnation in business which he contemplated as probable during the first few months of war was not in fact realized. It is true that for the first few weeks financial and commodity markets were upset by the shock of war and business itself was retarded by uncertainty and the disruption of certain established channels of trade. But the financial policies outlined in the September budget and the institution of foreign exchange control on September 16th restored confidence to financial markets and prevented the dumping of securities and the export of capital which might otherwise have produced serious disorganization. The prompt establishment of other controls through various war agencies, such as the Wartime Prices and Trade Board, the War Supply Board and the Agricultural Supplies Board, also made its contribution to the restoration of confidence and the rapid adjustment of trade and industry to the new war-time conditions.
There were various economic factors which also worked to improve conditions. The large wheat crop of last year, for which the initial price guaranteed by the government was realized by the producers immediately upon delivery, gave a very important stimulus to business generally. Almost equally important was the phenomenal rise during the first four months of war of Canadian exports to the United States. Our neighbour to the south experienced an intense forward-buying boom and in that we shared through greatly increased exports. Initial war orders were important in contributing to the early expansion of the textile, boot and shoe, and iron and steel industries particularly.
At the turn of the year, however, business activity in the United States receded very sharply. Seldom has there been in that country
The Budget-Mr. Ralston
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in so short a space of time so sharp a contraction in production. Under ordinary circumstances, Canadian trade and industry would have shown a similar, if less intense, recession. But as a matter of fact, while the rapid increase in Canadian business activity was slowed down somewhat, the cumulative increase in war orders and the recovery in Canadian exports to Britain, which had been abnormally low in October and November, largely offset the influence of the United States recession. Business activity in Canada flattened out in February and March but generally did not recede. In recent weeks the tempo of United States business has increased sharply and there are already indications that Canadian exports to that country are responding to a more active market. The stimulus to our business which has resulted from these exports is supplementing and reinforcing the expansion due to the acceleration of war expenditures here.
The record of the flow of business which I have outlined is clearly visible in the index of the physical volume of business in Canada. That index stood at 125 in August last, had increased to 139 in January, and stood at 137 in March-April. The increase over the same period in industrial production taken by itself was even more pronounced. A definite increase in consumers' incomes was shown in the rise of retail sales which by December had reached the highest figure since 1930, and, if allowance were made for to-day's lower price level as compared with 1930, retail sales last December would probably be found to have been the highest on record.
These retail sales have continued to be considerably higher than last year. Each month since last September, sales of automobiles have been greatly ahead of the corresponding month of the previous year. For the first four months of war, there was a marked hesitation in construction activity but since January construction has increased and through April and May the value of contracts let was 76 per cent above the value for the same two months of 1939.
According to the preliminary estimate of the Dominion Bureau of Statistics, over one hundred thousand idle wage earners had been drawn into employment during the twelve months to April, 1940. The fall in the numb sr of employable persons on urban relief rolls has lagged behind this increase in employment, but since last November the numbers on urban relief rolls have been lower than those for the corresponding months of the previous year and on the whole the reduction has been accelerating. We have no comprehensive statistics which would indicate changes in the amount of the incomes of wage and salary

earners. There are however, abundant indications that as a result of elimination of short time, earnings for overtime work, an increase in the number of earners per family and increases in wage rates, total wage and salary earnings are rising rapidly.
These are days when no one can predict what the future will disclose. However, if there is no serious interruption in our export trade, the increasingly great numbers of men and amounts of materials being employed in war production will lead to a substantial increase in our national income, that is to say, the aggregate of the incomes of all the people of this country. The heightened tempo of business in the United States will also make an important contribution to the same end.
On the basis calculated by the royal commission on dominion-provincial relations our national income for the calendar year 1939 was in the vicinity of $3,800 million. Using the same method of computation we consider that our national income for the fiscal year 1940-41 will not likely be less than $4,500 million. We must see to it that by far the greater part of that increase is used for war purposes.
I	need hardly say that our war effort is not in any sense to be limited by such financial calculations or by what we can comfortably accomplish. We must make the maximum effort of which this country is capable. Financial provision can be made and will be made for whatever it is physically possible for us to produce or to procure in the way of war services, supplies and materials. The limits of our effort are not fiscal; if there are any such limits they are physical, mental and moral-by that I mean the physical limits of our resources and the mental and moral capacity of Canadians to bear burdens and make sacrifices.
However, in obtaining whatever it is possible for our man-power, equipment and resources to produce or procure, it is certainly wise to adopt the most intelligent means of financing that effort. Plans already laid and approved by this house call for defence expenditures of $700 million. As I shall later explain, such a figure can only be provisional and not in any sense a limit. What concerns us this afternoon is to choose and determine what seem the wisest financial methods of paying for the maximum effort which is physically possible.
If an appropriate financial policy is not followed the ultimate result will inevitably be that the government will be frustrated in its attempt to procure goods for war purposes by the competition of consumers who seek to spend their increased buying power to satisfy civilian wants. In that event, also,

The Budget-Mr. Ralston
the familiar spiral of rising prices, then rising wages and costs, and then prices rising still further would begin to work. Prices would rise more rapidly than wages and salaries, and, by this indirect, hidden and most inequitable process, the civilian population and particularly the wage and salary earners and the receivers of fixed incomes, would be forced to curtail their consumption not only of luxuries but of comforts and necessaries as well. Eventually in such a process our entire economic life would be disorganized; a hectic period characterized by feverish speculation, waste and extravagance would develop; and a collapse of the inflationary structure would be as inevitable as it was at the close of the last war.
The government's financial and economic policies have been so designed as to try to safeguard against that type of situation. They have been evolved with the aim to avoid unjustified price increases or speculative excesses, to keep our economy functioning as effectually as possible and to secure the necessary diversions of man-power, equipment and materials to war purposes in a way which would be the least dangerous to the economy and the most equitable as between different individuals and groups.
We recognize clearly that we still have unemployed man-power and resources, that mobilizing them into productive work will expand the national income, and that by expansion of the national income we can add enormously to the magnitude of our war effort. Consequently our policies have been and are being directed to the end of producing soundly the maximum possible increase in our national income in the shortest possible time.
I have already told you of the part played by our financial policy thus far. My colleague, the Minister of Munitions and Supply (Mr. Howe), has already given you some indication of the steps which he has taken to organize the industrial resources of this country, to meet the expanding war demands of ourselves and our allies. In this connection the measures which he is taking are expanding daily.
In the relief estimates which have been tabled there is provision for the rehabilitation of unemployed workers and the technical training of young men and women.
There is every likelihood in my opinion that the expenditure of $700 million, and more, for war purposes plus the very large amounts which the United Kingdom is spending in this country will bring us before very long to the point when everyone able and willing to work and not needed for military service will find an opportunity for productive employment.
Already we can see evidence that shortages have appeared in certain types of skilled labour. To overcome this obstacle we must have the
cooperation of Canadian employers in providing the necessary apprenticeship and other training, and of our labour organizations in facilitating the necessary entrance of young men into their trades. We must not allow bottlenecks to develop and retard our armament programme in this supreme emergency. Plans are under way to meet such possible dangers, and the government is confident that it can count upon the hearty cooperation of both employers and employees in thus promoting the maximum efficiency of our war effort. Maximum efficiency, maximum production, maximum speed, must be the supreme objective of all of us to-day.
I have only touched upon some of the measures that have been taken to increase the national income. To the extent that we can increase the national income, we can increase our war power without crippling sacrifice in our standard of living. Some reduction in personal consumption there must necessarily be, and it can easily be made by those of us who are above the minimum standard of living.
To sum up:	In the measures which I shall
propose we are endeavouring to ensure that at least a very large proportion of the increase in national income shall be diverted to war purposes while, at the same time, leaving sufficient stimulus to bring the country as rapidly as possible to the maximum use of its labour, its plant and its resources. In this connection it will be seen that many of our tax proposals will not require immediate payment and that much of the planned-for increase in revenue will not be called for during the present fiscal year.
One feature of our economic activity since the outbreak of war, which is of special concern and deserves special mention here, is the great increase in our imports. Most of these increased imports have had to come from countries outside the British empire, mainly because Britain herself, pressed by her own needs, has been unable to supply them.
In normal times we are able to use any excess receipts from our trade with one country to meet any deficits in our trade with another. At this time, however, when Britain has such vital need of gold and United States dollars to purchase planes and other war equipment, we cannot expect her to settle all her trade balance with us in gold or foreign exchange. Consequently, while there has been, since the war began, a substantial increase in our favourable balance of trade with
The Budget-Mr. Ralston
[Stage Direction]
the United Kingdom, a very large proportion of the surplus sterling exchange which we obtain and which formerly we were able to convert into United States dollars in order to meet any adverse balance of payments with that country can no longer be so converted.
Since the United Kingdom could not supply us with goods to pay for all her purchases here, and since, as I have just explained, the sterling with which she was able to pay for these purchases could not be converted into dollars in the normal way, other measures were necessary. The Canadian government undertook to buy and use this sterling in buying Canadian securities from Britain and thus to provide our exporters with Canadian dollars in payment of their exports. While such purchases of Canadian securities held in London will strengthen our long-run financial position on international account, nevertheless two immediate problems face us. In the first place, our domestic market must absorb new securities to a corresponding amount. In the second place, the fact that the surplus sterling arising from our trade with Britain cannot be converted into United States dollars and must be used up by repatriation of securities means that our increased sales to Britain do not help us, as they would in normal times, to pay for the heavy imports of which I have spoken from non-empire countries. The result is that we must find from some other source the United States dollars needed to pay for the greater part of our imports from that country.
To illustrate this exchange problem, let me give in a little more detail the trend of our war-time import and export trade. Comparing the eight months of war ending April, 1940 with the corresponding eight months ending April 1939, Canadian imports from nonEmpire countries increased by $171 million, while our exports for the same period to nonEmpire countries increased by only $86 million. In other words, an adverse merchandise balance of only $18 million in the 1938-39 period had increased to an adverse balance of $102 million in the 1939-40 period. These figures cover only merchandise trade. There are, of course, other important items which increase our net credits in our accounts with non-empire countries, namely, the export of gold, the expenditures of tourists in Canada, and the curtailment, due to the prompt establishment and efficient operation of the Foreign Exchange Control Board, of the export of capital from Canada. There has also been a small but encouraging inflow of capital from the United States. Nevertheless, it is obvious from an examination of these trade figures that rising business activity and expanding consumer 
expenditures in conjunction with failure of empire sources of supply have led to a very great increase in our adverse balance with non-empire countries.
More recently, and despite the utmost care in selecting as far as possible Canadian sources of supply, the government's war orders have contributed directly and indirectly to this increase in imports from hard currency countries. It is apparent that already there has developed, between consumers and private business on the one hand, and the government and firms supplying government orders on the other, an active competition for foreign exchange with which to purchase imports. The problem of policy thus posed is not one of maintaining an exchange rate. The powers of the Foreign Exchange Control Board are quite adequate to do that. The problem is to ensure that, in handling the supply of foreign exchange which may be, from time to time, available, war requirements shall take priority over other requirements, and that to some degree also the requirements of industries which are exporting goods and therefore assisting us to acquire foreign exchange, shall take priority over the requirements of domestic trade. I have dealt with this aspect of our exchange position at some length because it furnishes the background for some of the proposals which we intend to make.
But before I leave this subject of foreign exchange I should say just a word regarding our system of foreign exchange control. Within a week of our declaration of war, the Foreign Exchange Control Board was established and given the necessary powers subject to the direction of the Minister of Finance, to regulate all foreign exchange transactions between residents of Canada and the outside world. Detailed plans for the establishment and operation of such a board has been prepared in advance, in case it should be needed, and, once the need was apparent, the Board swung into effective action very quickly. The Board immediately took over as its initial resources the exchange fund which was created under the Exchange Fund Act of 1935. Subsequently on April 30th an order was made requiring all Canadian residents to sell their holdings of foreign exchange to the Foreign Exchange Control Board before the first of June. Those who in complying with the order could demonstrate a need for foreign balances in order to carry on their normal business transactions, such as commercial and insurance companies doing business abroad, have been permitted by the board to retain such amounts as are considered necessary for this purpose. The private holdings of foreign exchange so transferred to the board were of
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The Budget-Mr. Ralston
course purchased at the official rates in Canadian dollars. At the same time as these private balances were purchased, the government, by appropriate orders and transactions arranged to have, the holdings of the board further increased by the transfer to the board by the Bank of Canada of the bank's gold reserves, also its reserves of foreign exchange over and above its short-term requirements and necessary working balances. The reason for all these transactions was the advisability of having all our liquid foreign resources centralized with, and managed by, the agency at present charged with the management of our foreign exchange transactions. Without going into details I can say that the main policy which has been followed by the board has been to restrict movements of capital out of Canada to the minimum while at the same time interfering as little as possible with import and export trade, the tourist trade, the payment of interest and dividends and the flow of normal, current business transactions. In carrying out its work, the board has received general and wholehearted cooperation from the people and business organizations of this country and, I may add, from the business organizations of the United States.

[Stage Direction]
I turn now, Mr. Speaker, to the government accounts for the fiscal year which closed on March 31. Following the procedure which was initiated last year by my predecessor, Mr. Dunning, I do not propose to weary the house with any extensive recital of the details of our revenues and expenditures, our direct and indirect liabilities, our active investments and our financing operations during the past year. All of these details I shall, when I conclude, table in the form of a white paper, in order that the house and the country may have a comprehensive record of our financial transactions during the year. As was the case last year, the white paper will be published as an appendix to the budget speech and therefore will be readily accessible. This procedure enables me to confine my remarks to summarized results rather than to burdensome details.
At the time of the September, 1939, budget, it was estimated that the total revenues for the fiscal year 1939^40 would be 8516 million, including $21 million to be derived from new and increased taxes. Because business expanded more rapidly than was anticipated, the yield of both our old and new taxes has exceeded our expectations. It is now estimated that when our books for the year are closed, our
total revenue will amount to $562 million. (This includes, it is true, a bookkeeping item of $20 million of credits to non-active accounts for which offsetting or contra items appear on the expenditure side of the statement.) The figure which I have given for total revenues represents an increase of nearly $47 million over the previous all-time record revenue which was received during the fiscal year 1937-38.
Dealing particularly with revenue from taxes, let me say that of the September, 1939, tax increases, only the luxury taxes were effective in the past fiscal year. Actual collections under the increased rates of the personal and corporation income taxes would not be made until the present fiscal year. The same is true of the excess profits tax. Nevertheless, tax revenues for the fiscal year 1939-40 are estimated to have been $468 million as compared with $436 million in the previous fiscal year. This increase in tax revenue, to which practically all taxes, except the income tax, contributed, was the result of increasing business activity and, in some cases, of increases in rates. Receipts from the income tax reflected the rates and the incomes of the calendar year 1938. and not the results of the accelerated business in 1939 which will be realized in the income taxes to be paid in the present fiscal year. Tax revenue from the first of September, 1939, to March 31, 1940, was $51 million in excess of the amount collected in the same period in 1938-39. This is a striking confirmation of the fact that the period which was expected to be commercially quiet and hesitant at the start at least, turned out in fact to be one of extremely active business and consumer buying.
Turning now to expenditures:	In the
September 1939 budget, total expenditures for the year would, it was estimated, aggregate approximately $651 million, not including the two items of capitalized defence expenditures and further losses in the marketing of wheat. Our total expenditures for last year are now estimated at $681 million. This includes all our defence expenditures and in addition a further $27 million incurred in wheat marketing. Once the war had begun, it seemed that conservative accounting could no longer justify the capitalization of defence expenditures as provided for in last year's estimates, and all such items have been charged to war expenditures. Furthermore, while at the close of the fiscal year there still remained unsold a small amount of wheat of the 1938 crop, it was clear that the losses of the Canadian Wheat Board in respect of the marketing of that crop would amount to at least $52 million. Therefore, an advance of this amount was made to the board and this enabled the board
[Stage Direction]
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[Stage Direction]
to pay off guaranteed bank advances to that amount in respect of 1938 wheat. As provision had already been made in the accounts of the year 1938-39 for setting up a reserve of $25 million in respect of possible losses in marketing this wheat, the difference between this sum and the advance of $52 million made to the Board, namely, $27 million, has as ahead}' indicated been included in the 1939-40 expenditures. When we add to our estimated expenditure of $651 million these two items of $27 million of capitalized defence expenditures and $27 million more for wheat losses, you will note that if we had spent what we estimated the total expenditure would have been $705 million. It will be seen, therefore, that since our actual aggregate expenditures were only $681 million we have done considerably better than was expected last September.
The figure of $681 million which I have given as representing our aggregate expenditures for the year may be broken down by main categories of expenditure as follows (using round numbers):
Ordinary expenditures	 $398,000,000
Capital expenditures	 7,000,000
Losses on and non-active advances
to government-owned enterprises. 42,000,000
War expenditures	 118,000,000
Other special expenditures including unemployment relief and
wheat losses	 89,000,000
Other charges	 26,000,000
In the above item of "other special expenditures", the amount for unemployment relief, relief works and western drought area relief totalled $62 million as compared with $47 million during the preceding year. This includes a net expenditure of $7-5 million under the Prairie Farm Assistance Act.
Under "government-owned enterprises'', the main item of expenditure was the net income deficit of the Canadian National Railway, which amounted to slightly over $40 million as compared with $54 million for the preceding year. This substantial decrease is a reflection of improved business conditions and heavier traffic movement, particularlj' during the latter part of the year. A fact to be noted with considerable satisfaction is that while operating revenues increased by 11-8 per cent, the heavier traffic was carried with an increase in operating expenses of only 3-8 per cent.
The net result of the year's receipts and outgoings is that, because our revenues were about $46 million greater and our expenditures about $24 million smaller than were anticipated, our over-all deficit for the year will be about $70 million less than was expected. However, the actual deficit will still approximate $118 million, as compared with $51 million in 1938-39.

As a result of the over-all deficit of $118 million, the net debt of the dominion rose to approximately $3,270,980,000 as at March 31, 1940. Gross liabilities at that date are estimated at $4,028,573,000. On the other side of the balance sheet, offsetting these liabilities in part, the dominion had active assets, including cash on hand, sinking funds, and active loans and investments, amounting to $757,593,000.
At the close of the fiscal year there was outstanding unmatured direct funded debt (including treasury bills) amounting to $3,695,685,000, of which $67,196,000 were held in sinking funds against certain issues payable in London. Bonds and debenture stocks bearing the guarantee of the dominion and outstanding in the hands of the public aggregated $1,084,479,000 as at March 31, 1940. These guaranteed securities were decreased by $987,000 during the year. There are also outstanding certain other contingent liabilities arising out of guarantees given under relief acts and various other statutes. These are fully set out in the white paper which is being placed on Hansard.
It will also be of interest to hon. members to know that as at March 31st last the average rate of interest on the dominion direct funded debt (including treasury bills) was 3-40 per cent as compared with 3-52 per cent on March 31, 1939 and 5-02 per cent on March 31, 1930.

[Stage Direction]
I now come, Mr. Speaker, to what is by far the most difficult part of my task. It is quite possible with reasonable assurance to analyse recent economic trends, to describe our fiscal policies and outline our financial operations for a year which has passed. But it is an entirely different matter, particularly under present circumstances, to forecast the future and to evolve and propose the measures which may be best calculated to meet conditions probably more unforeseeable than those of any period in our history. That, however, is a responsibility which one in my position must take and my task only differs in degree from that of my predecessors.
On the expenditure side, the estimates already tabled provide for a total expenditure on non-war activities of government of $448 million. As you know, these estimates represent a combination of the ordinary main estimates, the supplementary estimates and the special supplementary estimates which have been presented to the house in recent years. My hope is that it will not be necessary to ask parliament for any supplementary estimates for peace-time services of government,

The Budget-Mr. Ralston
unless this parliament approves new undertakings not contemplated when our estimates were prepared.
Just here may I divert for a moment or two to mention the matter of economies in governmental peace-time expenditures. These are important because they release funds for war purposes.
If you will compare the figure I have given with the corresponding total of the estimated expenditures for the preceding fiscal year, you will find a reduction of over S77 million. That very large reduction reflects not only improvement in the operations of the national railways and in the relief situation but it is also the result of a good deal of painstaking examination and re-examination in all government departments in order to obtain the maximum economies in our departmental activities as well as to reduce or eliminate services which however justifiable in peacetime ought not to be regarded as absolutely vital in war-time. Our war effort has unquestioned priority; and the tremendous financial burden it will involve and the drain it will cause on the man-power, equipment and resources of the country make it vitally imperative that all governmental authorities-not only dominion, but-if I may go beyond federal bounds-provincial and municipal as well, should appraise with a sense of national responsibility the justification for the dollars proposed to be spent on normal activities. Every such dollar must, directly or indirectly, come out of the pockets of the people. And it ought almost to go without saying that to provide the enormous sums which must be spent by the dominion this year for defence, the ordinary expenditures of governments-all governments-in Canada must be decreased if they are not to restrict the amount that can be devoted to the driving task of defeating nazism. In the federal field, I have had the effective cooperation of my colleagues and their departmental officers in achieving the economies I have reported. The premiers or provincial treasurers of several of the provinces have discussed this problem with me and I have also had the opportunity of conferring with a number at least of the mayors of our cities and towns on the same subject. The attitude of them all was so instantly and definitely cooperative as to convince me that all that is necessary is that the position be understood to make certain that the response by all governmental authorities will be just as unhesitating and just as reassuring.
The chief difficulty which all governments face in reducing ordinary expenditures is the fact that usually so small a proportion of these expenditures is controllable and there is the
further fact that significant reductions in these controllable expenditures involve throwing out of work large numbers of employees, many of them of long service and some without superannuation privileges of any kind. To give an example, the expenditures under our main estimates last year amounted roughly to $400 million. Of this amount $260 million represented what were regarded as absolutely uncontrollable expenditures; and by that I mean war pensions, old age pensions, subsidies to provinces, interest on funded debt, et cetera. This left only $140 million out of which savings might be made and of this amount $80 million was for salaries and wages. So that, apart from discharging government employees, there was only the sum of $60 million covered by those main estimates which might be subjected to reductions.
Fortunately, the development of the war programme has made, and will increasingly make possible the absorption of such persons in war activities. For some time we have had an inter-departmental committee at work to examine into and provide for the transfer of such personnel. As the house knows, there have been eliminated during the present year all ordinary public works of a capital character; but the opportunities for employment resulting from the war programme will make possible, and the demands of the war programme will, I believe, make it necessary that labour and resources should be released from the construction of these public works, most of which have in recent years been provided for primarily to alleviate unemployment.
With that interjection on economies I return to my forecast.
To our estimated expenditure for normal purposes of $448 million must be added whatever will have to be spent during the year for war purposes. Parliament has already approved a war appropriation amounting to the sum of $700 million, more than four times what was spent in the corresponding fiscal year of the last war.
Combining these two figures gives us a total of $1,148 million. But even this huge sum may not, and almost certainly will not, represent the total of our expenditures for the current fiscal year. Events are moving with lightning speed. Plans are having to be reshaped and extended almost daily, and no man can foretell what we will be called upon to provide in the next nine months. As you know, since the War Appropriation Act was passed with its grant of $700 million for war purposes, we have made heavy additional commitments and these are constantly having
1020
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[Stage Direction]
to be added to. There will be some offsetting factors to these new obligations. There were some commitments in our earlier estimates which may not be required due to possible alterations in military formations which depend on the nature of the duties for which they may be needed. There will be certain modifications because in some cases the estimates were based on a rate of replacements assumed to be required by active warfare in France. There will be other items which will be superseded by the emergent measures of the last few weeks.
There are many factors which make even approximate calculation very difficult, but to
give the house the roughest sort of idea, I would think that we are already committed for probably another $150 to S200 million for the fiscal year, and that such reductions as may take place in our original estimates due to changes in plans will probably be more than offset by further undertakings.
Turning now to make a forecast of our revenue, our estimate is that, assuming a continuance of present trends and no serious interruption of our export trade, our total revenues for the present fiscal year on the basis of our existing tax structure will amount to approximately $650 million. This estimate is made up as follows:
Tax revenue
Customs duties	 $132,000,000
Excise duties	 83,000,000
Sales tax		170,000,000
Other excise taxes	 30,000,000
Income taxes	 166,000,000
Excess profits tax (to	be	superseded)	
nilBank note circulation and	insurance	companies taxes	
2,000,000
Total tax revenue
Non-tax revenue
Post office receipts....
Interest on investments. Miscellaneous
[Stage Direction]
Total non-tax revenue
67,000,000
Total ordinary revenue
[Stage Direction]
Our ordinary expenditures and the amount already authorized by parliament for war purposes total, as I have said, $1,148 million. We are faced, therefore, with a probable deficit, on the basis of our present tax structure, of at least $498 million plus an indeterminate amount which may easily bring that deficit up to $700 million. Consequently, it is necessary to answer boldly and realistically two questions:
First, what part of this probable deficit is to be met by taxation, and what part by borrowing?
The same question can be put in different terms. How can we take out of the rising national money income of this country funds for the purposes of war as rapidly as, but not more rapidly than, resources, equipment and labour can be diverted for those purposes? Or, at what rate should this diversion of funds be accomplished so that the output of our industry and of our man-power shall be expanded to the limit?
The second question which has to be answered is: How can the budgetary policy of the government help to conserve foreign exchange?
Neither the house nor the people of this country will expect financial miracles. They

have a right, however, to expect that the financial measures recommended shall be appropriate to the critical situation in which the country finds itself and shall ensure a mobilization on the economic front which will achieve the very maximum effort of which this country is capable.
To answer the second question first:
I now outline the fiscal measures for promoting the conservation of foreign exchange. There will be two measures submitted with that definite purpose in view.
First, it is proposed that a war exchange tax of 10 per cent shall be imposed on the value for duty purposes of all imports, free and dutiable, from non-empire countries. The tax will be subject to drawback for export as in the case of customs duties.
The government is aware that there may possibly arise the odd case of real hardship where materials or parts used by Canadian producers will be subject to this tax while the finished products, entering tax free under the British preferential tariff, will actually compete with the Canadian-made finished product to such an extent that the 10 per cent exchange tax may make it impracticable commercially for the manufacturer of the finished product

The Budget-Mr. Ralston
to continue production. Such cases if they are established can be dealt with under existing machinery relating to the remission of taxes. They will, it is safe to predict, be very few because the apparent trade advantage given to imports from Great Britain by this tax is small in comparison with the handicaps which the higher costs of war-time production in Britain and of ocean transportation will impose on such imports.
Though the purpose of this tax is primarily to conserve exchange, it is estimated that it will be productive of considerable revenue. The estimate is that in the first full year of operation it will yield $65 million, of which $50 million will be collected in the present fiscal year.
As this is intended as an exchange tax and not a protective duty, power will be taken to prevent unjustified increases in prices as a result of this tax. The policing of price increases will be under the war-time prices and trade board and any attempt to take advantage of the tax to increase prices other than to the extent justified by an increase, resulting from the tax, in the cost of raw materials or parts entering into the product, can be dealt with by appropriate measures applicable to the industry or the individual as the case may be. It would merely add to the postwar problems of adjustment if industry made plans for permanent production in Canada on the assumption that this special exchange tax would be permanent.
The other exchange measure relates to automobiles, both imported and domestic. It is proposed that, in place of the present small excise tax on automobiles of 5 per cent on the value in excess of $650, there be substituted a heavier tax on new passenger automobiles, steeply graded so as to be, it is expected, virtually prohibitive of the purchase of higher priced cars. It is this class of automobile which accounts for the major part of our imports of finished cars, and in so far as they are produced in Canada, they require the importation of parts and materials in higher proportion than the lower priced cars. This tax will effectively help to prevent the drain on our foreign exchange which these imports cause. The proposed rates of excise tax to be imposed on the manufacturers' price of Canadian-made automobiles and on the duty-paid price of imported automobiles are
as follows:
On the value up to $700 ....	10 per cent
On the excess over $700 and up
to $900	 20 per cent
On the excess over $900 and up
to $1,200	 40 per cent
On the excess over $1,200 .... 80 per cent
This tax, which is on sales by manufacturers and importers, will extend to cover also sales by dealers of new and unused cars now in dealers' hands.
It can hardly be argued that there is any undue sacrifice imposed on the Canadian citizen in asking him to postpone the purchase of higher priced cars for the duration of the war.
But the tax is not limited to higher priced cars; it falls, in a decreasing scale, on lower priced cars most of which are made in Canada but have a certain percentage of imported content. Productive capacity in Canada, and I believe also in the United States, will be more and more taken up with work on war equipment. Our production of automobiles will necessarily therefore be restricted if war work is to have priority. While not at the moment cutting off all production of passenger cars, this tax will, it is believed, restrain the demand and tend to keep it in balance with lowered production without causing the increase in price which might result from curtailed productive capacity and unrestrained demand. It is expected that any surplus of labour either in manufacturing establishments or in garages occasioned by this tax will be absorbed by war needs for the production and servicing of mechanical transport and other equipment.
Here again, then, the primary purposes of the tax are to save exchange and to release productive capacity for war purposes without dislocation of industry. Revenue is only incidental and will be comparatively small. It is anticipated that in the first full year of taxation it will yield $3,500,000 in revenue, of which $1,500,000 will be collected in the present fiscal year.
In addition to these two substantive measures of a fiscal character for conserving exchange the government through the policies of the Department of Munitions and Supply and through the operation of administrators appointed under the Wartime Prices and Trade Board, is also endeavouring to save foreign exchange in its own operations, and it may, from time to time, in respect of certain classes of civilian imports, take other measures of a non-fiscal character for the purpose of meeting this vital need as circumstances seem to require.
I should add here that there is one important way in which our supplies of foreign exchange may be increased. Canada is fortunate in the strength and extent of her gold mining industry which in the last eight years has shown such a rapid expansion. Further expansion of output is the most immediate and important means at hand for directly augmenting our
The Budget-Mr. Ralston
[Stage Direction]
supplies of foreign exchange, and I think I can appeal with confidence to those engaged in producing gold to put forward every effort to increase their production as rapidly as possible.
In this connection I am glad to acknowledge assurances already from a number of important companies that it will be their policy to step up production as far and as fast as conditions permit. I realize that the rate of increase which is practicable will vary with the differing conditions at different mines, but I feel sure that the directors of each enterprise in the industry will review their situation and adjust their production policy in t'he light of the present need.
Even larger than our gold as a source of foreign exchange is the tourist industry that Canada has built up over many years. This year, the government provided for an increased appropriation to promote the expansion of this activity, but its effects may be at least partly offset by misinformation and misunderstandings regarding recent regulations and by unfounded rumours that have been circulated. Nearly every Canadian can help to increase our receipts of foreign exchange by stamping out these mischievous rumours and by encouraging our friends in the United States to visit us in Canada. This country is ready and anxious "to be a good host to a good neighbour".
We all should take particular pleasure in seeing that friendly visitors to this country are treated with the courtesy and cordial interest due to' good and sympathetic neighbours, and that they are made to feel that we appreciate their coming. At no. time have our friends from south of the border been more welcome, and we shall do everything we can to see that their coming to us and their stay with us is made as convenient and comfortable and enjoyable as it possibly can be. We want them to go back with the happiest recollections of their neighbourly visit to Canada.
The result of the two fiscal measures which I have outlined, namely, the war exchange tax and the automobile tax, will not be to reduce our total imports of merchandise from non-empire countries, of which the chief is, of course, the United States. As a matter of fact, these imports will, due to our war requirements, be greater than ever, but the important result of these measures will be that out of the total supply of foreign exchange which we can obtain by the export of our products, by the export of gold, by the sale of our tourist services, the maximum possible amount shall be made available for

those purchases abroad of industrial materials, machinery and instruments of war which the imperious needs of war dictate.
As I have explained, these proposals for conserving exchange are dictated by the conditions of the present emergency. Needless to say, we regret that the exigencies of war make any such restrictive action necessary, and our fervent hope and firm resolve are that at the earliest possible moment we may be able to return to the long-run policy of this government, which is that of the progressive lowering of trade barriers and the encouragement of trade not only with the United States but with all peaceful nations. The government remains in fullest accord with the trade agreements programme in which Canada has cooperated with the United States, Great Britain and other countries, and has no intention or desire to alter by these emergency measures the permanent channels of trade.
The war exchange tax is peculiarly an emergency measure. It is of the type provided for by the war clause of the Canada-United States Trade Agreement, and action is taken under that clause. The operation of this proposed measure will, accordingly, end with the war.
I now come to the measures designed primarily for revenue. The first one is a new Excess Profits Tax Act. At the brief session of last September, parliament enacted a statute of this type. Under that legislation, a business to which the tax applied had the option to be taxed on either of two bases. Under option A, the tax was graduated according to the rate of return on capital. Under option B, the tax was fifty per cent of the excess of profits in the taxable year over those of a four-year pre-war base period. The tax was payable only in respect of profits of the year 1940 and fiscal years ending after March 31, 1940. Up to the present, no taxes have been collected under this act because the tax is not payable until four months after the end of a firm's fiscal year.
As I have already stated, this act was quickly drafted and placed on the statute book last fall in order to indicate one of the forms of war taxation which the government was adopting. In the brief time available it was impossible to give this form of taxation, new to Canada, the intensive and detailed study required to envisage its application under the varying conditions existing here. On further examination one main feature which appeared to be undesirable was the right of the taxpayer to choose between the two options. In the light of actual conditions it was found that many established firms would pay little or no tax, while others which had not been in business prior to the

The Budget-Mr. Ralston
war, or had been operating in a depressed industry, or were undergoing rapid expansion, would be subject to what appeared to be unwarranted discrimination. There were many other situations both of substance and administration which required review. And so since the passing of the act in September the measure has been thoroughly overhauled and, as 1 intimated publicly over four months ago, very extensive amendments will be proposed and we have decided to recast the whole act. The new measure will be much more drastic but at the same time its application as between various industries and firms will be far more equitable.
I shall not attempt to summarize all the changes to be effected by the bill which will be submitted, but I should outline some of the main features of our proposals:
(1)	Option A will be dropped altogether and we will instead rely wholly on the general principle of the British act which was also the principle followed in option B of the old act. On this basis we will increase the tax from 50 per cent to 75 per cent on the excess of profits in any taxable year over those earned in the base or standard period.
(2)	In order to ensure that no profitable business will escape taxation, it is proposed that in no case of an incorporated company shall the excess profits tax, when combined with the corporate income tax, be less than 30 per cent of the company's total profits, whether or not such profits exceed pre-war profits. It will be remembered that the corporation income tax is 18 per cent.
The same result is achieved in the case of unincorporated businesses by provision that the excess profits tax shall never be less than 12 per cent of the total profits, whether or not such profits exceed pre-war profits.
(3)	There will be a number of provisions for adjusting the base or standard profits in the case of newly established businesses, businesses whose capital employed or whose scale of operations has been or is rapidly expanding, and businesses operating in depressed industries whose base years show losses or abnormally small profits.
(4)	In order that firms may not receive discriminatory treatment because their fiscal years happen to end on different dates it will be recommended that the tax in respect of all businesses shall apply to profits earned on and after the same date, namely, January 1, 1940, regardless of the expiry date of their fiscal year.
(5)	The tax will not apply to businesses whose profits are not in excess of $5,000, and allowance will be made for drawings in lieu of salaries not in excess of $5,000 by sole proprietors or partners.
(6)	To assist in carrying out these provisions fairly and realistically, the appointment of a board of referees will be proposed.
(7)	In connection with the gold mining and the oil producing industries a different basis of adjusting base or standard profits appears necessary to deal with new and expanding companies. In the present emergency, as I stressed a little earlier, it is considered desirable to encourage the development of these natural resources, particularly because of their effect in directly increasing our supplies of hard currency exchange or in decreasing our requirements therefor.
These industries also require the risking, and very often the losing, of large amounts of capital in exploratory and development work before production commences. The results obtained from these expenditures are inherently erratic, depending on the possibility of a "lucky strike." If a "strike" is eventually made, increases in the scale of production or recovery are not closely related to increases in the amount of capital employed.
Consequently, for the purpose of adjusting standard profits in the case of expanding operations, the basis used will be not capital employed but number of units of output. In the case of a new development, standard profits will be calculated by taking into account the number of units of output in the taxable year and the average price of the product during the base period.
All companies in the gold mining or oil producing industries (except companies exempted temporarily from corporate income tax under section 89 of the Income War Tax Act) will, however, as in the case of all other companies, pay in excess profits tax and corporate income tax combined a minimum of 30 per cent of the total profits, whether or not such profits exceed pre-war profits.
You can readily appreciate how difficult it is to forecast the yield of a tax such as this, but our rough estimate is that in a full year s operation the excess profits tax will yield about $100 million, of which approximately $25 million will be collected during the current fiscal year.
The next revenue measures proposed apply to individuals. They are:
First, sharp increases in the personal income tax by a revision upwards of rates throughout the whole range of taxable incomes and a lowering of exemptions;
Second, an over-riding flat rate tax, collectable at the source in most cases, in respect of all taxable incomes and including lower incomes than those covered by the income tax itself.
I will deal first with our proposals relating to personal income tax. This is the tax which
The Budget-Mr. Ralston
[Stage Direction]
in principle most nearly approximates ability to pay. We realize that increases in indirect taxes disguise the burdens imposed by the war but they are much more likely to distribute these burdens harshly and unfairly. While increases in such taxes may eventually be necessary, we are striving in this budget to deal with the situation (except in the case of particular commodities or where exchange considerations make special measures necessary) by a direct call on our citizens graded according to their means and responsibilities. We believe that a straightforward assessment of the contribution to the common cause will be loyally accepted and paid as a small price for the preservation of our liberties. Following out that principle, the government has, therefore, decided to submit not an increase in the sales tax but heavy increases in the direct tax on individual incomes.
In establishing the new rates, we have been limited by two insistent considerations. It would be popular, if it were practicable and possible, to pay the stupendous costs of war by imposing taxes only on those earning higher incomes. The stubborn fact is there is not enough income in the so-called higher brackets to produce more than a small fraction of the necessary revenue.
On the basis of 1938-39 figures, the latest which are available, the total of all incomes above $50,000 was only $35 million, and, under present rates, the tax on these would amount to $20-5 million leaving only $14-5 million available for provincial and municipal taxes and any further taxation by the dominion-to say nothing of living expenses and personal obligations. Similarly, in the group from $25,000 to $50,000, the aggregate income was only $32 million, of which taxes at the present rates would take about $10-8 million, leaving only $21-2 million. Finally, it has to be noted that the total assessed income of all persons liable to income tax in the year 1938-39 was only $730 million, and if we took from all these people the whole of their incomes in excess of $2,000 a year we should obtain only $114.5 million more than we would get on these incomes at existing tax rates. When we compare these disappointing amounts of aggregate income available in these various income brackets, however drastically we might tax it, with the $700 millions and upwards of war expenditure, to say nothing of the further expenditures of $448 million on ordinary account, it is clear that we cannot go far to meet the costs of the war simply by taxing large incomes, or even those of moderate size.
The second consideration is that the dominion is not the only taxing authority levying steeply graduated rates on large fMr. Ralston.]
incomes. Every province in Canada, except Nova Scotia and New Brunswick, now levies income taxes and in certain cities taxpayers must pay municipal income taxes as well as provincial income taxes. Ontario, Manitoba, and Prince Edward Island are the only provinces which allow, as a deduction from income, the tax paid to the dominion. All these authorities tax at different rates. This means that unless we are prepared to be entirely arbitrary and unfair and to set up schedules of rates which when added to the rates imposed by other taxing authorities would be nothing short of fantastic, the dominion must, in fixing its schedule of rates, take cognizance of the highest schedule of rates effective in any province. This is but an instance of the chaotic situation in the fiscal systems of Canada to which the Sirois report has drawn attention and which, I regret to say, appears to be getting worse rather than better.
There will, however, be no class in the community which will not recognize the necessity of bearing some part of the war burden. In the past our exempton limits have been considerate, to say the least. No income tax whatever has been paid by the single person receiving less than $1,000 per year or by the married person receiving less than $2,000 per year. In addition, the married person got a further exemption of $400 for each child. Our rates of tax in the low and middle income groups have been low, very low indeed as compared with the rates on comparable incomes in the United Kingdom. While the increases in rates I have to propose will be substantial when expressed as a percentage of the comparatively low taxes formerly paid, the increase in the dollar amount per individual is not unduly large and will, I am confident, not be regarded as an undue burden when contributed to meet the situation which faces us all.
It is proposed that exemptions under the graduated Income Tax-that is, our present personal income tax act-which, as I have said, are at present $1,000 for single persons and $2,000 for married persons, be reduced to $750 and $1,500 respectively. The exemption for each dependent child is left, as at present, at $400. Under the proposed rates, the taxpayer, on the first $250 in excess of the exemption, will pay 6 per cent instead of the present initial rate of 3 per cent. On the next $750 of income the proposed rate is 8 per cent, and on the next $1,000 in excess of exemptions 12 per cent, and so on upwards. In the past dependence on indirect taxation has left incomes which were just above the exemption limits taxable at very low rates, and, hence, the increases are necessarily proportionately

The Budget-Mr. Ralston
greater on the groups receiving incomes between the exemption limit and, say, $10,000, than on those receiving higher incomes Nevertheless, the rates on high income-already steeply graduated, have also been increased as much as we consider they can practicably be increased, having regard to the taxes levied on these same incomes by certain provinces and municipalities.
I may add that we have at the same time simplified the structure of income tax rates by doing away with the old 5 per cent surtax and the 20 per cent war surtax imposed last fall and substituting therefor a schedule of higher rates throughout the whole range of incomes.
I come now to the second revenue measure applicable to individuals-and I think I should deal with this measure and then give the house illustrations of how the two measures combined work out in connection with individual incomes:
To supplement the graduated income tax we propose a national defence tax at a flat rate applicable to all incomes above $600 for single persons and above $1,200 for married persons. The rate of tax for married persons will be 2 per cent if the income exceeds $1,200, and for single persons the rate will be 3 per cent if the income exceeds $1,200 and 2 per cent if the income exceeds $600 and is not more than $1,200. But there is a proviso that in no case will the income of the taxpayer be reduced below $600 or $1,200 as the case may be. For dependent children, a deduction from tax equal to the rate of 2 per cent on the usual $400 exemption for each dependent child is to be allowed. Thus, a married person with an income of $1,400 and three dependent children would be liable to a tax of $28 (2 per cent of $1,400) minus $24 in tax credits for children, leaving $4 as the tax payable.
As far as it is administratively practicable this tax will be collected at the source. Thus employers will deduct the tax from the employee's earnings when the pay is at the rate of $600 per year in the case of unmarried employees and $1,200 per year in the case of married employees, and companies will deduct the tax from dividends and interest on registered corporate bonds. In cases where the full amount payable has not been deducted and in all other cases where the annual income amounts to or exceeds the minimum amounts of $600 or $1,200, as the case may be, the taxpayer is required to make a return as in the case of the graduated income tax.
It is recognized that there will be a good deal of additional work for employers and their staffs in making deductions and returns, and provision will be made toward reimbursing
employers for expenses so incurred. Employers, however, can by their cooperation and interest help greatly in working out the methods to be adopted and in making the system operate efficiently and fairly and with a minimum of inconvenience both to their employees and to themselves. I feel sure that under the circumstances we can count upon the full cooperation of employers in this additional task which they are called on to perform in the national interest at this time.
It might be useful if I now gave a few examples showing how the new income tax rates taken along with the national defence tax which I have briefly described will affect certain classes of taxpayers. Let us take the case of the single person, with no dependents, earning $800 a year. Under our existing income tax law he would not pay any income tax since he is at present exempt up to $1,000. Under the legislation just proposed, however, the $800 single man will be required to pay the national defence tax of 2 per cent of his total earnings which is $16, and under the income tax he would pay 6 per cent on the amount of his income in excess of $750, which is the new exemption figure for income tax purposes. This income tax would thus amount to $3 (6 per cent of $50). Consequently, his total tax per year would be $19 where previously he paid no tax.
A single man with no dependents earning $1,500 would pay $100 under the new proposals where he now pays only $18.
A married man with no dependents earning $2,000 is at present just on the exemption line, and pays no tax. Under the new set-up his tax bill will be $75.
Perhaps some hon. members would be interested in knowing how the new measures will affect the position of a married man wit>
an income of $4,000 a year. Under our existing tax he pays $84; under the new measures he will pay $355. If he has two children he will pay $223 under these new taxes compared to $45.60 under the present tax. A single man with the same income now pays $144, and under the new measures he will pay $525.
To illustrate the effect of the changes in the case of higher incomes, a married man, with no dependents, having an income of $20,000, pays $3,112 under the present tax, and will pay $6,530 under the new taxes. With an income of $200,000 he pays the dominion $103,698 under the present rates, and under the new taxes he will pay $119,430 or 59-7 per cent of his income. Adding provincial and in certain cases municipal income taxes as well, we find that the latter married man with no dependents, if he lives in Ontario, will pay $129,679 or C4-8 per cent of his total income; if he lives in Montreal, he will pay $149,516.
The Budget-Mr. Ralston
[Stage Direction]
or 74-8 per cent of his total income; and if he lives in British Columbia, he will pay $170,425 or 85-2 per cent of his total income.
Let me give a few additional illustrations to show the relative burden of our new rates as compared with the British income tax rates. Take a married man with no dependents living in Ontario. If he receives an income of $1,000, he will pay no tax in Canada-that is, he is under the exemption limits provided for by the national defence tax ($1,200 for married men) and by the regular income tax ($1,500 for married men)-while his British cousin in like circumstances would pay $14.31. If his income is $1,500, he will pay 33 per cent of the amount he would pay in Britain; if it is $4,000, he will pay 46 per cent of the British tax; if it is $10,000 he will pay 71 per cent of the British tax; if it is $200,000 he will pay 86 per cent of the British tax; and finally, if he should have an income of $500,000, he will pay 94 per cent of what he would have to pay in Britain. If he happened to live in certain other provinces, his total tax would be a considerably higher percentage of the comparable British tax and in the higher brackets of income would in some cases exceed the United Kingdom tax. Thus, a married man with no dependents and an income of $50,000, living in Quebec, would pay 107 per cent of the British tax, and if he were living in British Columbia he would pay 114 per cent of the British tax. If his income were $200,000 he
would pay 99 per cent of the British tax if he lived in Quebec, and 113 per cent of such tax if he lived in British Columbia.
It is anticipated that the increases in the income tax will contribute $58 million of new revenue in a full year of operation, but none of this will be available in the current fiscal year. It is estimated that the national defence tax will provide $35 million additional revenue in a full year but only $20 million in the current fiscal year. To make it quite clear let me emphasize that this national defence tax is the only direct tax imposed by the dominion on unmarried persons with incomes from $600 up to $750 per year and on married persons with incomes from $1,200 up to $1,500 per year. On incomes of $750 and up in the case of single persons and of $1,500 and up in the case of married persons, both the income tax and the national defence tax apply.
For the convenience of hon. members, I shall now table a statement showing for a number of different incomes the amount of tax payable to the dominion under the existing income tax, the amount payable under the new income tax rates and the national defence tax combined, the total amount payable to the dominion combined with the amount payable in each of the several provinces where income taxes are imposed, and the percentage of the British tax which a man living in Ontario would pay in dominion and provincial taxes combined:

INCOME TAX COMPARISONS (Married Persons with No Dependents)
Income	Present Dom. Tax	New Dom. T ax with Nat. Def. Tax	New Dominion Tax Plus National Defence Tax Plus Income Tax Payable in	United Kingdom Tax (£1=84.45)	New Dom. Tax with Nat. Def. Tax and Ont. Tax as % of U.K. TaxB.C.	Alta.	Sask.	Manitoba	Ontario	Prov. Que. and Montreal	P.E.I.	$ c.	$ c.	$ c.	$ c.	$ c.	$ c.	$ c.	S c.	S c.	$ c.	%$ 1,500	30 00	35 00	30 00	30 00	45 00	30 00	30 00	32 50	141 00	21-32,000	75 00	85 00	85 00	86 50	103 90	75 00	83 75	85 73	328 50	22-83,000	36 00	195 00	225 00	230 00	236 50	251 70	£07 97	228 75	227 30	703 50	29-54,000	84 00	355 00	415 00	425 00	427 00	440 55	3S4 50	437 50	416 87	1,078 50	35-75,000	144 00	555 00	655 00	670 00	667 50	678 34	603 62	714 25	653 83	1,453 50	41-510,000	781 20	2,170 00	2,675 00	2,660 00	2,658 25	2,532 60	2,336 35	2,859 50	2,475 10	3,550 07	65-815,000	1,789 20	4,330 00	5,590 00	5,445 00	5,450 88	4,996 60	4,643 35	5,740 50	4,816 00	5,993 83	77-520,000	3,112 20	6,530 00	8,895 00	8,555 00	8,546 00	7,582 70	7,030 90	8,675 50	7,413 40	8,715 07	80-730,000	6,514 20	11,200 00	15,375 00	15,900 00	15,443 05	13,230 40	12,175 00	14,910 00	12,652 00	14,796 31	82-350,000	14,351 40	21,610 00	30,605 00	32,310 00	30,937 15	25,980 09	23,721 SO	28,823 50	24,424 00	26,943 19	88075,000	25,880 40	36,065 00	52,060 00	54,265 00	52,928 53	43,298 12	39,561 55	48,162 75	39,983 50	46,216 94	85-6100,000	39,299 40	51,520 00	74,515 00	77,220 00	77,232 40	61,586 54	56,382 20	68,424 00	56,443 00	66,547 56	84-7150,000	70,043 40	84,475 00	121,470 00	125,175 00	129,597 18	100,168 37	92,044 00	107,770 00	91,202 50	108,265 69	850200,000	103,698 00	119,430 00	170,425 00	175,130 00	183,977 18	140,711 25	129,679 75	149,516 00	127,762 00	150,765 69	86-0500,000	334,656 00	357,235 00	492,230 00	502,935 00	538,332 18	407,257 58	381,103 30	433,682 00	372,386 50	405,765 69	93-9
The Budget-Mr. Ralston
The Budget-Mr. Ralston
[Stage Direction]
It is on the foregoing taxes that we depend for the bulk of the necessary increase in revenue, but there are a number of other changes, some of which will contribute substantial sums to the treasury and some of which are proposed largely as readjustments of unsatisfactory situations.
Smokers' supplies are again made the subject of tax increases. It is proposed that the excise tax on matches shall be increased from three-quarters of a cent to one cent per hundred. It is further proposed that the excise tax on cigarettes weighing less than two and a half pounds per thousand shall be raised to 88 from the present rate of $5. The rate on manufactured tobacco is to be increased from 25 cents to 35 cents per pound. To prevent a substantial decline in the revenue from cigarettes and cut tobacco because of these high rates, it has been necessary to impose a tax of 10 cents a pound on the sale of raw leaf tobacco and to increase the tax on cigarette papers and tubes from 2 cents to 5 cents per hundred. The tax on raw leaf tobacco will only apply on sales to consumers. The grower may sell to the merchant or dealer or manufacturer without tax. The rates under the Special War Revenue Act on cigars will also be increased. It is estimated that in a full year these new or increased rates will yield $15,540,000 of new revenue, of which $11,680,000 will fall ih during the present fiscal year.
It is proposed that the present excise tax on automobile tires and tubes shall be increased from 2 cents and 3 cents per pound respectively to 5 cents and it is anticipated that from this change $1,100,000 in revenue will be derived in a full year and 8825,000 in the current year.
It is proposed that a new excise tax of 10 per cent will be imposed on radios, radio tubes, cameras and phonographs. While this is in the class of sumptuary taxes there is the further consideration that the resources used in the production of most of these products are of a type suitable for producing war supplies and it is expected that such manufacturing capacity as may be affected by any lessening or lack of increase in demand due to this tax will prove useful in war work. It is estimated that the approximate yield of this tax will be $1,500,000 in the full year and $1,100,000 in the current fiscal year.
There are proposed also a number of readjustments in taxes. Since the sales tax on dressed and dyed furs is imposed at the initial point of processing and not on the finished fur garment, it is proposed that the rate be 12 per cent rather than 8 per cent as at present in order more nearly to equalize

this tax with the 8 per cent sales tax which is imposed on finished cloth garments. The present exemptions under the sales tax for home canners and for farmer florists are to be restricted to fixed quotas so as to facilitate administration in confining the benefit of the exemptions to bona fide farmers. The tax on carbonic acid gas which last September was proposed to secure revenue from the soft drink trade is to be increased from 2 cents to 5 cents per pound. These revisions, it is estimated, will yield $550,000 in the full year, and $415,000 in the current fiscal year.
In addition to the major features of the budget programme which I have outlined, there will also be found in the resolutions a number of proposed amendments to our taxing statutes which either involve tax changes of a minor nature or are designed to remove anomalies and facilitate administration. For instance, in the income tax resolutions there will be a provision for clarifying and extending the definition of income to cover payments made to life annuitants under purchased annuity contracts, and the exemption now accorded to dominion government and like annuities up to $1,200 per year will be removed in respect of all new contracts. Also in order to prevent evasion of either the income tax or the excess profits tax it is proposed to give power to the treasury board to rule in any specific case that a transaction or reorganization has been of a specious character designed to avoid or minimize taxes and that therefore the taxpayer should be assessed without regard thereto.
With regard to the customs tariff: five reports from the tariff board will to-day be laid on the table. The reports on cyanides and firebrick and the two on aircraft arise out of the reference made to the tariff board on December 5, 1938. This reference instructed the board to revise the whole of the drawback schedule. The items now being reported upon relate to industries connected with our war effort. The report on the radio industry reiterates most of the recommendations made in the earlier report on this subject presented to parliament during the first session of 1939 and provides for the widening of the scope of the existing tariff items covering parts and materials of radio receiving sets and radio tubes.
The tariff changes to be announced to-day, implement the recommendations of the tariff board as shown in the reports now tabled and apart from these affect only five commodities. One of the amendments proposed provides for duty-free entry of sodium nitrates, regardless

The Budget-Mr. Ralston
of the purpose for which imported. This material is now being used in connection with the production of alloys for steel but the existing duty-free provision did not cover this use. Material for use in the manufacture of nicotine sprays will henceforth be admitted duty free. Forgings for the manufacture of scissors and shears will be admitted at the special rates now applicable to blanks for knives, forks and spoons. The proposed amendment of the item covering dressed lumber permanently removes an anomaly temporarily taken care of by an item due to expire on July 1, 1940. The only other tariff change provided for continues the reduced rates of duty that have applied for several years to imports of rayon fabric now being used in the manufacture of certain rubber tires.
The measure enacted during the special session last September, providing for additional duties of customs, is being amended. The additional duty on manufactured tobacco of all descriptions, except cigars, cigarettes and snuff, is increased from 5 cents per pound to 15 cents per pound, and the additional duty on cigarettes is increased from $1 to $2 per thousand. These increases are necessary
to correspond with the additional excise duties which I have announced as applicable to domestic tobacco items.
In the case of tea, while no change is being made in the actual rates of additional duties imposed last September, the value brackets are being lowered to bring a greater quantity of the imports of tea within the scope of the tax of 7| cents per pound. Previously the lowest rate of tax, 5 cents per pound, was allowed where the value was less than 35 cents per pound. Under the proposed change only tea valued at less than 22^ cents per pound will be entitled to the low 5 cents per pound rate. The two remaining value brackets are also reduced accordingly.
I may summarize the results of the new and increased taxes which we are recommending by stating that we expect them to produce an increase in revenue of approximately S280 million for a full year. Of this total it is expected that about $110 million will be paid into the treasury during the balance of the current fiscal year. The house will realize how difficult it is under present conditions to predict with any degree of precision the yield of some of these new taxes. But I give below the results of such estimates as we have been able to make:
Excess profits tax	
Graduated personal income tax	
National defence tax	
War exchange tax	
Automobile excise tax	
Taxes on tobacco and smokers' supplies	
Taxes on radios, radio tubes, cameras and phonographs
Taxes on tires and tubes	
Other excise taxes	
Full year $100,000,000
58.000.	000
35.000.	000
65.000.	000
3.500.000 15,500,000
1.500.000
1.100.000 500,000
Balance of current fiscal year $ 25,000,000 nil
20,000,000
50,000,000
1.500.000 11,700,000
1.100.000 800,000 400,000
$280,100,000	$110,500,000
Earlier this afternoon I estimated $650 million as the probable revenue for the present year without increases in taxes. Adding the $110 million which we expect to receive as a result of these new taxes, we get a total estimated revenue of $760 million. This may be increased somewhat as a result of prepayment of taxes because a number of individuals and corporations have already reported that they intend to make instalment payments in advance on account of their taxes which will not be due until next April. We can therefore take the figure of $760 million as a conservative estimate of our aggregate revenues.
Taking our expenditures at $1,148 million, our over-all deficit for the year would amount to $388 million, but that assumes that our
war expenditures will not exceed the $700 million war appropriation already voted by parliament. There are still the further war commitments already made which I have roughly estimated at another $150 million to $200 million, and these will not be all. This means that in spite of the very heavy increase in taxes which I have proposed, it is not safe to count on an over-all deficit less than from $550 million to $600 million. This will be a staggering deficit, larger indeed than our total governmental expenditures during the depression years.
Whatever the total deficit may be, it will have to be met by borrowing except to the extent of cash on hand. We shall also have to raise funds to continue the repatriation programme which I have already described
The Budget-Mr. Ralston
[Stage Direction]
If we assume that the amount on this account will be of the order of $200 million, we may conclude that our total cash requirements for the year will be roughly of the order of $750 million to $800 million. However, we began the year with cash in hand of approximately $187 million and as a result of the sale of war savings certificates and stamps we expect to raise during the balance of the year approximately $50 million. This would leave approximately $550 million to $600 million to be raised by the issue of new long-term loans. These are impressive sums but I know that they are not beyond the capacity of our markets to absorb under the conditions of expanding business and rising national income which I believe we have every reason to expect. I repeat, the limits of our war programme are not fiscal, but physical, mental and moral.
In the foregoing calculations I have, you will note, included in revenue only the yield of the new and increased taxes which we expect to be actually paid into the treasury before March 3'lst, namely, $110 million. But all our tax proposals relate to incomes, profits or transactions that will be earned or made during the current fiscal year. Not for the purpose of government accounting but in order to learn the answer to the question which I posed earlier this afternoon as to the relative reliance we intend to place on taxation and borrowing, it would be appropriate to take into account the total yield of our new or increased taxes, whether or not the proceeds will be actually received before the end of the fiscal year. On this basis we would add to the $650 million estimated as the probable total revenue from our existing tax structure during the year, the whole $280 million which is the expected yield of the new or increased taxes which I have proposed, making a total of $930 million instead of $760 million. This would mean that if our total war expenditures should amount to $900 million, the programme which we are proposing is designed to secure for such war expenditures from tax revenues the sum of $482 million (that is, the difference between the figure of $930 million I have just given and $448 million of anticipated government expenditures on non-war activities). As compared with this $482 million, there would be left a gap of $418 million to be financed by borrowing or by cash already in hand. I think the house will agree that a very serious effort is being made to carry the pay-as-you-go policy as far as is practicable. Of course, this comparison of the relative amounts to be provided by taxation and by borrowing will be less favourable if our war expenditures exceed $900 million.

It is natural, Mr. Speaker, that comparisons should be made between the new tax rates and rates previously levied, -and such comparisons will reveal great increases, particularly in income taxes, corporation and personal. But there are some other considerations which should be remembered. In the first place, we have not, in the lower and middle brackets at least, come near to the levels of income tax imposed in the United Kingdom. In the second place, there is every likelihood that during the present fiscal year our national income may be expected to show a very substantial increase. The government will be pouring into the income stream many hundreds of millions of dollars, while much of the taxes payable under the measures we propose will not be withdrawn from incomes until late this year, or in some cases until next year. Thirdly, with rising incomes, taxes even of this degree of severity can be borne without deprivation, and their imposition at this time will avoid the necessity of still heavier increases in taxation in the days after the war when incomes may be falling.
Fourthly, to those who may have any fear of the effects of these taxes on business in this country, I say that businessmen and individuals alike must strain every nerve to meet the needs of this hour. The taxes herein imposed on business are heavy taxes, but for the most part they fall on profits, and the more we can find practical means of paying as we go, the more we will improve the long-run outlook for business as well as individual prosperity in this country.
The proposals, Mr. Speaker, which I have outlined are an attempt to help to meet the crisis in terms of taxation. They bear upon all classes in the community. If the taxation provisions are the most drastic which have ever been imposed upon this country, they are certainly no more drastic than the present hour and the present need demand. The future may well demand still more.
I ask those who think that they are too drastic to bring both their common sense and their idealism to the rescue of their opinions. Common sense will ask them what will become of their property or incomes if Germany and Italy should conquer the British empire. Idealism will teach them that money and material things are as nothing compared with the freedom and the dignity which it alone can bring as a benediction to the life of man.
At this time everything which we treasure and the survival of the things of the spirit and mind and soul which are the most precious of all, will depend upon the willingness and the capacity of men of our blood and kith and kin to endure and to die.

The Budget-Mr. Ralston
We who remember our fathers and know our sons have no cowardly doubts or weak misgivings.
I will not dishonour the word sacrifice by applying it to anything except the gift of life itself. But, knowing the Canadian people, I am confident that they will shrink from no contribution to insure to the soldiers and sailors and airmen of Britain and Canada all the machines and equipment which can be produced or procured.
The overwhelming majority of men and women of the sturdy races which make up Canadian citizenship are at their best in days of trial.
A farmer offers me the total proceeds of his four-hundred acre wheat crop, and all the increases of his live stock for Canada's war chest.
The wife of a small wage earner begs me to place a heavy income tax on her own small income.
A small industrial firm agrees to give all its profits for the duration of the war.
A veteran of 1914, with a disability pension of $47 a month as the sole income of a family of five, sends me all he has to give, a collection of old coins, and the caretaker of one of our militia armouries sends me $20 each month.
With such examples to challenge and inspire us, I cannot believe that any man in Canada will complain about his burden, or by greed, panic or selfish fear, betray his Canadian citizenship in the hour of Canada's need.
Britain is giving her blood, her treasure, her all. We proudly share her courage, her sacrifice and her unshakeable resolution. Britain will not fall. Freedom will not perish, and Canada will fail neither the commonwealth nor the cause.

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

[Stage Direction]
Resolved, that it is expedient to amend the Income War Tax Act and to provide:-
1.	That the rates of tax applicable to persons other than corporations shall be increased to the rates of tax set forth in the following schedule:
A.-Rates of Tax Applicable to Persons other than Corporations and Joint Stock Companies
On the first $250 of net income or any portion thereof in excess of exemptions 6 per centum or
$15 upon net income of $250; and 8 per cent upon the amount by which the income exceeds $250 and does not exceed $1,000 or
$75 upon net income of $1,000; and 12 per centum upon the amount by which the income exceeds $1,000 and does not exceed $2,000 or
$195 upon net income of $2,000; and 16 per centum upon the amount by which the income exceeds $2,000 and does not exceed $3,000 or $355 upon net income of $3,000; and 20 per centum upon the amount by which the income exceeds $3,000 and does not exceed $4,000 or $555 upon net income of $4,000; and 24 per centum upon the amount by which the income exceeds $4,000 and does not exceed $5,000 or $795 upon net income of $5,000; and 27 per centum upon the amount by which the income exceeds $5,000 and does not exceed $6,000 or $1,065 upon net income of $6,000; and 30 per centum upon the amount by which the income exceeds $6,000 and does not exceed $7,000 or $1,365 upon net income of $7,000; and 33 per centum upon the amount by which the income exceeds $7,000 and does not exceed $8,000 or $1,695 upon net income of $8,000; and 35 per centum upon the amount by which the income exceeds $8,000 and does not exceed $9,000 or $2,045 upon net income of $9,000; and 37 per centum upon the amount by which the income exceeds $9,000 and does not exceed $10,000 or $2,415 upon net income of $10,000; and 39 per centum upon the amount by which the income exceeds $10,000 and does not exceed $20,000 or $6,315 upon net income of $20,000; and 41 per centum upon the amount by which the income exceeds $20,000 and does not exceed $30,000 or $10,415 upon net income of $30,000; and 44 per centum upon the amount by which the income exceeds $30,000 and does not exceed $40,000 or $14,815 upon net income of $40,000; and 47 per centum upon the amount by which the income exceeds $40,000 and does not exceed $50,000 or $19,515 upon net income of $50,000; and 50 per centum upon the amount by which the income exceeds $50,000 and does not exceed $75,000 or $32,015 upon net income of $75,000; and 53 per centum upon the amount by which the income exceeds $75,000 and does not exceed $100,000 or $45,265 upon net income of $100,000; and 56 per centum upon the amount by w'hich the income exceeds $100,000 and does not exceed $150,000 or $73,265 upon net income of $150,000; and 59 per centum upon the amount by which the income exceeds $150,000 and does not exceed $200,000 or $102,765 upon net income of $200,000; and 63 per centum upon the amount by which the income exceeds $200,000 and does not exceed $300,000 or $165,765 upon net income of $300,000; and 67 per centum upon the amount by which the income exceeds $300,000 and does not exceed $400,000 or $232,765 upon net income of $400,000; and 72 per centum upon the amount by which the income exceeds $400,000 and does not exceed $500,000 or $304,765 upon net income of $500,000; and 78 per centum upon the amount by which the income exceeds $500,000.
2.	That the additional rate of tax applicable to all persons other than corporations and joint stock companies in receipt of income in excess of $5,000 in the amount of five per centum, be repealed.
3.	That the war surtax of twenty per centum as enacted by sections two, three and four of chapter 6 of the 1939 statutes (second session), be repealed.
4.	That the statutory exemption of a married person and other persons with dependent relatives as set forth in paragraph (c) of subsection 1 of section five of the act be reduced from $2,000 to $1,500.
5.	That the statutory exemptions of all other persons except corporations, be reduced from $1,020 to $750.
The Budget-Mr. Ralston
[Stage Direction]
6.	That a tax of five per centum be imposed upon Canadian residents with respect to all interest or dividends paid or payable by Canadian debtors in a currency which is at a premium in excess of five per centum in terms of Canadian funds.
7.	(a) That the income accrued or earned during the life of any deceased person shall, when paid, be taxable income in the bands of his executors or trustees.
(b)	That income received by executors or trustees and capitalized shall be taxable income of such executors or trustees.
8.	(a) That the qualifications of personal corporations as set forth in the aot shall be extended to include revenue derived from the hire of chattels or from charter party fees.
(b) That a company shall not be deemed to be a personal corporation if it carries on an active commercial or industrial business.
9.	That as a means of insuring the collection of tax from non-resident transient persons who earn salary, fees, commissions or other remuneration in Canada, there shall be withheld an amount of fifteen per centum of such remuneration as a credit against the tax found due upon the filing of the income tax return of such person.
10.	That the rate of tax applicable to rents and royalties payable to non-residents of Canada shall be on the gross amount thereof, and in the case of non-resident corporations the rate shall be fifteen per centum, and in the case of non-resident persons other than corporations the rate shall be five _ per centum, and the Canadian debtor shall withhold such tax before making payment to the non-resident.
11.	That the rate of tax applicable to corporations shall be eighteen per centum (in the case of consolidated returns, twenty per centum) on the profits of the year 1940, and in the case of fiscal periods ending in 1940 prior to December 31, the said rate shall apply to that proportion of the profits thereof which the number of days of the said fiscal period in the year 1940 bears to the total number of days of such fiscal period.
12.	That the section of the act in respect of depreciation be amended to provide for the elimination of duplicate depreciation in respect of assets after their transference to persons who have substantially the same equity or interest in the said assets after their transfer as they had before the transfer.
13.	That the distribution of otherwise tax free profits of a family corporation made after 31st December, 1942, shall render such profits so distributed liable to income tax.
14.	That the act be amended to prevent evasion by giving power to the treasury board to direct that a taxpayer be assessed without regard to any transaction or reorganization which in the opinion of the treasury board, is of a specious character designed to avoid or minimize tax, whether any such transaction or reorganization was entered into with persons or corporations resident outside or within Canada.
15.	That in order to prevent evasion the Minister of National Revenue (hereinafter called the minister) shall have power to determine what are reasonable disbursements for advertising, repairs, salaries and other operating and administrative expenses.
16.	That the amount paid by proprietors of a business, other than a corporation, by virtue

of the Excess Profits Tax Act shall be allowed as a deduction from their incomes for purposes of income tax in proportion to their interests in the said business.
17.	(1) That the definition of income be clarified and extended to cover the amount of annuity payments made to life annuitants under purchased annuity contracts.
(2)	That the exemption now accorded to dominion government annuities and like annuities sold by provincial governments and insurance companies shall not apply in respect of all contracts issued subsequent to June 24, 1940, nor to contracts or extensions of contracts made since that date to holders of options or contractual rights in existence at that date.
(3)	That purchasers of annuities be entitled to deduct the annual amounts paid out by them in purchasing annuity contracts not to exceed $300 per year.
18.	(1) That in addition to the income tax there be imposed a national defence tax on all persons in respect of their income,
(a)	in the case of married persons, of two per centum on the total net income if the income exceeds $1,200 per year;
(b)	in the case of single persons, of two per centum on the total net income if the income exceeds $600 and does not exceed SI,200 per year; or three per centum if the said income exceeds $1,200 per year.
Provided, however, that if the effect of such tax would be to reduce the income of any person below the relevant amount specified above, then to the extent it would so reduce the income the tax shall not be exigible; Provided, further, that there shall be allowed a tax credit on an amount of $400 at a rate equal to two per centum in respect of each dependent child or grandchild, brother or sister of the taxpayer under twenty-one years of age, and each child, grandchild, brother, sister, parent, or grandparent over twenty-one years of age dependent on account of mental or physical infirmity and resident in Canada;
(2)	That every employer be required to deduct the tax imposed in respect of earnings of the employee earned or accruing due during and after July, 1940;
(3)	That every employer remit the tax collected at the source on the sixteenth day of September. 1940, and on the fifteenth day of each month thereafter;
(4)	That incorporated companies paying interest on bonds or other like obligations registered as to interest, or paying dividends, irrespective of the amount, to persons on record in their office or that of their agents, be required to deduct and collect the taxes imposed from each payment made to residents of Canada, paid in the case of interest, and declared and paid in the case of dividends, after the twenty-fourth day of June, 1940;
(5)	That each incorporated company remit the tax collected at the source in respect of interest and dividends on or before the fifteenth day of the month immediately following the date of payment, the first remittance however to be made on the sixteenth day of September, 1940;
(6)	That every person liable to taxation in respect of whom the deduction of the nationa" defence tax on the full income has not been made be required, on or before the thirtieth day of April in each year, to deliver to the minister a return of his total income during the preceding year and pay the tax as in the Income War Tax Act provided;

The Budget-Mr. Ralston
(7)	That the national defence tax be applicable to the income of 1940 and all subsequent years except that in respect of the income of the year 1940 the tax shall be imposed only on one-half of the income if the income for the whole year exceeds the relevant amount specified in resolution No. 18(1);
(8)	That the income of the following persons shall not, except as in this resolution provided, be liable to the national defence tax
(a)	incorporated companies;
(b)	persons and institutions mentioned in paragraphs (a) to (i) inclusive and in pararaphs (p) and (q) of section four of the ncome War Tax Act;
(c)	members of the Canadian naval, military and air forces shall be exempt from tax while such members are on active service beyond Canada or are on active service in Canada and whose duties are of such a character as are required normally to be performed afloat or in air craft, but only to the extent of their service pay and allowances.
19.	That the resolutions numbered 1, 2, 3, 4, 5. 6, 7, 8, 9, 11, 12, 14, 15, 16, 17 and 18 hereof shall be applicable to the income of
he 1940 taxation period and fiscal periods ,-nding therein and of all subsequent periods.
20.	That the resolution numbered 10 hereof be applicable to payments made after the 24th June, 1940.

[Stage Direction]
Resolved, that it is expedient to reenact the Excess Profits Tax Act and to provide:
1.	That the option of using rates "A" be deleted, and that the excess profits be the difference between the profits of the year of taxation and the profits of the standard or base period.
2.	That the standard profits be determined with reference to the average profits of the standard or base period being the years, 1936, 1937, 1938 and 1939, except as provided in resolution 5 hereof.
3.	That the rate of tax on the excess profits be increased from fifty per centum to seventy-five per centum.
4.	That on all profits a minimum tax be paid by every taxpayer under the Excess Profits Tax Act, such minimum to be a tax of twelve per centum on the total profits of the business before deducting income tax, and to be payable in all cases unless the tax provided in resolution 3 hereof is greater than the said minimum tax, in which case only the greater shall be paid.
5.	That a board of referees (hereinafter called the board) be established with discretionary power, subject to the approval of the Minister of National Revenue (hereinafter called the minister), to ascertain a standard of profits for new businesses or businesses depressed during the standard period subject to the following:
(a)	in the case of a business depressed during the standard period the minister may direct that the board ascertain a standard of profits at an amount which they think just, being a return of not less than five nor more than ten per centum of the capital employed;
(b)	in the case of a new business other than that of the operation of a gold mine or an oil well, if it has been commenced since January 1st, 1938, the minister may direct that the board ascertain a standard of profits at an amount which they think just, provided that the said amount represents a rate of return
on the capital employed by the taxpayer equal to the average rate of return of taxpayers in similar circumstances engaged in the same or analogous classes of business;
(c) in the case of a taxpayer engaged in the operation of a gold mine or an oil well which has come into production since January 1st, 1938, the minister may direct that the board ascertain a standard of profits at such an amount which they think just on the basis of a presumed volume of production during the standard period equal to the volume of production in the taxation year and a presumed selling price for the product during the standard period equal to the average selling price of the said product during the standard period.
6.	That the minister may adjust the standard profits so as to ensure the comparison of like with like in the following cases:
(a)	where the accounting period in the taxation year is longer or shorter than the standard accounting period;
(b)	where the capital employed in the taxation year has been substantially increased or decreased over that of the standard period by the contribution or withdrawal of capital;
(c)	in the case of gold mines and oil wells where the volume of production in the taxation year has been substantially increased or decreased over that of the standard period.
7.	That there be exempted from the tax imposed under the said act:
(a)	small businesses where the profits before any salary or drawings by proprietors or shareholders do not exceed five thousand dollars per annum;
(b)	personal corporations which act solely as investment-holding agencies of individual Canadian taxpayers;
(c)	non-resident-owned investment corporations.
8.	That sole proprietorships or partnerships be allowed to claim as a deduction such reasonable amount for salaries paid to the proprietor, or partners as the minister may determine, not to exceed five thousand dollars per year for each.
9.	That in the case of a taxpayer who acquired a business as a going concern since January 1st, 1938, the minister may direct that the standard profits of the predecessor may be added to those of the taxpayer if the minister is satisfied that the trade or business of the predecessor and the taxpayer is not substantially different.
10.	That the definition of average profits during the standard period be revised to provide that only the profits of the standard period shall be taken into account when determining the average of the years during the standard period when the taxpayer was in business.
11.	That, in order to prevent evasion, power be given the minister to:
(a)	disallow the deduction of disbursements by the taxpayer which the minister in his discretion may determine to be in excess of what is reasonable and normal for the business;
(b)	assess without regard to specious transactions or reorganizations which the treasury board has found to have no reasonable business purpose other than that of avoidance or minimization of taxation.
12.	That capital be redefined having regard to the cost price of the assets presently employed by the taxpayer less depreciation or depletion thereof, and deducting borrowed money and debts, with a proviso that non-productive
The Budget-Mr. Ralston
[Stage Direction]
assets, assets not actually employed in the production of profits, and assets producing tax-exempt income, shall not he included.
13.	That there be allowed a tax credit in respect of the amount of excess profits tax or similar tax paid to the government of the United Kingdom or to the governments of other members of the British commonwealth of nations or to the governments of allies of the United Kingdom, if such governments allow a reciprocal credit for Canadian-paid excess profits tax.
14.	That the act shall apply to the profits of the year 1940, and in the case of a fiscal period ending in 1940 prior to December 31, that the act shall apply to that proportion of the profits thereof which the number of days of the said fiscal period in the year 1940 bears to the total number of days of such fiscal period.

[Stage Direction]
Resolved, that it is expedient to introduce a measure to amend The Special War Revenue Act, and the amendments thereto and to provide,
1.	That section seventy-six of the said act be repealed and the following substituted therefor:
[Stage Direction]
"76. (1) Except as hereinafter provided, every manufacturer and every importer of matches shall affix to every package of matches manufactured by him or imported into Canada, an adhesive or other stamp of the value of one cent for each one hundred matches or fraction of one hundred matches contained in such package.
(2)	When matches are put up in packages containing not more than fifty matches and not less than thirty-one matches each, the tax shall be payable at the rate of one-half of one cent for each package, and when matches are put up in packages containing not more than thirty and not less than twenty-six matches each, the tax shall be payable at the rate of three-tenths 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 one-fourth 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 one-fifth of one cent per package.
(3)	No manufacturer or importer shall sell or import matches unless they are in packages."
2. That subsection one of section seventy-seven A of the said act be amended by providing that the excise tax on packets of cigarette papers be increased from two cents to five cents for each one hundred leaves or fraction thereof contained in such packet.
3. That subsection two of section seventy-seven A of the said act be amended by providing that the excise tax on packages of cigarette paper tubes be increased from two cents to five cents for each one hundred cigarette paper tubes or fraction thereof contained in each such package.
4.	That subsection four of section eighty-six of the said act be amended by increasing the tax from eight per cent to twelve per cent upon the current market value of all furs dressed and/or dyed in Canada.

5.	That the said act be amended by adding thereto after section eighty-eight the following section:
"88A. (1) In addition to any duty or tax that may be payable under this Act, or any other statute, there shall be imposed, levied and collected a war exchange tax of ten per cent on the value for duty of all goods imported into Canada, payable by the importer or transferee who takes the goods out of bond for consumption at the time when the goods are imported or taken out of warehouse for consumption.
(2)	The tax imposed by this section shall not apply to any goods imported into Canada,-
(a)	which are entitled to entry under the British preferential tariff, or under trade agreements between Canada and other British countries;
(b)	Which are entitled to entry under Customs Tariff items 360, 460, 690, 690a, 696a, 700, 700a, 701, 702, 703a, 704, 705 705a, 706, 707, 708. 709; or to fish caught by fishermen m vessels registered in Canada or owned by any person domiciled in Canada and the products thereof carried from the fisheries in such vessels.
(3)	Where the Wartime Prices and Trade
Board reports to the government in council that any producer or producers of goods have taken advantage of the tax imposed by this section to increase the price of such goods by an amount greater than is justified by any increases properly arising from such tax in the cost of materials or parts entering into the production of such goods or to maintain prices of such goods at levels greater than are so justified, the Governor in Council may, upon the recommendation of the said Board, impose upon all or any of the products of any such producer an excise tax at a rate not to exceed ten per cent of the selling price of such products for such period of time as he may determine, remove or reduce customs duties applicable thereto for such period of time as he may determine, fix the prices thereof and/or take such other measures and impose such penalties as he may determine."
6.	That the provisions of section eighty of the said act levying taxes on articles manufactured or produced in Canada enumerated in schedules I and II to the said act be amended to provide that the taxes mentioned therein shall apply at the time of delivery.
7.	That schedule I to the said act be amended by repealing section one thereof and substituting therefor the following:-
"1. (a) Automobiles adapted or adaptable for passenger use, with seating capacity for not more than ten persons each, valued at
$700 or less	 10 per cent.
Over $700 but not more
than $900	 10 per cent on $700
plus 20 per cent on the amount in excess of $700.
Over $900 but not more
than $1,200	 10 per cent on $700
plus 20 per cent on $200 plus 40 per cent on the amount in excess of $900.
Over $1,200	 10 per cent on $700
plus 20 per cent on $200 plus 40 per cent on $300 plus 80 per cent on the amount in excess of $1,200.

The Budget-Mr. Ralston
(b) Automobiles adapted or adaptable for passenger use with seating capacity for more than ten persons	5 per centum
Provided that the tax collected under paragraph (b) above shall in no case exceed $250 per automobile;
Provided further that the tax on automobiles shall apply on the total price charged for such automobiles, which price shall include all charges for accessories, optional equipment, servicing, financing, warranty or any other charge contracted for at time of sale, whether charged for separately or not, but not to include heaters or radios;
Provided further that the tax on automobiles shall apply to any such vehicles in transit to dealers or others;
Provided that if a new and unused automobile is on the twenty-fifth day of June one thousand nine hundred and forty in the hands of a dealer and not delivered to another purchaser the tax shall be paid by such dealer when such automobile is delivered.
Provided further that the tax shall not apply to automobiles imported:-
(i)	Under customs tariff items 702, 706, 707 and 708;
(ii)	by a bona fide settler on a first arrival;
(iii)	by a beneficiary resident in Canada, under the terms of a will of a person dying in a foreign country."
8.	That schedule I to the said act be further amended by adding at the end thereof the following section:-
"5. Cameras, phonographs, radios and radio tubes	10 per centum"
9.	That schedule II to the said act be amended by repealing section one thereof and substituting therefor the following:-
"Cigars:-
(a)	Valued at not more than forty dollars
per thousand, per thousand	$1
(b)	Valued at more than forty dollars per
thousand and not more than one hundred and ten dollars per thousand, per thousand	$6
(c)	Valued at more than one hundred and
ten dollars per thousand and not more than one hundred and fifty dollars per thousand, per thousand	$14
(d)	Valued at more than one hundred and
fifty dollars per thousand and not more than two hundred dollars per thousand, per thousand	$20
(e)	Valued at more than two hundred dollars
per thousand, per thousand	$32
Provided that the value on imported cigars shall be the duty paid value as defined in section seventy-nine of this act; the value on cigars manufactured in Canada shall include the amount of excise duty payable thereon."
10.	That schedule II to the said act be further amended by repealing section three thereof and substituting therefor the following:-
"Tires and tubes:-
(a) Tires in whole or in part of rubber for automotive vehicles of all kinds, including trailers or other wheeled attachments used in connection with any of the said vehicles	5 cents per pound
(b) Inner tubes for use in any such tires	5 cents per pound
Provided the tax hereby imposed shall not apply to the goods mentioned herein when used exclusively for the original equipment of such automotive vehicles."
11.	That schedule II to the said act be further amended hy repealing section four thereof and substituting the following:-
"4. Carbonic acid gas and similar preparations to be used for aerating non-alcoholic beverages	5 cents per pound."
12.	That schedule III to the said act be amended by striking out under the heading of "Farm and Forest, in the eighth and ninth lines the following words:
"farm produce sold by the individual farmer of his own production,"
and substituting therefor the following words: "farm produce sold by the individual farmer of his own production, not to include canned fruits or vegetables when produced in excess of 10,000 cans of one pound each or their equivalent, per annum, nor flowers, flowering plants or bulbs, when the sales thereof exceed $500 per annum."
13.	That any enactment founded on this resolution shall be deemed to have come into force on the twenty-fifth day of June, one thousand nine hundred and forty, and to have applied on all goods imported or taken out of warehouse for consumption on and after that day and to have applied to goods previously imported for which no entry for consumption was made before that day.

[Stage Direction]
Resolved, that it is expedient to introduce a measure to amend the Schedule to the Excise Act, 1934, and to provide:-
1.	That the duty of excise on malt syrup as defined by paragraph (c) of section six of the Excise Act, 1934, when imported into Canada and entered for consumption be increased from twenty-one cents per pound to twenty-five cents per pound.
2.	That the duty of excise on tobacco of all descriptions manufactured in Canada, except cigarettes, be increased from twenty-five cents per pound to thirty-five cents per pound actual weight.
3.	That the duty of excise on cigarettes manufactured in Canada which was formerly $5 per thousand when weighing not more than three pounds per thousand be increased to $6 per thousand when weighing not more than two and one-half pounds per thousand.
4.	That the duty of excise on cigarettes manufactured in Canada which was formerly $11 per thousand when weighing more than three pounds per thousand shall now apply to cigarettes weighing more than two and one-half pounds per thousand.
5.	That a duty of excise of ten cents per pound actual weight apply on all Canadian raw leaf tobacco when sold for consumption.
6.	That any enactment founded on paragraphs one, two, three and four of this resolution shall be deemed to have come into force on the twenty-fifth day of June, one thousand nine hundred and forty, and to have applied to all
The Budget-Mr. Ralston
[Stage Direction]
goods mentioned therein imported or taken out of warehouse for consumption on and after that day and to have applied to goods previously imported for consumption for which no entry for consumption was made before that day.
7.	That any enactment founded on paragraph five of this resolution shall come into force on the first day of August, one thousand nine hundred and forty.

[Stage Direction]
1. Resolved, that schedule A to the customs tariff, being chapter forty-four of the revised statutes of Canada, 1927, as amended by chapter seventeen of the statutes of 1928, chapter thirty-nine of the statutes of 1929, chapter thirteen of the statutes of 1930 (first session), chapter three of the statutes of 1930 (second
session), chapter thirty of the statutes of 1931, chapter forty-one of the statutes of 1932, chapters six and thirty-seven of the statutes of 1932-33, chapters thirty-two and forty-nine of the statutes of 1934, chapter twenty-eight of the statutes	of	1935,	chapter	thirty-one	of	thestatutes	of	1936,	chapter	twenty-six	of	thestatutes	of	1937,	chapter	forty-one	of	thestatutes of 1939 (first session) and chapter two of the statutes of 1939 (second session), be further amended by striking thereout tariff items 209b, 210, 210e, 281a, 281b, sub-division (a) of item 429, 4401, 440m, 440n, 445o, 445p, 505, 505b, 791 and 825, the several enumerations of goods respectively	and the several rates of
duties of customs, if any, set opposite each of the said items, and by inserting the following items, enumerations and rates of duty in said schedule A:
IMr. Ralston.!
Tariff Item	-	British Preferential Tariff	Intermediate Tariff208jc	Materials, including all parts, entering into the cost of cyanide of potassium and cyanide of sodium, when imported by manufacturers of cyanide of potassium and cyanide of sodium for use in their own factories.	Free	Free209b	Nicotine; salts ol nicotine; non-alcoholic preparations containing nicotine in a free or combined state, for dipping, spraying or fumigating, n.o.p	Free	Free210	Peroxide of soda; silicate of soda in crystals or in solution; bichromate of soda; sulphide of sodium; nitrite of soda; arseniate, binarseniate, chlorate, bisulphite and stannate of soda; prussiate of soda and sulphite of soda	Free	15 p.c.210e	Nitrate of soda or cubic nitre	Free	Free281a	Firebrick, n.o.p., of a class or kind not made in Canada, for use exclusively in the construction or repair of a furnace, kiln, or other equipment of a manufacturing establishment	Free	Free281b	Fire brick, n.o.p	5 p.o.	15 p.c.429	Cutlery of iron or steel, plated or not: (a) Knife blades or blanks, and table forks, of iron oi steel, in the rough, not handled, ground nor otherwise manufactured; spoon blanks of iron or steel, in the flat, not further manufactured than stamped to shape; blanks, of iron or steel, for scissors and shears, in the rough, not ground nor otherwise manufactured	Free	7J p.c.4401	Aircraft and complete parts thereof, n.o.p., not including engines, under regulations prescribed by the Minister	Free	25 p.c.440m	(i) Unfinished parts of aircraft, n.o.p., not including parts of aircraft engines	Free	15 p.c.
Present Rates
British
Preferential
Tariff
Intermediate
Tariff
General
Tariff
Various
Free
(subjec
Various t to 99 p.c. drawba
Free
Various
[Stage Direction]
10 p.c.
Free
/Free
\Free
15 p.c.
Free 15 p.c.
20 p.c.
Free 20 p.c.
Free
(In part s
7* p.c.
(in part subject
121 p.c.
ubject to 99 p.c. d 20 p.c.
to 99 p.c. drawbac
15 p.c. rawback)
221 p.c. k.)
[Stage Direction]
I Free \17i p.c.
Free
(15 p.c. 110 p.c. ]15 p.c. I (20 p.c.
71 p.c.	10 p.c.
271 p.c.	30 p.c.
25 p.c.	6 6. <M
25 p.c.	27* P-e.
27* p.c.	35 p.c.
30 p.c.	30 p.c.
27* P-e.	30 p.
The Budget-Mr. Ralston

Tariff		British	Intermediate	General	Present Rates			
								
Item	-	Preferential	Tariff	Tariff	British	Tariff	Preferential	Intermediate	GeneralTariff	Tariff	Tariff440m	(ii) Direct or inertia starters with or without related operating gear and parts thereof; generators; voltage control boxes; batteries; de-icing and anti-icing equipment and parts thereof, not including parts of rubber; vacuum pumps with related operating gear	and parts thereof; landing and navigation lights; propellers; hydraulic jacks and pumps and parts	thereof; aircraft wheels; aircraft brakes with related	operating gear; aircraft tires and tubes; oil coolers; fuel pressure warning devices; exhaust gas analysers; pressure fire extinguishers; primer pumps; instruments excepting fuel contents gauges; bolts, nuts, cocks, turnbuckles, clevis and pins, swaged wires and tie rods; bars, tubes, extrusions and forgings of aluminum, aluminum alloys and magnesium alloys; steel tubing; all of the foregoing when of types and sizes not made in Canada and imported by manufac-	turers of aircraft for use exclusively in the manufacture in their own factories of the goods enumerated in tariff item 4401, under such regulations as the Minister may prescribe, provided that not less than sixty per centum of the factory cost of production of the aircraft is incurred in the British Empire.	Free	Free	271 p.c.	Free	25 p.c.	271 P.c.440n	Engines, when imported for use only in the equipment	Free	25 p.c.	27J P-c.	Free	25 p.c.	27^ p.c.440o	(i) Carburettors, magnetos, distributors, coils and	spark plugs and complete parts thereof; all of the foregoing when of a class or kind not made in Canada when imported for use in aircraft engines.	Free	Free	271 P-c.	Free	25 p.c.	271 P-c.Free	121 P-c.	15 p.c.(su	bject to drawback)	(ii) Parts, finished or not, n.o.p., for aircraft engines..	Free	71 p.c.	271 P-c.	[Free	25 p.c.	271 P-c.Various	Various	Various(	subject to drawback	>445o	Acid-free capacitor tissue and paper, plain and	gummed; metal cans, extruded, plated or unplated; automatic record changers; parts for pickups; bias cells and holders; frames, yokes, brackets, pole-	pieces, gaskets and field covers, separate or assembled for use in speakers with mounting diameter not	exceeding 6f inches; cones, spiders, spider sus-	
o
o
£
£
o
m
The Budget-Mr. Ralston
pensions, voice coils and voice coil dust covers, separate or assembled; magnetic structures and parts thereof for permanent magnet speakers; glass dial crystals and scales and metal dials or scales made by the silk-screen process; metal cabinet escutcheons without crystals, plain or finished; high frequency circuit switches and essential components thereof; high frequency iron cores with or without inserts moulded therein; motors and gears for automatic tuning; radio frequency ceramics; raw low loss mica; sheets and punchings of low loss mica; tube shields and parts thereof; vibrators; vulcanized fibre in sheets, rods, strips or tubing; high frequency coil forms and tubing having an outside diameter not exceeding one inch; for use in the manufacture or the repair of the goods enumerated in tariff items 445d, 597a, and other apparatus using radio tubes, or for use in the manufacture of parts therefor	
Free
445p
Ceramic parts; copper alloys for welding; getter and getter assemblies; glass parts; metal bulbs and shells and metal headers; mica parts; mica assemblies; wire snubbers, clips and straps; wire of molyb denum and molybdenum alloy; nickel and nickel alloy tubing, wire, ribbon, screen and strip, coated or not, carbonized or not; metal cathodes; nickel, nickel alloy and nickel plated parts, coated or not, carbonized or not; tungsten and tungsten alloy and zinc wire; leads, spuds and welds; iron parts designed for sealing to glass; hooks and supports; base pins; wire and strip of silver copper, chrome copper, chrome iron or plated iron; top cap assemblies; graphite anodes; heaters and filaments; all the foregoing when imported by manufacturers of radio tubes and parts therefor, for use exclusively in the manufacture of such articles, in their own factories	
Free
Planks, boards, deals and other lumber of wood, not further manufactured than planed, dressed, jointed, tongued or grooved, n.o.p	
10 p.c.
Materials of all kinds for use only in producing or manufacturing preparations provided for in tariff items 209b and 219a, under regulations prescribed by the Minister of National Revenue	
Free
Woven cord tire fabric, wholly or in chief part by weight of artificial silk or similar synthetic fibres, not to contain silk nor wool, coated with a rubber composition, when imported prior to July 1st, 1941, by manufacturers of rubber, to be incorporated by them in pneumatic tires, in their own factories..
Free
Free
Free
10 p.c.
Free
15 p.c.
30 p.c.
30 p.c. 25 p.c.
Free
/Free.	Free
\Free	25 p.c.
/Free	Free
\Free	25 p.c.
/17J P-c.	22J p.c.
\10 p.c.	10 p.c.
/Free	Free
VVarious	Various
1 Free	15 p.c.
30 p.c. 30 p.o.
30 p.c. 30 p.c.
25 p.c. 20 p.c.
Free
Various

25 p.c.
25 p.c.
The Budget-Mr. Ralston
The Budget-Mr. Ralston
[Stage Direction]
2.	Resolved, tliat schedule A to the Customs Tariff, as amended, be further amended by deleting from The Customs Tariff Amendment Act, 1939, being chapter two of the statutes of 1939 (second session), the following enumerations of goods and rates of additional duties of customs:
"Manufactured tobacco of all descriptions except cigars, cigarettes and snuff-5 cents per pound.
Cigarettes weighing not more than three pounds per thousand-$1 per thousand.
Tea, when the value for duty thereof under the provisions of the Customs Act:
(a)	is less than 35 cents per pound-5 cents per pound.
(b)	is 35 cents or more but less than 45 cents per pound-7i cents per pound.
(c)	is 45 cents or more per pound-10 cents per pound."
and by substituting therefor the following enumerations of goods and rates of additional duties of customs:
"Manufactured tobacco of all descriptions except cigars, cigarettes and snuff-15 cents per pound.
Cigarettes weighing not more than three pounds per thousand-$2 per thousand.
Tea, when the value for duty thereof under the provisions of the Customs Act:
(a)	is less than 22J cents per pound-5 cents per pound.
(b)	is 22J cents or more but less than 30 cents per pound-7 J cents per pound.
(c)	is 30 cents or more per pound-10 cents per pound."
3.	Resolved, that schedule B to the Customs Tariff be amended by striking thereout tariff items 1042, 1044 and 1063.
4.	Resolved, that any enactment founded upon the foregoing resolutions to amend the Customs Tariff or schedules thereto shall he deemed to have come into force on the twenty-fifth day of June, nineteen hundred and forty, and to have applied to all goods mentioned in the foregoing resolutions imported or taken out of warehouse for consumption on and after that date, and to have applied to goods previously imported for which no entry for consumption was made before that date.

[Stage Direction]
A.	Review of Government Accounts, 1939-40.
B.	Review of Economic and Financial Conditions, 1939-40.
A. Government Accounts, 1939-40 Comparative Summary Statement of Revenues and Expenditures
1.	As the final figures for the fiscal year 1939-40 are not as yet available, all statements dealing with revenues, expenditures, investments and balance sheet items are estimated. It is expected that when the books of the year are finally closed, any variations from
the figures shown herein will be of slight importance.
2.	The following tables show, by main categories and in detail, revenues, expenditures and the increase in net debt for the fiscal year 1939-40, together with comparable figures for the four preceding fiscal years:
[Stage Direction]
The Budget-Mr. Ralston

[Stage Direction]
(000 omitted)
-	1935-36	1936-37	1937-38	1938-39	Estimated 1939-40S	$	i	t	tTax Revenues-	78,751	Customs import duties	74,004	83,771	93,456	104,301Excise duties	44,410	45,957	52,037	51,314	61,032War tax revenues-	Banks	1,281	1,210	1,107	1,014	949Insurance companies	761	775	867	891	926Income tax	82,710	102,365	120,366	142,026	134,449Sales tax	77,552	112,832	138,055	122,139	137,446Manufacturers', importations, stamps,	42,764	39,572	28,582transportation taxes, etc	35,181	39,641	Tax on gold	1,413	-	-	-	-Total revenue from taxes	317,312	386,551	448,652	435,707	467,685Non-tax Revenues-	Canada Grain Act	1,213	1,192	680	1,156	1,711Canada Gazette	49	48	47	49	55Canals	890	1,004	1,866	723	762Casual	4,636	6,276	6,597	7,440	9,373Chinese revenue	6	7	2	2	2Electricity	542	646	692	726	715Fines and forfeitures	295	134	209	211	88Fisheries	42	56	60	52	54Gas inspection	91	93	88	84	81Insurance inspection	147	152	162	172	179Interest on investments	10,614	11,231	13,120	13,163	13,394Lands, Parks and Forests	458	478	541	681	677Marine	222	263	336	377	349Mariners' fund	187	205	206	211	278Military college	20	20	20	20	14Militia pensions revenue	178	187	194	209	233Ordnance lands	16	15	16	20	18Patent and copyright fees	455	464	452	442	416Penitentiaries	68	62	63	82	137Post Office	32,508	34,275	35,546	35,288	36,729Premium, discount and exchange	36	-	27	478	7,940Public Works	251	274	318	297	306Radio Licences	1,574	(>) 990	-	-	-R.C.M.P. officers' pensions	11	10	11	11	11Weights and measures	401	396	393	416	411Total non-tax revenue	54,910	58,478	61,646	62,310	73,933Total ordinary revenues	372,222	445,029	510,298	498,017	541,618Special Receipts-	Sundry receipts	320	(*) 8,464	3,010	1,256	164Other credits-	Refunds on capital account	27	616	1,543	40	21Credits to non-active accounts	27	45	819	2,858	20,292Net credit resulting from various adjustments in Railway accounts authorized by Canadian National	Railways Capital Revision Act, 1937	-	-	1,023	-	-Total Special Receipts and Credits	374	9,125	6,395	4,154	20,477Grand Total Revenue	372,596	454,154	516,693	502,171	562,095
(*) As from November 1936, radio licence fees have been deposited to credit of The Canadian Broadcasting Corporation.
(') Includes $8,000,000'rfrom Canadian Wheat Board taken into the accounts as an offset, in part, to the disbursements in 1935-36 re losses on 1930 wheat pool and stabilization operations.
[Stage Direction]
The Budget-Mr. Ralston

[Stage Direction]
(000 omitted)
-	1935-36	1936-37	1937-38	1938-39	Estimated 1939-40$	$	$	$	$Ordinary Expenditure	Agriculture	9,399	8,741	9,017	9,527	11,817Auditor General's Office	429	423	463	473	459Civil Service Commission	259	305	358	379	398External Affairs, including Office of	Prime Minister	1,290	1,341	1,450	1,057	1,228Finance-	Interest on Public Debt	134,549	137,410	132,118	127,996	129,315Cost of Loan Flotations and Annual	Amortization of Bond Discounts and	Commissions	3,577	3,839	4,555	4,914	4,992Premium, Discount and Exchange (net)	-	400	-	-	-Subsidies to Provinces	13,769	13,735	13,735	13,752	13,769Special Grants to Provinces	3,975	3,225	7,475	7,475	5,475Other Grants and Contributions	736	540	560	643	660Civil Pensions and Superannuation....	854	787	712	638	574Government contribution to Super-	annuation Fund	1,875	2,019	2,065	2,220	2,271Old Age Pensions, including pensions	to blind persons commencing in 1937-	38	16,764	21,149	28,653	29,044	29,977General Expenditure	3,654	3,498	3,573	3,689	3,959Fisheries	1,710	1,691	1,850	2,036	2,320Governor General and Lieutenant Gov-	ernors	219	224	225	226	227Insurance	163	172	187	194	195Justice	2,748	2,773	2,790	2,748	2,725Penitentiaries	2,377	2,372	2,577	2,675	2,941Labour	660	720	706	788	788Technical Education	99	76	49	27	31Government Annuities-	Payments to maintain reserve	272	541	8,941	-	-Legislation-	House of Commons	1,486	1,760	1,516	1,800	1,286Library of Parliament	76	75	79	72	76Senate	491	587	536	600	432General	55	73	57	75	68Dominion Franchise Office	498	53	76	50	-Chief Electoral Officer, including elec-	tions	1,089	72	45	114	458Mines and Resources-	Administration	-	-	(>) 1,491	(i) 184	(*) 180Immigration and Colonization	1,322	1,313	1,163	1,335	1,338Indian Affairs	4,869	4,904	4,897	5,305	5,579[Interior	2,939	2,887	f -	-	-Lands, Parks and Forests	-	-	[DOT] f 1,910	2,249	2,117Surveys and Engineering	-	-	[ 933	1,325	1, 106Mines and Geological Survey	1,040	1,135	658	1,340	1,325Movement of Coal and Subsidies under	Domestic Fuel Act	2,103	2,277	2,521	1,921	4,532National Defence-	Administration	-	-	-	(«) 409	(' ) 166Militia Service	10,141	11,346	17,221	15,772	5,995Naval Service	2,380	4,763	4,372	6,590	1,869Air Service	3,777	5,822	10,018	11,216	4,852Sundry Services	879	992	1,149	447	310National Revenue (including Income	Tax)	10,963	11,205	11,870	11,899	12,064Pensions and National Health-	Administration	-	-	-	(*) 118	(*) 126Treatment and after-care of returned	soldiers	11,060	11,579	12,109	13,453	14,778Pensions, War and Military	42,790	42,801	42,240	42,181	42,217Health Division	993	873	957	1,012	1,113
(>) Prior to 1937-38 general administration expenses were not segregated from other expenditures of the respective services of the departments which were amalgamated to form the Department of Mines and Eesources. The figures from 1938-39 represent only Departmental Administration, other administration costs being included as in other departments, under the respective services.
(Mr. Ralston.]

The Budget-Mr. Ralston

[Stage Direction]
five fiscal years-Continued
(000 omitted)
-	1935-36	1936-37	1937-38	1938-39	Estimated 1939-40$	$	$	$	*Ordinary Expenditure-Concluded	Post Office	31,438	31,906	33,762	35,456	36,727Privy Council	46	45	48	49	59Public Archives	165	160	170	159	149Public Printing and Stationery	169	169	161	191	199Public Works	12,945	14,519	12,382	15,484	13,066Royal Canadian Mounted Police	6,165	5,901	6,308	6,145	5,667Secretary of State	705	655	693	730	836Soldier Settlement	762	806	801	758	621Trade and Commerce	3,458	5,523	4,070	4,763	4,950Canada Grain Act	1,848	1,739	1,675	1,847	1,983Mail Subsidies and Steamship Subven-	tions	2,426	2,120	2,029	1,993	1,907T ransport-	Administration	-	-	(!) 417	(«) 371	(!) 364Air Service	-	-	(*) 2,935	(') 3,457	(*) 3,862Marine Service	5,857	5,614	4,290	4,271	4,215Canadian Radio Commission	1,500	878	-	-	Canadian Travel Bureau	248	250	250	249	312Railways and Canals	4,002	3,769	3,661	4,371	3,756Maritime Freight Rates Act	2,348	2,506	3,183	2,583	2,660Railway Grade Crossing Fund	128	54	180	187	255Total ordinary expenditure	372,539	387,112	414,892	413,032	397,996Capital Expenditure	Canals	458	52	Railways	287	203	71	26	23Public Works	5,799	3,237	4,359	5,398	7,006Total capital expenditure	6,544	3,492	4,430	5,424	7,029Special Expenditure	Unemployment Relief Act, 1930	26	Unemployment Relief Act, 1931	26	-	-	-	-Unemployment Relief Act, 1932	111	-	-	-	Unemployment Relief Act, 1933	494	-	-	-	Unemployment Relief Act, 1934	1,152	-	-	-	Unemployment Relief Act, 1935	48,027	-	-	-	Administration-Relief Acts	-	194	378	260	287Grants-in-aid to Provinces	-	28,930	19,493	17,037	Material Aid to Provinces, including	municipal improvements projects	-	-	-	-	19,534Dominion share of joint Dominion-	Provincial projects	-	12,692	8,841	6,259	7,147Dominion Projects	-	23,554	13,913	12,981	24,919Transportation facilities into mining areas	-	1,221	1,324	1,213	1,121Railway Maintenance Relief Work	-	2,662	-	-	-49,836	69,253	43,949	37,750	53,008Western Drought Area Relief- Direct Relief	5,144	11,9251	8,869	1,605Feed and fodder and freight thereon.. Freight charges on movement of cattle	-	3,517 90	11,352/	Expenses of marketing cattle	-	-	337	-	Purchase and distribution of food	stuffs	-	-	972	277	Prairie Farm Assistance Act, 1939-	Net Expenditure	-	-	-	-	7,500-	8,751	24,586	9,146	9,105
(') Prior to 1937-38 in the case of the Department of Transport and prior to 1938-39 in the case of National Defence and Pensions and National Health general administration expenses were not segregated from other expenditure of the respective services of the departments.
(*) Prior to 1937-38 expenditures on civil aviation, now the Air Service Branch of the Department of Transport, were included under expenditures for the Air Service Branch of the Department of National Defence 95826-06J
The Budget-Mr. Ralston

[Stage Direction]
five fiscal years-Continued
(000 omitted)
-	1935-36	1936-37	1937-38	1938-39	Estimated 1939-40*	$	$	S	sSpecial Expenditure-Concluded Public Works Construction Acts	29,581	1930 Wheat Crop Equalization Payments Act	6,600	_	_Loss on 1930 Wheat Pool and stabilization operations- Payment to Canadian Wheat Board of net liability assumed as at Dec. 2, 1935	15,856	Loss on 1930 oats pool under guarantee of bank advances to Canadian Cooperative Wheat Producers, Limited	174	Provision for reserve against estimated losses on 1938 wheat marketing guarantees	25,000	27,00052,211	-	-	25,000	27,000War Expenditure	-	-	-	-	118,340Total special expenditure	102,047	78,004	68,535	71,896	207,453Government Owned Enterprises Losses charged to Consolidated Fund- Canadian National Railway System, ex-eastern lines	41,796	37,449	37,882	48,194	34,851Eastern Lines	5,625	5,854	4,464	6,120	5,245Prince Edward Island Car Ferry and Terminals	_	_	(*) 388	427Canadian National Steamships	270	-	-	-	-National Harbours Board	1,126	250	289	138	94Trans-Canada Air Lines	-	-	111	818	412Central Mortgage Bank	-	-	-	-	16Total charged to consolidated fund	48,817	43,553	42,746	55,658	41,045Loans and advances non-active- Canadian National Steamships	(Cr.) 333	(Cr.) 1,754	104	6	8National Harbours Board	2,456	2,419	1,983	3,279	1,027Total non-active advances	2,123	665	2,087	3,285	1,035Total government-owned enterprises	50,940	44,218	44,833	58,943	42,080Other Charges Write-down of assets chargeable to Consolidated Fund- Drought Area Relief Loans, 1934-35- Province of Saskatchewan	1,374Reduction in soldier and general land settlement loans	488	628	750	1,023	1,643Yearly established losses in seed grain and relief accounts-Department of Mines and Resources	27	44	14	18	10Canadian National Railways Securities Trust Stock-Reduction due to line abandonments during calendar years 1938 and 1939	(*) -	2,713	2,600Cancellation of Canadian Farm Loan Board-Capital Stock	20	10	14	11Province of Manitoba Treasury Bills..	-	-	(*) 805	-	-Province of Saskatchewan Treasury Bills	-	-	-	(*) 17,682
The Budget-Mr. Ralston

[Stage Direction]
five fiscal years-Concluded
(000 omitted)
-	1935-36	1936-37	1937-38	1938-39	Estimated 193940
Non-active Accounts-					
General Land Settlement Loans	-	-	139	-	-Active assets transferred to non-active.	-	(*) 18,487	-	-	-Fulfilment of guarantees- The Saskatchewan Seed Grain Loans	2,638Guarantee Act, 1936	-	-	-	Total other charges	515	19,179	1,718	3,768	25,958Grand total expenditures	532,585	532,005	534,408	553,063	680,516(>) Included with Eastern lines in previous years.	.
(>) An amount of $711,000 representing line abandonments during the calendar year 1937 was included in the adjustments resulting from the Canadian National Railways Capital Revision Act, 1937.
(*) Dominion contribution to Voluntary Debt Adjustment Program effected in Provinces of Manitoba and Saskatchewan respecting Drought Area Relief that was financed by the Dominion up to January 1, 1935-Manitoba $805,000, Saskatchewan $17,682,000.
(*) These amounts are offset by a contra account on the revenue side.
summary of revenues and expenditures (000 omitted)
1935-36	1936-37	1937-38	1938-39	Estimated 1939+0$	$	t	$	$372,539 372,222	387,112 445,029	414,892 510,298	413,032 498,017	397,996 541,618-317	+57,917	+95,406	+84,985	+143,622102,047 320	78,004 8,464	68,535 3,010	71,896 1,256	207,453 164101,727 6,544 50,940 515	69,540 3,492 44,218 19,179	65,525 4,430 44.833 1,718	70,640 5,424 58,943 3,768	207,289 7,029 42,080 25,958159,726 54	136,429 661	116,506 3.3S5	138,775 2,898	282,356 20,313159,672 317	135,768 57,917	113.121 95,406	135,877 84,985	262,043 143,622159,989	77,851	17,715	50,892	118,421Ordinary expenditures. Ordinary revenues	Deficit (-) or surplus (+) on ordinary account	
Special expenditures....
Less special receipts.
Balance	
Add-Capital expenditures	
" Government owned Enterprises. " Other charges	
Less other credits	
Add deficit or deduct surplus as above.
Over-all deficit or increase of direct ne debt	
The Budget-Mr. Ralston

[Stage Direction]
3.	The total revenues of the dominion from taxation and other sources, not including $20,292,000 of credits to non-active account which necessarily appears also on the expenditure statement, aggregated $541,803,000. This represents an increase of $26,952,000 or 5-2 per cent over the previous all-time record revenue received in the fiscal year 1937-38. Compared with last fiscal year, 1938-39, the increase was $42,490,000, or 8-5 per cent.
4.	Total revenue from taxation amounted to $467,685,000, an increase of $31,978,000 over that collected in the previous year. With the exception of (1) income tax, and (2) manufacturers', importations, stamps, transportation taxes, etc., the main sources of taxation recorded substantial increases over last fiscal year. These increases arose out of taxation changes effected by the emergency budget of September 12, 1939 and improvement of business conditions generally.
5.	The sales tax replaced income tax as the largest single revenue producer. Receipts from this tax totalled $137,446,000, an increase of $15,307,000 over 1938-39. This increase was due in part to improvement in general business activity and in part to the removal from the schedule of exemptions of electricity and gas used for domestic purposes, salted or smoked meats and canned fish, as provided for in the budget of September 12, 1939.
6.	Income tax receipts totalled $134,449,000, a decline of $7,577,000 from that collected in the previous year. This decline was principally in the collections of the tax on corporation incomes based on 1938 earnings. Of the receipts, $77,920,000 was from the tax on corporation incomes, $45,407,000 from the tax on individual incomes, and $11,122,000 from the 5 per cent tax collected at the source on interest and dividends.
7.	Other excise taxes including the stamp tax on cheques, etc., and the taxes on sugar, automobiles and rubber tires, matches, toilet preparations, pullman tickets, telegraph and telephone messages and other miscellaneous commodities realized $28,582,000, a decrease of $10,990,000 from the previous year. The removal of the 3 per cent tax on importations under the intermediate tariff resulted in a loss in revenue from this source of $13,612,000. The difference, namely $2,622,000, represents the net increase in other items of excise taxes.
8.	Receipts from excise duties, mainly on liquor and tobacco totalled $61,032,000, an increase of $9,718,000. This increase was due largely to the increased duties on liquor and
tobacco following the budget of September 12, 1939.
9.	The greatest increase in revenues from any one source occurred in customs import duties, where a total of $104,301,000 was realized, compared with $78,751,000 for the previous fiscal year, an increase of $25,550,000 or 32-4 per cent. Of this increase it is estimated that approximately $6,600,000 was obtained from the tariff increases provided for in the September, 1939, budget. The balance of the increase reflects improvement in conditions generally due in part at least to expanding activity brought about by the war.
10.	Non-tax revenues or revenues from services rendered by the various departments and interest on investments, totalled $73,933,000 compared with $62,310,000 in the previous year. The largest non-tax item is the receipts of the Post Office which totalled $36,729,000 during 1939-40, an increase of $1,441,000 over the preceding fiscal year. The cost of operations of the Post Office last year was practically the same as its receipts, there being a nominal surplus of $2,000. Last fiscal year there was a nominal deficit of $168,000. The Post Office accounts do not include the rental value and other costs of premises occupied and equipment used, nor do they include any credit to the Post Office for services rendered to other departments through the free use of the mails.
The second largest non-tax revenue item is Interest on Investments which totalled $13,394,000, an increase of $231,000 over that received in the previous year.
Casual Revenue including mint handling charges and net profits on coinage, Dominion's share of surplus profits of the Bank of Canada, receipts from various provinces for services rendered by the Royal Canadian Mounted Police and other miscellaneous items totalled $9,373,000.
The large amount shown as Premium, Discount and Exchange revenue is due mainly to the redemption of the 31 per cent 1930-50 loan of £28,162,776, which was called for payment and paid at the current rate of sterling.
11.	Special Receipts and other credits amounted to $20,477,000. The main item in this category is the credit of $20,292,000 made up of $17,682,000 of Province of Saskatchewan treasury bills written off from non-active account; $2,600,000 of Canadian National Railways Securities Trust Stock written off because of line abandonments during the calendar year 1939; and $10,000 representing the yearly established losses in the seed grain and relief accounts of the Department of Mines and Resources. All of these amounts necessarily appear on the expenditure statement under the heading of "Other Charges".
[Stage Direction]
The Budget-Mr. Ralston

[Stage Direction]
12.	The comments which follow will deal
with expenditures classified by the usual main categories:	Ordinary Expenditures, Capital
Expenditures, Special Expenditures (including relief and war), Operating Deficits of and Nonactive Advances to Government Owned Enterprises, and Other Charges. All disbursements under these categories are included as expenditure in arriving at the over-all deficit or increase in net debt.

[Stage Direction]
13.	Ordinary expenditures, which include interest on the public debt and the general administrative expenses of the Government totalled $397,996,000, a decrease of $15,036,000 from the previous fiscal year.
The largest decrease in ordinary expenditures is in the Department of National Defence where by reason of the war a change in policy was instituted as from September 1, 1939 which involved the charging of certain expenditures of this department to War Expenditures. These are included in the totals shown under section 15. Certain Defence Expenditures, totalling $3,770,000, originally set up as Capital have been charged to Ordinary Account pursuant to Item 205 of the Main Estimates, 1940-41. Ordinary expenditures of the Public Works Department
decreased approximately $2,400,000 and special grants to provinces were reduced by $2,000,000.
There were no very large increases in the ordinary expenditures of any particular department. Expenditures of the Department of Agriculture increased by $2,290,000. Interest on public debt was up by $1,319,000. The dominion's share of Old Age Pensions, including pensions to blind persons was $933,000 higher than last fiscal year. Payments in connection with the movement of ceal under the Department of Mines and Resources increased by $2,611,000. The only other increase of any considerable amount was for the treatment and after-care of returned soldiers which increased by $1,325,000.

[Stage Direction]
14.	Total expenditures charged to capital amounted to $7,029,000 compared with $5,424,000 in the previous year. The main items in this category are expenditures arising out of dredging the St. Lawrence Ship Channel and the construction and improvements of airways and airports.

[Stage Direction]
War Expenditures-
15.	Expenditures arising out of the war are treated as special expenditures. The amount actually expended and charged to the fiscal year 1939-40 was $118,340,000 divided by departments and services as follows:
Agriculture
[Stage Direction]
Purchase of Apples	
Purchase of Fibre Flax Seed	
Programme to encourage production of essential agricultural
war supplies	
Sundry	
[Stage Direction]
Auditor General's Office-
Audit of War Expenditure
1,302.000
1,000
39.000
35.000
[Stage Direction]
Civil Service Commission- Additional War Expenses
External Affairs-
Establishment of new offices abroad	 47,000
Sundry	 29,000
Finance-
Comptroller of the Treasury-
Dependents' Allowance Office and Outside Establishments	 358,000
War Supply Board Administration	 215,000
Justice-
Prize Court	 1.000
Defence of Canada regulations	 13,000
Labour-
Wartime Prices and Trade Board
Mines and Resources-
Repatriation of distressed Canadians abroad
1,377,000
8,000
6,000
76,000
573,000
14.000
55.000
18.000
The Budget-Mr. Ralston
[Stage Direction]
War Expenditures-Concluded National Defence-
Administration	
Military Services	
Censoring	
Internment	
Naval Services	
Air Services	
British Commonwealth Air Training Plan	
National Harbours Board-
St. John-Dredging-Courtenay Bay	
National Research Council-
Scientific and Technical Work	
National Revenue-
Censorship of Publications	
Pensions and National Health-
Hospitalization Expenses-
C.A.S.F	
R.C.M.P	
Air Raid Precaution	
Sundry	
Post Office-
Censorship Co-ordination Committee
(Postal Censorship)	
Privy Council-
Censorhip Co-ordination Committee	
Sub-Committee of the Cabinet on Public Information
Public Works-
New Office building in Ottawa	
Furniture, etc., for new employees	
Alterations to buildings	
Rental of new premises	
Construction, repairs and improvements to drydocks and
dockyards	
Halifax barracks and torpedo building	
Sundries	
Royal Canadian Mounted Police-
Increase in strength	
Secretary of State-
Censorship Co-ordination Committee (Press Censorship
Division)	
Internment Operations	
Public Information Office	
Sundries	
Trade and Commerce-
Expenses re Canadian Shipping Board	
Transport-
Airport and airway facilities and aerodrome sites	
Meteorological services-wartime	
Radio services

wartime	
Canals services-canals protection and special pilotage...
Marine services-increased services of Marine Service Fleet, and replacing of buoys	
Sundries	
504.000
67.323.000 99,000
274.000
11.351.000
28.554.000 4.257,000
778,000
49.000
56.000
17.000
5,000
25,000
137.000
263.000
203.000
87.000
68.000 60.000 11.000
30.000 215,000
22.000
8,000
138,000
25.000
71.000
18.000
75.000
23.000
112,362,000
70,000
121,000
2,000
900,000
70.000
30.000
829.000
1,400,000
75,000
4,000
350,000
Total
[Stage Direction]
The Budget-Mr. Ralston
Relief Expenditures-
16.	Special expenditures for the alleviation of unemployment conditions and of agricultural distress amounted in 1939-40 to $62,113,000 compared with $46,896,000 in the previous year. Payments to provinces under the Material Aid and Municipal Improvements Projects agreements amounted to $19,534,000 compared with Grants-in-aid to provinces the previous year of $17,037,000. The Dominion's share of joint Dominion-Provincial projects, including transportation facilities into mining areas and the development of tourist highways, increased from $7,472,000 to $8,268,000. The total cost of public works and other projects including administration for which
the dominion assumed sole responsibility amounted to $25,206,000 as compared with $13,241,000 during the preceding year.
Special drought area relief in the Province of Saskatchewan was confined to the earlier months of the fiscal year, and consequently expenditures under this heading declined from $9,146,000 in 1938-39 to $1,605,000 in 1939-40. However, as an offset to this reduction, there was an expenditure during 1939-40 of $7,500,000 under the Prairie Farm Assistance Act, 1939, representing the net cost to the Dominion in connection with the acreage bonuses paid to farmers under the Act.
The following table compares relief expenditures during each of the last two fiscal years:
Material Aid to Provinces	
Dominion's share, Municipal Improvements projects.
[Stage Direction]
Dominion's share of joint Dominion-Provincial projects Dominion Projects-
Department of Agriculture	
"	Fisheries	
"	Mines & Resources	
"	National Defence	
"	Public Works	
"	Transport	
Sundry Departments	
Western Drought Area Relief-
Direct Relief and Agricultural Relief	
Foodstuffs	
Prairie Farm Assistance Act Net Payments	
1938-39	1939-40
$ 17,037,000	$ 18,291,000
	1,243,000
7,472,000	8,268,000
3,338,000	3,620.000
533,000	232,000
1.672.000	2,752,000
369,000	137.000
5,780.000	13.338,000
1,076,000	4,296,000
473,000	831,000
8.869.000	1,605,000
277,000	
	7,500,000
$46,896,000	$62,113,000
17.	The following table shows the Domin- the passing of the first Relief Act in 1930: ion's relief expenditures of a direct nature since
(000 omitted)
-	Direct ^ Relief including G rant 8-in-Aid	Joint Dominion-Provincial W'orks and Projects	Dominion Works and Projects	Western Drought Area Relief	Write-off of Provincial Loans	Miscel- laneous Relief Expendi- tures	TotalPeriod Sept. 22/30 to Mar. 31, 1935	
Year ended Mar. 31/36	
Year ended Mar. 31/37	
Year ended Mar. 31/38	
Year ended Mar. 31/39	
Year ended Mar. 31/40 (estimated)	$ 77,767 26,570 28,931 19,530 17,070 19,534	$ 49,643 10,408 12,472 10,165 7,472 8,268	$ 29,977 38,132 27,585 13,847 12.919 24.919	$ (i) 15,088 (*) 4,000 8.751 24,586 9,146 (4) 9,105	$ (*) 18,487 (') 1.374	$ 3,532 306 265 407 288 287	$ 176,007 79,416 96,491 68,535 46,895 63,487Total	189,402	98,428	147,379	70,676	19,861	5,085	530,831
(i) Includes $5,000,000 Province of Saskatchewan Treasury Bills written off and charged to expenditure.
(*) Represents Province of Saskatchewan Treasury Bills written off and charged to expenditure.
(«) Written down to non-active assets as of March 31, 1937, and written off during 1939-40.
(«) Includes net cost to the Dominion under the Prairie Farm Assistance Act 1939, $7,500,000.
(*) Write off of Saskatchewan Treasury Bills re 1934-35 Drought Area Relief.
In the above table no account is taken of	loans to cover labour cost of special railway
loans to Western Provinces under Relief Acts,	works programmes and losses borne by the
[Stage Direction]
The Budget-Mr. Ralston
[Stage Direction]
Dominion as a result of wheat marketing operations.
18.	The last item in this classification covers losses arising from the dominion's guarantee of a price of 80 cents per bushel, basis No. 1 northern, Fort William, for the Western Wheat Crop of 1938. At the close of the fiscal year under review there remained unsold a small quantity of wheat of the 1938 crop and accordingly the losses of the Canadian Wheat Board in respect of the marketing of that crop were not finally determined. It was clear, however, that these losses would amount to at least 152,000,000. An advance of this amount without interest was made on account to the board to enable it to pay off guaranteed bank advances. During 1938-39 a reserve of $25,000,000 had been set up as a reserve in the accounts in respect of possible losses in marketing this wheat and the difference between the total advance of $52,000,000 and this reserve, namely, $27,000,000 has been charged to the dominion's accounts in 1939-40.

[Stage Direction]
19.	The next major classification of expenditures comprises the losses of, and non-active advances to, Government owned enterprises which are operated as separate corporations.
Canadian National Railways
20.	The operating revenues of the Canadian National Railways for the calendar year 1939 amounted to $203,820,000, an increase of $21,-
578,000	or 1T8 per cent from the preceding year. All classifications of revenue tonnage, except forest products, showed substantial increases over 1938.
Operating expenses of the railways totalled
S1S2,966,000	an increase of $6,790,000 or 3-8 per cent over 1938. Most of this increase was in maintenance and [DOT] transportation expenses necessitated by the increase in traffic.
The net revenue available for interest on the railway's debt was $10,635,000 compared with a deficit before interest charges of $3,549,000 in 1938. After payment of interest charges of $49,814,000 due to the public and interest charges of $916,000 due to the government in respect of temporary loans for capital purposes, there was a net cash deficit of $40,096,000 compared with $54,314,000 in the previous year, a decrease of $14,218,000.
The operating deficit of the Prince Edward Island Car Ferry and Terminals during 1939 was $427,000 as compared with $388,000 in 1938.
National Harbours Board
21.	The operations of the harbours and facilities under the administration of the Na-

tional Harbours Board in 1939 recorded a small gain over 1938. Operating income for the calendar year after payment of interest to the public but before depreciation and interest on Government advances, totalled $3,723,000 compared with $3,640,000 in the previous year.
Financial assistance provided by the government to the National Harbours Board and charged to dominion expenditure in the fiscal year ended March 31, 1940, amounted to $1,121,000. This amount was made up as follows: $94,000 for the operating deficits of the harbours at Quebec and Churchill; $377,000 for non-active advances for the deficit of the Jacques Cartier Bridge at Montreal; $7,000 for retirement of debentures of the Saint John Harbour Commission and $643,000 for capital expenditures at Halifax, Saint John, Quebec, Chicoutimi and Three Rivers.
The elevators at Port Colbome and Prescott operated at a profit during 1939 and the Government received $325,000 from these sources which was credited to Casual Revenue.
Canadian National Steamships
22.	Total earnings, especially passenger revenue, of the Canadian National (West Indies) Steamships Limited were seriously affected after the outbreak of war. The 1939 operations of the company resulted in a surplus of $154,000 after payment of interest on bonds held by the public but before depreciation and interest on advances from the government. The comparable figure for 1938 was $276,000. The 1939 operating surplus was paid to the Government in partial payment of interest. An advance of $8,000 was made to the company for capital improvements of vessels under its control.
Trans-Canada Air Lines
23.	The operations of the Trans-Canada Air Lines expanded greatly during the calendar year 1939. Operating revenue increased from $591,000 to $2,350,000. The annual deficit after payment of interest on capital and depreciation decreased from $818,000 in 1938 to $412,000 in 1939.
Central Mortgage Bank
24.	The operations of the Central Mortgage Bank for the period July 14 to December 31, 1939, resulted in an operating deficit of $16,000 which was paid by the. dominion government. Further information as to this bank will be found under Loans and Investments.

The Budget-Mr. Ralston
Summary
25.	The total amount charged to Government expenditures resulting from operating deficits and non-active advances to all government owned enterprises totalled $42,080,000 as compared with $58,943,000 in the fiscal year ended March 31, 1939. The decrease of $16,-
863,000	was mainly due to the reduction of the deficit of the Canadian National Railways. Loans and Advances to Government Owned Enterprises which are treated in the Public Accounts as Active Assets are referred to in a later section.

[Stage Direction]
26.	Other Charges, the final main category of expenditures, amounted to $25,958,000. The principal item included in this total was the write-off of Saskatchewan treasury bills from non-active assets to Consolidated Fund amounting to $17,682,000. Other items similarly dealt with were reduction of Canadian National Railways Securities Trust Stock of $2,600,000 representing line abandonments during the calendar year 1939 and the yearly established losses in seed grain and relief accounts of the Department of Mines and Resources amounting to $10,000. The total of these three items, namely, $20,292,000, is offset by a similar amount of Other Credits already referred to under Revenues.
The annual write-off of Soldier and General Land Settlement Loans amounted to $1,643,-
000. Capital Stock of the Canadian Farm Loan Board in the amount of $11,000 was cancelled. An amount of $1,374,000 of Saskatchewan Treasury Bills was written-off as a final adjustment with respect to drought area relief assumed by the Dominion for the period September 1, 1934, to August 31, 1935.
Pursuant to the Saskatchewan Seed Grain Loans Guarantee Act, 1936, the dominion was required to fulfil its guarantee with respect to bank loans to municipalities to the extent of $2,638,000.

[Stage Direction]
27.	The grand total of the preceding expenditures, i.e., Ordinary, Capital, Special including War. Government Owned Enterprises, and Other Charges, is $680,516,000 for the fiscal year 1939-40.
28.	The following table shows the percentage distribution of revenues and expenditures for a number of important items of revenue and expenditure. Receipts from various taxes and other revenue sources are shown as percentages both of total revenues and of total expenditures. Similarly, several of the main items of expenditure or groups of such items are shown as percentages both of total expenditures and of total revenues. This table should only be used for the purpose of drawing broad conclusions as to the relative burdens imposed on the treasury by the several important services or obligations of government.
PERCENTAGE DISTRIBUTION OF REVENUES AND EXPENDITURES, 1939-40 (000 omitted)
Revenues	Amount (estimated)	Percentage of total Revenues	Percentage to total ExpenditureOrdinary Revenue-	$	%	%Income Tax	1.14,449	23-92	19-76Customs Import Duties	104,301	18-56	15-33Excise Duties	61,032	10-86	8-97Sales Tax	137,446	24-45	20-20Manufacturers', importation, stamp taxes, etc	28,582	5-09	4-20Other tax revenues	1,875	0-33	0-27Total Revenue from Taxes	467.685	83-21	68-73Non-tax Revenues	73,933	13-15	10-86Total Ordinary Revenue	541,618	90-36	79-59Special Receipts and Credits	
Other Receipts and Credits- Refunds of capital expenditures and credits on non-active	164	0-03	0-02accounts	20,313	3-61	2-99Grand Total Revenues	562,095	100-00	82-60
1052
The Budget-Mr. Ralston
[Stage Direction]
PERCENTAGE DISTRIBUTION OF REVENUES AND EXPENDITURES, 1939-40-Concluded
(000 omitted)
Expenditures	Amount (estimated)	Percentage of total Expenditure	Percentage to total RevenueOrdinary Expenditure-	$	%	%Interest on public debt	129,315	19 00	23-01Cost of loan flotations and amortization charges	4,992	0-73	0-89Public Debt Charges	134,307	19-73	23-90Subsidies and special grants to Provinces	19,244	2-83	3-42Old Age Pensions	29,977	4-40	5-33Civil pensions and superannuation	574	0-08	0-10Pensions and after-care of soldiers-	Pensions, war and military	42,217	6-20	7-51Treatment and after-care of returned soldiers	14,778	2-17	2-63Total	56,995	8-37	10-14Agriculture	11,817	1-74	2-10Fisheries	2,320	0-34	0-41Legislation	2,320	0-34	0-41Mines and Resources	16,477	2-42	2-93National Defence	13,192	1-94	2-35Post Office	36,727	5-40	6-54Public Works	13,066	1-92	2-33Transport	15,424	2-27	2-75All other	45,556	6-70	8-10Total Ordinary Expenditure	397,996	58-48	70-81Capital Expenditure-	Railways	23	-	Public Works	7,006	1-03	1-25Total Capital Expenditure	7,029	1-03	1-25Special Expenditure-	Reserve for losses on wheat	27,000	3-97	4-80Material aid to Provinces, including improvements projects..	19,534	2-87	3-48Dominion projects	24,919	3-66	4-43Western Drought Area Relief	9,105	1-34	1-62Miscellaneous relief	8,555	1-26	1-52War expenditure	118,340	17-39	21-08Total Special Expenditure	207,453	30-49	36-91Government Owned Enterprises- Losses charged to Consolidated Fund- Canadian National Railways	40,523	5-95	7-21National Harbours Board, Trans-Canada Air Lines and Central Mortgage Bank	522	0-08	0-09Loans and Advances Non-Active- Canadian National Steamships and National Harbours Board	1,035	0-15	0-18Total Government Owned Enterprises	42,080	6-18	7-48Other Charges-	Write-down of assets	23,320	3-43	4-15Fulfilment of guarantees-Saskatchewan Seed Grain Loans Guarantee Act, 1936	2,638	0-39	0-47Total Other Charges	25,958	3-82	4-62Grand Total Expenditures	680,516	100-00	121-07
[Mr. Ralston.)

The Budget-Mr. Ralston

[Stage Direction]
29.	Total revenues for 1939-40 amounted to $562,095,000, and total expenditures to $680,-
516,000,	resulting in an over-all deficit of $118,-
421,000.	In the preceding fiscal year, the comparable deficit was $50,892,000.
LOANS AND INVESTMENTS Active Assets
30.	In addition to the expenditures for the year, as already outlined, the dominion has made disbursements for the acquisition of investments which are considered as active assets in the Public Accounts. These active assets are deducted from the total direct debt in arriving at the figure of net debt. During the fiscal year 1939-40, the net increase in active loans and investments was $46,017,000 as compared with $27,557,000 in 1938-39.

[Stage Direction]
31.	Under authority of the annual Relief Acts, 1931 to 1935, inclusive, the dominion had power to grant financial assistance to a provincial government by way of loan, advance or guarantee without limitation as to purpose or amount. Up to the close of the fiscal year 1935-36, loans had been granted to the four Western Provinces for purposes other than relief including the retirement of maturing
provincial obligations, and, to a limited extent, ordinary provincial government expenditures. Since April 1, 1936, the dominion's lending power has been limited to the making of loans only where necessary to enable a province to pay its share of expenditures pursuant to agreements with the dominion entered into under authority of the relative Relief Act.
32.	The total amount of loans advanced during the fiscal year 1939-40 was $12,191,966, divided as follows:-
Manitoba	$ 2,012,000
Saskatchewan	 8.633,414
British Columbia	 1,546,552
In addition the dominion accepted Saskatchewan Treasury Bills to the net amount of $1,614,335 in respect of certain interest accruals on previous relief loans which the province was unable to pay in cash.
33.	During the year repayments of loans were made to the amount of $1,240,273 as follows:
Manitoba	S 129,507
Saskatchewan	 1,057,068
Alberta	 53,698
34.	The following tables show the net loans made to each province during each fiscal year and a classification of such loans on the basis of the general purposes for which the loans were given:-
NET LOANS	TO PROVINCES	UNDER RELIEF	ACTS BY FISCAL YEARS	-	Manitoba	Saskat- chewan	Alberta	British Columbia	Total$	$	$	$	$1931-32	2,788,812	10,934,341	4,097,740	4,813,124	22,634,0171932-33	5,171,904	7,578,556	1,902,041	912,636	15,565,1371933-34 	2,273,283 2,874,631	5,469,240	4,050,743	1,321,761	13,115,0271934-35	10,141,014	1,926,476	7,966,714	22,908,8351935-36	2,396,226	14,245,478	13,104,000	12,558,445	42,304,1491936-37	4,626,000	6,058,879	805,198	3,972,400	15,462,4771937-38	2,959,188	11,604,787	193,000	1,541,636	16,298,6111938-39	1,405,499	13,708,847	-	-129,506	14,984,8401939-40	1,882,493	9,190,681	-53,698	1,546,552	12,566,02826,378,036	88,931,823	26,025,500	34.503,762	175,839,121Less Write-off as provided by votes 392 and 393 of further supplementary estimates,	17,682,158	18,487,0551936-37	804,897	-	-	Less Write-off Sask. Treas. Bills re 1934-35 Drought Area relief assumed by Dominion. (Principal $1,250,000; Accrued int. pre-	1,373,980vious yrs. $123,979.81)	-	1,373,980	-	-	25,573,139	69,875,685	26,025,500	34,503,762	155,978,086
The Budget-Mr. Ralston

[Stage Direction]
-	Loans Specifically to meet Maturing Obligations and Interest	Loans Specifically for Agricultural Relief, Including Purchase of Seed Grain	Loans for Provincial Purposes Generally including Direct Relief and Public Works	Total$	$	$	$1,139,455 3,934,341 8,577,000 9,818,845	234,819 15,509,871 3,149,050	25,003,762 69,487,611 14,299,450 24,684,917	26,378,036 88,931,823 26,025,500 34,503,762Saskatchewan	Alberta	British Columbia	
23,469,641	18,893,740	133,475,740	175,839,121
Less write-offs as shown in the preceding table; Manitoba $804,897; Saskatchewan $19,056,138	19,861,035
155,978,086
Canadian national railwats	Dominion made advances to the Railway for
35.	In addition to paying the net income capital purposes amounting to $22,979,000, deficit of the Canadian National Railways, the classified as follows:
Under Canadian National Railways Financing and Guarantee Act,
1939 (capital expenditures and retirement of miscellaneous
obhgations)	 $12,443,000
Under Canadian National Railways Refunding Act, 1938	 9,761,000
Construction of Senneterre-Rouyn Branch Line	 325,000
Purchase of Trans-Canada Air Lines Capital Stock	 450,000
[Stage Direction]
A loan of $1,500,000 made in the fiscal year 1938-39 in anticipation of the passing of the 1939 budget of the railway company was repaid in the fiscal year ended March 31, 1940.
The dominion purchased under authority of the War Measures Act and the War Appropriation Act approximately $15,000,000 of railway equipment for the Canadian National Railways. As of the close of the fiscal year, equipment to the amount of $6,189,000 had been paid for and delivered. This equipment is being leased to the railway company under a hire-purchase agreement extending over a period of fifteen years.
The railway company paid the second instalment of $517,000 under the terms of a hire-purchase agreement relating to certain equipment purchased by the government in 1935-36 and 1936-37 at a cost of $6,723,000 and leased to the railway.

[Stage Direction]
36.	During the fiscal year the government purchased a further $188,000 of the capital stock of the Canadian Farm Loan Board and an additional $2,100,000 of the Board's 3£ per cent bonds. Capital stock in the amount of $11,000 was cancelled and written off. As at March 31, 1940, the total investment in the Canadian Farm Loan Board was $36,695,000.
37.	In the fiscal year under review, 4,936 loans were approved under the National Housing Act in the amount of $21,924,000,

bringing the total to March 31, 1940, to $52,-
553,000.	During the year, the dominion's share of loans actually paid out, less repayments by borrowers, was $4,393,000. The net amount of loans outstanding at the close of the fiscal year made under the authority of the National Housing Act and the Dominion Housing Act was $9,805,000. Loans under the National Housing Act are made jointly by the Government and approved lending institutions and are secured by first mortgage or hypothec, running jointly to the government and an approved lending institution. Loans are normally made not in excess of 80 per cent of the cost or appraised value of the completed property, whichever is the, lesser. However, in the case of owner-occupied houses where the lending value does not exceed $2,500, a loan may be made up to 90 per cent of the said lending value. Since January 1, 1940, new applications for loans are received only in respect of the construction of houses containing one self-contained dwelling place and where the loan does not exceed $4,000.
38.	To March 31, 1940, the government has approved loans to the amount of $5,272,000 under the Municipal Improvements Assistance Act, 1938 to municipalities to enable them to finance the construction of municipal self-liquidating projects. During the fiscal year under review, the amount actually paid out on such loans, less repayments, was $3,111,000.

The Budget-Mr. Ralston
These loans bear interest at the rate of 2 per cent per annum and are amortized over a period not longer than the estimated useful life of the project. The province in which the municipality is located is required to guarantee the payments for interest on and amortization of each loan.
39.	There was advanced during the year $947,000 to the National Harbours Board for capital construction purposes at the ports of Montreal and Vancouver. As a considerable part of the interest accrued on the obligations issued by these two ports has been paid to the government, these loans are carried as active assets on the books of the dominion.
40.	Loans to the Canadian Pacific Railway Company made in previous years for relief purposes were further reduced by $211,000. In addition, the railway company paid the second instalment of $441,000 under the terms of a hire-purchase agreement relating to certain equipment purchased by the government in the fiscal years 1935-36 to 1937-38 at a cost of $5,730,000 and leased to the railway. Under the authority of the War Measures Act and the War Appropriation Act, the dominion purchased approximately $10,000,000 of railway equipment for the Canadian Pacific Railway company. As at March 31, 1940, equipment to the amount of $2,904,000 had been paid for and delivered. This equipment is being leased to the railway company under a hire-purchase agreement extending over a period of fifteen years.
41.	The government purchased capital stock of the Central Mortgage Bank to the amount of $250,000. On November 13, 1939, it was announced that the government had decided that the Central Mortgage Bank should not commence active operations for the time being. The existing state of war and the uncertainties regarding the effect which war might
have on incomes and real estate values, made conditions so abnormal that the government did not feel it would be practicable to make, with any degree of assurance, valuations that would provide an equitable and permanent basis for sound debtor-creditor relationships. There was the further consideration that the adjustments contemplated by the act involved the use of the national credit on a substantial scale, and this also seemed undesirable in view of the very heavy present and prospective demands upon the national resources for war purposes.
42.	There was advanced to the Canadian Broadcasting Corporation the sum of $750,000 for capital construction, mainly for two transmitting stations located in the maritime and prairie provinces. The corporation repaid $50,000 on account of a loan made in the fiscal year 1937-38.
43.	During the fiscal year under review, the provinces of Manitoba, Nova Scotia and Prince Edward Island reduced by $699,000 loans granted by the dominion in the postwar period for house construction. Loans for Soldier and General Land Settlement were reduced by payments of $1,116,000.
44.	Investments in Sinking Funds amounted to $4,189,000. Stocks of other loans amounting to $6,987,000, held in the Sinking Fund of the 3J per cent 1930-50 loan which was called for payment on April 17, 1940, were transferred to a bond holding account to be repurchased later for the Sinking Fund of other sterling issues. This resulted in Sinking Funds Account showing a net decrease for the year of $2,798,000.
45.	The following statement shows the net changes in active investments during the last fiscal year together with comparable figures for the four preceding years:
LOANS AND INVESTMENTS, ACTIVE (000 omitted)
-	1935-36	1936-37	1937-38	1938-39	Estimated 1939-40S	8	$	S	SSinking Funds	3,636	3,646	3,843	4,336	Cr. 2,798Canadian National Railways	3,689	4,573	Cr. 27,429	3,841	21,479Canadian Pacific Railway	1,270	555	Cr. 211	Cr. 211	Cr. 211Canadian Farm Loan Board	7,933	10,991	3,848	2,834	2,288Dominion and National Housing Acts-	Loans	82	995	1,678	2,657	4,393Municipal Improvements Assistance Act,	1938-Loans	-	-	-	815	3,111National Harbours Board	1,438	323	1,890	692	947Provinces-under relief legislation	42,304	15,462	16,299	14,985	12,566Provinces-Post War Housing Loans....	Cr. 3,003	Cr. 2,038	Cr. 1,422	Cr. 105	Cr. 699Railway Equipment purchased	7,244	5,120	89	Cr. 1,399	8,135Soldier and general land settlement	Cr. 566	Cr. 489	505	Cr. 749	Cr. 1,116Roumanian Government	-	-	359	-	-Bank of Canada-Capital Stock	-	5,100	-	820	-Central Mortgage Bank-Capital Stock.	-	-	-	-	250Canadian Broadcasting Corporation	-	-	500	Cr. 50	700Canadian National (West Indies) Steam-	ships	-	-	450	-	-Net Advances	64,027	44,238	399	28,466	49,045
The Budget-Mr. Ralston
[Stage Direction]
loans and investments, active-Concluded,
(000 omitted)
-	1935-i>6	1936-37	1937-38	1938-39	Estimated 1939-40Less write-offs- Soldier and general land settlement	$	$	$	$	$loans	
Canadian Farm Loan Board-Capital	-488	-628	-750	-895	-1,643Stock	
Loans to Province of Saskatchewan-	-	-20	-10	-14	-11Drought Area Relief, 1934-35	
Write-down to non-active assets- Manitoba and Saskatchewan treasury	-1,374bills	-	-18,487	-	-	-Net change in active investments	63,539	25,103	Cr. 361	27,557	46,017

[Stage Direction]
46.	In the fiscal year ended March 31, 1940, the government issued obligations in the amount of $657,793,471. All these issues were floated in the Canadian market. Maturing obligations in the amount of $362,935,587
were redeemed out of the proceeds of the new issues, the remainder of the proceeds providing cash for the current purposes of government.
47.	The following table gives details of the amounts, terms- and purposes of the new issues and the prices at which they were sold:

[Stage Direction]
Issue Date	Maturity Date	Interest Rate	Where Payable	Price	Yield at	Amount Issued	Issue Refunded	To Public	To Govern- ment*	Public Price	Price to Government	Amount	Interest Rate1939	%	s	s	%	%	$	t	%May 15..	May 15, 1942	n	Canada	99-375	98-77	1*72	1-92	95,500,000]	37,362,000	115,346,000	21,690,500	21May 15..	June 1, 1958	3	Canada	98-50	97-71	3-10	3-16	39,000,000J	30,101,500	4July 1..	July 1, 1940	4	Canada	100-00	4-00	33,293,471	33,293,471	4(School Lands)	2,638,000	14,654,000	2Oct. 16..	Oct. 16, 1941	2	Canada	-	100-00	-	2-00	200,000,000	6,242,500	2199,425,979t	3117,168,000	41940	Feb. 1..	Feb. 1, 1948	31	Canada	100-00	99-216	3-27	3-36	250,000,000	75,013,637	3-52	Mar. 1..	Mar. 1, 1945	2	Canada	-	99-375	-	213	40,000,000	40,000,000	657,793.471	362,935,587	Total	amount issued	for refun	ding purposes	362,935,587	Total amount issued to provide new cash	294,857,884	657,793,471	
* Price to public, less commissions to dealers.
t Amount outstanding of 1930-50 31% Registered Stock called for redemption on April 17, 1940, less amount held in sinking fund, converted at $4.86=£1.
48.	During the fiscal year under review, the issue fortnightly of three months' treasury bills was continued. The last issue of treasury bills during the year ended March 31, 1940, was sold at a discount of -747 per cent. The average cost to the treasury of funds obtained 
from the twenty-three offerings during the year was a discount basis of -726 per cent. The amount of these treasury bills outstanding at March 31, 1940, was $155,000,000 unchanged from the total outstanding at the close of the previous fiscal year.

The Budget-Mr. Ralston
49.	As at March 31, 1940, the average rate of interest on the dominion's outstanding direct funded debt (including treasury bills) was 3-40 per cent, as compared with 3-52 per cent on March 31, 1939.

[Stage Direction]
50.	At the close of the fiscal year there was outstanding unmatured funded debt (including treasury bills) of the dominion in the amount of $3,695,685,000. Of this total, securities in the amount of $67,196,000 were held in the sinking funds against certain issues payable in London. The remaining amount, $3,628,489,000, was outstanding in the hands of the public. Other liabilities, consisting chiefly of annuity, superannuation and insurance funds, Post Office Savings Bank deposits, and trust and contingent funds, were outstanding on the same date in an estimated aggregate amount of $332,888,000. Without deducting sinking funds now shown as an asset, the gross liabilities of the dominion totalled $4,028,573,000. On the other side of its balance sheet, the dominion had active assets of $757,593,000 representing cash on hand, sinking funds and active loans and investments. The net debt of the dominion, the difference between the gross liabilities and the active assets, is therefore estimated at $3,270,980,000. The increase over the same date last year amounted to $118,421,000, namely, the amount of the over-all deficit for the fiscal year.
51.	The following is a preliminary statement showing the liabilities and assets of the dominion as estimated at March 31, 1940:-
LIABILITIES-MARCH 31, 1940 (estimated)
Bank Circulation Redemption Fund	
Post Office Money Orders, Postal Notes, etc., outstanding.
Post Office Savings Bank deposits	
Insurance and Superannuation Funds-[DOT]
Government Annuities	
Insurance Fund-Civil Service	
Insurance Fund-Returned Soldiers	
Retirement Fund	
Superannuation Funds	
Trust Funds-
Indian Funds	
Common School Funds	
Contractors' Securities Deposits	
Other Trust Funds	
Contingent and Special Funds	
Province Debt Accounts	
Funded Debt and Treasury Bills unmatured	
Floating Debt-
Funded Debt matured and outstanding	
Interest due and outstanding	
Outstanding cheques	
$	5,054,000
2,787,000 23,100,000
$ 140,042,000 13.336.000 18.683.000 9,827,000 60.887.000	242,775,000
	
14,298,000 2.677.000 2.114.000 3.126.000	22.215.000 4,312,000 11.920.000
. 3,695,685,000	
. 2.465,000 . 1,981,000 . 16,279,000	
3,716,410,000

[Stage Direction]
(estimated)
Active Assets-
Cash, working capital advances and other current assets	 $
Special Deposits	
Sinking Funds	
Bank of Canada Capital Stock	
Central Mortgage Bank Capital Stock	
Canadian Broadcasting Corporation-Loan	
Canadian National (West Indies) Steamships, Ltd.-Loan	
Dominion and National Housing Acts-Loans	
Municipal Improvements Assistance Act, 1938-Loans	
Loans to Provinces-
Post War Housing Loans	$	2,504,000
Unemployment Relief Loans	 155,978,000
Alberta-Subsidy Overpayment	 469,000
Loans to National Harbours Board-
Montreal	 61,698,000
Vancouver	 25,032,000
New Westminster Harbour Commission-Loan	
Canadian Farm Loan Board-Advances and Capital Stock.
186,742,000
166,000
67,196,000
5.920.000
250.000
1.150.000
450.000
9.805.000
3.926.000
158,951,000
86.730.000 275,000
36.695.000
The Budget-Mr. Ralston
[Stage Direction]
assets-march 31, 1940-Concluded
Active Assets-Concluded
(estimated)
Railway Accounts-
Canadian National Railways-
Advances-Financing and Guarantee Act, 1938
Advances-Refunding Act, 1938	
Advances-Financing and Guarantee Act, 1939,
Senneterre-Rouyn Railway Line	
Trans-Canada Air Lines	
Canadian Pacific Railway-
Loan for betterment or repair of railway equipment Loan for wages on special works program....
Purchase of equipment leased to-
Canadian National Railways	
Canadian Pacific Railway	
Loans to Foreign Governments-
Greece	
Roumania	
Soidier and General Land Settlement Loans..
Seed Grain and Relief Advances	
Canadian Government Railways Working Capital
Bond Holding Account	
Province Debt Accounts	
Deferred Debits-
Unamortized discount and commission on loans
1,717,000
24.689.000
12.443.000
639.000
550.000
970.000
222.000
11,87S,000
7,311,000
6,525,000 24,329 0C0
40,038,000
1,192,000
19,189,000
30.354.000
37.830.000
2.434.000
16.772.000
6.657.000
2.296.000
42,075,000
Net Debt, March 31,1940 (estimated)	
Net Debt represented by-
A. Expenditure and non-active assets (estimated) March 31,1940. Capital Expenditures-
Public Works-
Canals	
Railways	
Public Buildings, harbour and river improvements....
Military property and stores	
Territorial Accounts	
Loans, non-active-
Canadian National Railways Securities Trust Stock	
Canadian National Railways Stock	
Canadian National Steamships	
Canadian Pacific Railway (old)	
National Harbours Board-
Quebec	
Chicoutimi	
Churchill	
Halifax	'
Saint John	
Three Rivers	
Montreal (Jacques Cartier Bridge)	
Seed Grain and Relief Advances	
Soldier and General Land Settlement	
Saskatchewan Seed Grain Loans Guarantee Act, 1936	
Miscellaneous Advances
[Stage Direction]
264,013,000
	 18,000,000
	 13,872,000
	 62,791,000
$	27,365,000
3.838.000 9,000
12.291.000
16.448.000
3.743.000
4.049.000
[Stage Direction]
 67,743,000
	 450,000
	 16,526,000
	 2,638,000
	 3,536,000
B. Consolidated Fund-
Balance, consolidated fund brought forward from Mar. 31, 1939____ 1,702,494,000
Excess of expenditure over revenue, fiscal year ended Mar. 31, 1940
(estimated)	 128,032,000
[Stage Direction]
 1,830,526,000
[Stage Direction]
(Mr. Ralston.]

The Budget-Mr. Ralston
52.	The following table gives a statement of March 31, 1940 and the annual interest charges the unmatured funded debt (including treasury thereon: bills) of the dominion outstanding as at

[Stage Direction]
Date of Maturity	Hate per cent	Where Payable	Amount of Loan	. Annual Interest Charges
			$ ets.	$ cts.
1940, June 1	u	Canada	80,000,000 00	1,200,000 00July 1 	4	Canada	33,293,470 85	1,331,738 83Sept. 1	41	Canada	75,000,000 00	3,375,000 001941, Mar. 15	1	Canada	45,000,000 00	450,000 00May 1	H	New York	20,000,000 00	250,000 00Oct. 16	2	Canada	200,000,000 00	4,000,000 00Nov. 15	5	Canada	141,663,000 00	7,083,150 001942, May 15	H	Canada	95,500,000 00	1,432,500 00June 1	2	Canada	60,000,000 00	1,200,000 00Oct. 15	3	Canada	40,409,000 00	1,212,270 001943, June 1	21	Canada	20,000,000 00	500,000 00Oct. 15	5	Canada	147,000,100 00	7,350,005 001944, Jan. 15	21	New York	30,000,000 00	675,000 00June 1	2	Canada	90,625,000 00	1,812,500 00Oct. 15	41	Canada	50,000,000 00	2,250,000 00Nov. 15	21	Canada	20,000,000 00	500,000 001945, Mar. 1	2	Canada	40,000,000 00	800,000 00Aug. 15	21	New York	76,000,000 00	1,900,000 00Oct. 15	4	Canada	88,337,500 00	3,533,500 001946, Feb. 1	4)	Canada	45,000,000 00	2,025,000 001947, Oct. 1	2)	London	4,888,185 64	122,204 641948, Feb. 1	31	Canada	50,000,000 00	1,625,000 001949, Feb. I	31	Canada	50,000,000 00	1,625,000 00June 1	31	Canada	33,500,000 00	1,088,750 00Oct. 15	3)	Canada	138,322,000 00	4,841,270 001950, Feb. 1	31	Canada	50,000,000 00	1,625,000 00July 1	31	London	*52,763,135 43	1,846,709 741951, Feb. 1	31	Canada	50,000,000 00	1,625,000 00Nov. 15	31	Canada	60,000,000 00	1,950,000 001952, Feb. 1	31	Canada	50,000,000 00	1,625,000 00May 1	5	New York	100,000,000 00	5,000,000 00Oct. 15	4	Canada	56,191,000 00	2,247,640 001955, May 1	31	London	48,666,666 67	1,581,666 67June 1	3	Canada	40,000,000 00	1,200,000 00June 1	3	Canada	55,000,000 00	1,650,000 001956, Nov. 1	41	Canada	43,125,700 00	1,940,656 501957, Nov. 1	41	Canada	37,523,200 00	1,688,544 001958, June 1	3	Canada	88,200,000 00	2,646,000 00Sept. 1	4	Ixmdon	73,000,000 00	2,920,000 00Nov. 1	41	Canada	276,687,600 00	12,450,942 001959, Nov. 1	4)	Canada	289,693,300 00	13,036,198 501960, Oct. 1	4	London	93,926,666 66	3,757,060 67Oct. 1	4	New York	100,000,000 00	4,000,000 001961, Jan. 15	31	New York	48,000,000 00	1,560,000 001963, July 1	31	London	48,666,666 66	1,581,666 671966, June 1	31	Canada	54,703,000 00	1,777,847 50Perpetual	3	Canada	55,000,000 00	1,650,000 001967, Jan. 15	3	New York	55,000,000 00	1,650,000 001968, Nov. 15	3	New York	40,000,000 00	1,200,000 00Treasury Bills due April 1, 1940	[DOT]788	Canada	25,000,000 00	197,000 00Treasury Bills due April 15,1940	[DOT]784	Canada	30,000,000 00	235,200 00Treasury Bills due May 1, 1940.	[DOT]752	Canada	25,000,000 00	188,000 00Treasury Bills due May 15, 1940	[DOT] 746	Canada	25,000,000 00	186,500 00Treasury Bills due May 31, 1940	[DOT]751	Canada	25,000,000 00	187,750 00Treasury Bills due June 14, 1940	[DOT]747	Canada	25,000,000 00	186,750 003,695,685,191 91	125,574,026 72Payable in Canada	2,904,773,870 85	78-60%Payable in New York	469,000,000 00	12-69%Payable in London	321,911,321 06	8-71%3,695,685,191 91	100%
* Called for payment April 17, 1940.
The Budget-Mr. Ralston

[Stage Direction]
53.	Bonds and debenture stocks bearing the guarantee of the dominion outstanding in the hands of the public at March 31, 1940, amounted to $1,084,479,000, a decrease of $987,000 during the fiscal year.
54.	There were also outstanding on March 31, 1940, other contingent liabilities arising out of guarantees given under Relief and Seed Grain legislation and other acts. There were no new guarantees incurred during the last fiscal year.
During the fiscal year under review an amount of $52,000,000 was advanced without interest to the Canadian Wheat Board to enable the board to pay off guaranteed bank advances with respect to the marketing of the
1938	wheat crop. The guaranteed bank loans to the board outstanding at the close of the fiscal year amounted to $42,998,000. This amount constituted the board's gross liability to the banks at the close of the fiscal year and mainly related to the purchase of the
1939	wheat crop at the fixed price of 70 cents per bushel No. 1 northern, Fort William. The guarantee of the dominion to the Winnipeg Grain and Produce Clearing Association Limited, referred to in previous budgets, is still outstanding. No liability accrues from day to day in connection with the guarantee as margin deposits are made to the Clearing Association daily.
At March 31, 1940, 102,365 Home Improvement Loans had been made by banks and approved lending institutions to home owners in the amount of $41,110,000. Repayments to the same date on account of these loans amounted to $24,068,000, or over 58 per cent of the total amount of loans made. The dominion's contingent liability arising out of these loans is limited to 15 per cent of the aggregate of such loans made by each approved lending institution. As 288 loss claims for $86,922 have been paid, the maximum contingent liability as at March 31, 1940, was $6,079,595. In terms of dollar losses to total volume of loans, this loss ratio is only approximately i of 1 per cent.
Under the Dominion Housing Act, 1935, and the National Housing Act, 1938, the dominion has accepted and is accepting certain obligations arising out of its contracts with approved lending institutions which, while not expressed in the form of a guarantee, may nevertheless be regarded as contingent or indirect liabilities.
The manner in which losses in respect of any loan are to be borne by the dominion and the lending institution is fixed by the contract. The general principle is that the dominion bears two-thirds of the loss if at the time the loss is sustained the principal amount of the loan repaid, less any other amounts due, is equal to or less than the amount advanced by the dominion and one-third of the loss if at the time the loss is sustained the principal amount repaid, less any other amounts due, is more than the amount advanced by the dominion. In the case of small loans (that is, for amounts not in excess of $4,000 in the case of a single dwelling place or not in excess of $700 per habitable room in the case of a multiple family dwelling), the share of the loss to be borne by the dominion is not more than 80 per cent and not less than 50 per cent of the loss. The above provisions apply to loans made under both the present National Housing Act and its predecessor, the Dominion Housing Act. Under the National Housing Act a new provision has been added to encourage the making of small loans in such small or remote communities and in such districts of other communities as may be designated by the Minister of Finance in any contract. In respect of such loans, the dominion has agreed in contracts with certain lending institutions to pay losses sustained by any such lending institution up to certain amounts determined by the contract which are not less than 7 per cent and do not exceed 25 per cent of the total amount of such loans made in such areas by the lending institution.
Order in Council, dated December 5, 1939, provided that after January 1, 1940, applications would be received only for loans for the construction of houses containing one self-contained dwelling place and where the loan does not exceed $4,000.
Loans to the number of 15,054 had been approved at March 31, 1940, under the Dominion Housing Act, 1935, and the National Housing Act, 1938, and in the amount of $52,-
553,000.	No losses had been realized by the dominion as of that date.

JUNE 24, 1940 1061 The Budget-Mr. Ralston			
55. The following is a statement of bonds guaranteed by the dominion outstanding as			
and debenture stocks and other indebtedness at March 31, 1940:			
BONDS AND DEBENTURE STOCKS GUARANTEED BY THE DOMINION GOVERNMENT AS AT MARCH 31, 1940			
Date of	Issue	Interest	AmountMaturity	Rate	Outstanding%	$Jan. 15, 1942....	Canadian National	2	20,000,000 00Feb. 15, 1943....	Canadian National	2	55,000,000 00Feb. 1, 1944....	Canadian National	15,500,000 00May 1, 1944....	Canadian National	3	35,000,000 00Jan. 15, 1946...	Canadian National	2i	15,000,000 00July 1, 1946....	Canadian Northern	6^	24,238,000 00April 1, 1948....	New Westminster Harbour Commissioners	4!	700,000 00Dec. 15, 1950....	Canadian National	3	50,500,000 00Sept. 1, 1951...	Canadian National	4i	50,000,000 00Feb. 1, 1952....	Canadian National	3	20,000,000 00Aug. 1, 1952...	Saint John Harbour Commissioners	5	667,953 04Feb. 15, 1953...	Canadian National	3	25,000,000 00July 10, 1953....	Canadian Northern	3	9,359,996 72Feb. 1, 1954....	Canadian National	5	50,000,000 00Mar. 1, 1955...	Canadian National (West Indies) Steamships	Limited	5	9,400,000 00June 15, 1955....	Canadian National	4!	50,000,000 00Feb. 1, 1956....	Canadian National	41	70,000,000 00July 1, 1957...	Canadian National	4i	65,000,000 00July 20, 1958...	Canadian Northern	3*	7,896,541 81Jan. 15, 1959....	Canadian National	3	35,000.000 00May 4, I960....	Canadian Northern Alberta	3i	3,149,998 66May 19, 1961....	Canadian Northern Ontario	3j	34,229,996 87Jan. 1, 1962....	Grand Trunk Pacific	3	34,992,000 00Jan. 1, 1962....	Grand Trunk Pacific	4	8,440,848 00July 1, 1969....	Canadian National	5	60,000,000 00Oct. 1, 1969....	Canadian National	5	60,000.000 00Nov. 1, 1969....	Harbour Commissioners of Montreal	5	19,000,000 00Feb. 1, 1970....	Canadian National	5	18,000,000 002	21,401,371 07Various dates	1940-54	City of Saint John Debentures assumed by Saint	John Harbour Commissioners	Various	795,384 784	60,833,333 335	20,782,491 675	13,252,322 674	119,839,014 33do 	Northern Railway of Canada Debenture Stock..	4	1,499,979 67$ 1,084,479,232 62OTHER LIABILITIES GUARANTEED	PrincipalAmountOutstandingMar. 31, 1940Bank Advances, re Province of Manitoba Savings Office	$	6,491,173Bank Advances, re Government of Newfoundland	625,000Province of Manitoba Treasury Bill	4,809,206Province of British Columbia Treasury Bill	626,534Bank Advances, re Canadian Wheat Board	42,998,100Winnipeg Grain and Produce Clearing Association, Ltd. Day to day mar-	gins of the Canadian Wheat Board (closed out daily)	Bank Advances guaranteed under Seed Grain Loans Guarantee Act, 1937..	6,891,858Bank Advances guaranteed under Seed Grain Loans Guarantee Act, 1938..	not determinedLoans made by approved lending institutions under Dominion Housing Act,	1935 and National Housing Act, 1938	indeterminateLoans made by approved lending institutions under The Home Improvement	Loans Guarantee Act, 1935	6,079,595Deposits maintained by the chartered banks in the Bank of Canada	202,324.405
The Budget-Mr. Ralston

[Stage Direction]
1.	The following tables and related paragraphs present a comprehensive survey of general economic conditions in Canada during the past year. For purposes of comparison figures for certain earlier years are also provided, and in the case of the more important factors statistics on a monthly basis are given covering the last two fiscal years.
The figures used throughout are those published by the Dominion Bureau of Statistics, unless otherwise indicated. Where an index or average figure is given for a fiscal, rather than a calendar year, it represents an average of the monthly data during the period concerned. All indexes shown as based on the year 1926 are to be construed as based on the calendar year 1926, and not the fiscal year.
A change this year in the method of compiling trade statistics at the end of the fiscal year has artificially decreased the March trade figures and artificially increased those of April, so that a valid comparison of either month with the same month in any previous year has been made impossible. This change not only
affected directly the comparability of the trade statistics but influenced indirectly as well the index of the physical volume of business, many of the components of which utilize imports and exports of certain commodities as indicators of current business activity. To facilitate an accurate comparison of recent trends, therefore, in the following tables the figures for March and April of both the current and the preceding year have been averaged throughout, in the case not only of factors affected by the trade statistics, but, in order to provide comparable data, of other factors as well. In the text this average will be termed the March-April figure.
In the case of averages for the fiscal year ended March 31, 1940, no attempt has been made to adjust the March figures which have been artificially lowered by the change in the trade statistics, so that in all statistics affected by trade figures the average for the last fiscal year is slightly lower than it would have been if calculated on a basis comparable with previous years. This artificial reduction might amount to about one, two or three per cent in the annual figures.


[Stage Direction]
-	Fiscal Years ended March 31	Mar.-Apr. Av.	1927	1929	1933	1937	1938	1939	1940	1939	1940Group I.-Comprehensive Indexes	(1926 = 100)	Physical volume of business	101-9	122-1	74-8	115-2	120-8	113-8	126-9	114-9	137-0Volume of manufacturing	101-1	117-5	70-8	117-6	119-8	108-4	125-6	108-5	132-8Mining	103-0	121-1	104-2	166-5	196-0	194-8	217-6	208-1	252-2Forestry	99-7	104-3	64-2	131-8	130-3	106-5	125-6	115-3	135-5Carloadings	102-6	112-5	63-8	77-9	79-9	72-8	80-5	70-5	79-0Electric power output	104-7	136-6	132-4	218-0	229-0	220-9	239-9	229-7	243-0Employment	100-8	113-7	84-4	104-4	115-7	110-8	115-8	111-0	118-3National income t	100-0	114-3	64-4	85-1	97-3	94 l	101 -9	Dollar value of retail sales! (1930=100)...	93-2	110-1	G6-8	74-0	78-6	77-5	79-8	Group II.-Price Levels and Financial	Factors (1926=100)	Wholesale prices	98-8	95-8	65-5	77-2	84-6	76-0	77-8	73-3	83-2Farm Product Prices	99-1	99-1	46-3	75-6	86-3	68-6	65-8	65-3	71-7Cost of living	99-6	98-9	79-9	81-2	83-6	83-9	84-1	83-1	85-6Common stock prices	101-8	173-3	52-1	125-5	117-6	103-8	99-4	99-9	98-0Dominion Government bond prices	100-4	102-4	100-8	117-9	115-2	118-1	115-1	119-2	114-4Dividend payments	101-8	123-7	79-9	112-9	139-0	143-4	129-2	136-1	124-7Bank deposits	101-0	116-1	98-5	116-4	122-1	127-0	137-7	129-9	140-1Active currency circulation	101-0	105-4	75-9	102-3	111-1	113-4	126-7	114-5	137-4
fNearest calendar year.
[Stage Direction]
The Budget-Mr. Ralston
SUMMARY TABLES-Concluded
Calendar Years
	1926	1928	1932	1937	1938	1939
Group III.-Gross Value of Production in Major Industries		(Millions of Dollars)				
						
Agriculture	1,714-5	1,806-0	766-8	1,039-5	1,062-6	1,170-9-Forestry	555-8	586-2	349-3	494-3	425-0	484-8*Fisheries	73-1	70-7	33-7	51-2	53-2	55-8*Mining (inc. Smelting)	276-8	313-1	265-0	662-6	653-8	685-3*Construction	385-9	488-4	132-9	351-9	353-2	354-9*Manufacturing	3,100-6	3,582-3	1,980-5	3,625-5	3,337-7	3,613-8-Group IV.-Foreign Trade and Intemationai Transactions^	Merchandise exports (all gold excluded)	1,276-6	1,363-6	497-9	1,012-1	848-7	935-9Net exports of non-monetary goldf	30-4	40-1	70-0	145-1	160-5	184-4Total exports, including non-monetary gold	1,307-0	1,403-7	567-9	1,157-2	1,009-2	1,120-3Merchandise imports (all gold excluded)	1,008-3	1,222-3	452-6	808-9	677-5	751-0Total trade	2,315-3	2,626-0	1,020-5	1,966-1	1,686-7	1,871-3Export balance	+298-7	+181-4	+115-3	+348-3	+331-7	+369-3Net tourist receipts	102-5	167-7	155-0	166-2	159-9	166-0Net interest and dividend payments going abroad	201-0	221-0	261-8	246-2	251-0	260-8Net capital export (direct estimate)	tt	82-0	11-4	198-8	135-0	162-1
Preliminary estimate. Certain of these figures have not yet appeared in official publications, or represent revisions of previously published figures.
J It should be noted that the export and import figures given in the table above, which have been compiled from official trade returns, differ slightly from the adjusted figures used in making up the Balance of International Payments. In the remaining part of the table certain less important items in the Balance of Payments have not been detailed.
t Adjusted for earmarked gold. These figures were computed by the Bank of Canad on the basis of official trade returns.
ft Not available.

[Stage Direction]
2.	The index for the physical volume of business in Canada is the most comprehensive single measure of the level of general economic and business activity. It is made up by the Dominion Bureau of Statistics from 46 constituent items weighted according to their relative importance in the economy as a whole, and is adjusted for seasonal fluctuations. Included in the making of this index are such items as mineral production, manufacturing in its chief branches, construction, electric power output, trade employment, carloading, imports
and exports. Agricultural production as such does not find a place in this index, nor do fishing and lumbering as primary activities, but the processing of and trade in the products of these industries are reflected in the index. Correction is made, where necessary, for changes in the price factor in order that the index shall properly record only changes in the :physical volume of business done. 1926 is taken as the base year. Following are presented the index numbers for each fiscal year since 1927 and the index for each month in the last two fiscal years.
INDEX OF PHYSICAL VOLUME OF BUSINESS (1926=100)
Fiscal Years ended March 31
1927	1928	1929	1930	1931	1932	1933	1934	1935	1936	1937	1938	1939	1940101-9	108-0	122-1	122-0	105-4	89-3	74-8	84-9	96-4	104-4	115-2	120-8	113-8	126-9
The Budget-Mr. Ralston
[Stage Direction]
MONTHLY INDEX*
(1926=100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.-Apr. Av.1938-39	112-4	110-7	108-4	109-1	110-5	119-2	118-6	123-4	115-6	113-0	111-7	114-91939-40	116-7	121-4	121-4	120-5	125-2	125-8	133-1	133-0	133-3	138-6	131-2	137-0
* Seaaonally adjusted.
The recovery from the depressed level of business activity of 1938 which had become evident in the early months of 1939 continued throughout the year and was accelerated by the outbreak of war in September. Each month in the past fiscal year was considerably above the corresponding month in the year previous, and the average for 1939-40 of 126-9 was about 11-5 per cent above that of 1938-39. The March-April figure for 1940 was 19-2 per cent higher than that for 1939, and has only been exceeded in one month in 1929, and in January of this year.
It may be of interest to compare this expansion of 19-2 per cent in the physical volume of business with the expansion in employment in all industries of about 6-6 per cent between March-April, 1939, and March-April, 1940. This suggests that the increased production has been achieved in considerable degree by a reduction in part-time work.

[Stage Direction]
3.	The gross value of agricultural production in 1939 increased by about 10 per cent over the previous year and reached the highest level since 1930. In general, it was a year of good crops, but of low prices. The wheat crop of 490 million bushels was the second largest in our history. In quality it was about normal, through relatively highly concentrated in No. 1 northern grade. The area of poor crops was very much reduced from preceding years. The average price received by the farmer at the farm for his 1939 wheat, up to December 31, has been estimated at 52c. a bushel compared with a revised figure of 59c. for the 1938 crop.
One of the most outstanding features of Canadian agriculture in the past year has been the great increase in hog production and marketings since the summer of 1939. Hog marketings in the eight months from September to April amounted to 3,213,373 compared with 2,244,765 in the eight months a year before. Indications are that hog production and marketings in 1940 will be the largest recorded in the history of the industry. Hog prices declined during the spring of 1939, and during the summer months were lower than in the previous two years. They rose during the fall months and were fairly well stabilized during the first three months of this year under the operation of the Bacon Agreement with the United Kingdom, but they have weakened in recent months as a surplus of hog products has accumulated, and in April were below the levels of the past three years.
Among the branches of agriculture most affected by the war is that of apple production, since exports of apples to British and foreign markets have been severely curtailed. The apple crop of 1939 was a very large one, exceeded only by 1933 in the last fourteen years, but the average value received per unit fell to a level lower than that for any year of the same period and, consequently, the total value of the crop was much below that of recent years. The dominion government provided assistance in the marketing of the apple crop, including special arrangements for processing apples in Nova Scotia which is more dependent than other regions upon the export market.
It will be noted in the table below that the general index of farm prices in March-April of 1940 had increased by about 10 per cent over the level of a year before.
[Stage Direction]
The Budget-Mr. Ralston

[Stage Direction]
(Millions of Dollars)
	Calendar Yeara					
1926	1928	1932	1937	1938	1939*1,714-5	1,806-0	766-8	1,039-5	1,062-6	1,170-9Wheat	442-2	451-2	154-8	184-7	211-S	252-8662-8	673-8	297-7	371-5	338-8	381-3277-3	297-6	159-1	215-6	226-2	217-7178-4	197-9	65-2	141-0	136-8	170-883-6	106-7	42-1	51-8	53-7	55-543-1	48-8	32-2	41-8	57-1	55-97-4	6-8	6-1	17-1	20-3	19-219-7	23-2	9-6	16-0	18-4	17-7
* Subject to revision.
GENERAL INDEX OF FARM PRICES Monthly Index*
(1926=100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.-Apr. Av.1938-39	82-5	77-3	76-6	71-4	64-1	63-8	63-8	64-9	64-6	64-8	64-7	65-31939-40	65-5	65-2	63-3	62-7	58-4	64-2	64-5	65-1	69-1	700	70-3	71-7
Seasonally adjusted.
[Stage Direction]
4.	The past year has seen production and employment in the mineral industry expand to new record levels. Gold mining continues to be the largest element and the volume of gold produced in the fiscal year 1939-40 showed an increase of about 5-8 per cent over the previous year, while the value of the production has, of course, been increased since September by the higher price received in Canadian dollars. Production of copper, nickel and zinc was larger in each case than in any previous year, but the value of this production was not as great as in 1937 because prices were lower than in that year. Contracts were made between the major Canadian base metal producers and the United Kingdom Ministry of Supply, providing for the sale of the bulk of the Canadian export surplus of copper, lead and zinc at prices approximately equal to those prevailing immediately before the outbreak of war.
Iron ore production commenced again in Canada in 1939 after a lapse of 16 years. Development is also proceeding rapidly to bring into production the high grade iron ore deposit at Steep Rock Lake.
Petroleum production in Alberta continued to expand though subject to pro-rationing because of the limited market available in the Western Provinces. Thirty-four new wells were brought into production in Turner Valley in 1939. Coal production in 1939 was also increased by 8-6 per cent over the previous year, most of the increase occurring in Nova Scotia, and in the first four months of this year production shows an increase of 26i per cent over the same months of last year.
Employment in mining continued to expand despite a slight set-back during the early winter. The March-April figure this year shows an increase of 4-2 per cent over that of a year ago.
The Budget-Mr. Ralston
[Stage Direction]
VALUE OF MINERAL PRODUCTION (Millions of Dollars)
Value of All Minerals.
Gold	
Copper	
Nickel	
Lead	
Zinc	
Silver	
Coal	
Petroleum	
All others	
t Preliminary.
Calendar Years
240-4
17-5
19-2
13-9
1-3
1928
39-1
22-3
10-1
63-8
80-7
191-2
71*5
7-2
4-	1
5-	8 37-1
41-8
457-4
68-9
21-1
10-3
5-4
1938
166-2
53-9
11-7
44-0
76-5
1939f
473 1 184-1 60-9 50-9
12-3 12-1 9-4 48-3 10-4 84-7
PHYSICAL YOLUME OF MINERAL PRODUCTION Monthly Index*
(1926=100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.-Apr. Av.1938-39	212-7	199-4	176-6	192-1	198-6	202-1	201-4	206-6	183-1	176-8	190-9	208-1
1939-40		219-6	232-7	228-9	238-5	233-2	223-2	194-2		202-4	215-6	200-9	252-2
												
'Seasonally adjusted.
EMPLOYMENT IN MINING Monthly Index* (1926=100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.-Apr. Av.1938-39	156-6	155-0	156-7	156-7	154-4	156-2	156-5	157-2	159-1	160 7	163-3
1939-40		162-9	161-3	164-1	166-4	166-4	166-7		163-8	164-9	163-4	168-6	170-1
												
* Seasonally adjusted as at first of month.

[Stage Direction]
5.	The volume and value of forestry production in the past fiscal year, and in the calendar year 1939, have shown substantial increases over the preceding year. This was true for some months before the outbreak of war, as well as after it.
Newsprint production has increased markedly during the war period due to a greater demand in the United States and to the shutting off of Scandinavian supplies from world markets. In the first eight months of war newsprint production was 15'3 per cent above the same period a year before, and for May the industry reports production of 323,563 tons, which is a new high record, and 29-6 per cent above May of last year.
[Mr. Ralston. 1
Lumber production has also been stimulated by wartime requirements, though not as yet to the same degree as newsprint production. Lumbering in eastern Canada has been favoured relatively to that in British Columbia due to the greater availability of Atlantic shipping for export. About 10 per cent more lumber was scaled in British Columbia from September to April than in the same period in the previous year. The index of lumber and timber prices during the war period has averaged about 12 per cent above the year before.
It will be noted in the table below that improved employment in logging reflects the much better market for forestry products in the past year.

The Budget-Mr. Ralston
FORESTRY PRODUCTS (Millions of Dollars)
-	Calendar Years					
1026	1928	1932	1937	1938	1939555-8	586*2	349*3	494*3	425-0	484-8+
121*1	144*1	85*5	126-4	107*1	120-Of
						
	61*9	47-7	12-6	45-4	35-9	48-8
						
	521	45-6	18-9	41-8	27-7	31*0
						
t Preliminary.
PHYSICAL VOLUME OF FORESTRY PRODUCTION Monthly Index*
(1926=100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.-Apr. Av.1938-39	100-4	91-9	96-7	101*4	102-2	110*2	107-1	112*8	111-7	120-7	111*6	115-31939-40	120-2	112-6	120-6	114-2	126-4	130-7	139-3	128-7	127*6	142-4	125*4	135*5
*Seaaonally adjusted.

[Stage Direction]
Monthly Index*
(1926=100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.-Apr. Av.1938-39	146-1	135*8	121*9	121*1	90-4	89-5	91-0	105-3	114-8	103-9	98-4	84-41939-40	81*3	71-0	126*4	134*0	111*5	92-1	133-5	166-2	181-9	164*1	156-4	129-2
* Seasonally adjusted index as at first of month.

[Stage Direction]
6.	The Atlantic deep sea catch in 1939 was about 5 per cent greater than in 1938, but prices were lower due to a slackening in European demand so that the value of the catch was only about 2J per cent higher. So far in 1940 events in Europe have kept changing the market situation, but during the early months of the year prices have been slightly higher than before the war. The normal export market for canned lobster has now been cut off by war restrictions and the dominion government has made provision for assisting in the disposal of the lobster catch. The British Columbia salmon pack in 1939 was somewhat smaller than the year before and of lower quality, but it was all marketed despite the war at somewhat higher prices than in the preceding year. The halibut catch this spring has been larger than last year, and prices received are slightly better.
FISHERIES (Millions of Dollars)
	Calendar Years					
1926	1928	1932	1937	1938	1939Gross Value of Production	73*1	70-7	33*7	51*2	53-2	55 * 8tSalmon marketed (in above)	19-6	17-9	8-0	12*3	15-0	15-3fValue of fish exported	36-0	36-3	18*5	28*0	25-6	28*0
*^Preliminary.
The Budget-Mr. Ralston

[Stage Direction]
7.	Production and employment in manufacturing have shown a substantial and general increase during the past fiscal year, and the average level of the production index for the year as a whole was higher than any year in the past. Activity in manufacturing increased very quickly after the outbreak of war, apparently reached an all-time peak in January and then receded slightly in the next two or three months. Unofficial information indicates that the expansion was resumed in May. The March-April figures for 1940 compared with those for 1939 show an expansion of 22-4 per cent in production and 14-9 per cent in employment in manufacturing as a whole.
Among the various manufacturing industries the most marked expansion has taken place in textiles for which the production index in March-April this year was more than double that of a year before. Many textile factories are now reported to be working at capacity. Steel production shows an expansion during
the year of nearly 60 per cent. Much of this increase took place before the outbreak of war but was due in part to British armament demands. The expansion in food manufacturing reflects in part the increased exports of flour and bacon and also the increased domestic consumption of foodstuffs such as that of sugar.
Production in the automobile industry showed little change for the last fiscal year as a whole compared with the preceding one, and the figures for March-April are only about 5 per cent above those a year before. Restrictions imposed in export markets have offset the increased domestic sales of cars and the military demand for motor transports. Since the middle of March the Canadian automobile industry has received a number of substantial orders for military vehicles, however, and production in May reached a figure which was some 35 per cent above May of last year and represented the largest volume in any month since June, 1937.
INDEXES OF PHYSICAL VOLUME OF MANUFACTURING* (1926=100)
-	Fiscal Years ended March 31	Mar .-Apr. Av.	1927	1929	1933	1937	1938	1939	1940	1939	1940Manufacturing of All Kinds	101 1	117-5	70-8	117-6	119-8	108-4	125-6	108-5	132-8Selected Industries-	Foodstuffs	1000	97-1	83-4	105-8	101-8	102-2	117-0	105-7	128-0Tobacco	102-3	138-2	107-1	153-9	178-3	178-1	189-1	176-9	205-1Boots and shoes	101-5	97-7	84-0	108-4	114-2	110-3	135-8	108-6	119-7Textiles	101-6	103-4	71-9	123-3	128-4	108-9	152-7	104-9	226 3Steel production	104-5	169-0	40-4	150-8	178-2	139-1	206-7	134-2	213 4Automobile production	100-7	145-2	26-9	98-8	93-1	77-2	79-1	70-2	73-6Crude petroleum (imports)	104-7	146-6	138-4	208-1	221-3	207-3	217-3	183-4	186-0
Seasonally adjusted.
PHYSICAL VOLUME OF MANUFACTURING PRODUCTION Monthly Index*
0926=100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.-Apr. Av.1938-39	103-2	104-7	103-5	101-3	100-9	114-2	113-2	125-3	111-3	111-1	105-0	108-51939-40	109-5	113-3	112-9	112-3	116-5	121-3	143-7	136-9	136-9	146-8	134-2	132-8
* Seasonally adjusted.
EMPLOYMENT IN MANUFACTURING Monthly Index*
(1926 = 100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.-Apr. Av.1938-39	111-7	109-7	110-2	109-5	107-5	110-6	109-0	109-9	111-3	111-3	110-0	108-61939-40	108-0	107-5	109-4	109-1	110-3	112-1	116-0	121-0	123-6	126-1	125-0	124-8
* Seasonally adjusted as at first of month. 

The Budget-Mr. Ralston

[Stage Direction]
8.	Total construction during the fiscal year 1939-40, as indicated by contracts awarded, showed a small increase over the preceding year. This increase appeared both in residential and in other construction. In the period May to August preceding the war there was evidence of a recovery in private construction, both residential and business, and total contracts in this period had recovered half the ground lost in the recession from 1937 to 1938. After the outbreak of war there was a falling off in contracts other than residential, and some decline in residential contracts. Contracts for business and industrial construction began to increase about the end of the year and by March all major types of construction were showing substantial increases over the previous year. Total figures for the three months ending May 31 have not been exceeded since 1931, and this is true as well for all the major categories of construction except engineering work where in 1937 these three months showed a high figure.
During the fiscal year 1939-40 loans approved under the National Housing Act showed a substantial increase and reached a total of nearly $22,000,000 which was equal to almost a third of the value of all contracts awarded for residential construction during that year. Early in December it was announced that, in order to conserve the financial resources of the Dominion, loans under Part I of the Act would be restricted to a maximum of $4,000, and to single family houses, for applications received after December 31, 1939, and that the assistance by way of tax payment benefits under Part III of the Act would be restricted to buildings commenced before May 31, 1940. One effect of this announcement was to produce a rush of applications in December, and this shows up in the high figures for loans approved in January and February notable in the table below. Loans under the Home Improvement Plan have continued to increase and all months in the last fiscal year have shown increases over the corresponding months in the preceding year.
CONTRACTS AWARDED (Millions of Dollars)
	Fiscal Years ended March 31							Mar .-Apr. Av.	
1927	1929	1933	1937	1938	1939	1940	1939	1940Total Contracts Awarded	380-8	500-2	104-3	161-9	218-8	188-6	191-9	10-6	18 8Residential	1110	137-4	26-0	49-6	54-1	63-0	64-5	4-7	4-9All other	269-8	362-8	78-3	112-3	164-7	125-6	127-4	6-9	13-9
MONTHLY INDEX OF CONTRACTS AWARDED* (1926-100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.-Apr. Av.1938-39	65-3	53-2	53-1	53-8	55-7	54-1	55-2	50-4	74-8	45-6	69-1	53-61939-40	54-3	53-0	64-1	56-2	64-9	52-9	42-6	41-7	64-8	53-0	68-4	87-1
Seasonally adjusted.
LOANS APPROVED UNDER NATIONAL HOUSING ACT*
(Thousands of Dollars)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	Total1935-36	_	_	_	_	_	214	152	159	142	89	48	8041936-37	432	281	698	690	518	424	372	301	450	407	317	506	5,3961937-38	865	821	919	1,049	753	551	742	636	500	456	342	1,190	8,8241938-39	832	1,496	2,097	1,707	1,031	1,241	1,269	1,740	1,241	646	763	1,542	15,6051939-40	1,403	2,426	2,197	2,772	2,184	2,192	1,313	1,615	1,255	2,193	1,421	953	21,92452,553
Dominion Housing Act prior to August, 1938.

1070	COMMONS
The Budget-Mr. Ralston

[Stage Direction]
(Thousands of Dollars)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	Total1936-	37	
1937-	38	
1938-	39	
1939-	40	1,240 966 1,099	1,606 1,325 1,950	1,592 1,437 1,902	1,342 1,233 1,786	1,146 1,138 1,878	1,206 1,311 1,653	1,185 1,224 1,245	682 916 968 1,014	516 613 648 716	303 377 403 487	306 367 409 480	598 533 650 670	2,405 12,123 11,702 14,880
Grand Total.
41,110

[Stage Direction]
9.	Movement of the near-record grain crop and the heavy demands placed on transportation facilities with the outbreak of war were responsible for a level of railway operations
during the period since mid-year of 1939 which
1..
was considerably higher than that of any recent years. This is graphically illustrated by the striking increase in net operating income for the March-April average of 1940 over that of 1939. Carloadings during the first eight months of war show an increase of 14-4 per cent over the similar period a year earlier.

[Stage Direction]
-	Calendar Years	Mar.-Apr. Av.	1926	1928	1932	1937	1938	1939	1939	1940All Railways Operating Revenues (millions of dollars)	
Net Operating Income (millions of dollars).... Carloadings (thousands of cars)	
Railway Payrolls (millions of dollars)	493-6	563-7	293-4	355-1	336-8	366-5*	25-4	30-2*+49-2	+67-9	-62-9	-31-2	-55-0	-34-0*	+0-6	+4-0*3,267	3,706	2,179	2,635	2,429	2,549	185	207260-4	287-8	181-1	193-6	195-1	200-0*	14-8	16-1*
* Preliminary.
MONTHLY INDEX OF CARLOADINGS* (1926=100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.-Apr. Av.1938-39	71-4	71-8	68-7	71-5	76-3	81-0	76-0	74-2	73-7	70-7	66-7	70-51939-40	69-2	81-1	71-3	76-8	82-0	95-6	80-0	84-0	82-6	86-7	83-1	79-0
* Seasonally adjusted.

[Stage Direction]
10.	Total Canadian trade with the rest of the world, including net exports of nonmonetary gold, was just under two billion dollars in the fiscal year ended March 31, 1940. Exports of merchandise increased by 16-8 per cent over the preceding fiscal year, while imports rose by 25-7 per cent. The relatively greater increase in imports resulted in a reduction of about 2 per cent in the net export balance, including net exports of non-monetary gold.
Although our foreign trade was moving upward prior to last August, the war produced

an immediate stimulus to both exports and imports, so that trade during the war period showed a substantially greater proportionate increase than that of the fiscal year. Exports of merchandise in the eight months ended April, 1940, were 23-9 per cent greater than in the same period of the previous year, while imports of merchandise were 48-9 per cent greater. During this period as compared with the same period a year before our merchandise exports to the United States increased by 47-5 per cent and to the United Kingdom by 19-5 per cent, while imports from the same countries increased by 62-6 per cent and 13-2 per

The Budget-Mr. Ralston
cent respectively. Exports to the United States showed their most marked advance during the first four months of the war when American business was expanding rapidly, while exports to the United Kingdom have shown their substantial increase since the beginning of 1940. Imports from the United States, however, have continued at a high level since the beginning of the war.
Commodity exports which showed notable gains in the war period over the same period of the previous year, and the percentages by which they increased, were as follows: Wheat flour 77 per cent, meats, chiefly bacon and ham 66 per cent, wood pulp 56 per cent, wheat 54 per cent, asbestos 46 per cent, planks and boards 35 per cent, cheese 33 per cent, and paper 22 per cent.

[Stage Direction]
(Millions of Dollars)
			Fiscal Years ended March 31					Mar.-Apr. Av.	
	1927	1929	1933	1937	1938	1939	1940	1939	1940
Merchandise Exports (all gold									
excluded)		1,260-7	1,376-5	476-9	991-1	991-2	841-6	983-4	60-5	84-1
Net Exports of Non-Monetary									
Goidt		34-8	36-5	70-7	137-3	147-7	167-5	188-0	13-0	17-1
Total Exports, including Non-									
Monetary Gold		1,295-5	1,413-0	547-6	1,128-4	1,138-9	1,009-1	1,171-4	73-6	101-2
Merchandise Imports (all gold									
excluded)	1,030-9	1,265-7	406-4	671-9	799-1	658-2	827-4	50-1	81-3Total Trade	2,326-4	2,678-7	954-0	1,800-3	1,938-0	1,667-3	1,998-8	123-7	182-5Export Balance	+264-6	+147-3	+141-2	+456-5	+339-8	+350-9	+344-0	+23-5	+19-9Merchandise Trade by Countries (all gold excluded) United Kingdom-	Exports	448-0	431-7	185-1	406-8	407-8	326-9	364-0	21-6	38-9Imports	163-9	194-0	86-5	129-5	145-0	115-6	119-5	8-8	12-4Other Commonwealth Countries-	Exports	94-3	107-0	38-2	88-2	108-7	103-5	106-2	7-4	8-8Imports	50-2	63-4	33-9	68-7	88-2	65-1	85-1	4-0	7-3United States-	Exports	472-5	508-9	144-7	364-4	343-3	288-5	399-9	23-5	28-6Imports	687-0	868-0	232-5	393-7	487-3	412-5	554-1	33-4	55-6Other Countries-	Exports	245-9	328-9	109-0	130-8	130-0	122-7	113-3	8-0	7-8Imports	129-8	120-3	53-5	80-0	78-6	65-0	68-7	3-9	6-0Principal Commodity Exports	Non-Monetary Goldf	34-8	36-5	70-7	137-3	147-7	167-5	188-0	13-0	17-1Paper, chiefly Newsprint	123-2	148-4	77-2	117-8	129-9	115-0	129-4	8-8	12-2Wheat and Wheat Flour	421-8	493-6	147-5	245-0	139-5	100-3	140-9	3-7	9-0Copper and its Products	14-9	28-0	12-3	40-2	57-3	53-9	63-6	4-6	4-5Nickel	12-9	23-9	7-6	45-9	61-9	49-6	67 9	4-7	5-4Planks and Boards	59-8	47-7	11 1	40-3	43-7	37-1	50-5	2-9	3-8Meats	29-4	19-2	6-7	36-1	414	35-3	45-0	2-7	5-6Wood Pulp	49-9	44-9	17-8	33-2	40-0	26-8	35-7	2-2	3-9Automobiles and Parts	36-4	45-4	7-8	22-3	28-3	25-3	23-3	2-0	1-4Fish	34-5	34-9	16-6	25-1	26-3	25-6	27-9	1-7	2-0Fruits and Vegetables	18-7	12-0	11-4	13-6	16-6	20-2	22-5	0-7	1-6Milk and its Products	41-6	35 8	11-7	14-4	17-7	17-6	18-7	0-6	1-0tAdjusted for earmarked gold. These figures were computed by the Bank of Canada on the basis of official trade returns.	.

[Stage Direction]
11.	The general index of employment registered a gain of 4-4 per cent during 1939-40 over the previous fiscal year. Although in the early part of 1939 employment was at levels considerably below those of the preceding year, it rose gradually with increased business activity and since June each month has shown
a substantial increase over the same month of the year previous. The May 1 figure this year at 118-7 for the general index was about 7-6 per cent higher than the same date in 1939 and was higher than any other May except that of 1929. Greatly increased employment in manufacturing, logging, mining and transportation contributed to this upward movement. The index of employment in con-
The Budget-Mr. Ralston
[Stage Direction]
struction and maintenance has recently been at levels considerably below those of a year ago owing to curtailment of expenditure on highway construction and maintenance; other branches of construction have shown increases.
The improved employment situation is reflected in the lower number of persons in receipt of relief. In each month since November, 1939, both the numbers of employable unemployed and of all persons on relief have shown a considerable reduction from the same month of the previous year. Preliminary
figures for April, 1940, show a decrease of 25-2 per cent from April, 1939, in the total of relief recipients, and a decline of 11 per cent from the same month in the number of employable unemployed. The number of wage-earners unemployed in April, 1940, was estimated by the Bureau of Statistics to be about 367,000, as compared with 473,000 in April, 1939, a decrease of about 22-5 per cent. This 367,000 includes a considerable but unknown number of enlisted men who were formerly unemployed.

[Stage Direction]
(1826=100)
	Fiscal Years ended March 31							Mar.-Apr. Av.	
1927	1929	1933	1937	1938	1939	1940	1939*	1940*100-8	113-7	84-4	104-4	115-7	110-9	115-8	111-0	118-3100-8	112-7	81-8	104-7	115-5	110-0	116-1	108-6	124-8100-2	116-6	42-7	153-4	201-6	107-4	130-2	84-4	129-2101-2	115-5	97-2	140-7	155-2	157-4	165-4	163-3	170-1100-4	106-7	82-7	84-6	85-2	84-3	86-5	85-0	88-3101-4	120-2	77-1	83-5	104-0	110-0	103-3	128-6	79-8100-8	118-2	114 4	128-4	132-5	133-4	137-9	132-4	140-6
* Seasonally adjusted as at first of month.
EMPLOYMENT-ALL INDUSTRIES Monthly Index* (1926=100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.-Apr. Av.1938-39	111-2	111-5	111-9	111-4	109-0	110-6	111-0	109-7	111-3	111-3	110-6	111-01939-40	111-1	110-3	113-1	113-6	114-3	115-0	115-8	118-3	119-8	120-7	118-8	118-3
* Seasonally adjusted as at first of month.
EMPLOYABLE UNEMPLOYED IN RECEIPT OF MATERIAL AID From the National Registration-Department of Labour (thousands)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	Average1938-39	169	154	138	132	124	115	124	143	162	181	191	192	1521939-40	187	169	149	141	142	125	125	133	147	164	170	173	152
[Stage Direction]
The Budget-Mr. Ralston
107;

[Stage Direction]
From the National Registration-Department of Labour (thousands)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	Average
All Persons-													
1938-39	1,024	956	885	836	758	554	641	787	896	977	1,019	1,028	8631939-40	1,005	923	839	806	803	539	544	586	629	714	753	773	743A GRICULTURE-	1938-39	392	380	364	339	287	109	168	252	292	321	321	323	2951939-40	319	297	282	271	258	50	60	78	73	96	112	124	168Urban-	1938-39	632	576	521	497	471	445	473	535	604	668	698	705	5691939-40	686	626	557	535	545	489	484	508	556	618	641	649	575
WAGE EARNERS UNEMPLOYED* Estimated by Dominion Bureau of Statistics (thousands)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	Average1938-39	437	400	387	407	368	346	378	398	472	485	491	494	4211939-40	473	395	369	352	332	300	283	296	364	377	387	391	360
* Beginning with Sept. 1939, includes a considerable number of enlisted men who were previously unemployed wage earners.
[Stage Direction]
12.	The gradual decline of wholesale prices which had marked the latter part of the fiscal year 1938-39 continued up until August of 1939, and the index reached a low point of 72-4 in that month. During the economic adjustments that took place in the month or two immediately following the outbreak of war, and in considerable part due to such factors as exchange movement, higher ocean freight and insurance rates, and forward buying both by consumers and producers, wholesale prices of some commodities rose fairly steeply, particularly those of certain imports and exports, including grains and animal products. The total index rose to 79-3 in October, i.e., by about 10 per cent in two months. From that point on to March the rise was more gradual and the index reached a peak of 83-2 in that month. This rise showed up mainly in a further increase in grain prices and in textile prices. Since March there has been a slight decline largely due to lower prices for animal products and grains, and the index for the week ending June 7 was 81-9.
It may be of interest in wartime to note that prices of fully and chiefly manufactured goods 95826-68
have followed very closely the movements of the general index, and that the index of the group "iron and its products" has risen by only about 5 per cent since August while the group "producers' equipment" has increased less than 2 per cent. It may also be worth noting that the index of our export prices had risen by about 24 per cent, and that for imports about 17 per cent between August and April.
During the six months before the war the cost of living remained at the low level to which it had declined in the latter part of 1938. Increased cost of food and, to a much lesser extent, of fuel, caused a rise of about 2 per cent in the index in the first two months of war. Since that time only minor changes have occurred in the total index. Increases in the cost of clothing early in 1940 were offset by some reduction in the cost of food. The latest figure shows an increase of only 3 per cent over that of a year ago.
While no official indexes of wage rates exist except on an annual basis, other information indicates that there have been numerous increases in wage rates, particularly in those trades where there is already some evidence of a shortage of skilled labour.
[Stage Direction]
The Budget-Mr. Ralston
[Stage Direction]


Indexes
(1926=100)
	Fiscal Years ended March 31							Mar .-Apr. Av.	
1927	1929	1933	1937	1938	1939	1940	1939	1940Wholesale Prices	98-8	95-8	65-5	77-2	84-6	76-0	77-8	73-3	83-1Consumer's goods	98-6	95-2	70-4	75-7	79-7	76-1	77-9	74-1	82-7Producer's goods	990	95-9	61-3	76-4	85-5	72-1	73 2	68-2	80-2Export prices(f)	1000	94-2	54-9	71-3	81-1	65-9	66-6	60-8	740Import prices(f)	100 0	96-1	70-6	82 1	890	82-2	87-7	80-7	94-213 sensitive manufacturing materials...	96-3	87-6	36-6	61-0	62-5	49-8	61 4	510	67-6Retail Prices	99-5	98 9	71-3	73-9	790	78 7	79-1	77 4	81 4Cost oj Living	99-6	98-9	79-9	81-2	83-6	83 8	84-1	83-1	85-6
t For the fiscal years 1927, 1929 and 1933 figures for nearest calendar years are given.
MONTHLY INDEX OF WHOLESALE PRICES (1926 = 100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.-Apr. Av.1938-39	82-3	80-3	80 1	78-6	76-0	74-5	74 1	73-5	73-3	73-2	73-2	73-31939-40	73-4	73-7	73-3	72-6	72-4	78-2	79-3	80-3	81-7	82-6	82-8	83-1

[Stage Direction]
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.-Apr. Av.1938-39	84-2	84-2	84-1	84-2	84-9	84-1	83-9	83-8	83-6	83-3	83-1	83-11939-40	831	831	82-9	83-1	83-0	82-9	84-7	850	85-3	85-1	85-2	85-6

[Stage Direction]
13.	The outstanding facts relating to financial conditions during the past year are, firstly, the changes in exchange rates and the imposition of exchange control, secondly, the smooth working of our credit and monetary machinery and, thirdly, the disturbances, caused to security markets by various developments in the war.
The foreign exchange value of the Canadian dollar remained close to the United States dollar until about a week before the outbreak of war. Between August 24 and September 15 it fell to a discount of about 10 per cent. On September 15 the Foreign Exchange Control Board was established and after that date all sterling and foreign exchange transactions of Canadian residents were subject to its control. The official rates established by the Board were: American dollars, buying rate, $1.10, selling rate $1.11; Sterling, buying rate $4.43, selling rate $4.47. These official rates closely
rMr. Ralston.]
approximated the actual rates prevailing during the few days prior to control, and have not been changed since they were established. Practically all dealings involving Canadian dollars take place at these official rates. Nonresidents of Canada are able to transfer Canadian bank balances and other assets to other non-residents, and there is a market for Canadian dollars in New York which is not subject to control by the Foreign Exchange Control Board. The small volume of transactions in this market makes its rates of little significance and also makes them rather unstable.
During the early months of the fiscal year 1939-40 the average yield on long-term Dominion Government bonds remained close to 3 per cent. In the disturbances that naturally took place on security markets at the time of outbreak of war bond prices declined sharply and the average yield on long-term dominion bonds in September was about 3-60 per cent. From September to April there was a rather

The Budget-Mr. Ralston
irregular recovery in the prices of these bonds, and by the end of April the yield was back down to 3-25 per cent. Since that time there has been a small decline in price, and yields during the first half of June have been in the neighbourhood of 3^ per cent. Canadian stock prices declined, moderately in the weeks preceding the outbreak of war. After the war began industrial share prices rose sharply, particularly those of pulp and paper companies. Golds and utility stocks also began to rise before the end of September, and there was a general but mild upward movement till the end of the year. During the first four months of 1940 all groups except the paper stocks suffered a small and gradual decline. In May, however, there was general and severe liquidation which carried most groups to levels lower than any in recent years.
During the first five months of the fiscal year 1939-40 monetary and banking conditions remained stable. Cash reserves of the Chartered Banks increased slightly from $257 millions in March to $261 millions in August, while Canadian deposits of the banks increased in proportion. During the three months after the outbreak of war the Bank of Canada added substantially to its security holdings which increased from about $163 millions in August to $248 millions in November. This provided cash to meet the enlarged public demands for currency and to increase the cash reserves of the Chartered Banks from an average of $261 millions in August to an average of $294 millions in November. With this increase in their reserves the Chartered Banks were enabled to increase their Canadian deposits from $2,565,000,000 at the end of August to an all time record figure of $2,871,000,000 at the end of November. In these three months the security holdings of the Chartered Banks rose by $158 millions, and their current loans to the public by $147 millions. From November until April the Bank of Canada gradually reduced its security holdings from $248 millions to $206 millions. The
cash reserves of the Chartered Banks have fallen in the same period from $294 millions to $271 millions. Total Canadian deposits of the Chartered Banks have been reduced less than in proportion and at the end of April amounted to about $2,753,000,000. This has involved a reduction of the security holdings of the Chartered Banks of about $73 millions, which is a little less than half their increase last fall.
Total net Government and corporate bond issues in 1939, as reported by the Bank of Canada, amounted to about $237 millions, exclusive of municipal issues. This compares with $174 millions, $56 millions and $106 millions in the preceding three years. The $237 millions included net Dominion direct and guaranteed and other C.N.R. issues amounting to $177 millions, Provincial issues amounting to $79 millions and net retirements of corporation issues of $20 millions. In the first quarter of 1940 there have been net Dominion and C.N.R. issues of about $168 millions and net Provincial issues of about $40 millions.
On April 30, 1940, an order in council was passed requiring all Canadian residents to sell their holdings of foreign exchange (but not of foreign securities) to the Foreign Exchange Control Board before May 31. Some exemptions were made for those requiring a certain amount of foreign exchange to carry on their normal business. As part of this mobilization of foreign exchange resources the gold and most of the foreign exchange reserves of the Bank of Canada were transferred to the board. In order to provide the board with the funds to purchase this gold and foreign exchange, the Exchange Fund was increased by $325,000,000, which was raised by the sale to the Bank of Canada of that amount of short-term Dominion securities. As a consequence of these operations the statements of the Bank of Canada since May 1 show no figures for gold coin and bullion, and much larger figures for investments. The value of gold held by the Bank on April 30 was $225,772,887.41.

[Stage Direction]
Fiscal Years ended March 31					Mar.-Apr. Av.	
1927	1929	1933	1937	1938	1939	1940	1939	1940Security Prices and Yields Indexes of Common Stock Pricas (1926=100) General Index	101-8	173-3	62-1	125-5	117-6	103-8	99-4	99-9	98-0Industrials	102-4	222-2	60-1	207-6	192-2	171-8	163-0	164-5	157-0Gold Mines	-	94-1	590	132-0	112-7	118-8	107-9	114-1	96-1Dominion Bonds-Average Yields (%)	4-82	4-64	4-90	3-29	3-32	3-09	3-26	3-03	3-30Dominion Treasury Bills-Aver age Yield (%)	_	[DOT]778	[DOT]739	[DOT]601	*702	[DOT]650	[DOT]74595826-88£	
The Budget-Mr. Ralston
[Stage Direction]
FINANCIAL FACTORS-Concluded
			Fiscal Years ended March 31					Mar.-Apr. Av.	
	1927	1929	1933	1937	1938	1939	1940	1939	1940
Banking and Currency (Millions of Dollars) Bank of Canada-									
Total Reserves	-	-	-	194-8	206-0	217-5	267-0	236-4	284-6Total Security Holdings	-	-	-	135-8	166-6	179-5	200-2	160-3	206-9Active Note Circulation	-	-	-	70-6	95-9	107-8	140-5	108-3	152-7Government Deposits	-	-	-	23-1	23-7	24-0	39-3	19-8	47-7Chartered Banks' Cash Re-	serves	-	-	-	230-6	243-1	259-5	270 8	258-6	269-9Chartered Banks-	Canadian Deposits	1,978-0	2,274-0	1,929-0	2,280-1	2,390-6	2,487-0	2.697-0	2,544-5	2.743-5Notice Deposits	1,355-7	1,507-0	1,378-3	1.530-6	1,584-7	1,649-6	1,700-1	1,698-7	1.666-3Demand Deposits	557-8	682-4	473-1	646-0	684-0	705-0	764-1	710-4	791-0Total Security Holdings	517-8	517-0	726-2	1,370-3	1,430-7	1,450-5	1,577-5	1,503-9	1,595-4Current Loans in Canada	957-7	1,212-9	997-9	685-6	744-1	799-4	899-7	807-3	959-2Call Loans in Canada	145-5	260-1	109-0	104-0	94-3	64-5	52-6	55-0	52-9
On motion of Mr. Harris (Danforth) the debate was adjourned.


[Stage Direction]
The house resumed from Friday, June 21, consideration in committee of Bill No. 42, to assist in the alleviation of unemployment and agricultural distress - Mr. McLarty - Mr. Fournier, (Hull), in the chair.
On section 3-Agreements with provinces and others.
Hon. N. A. McLARTY (Minister of Labour):: Mr. Chairman, may I take this
opportunity to make a brief statement? On Friday last the hon. member for Lake Centre (Mr. Diefenbaker) referred to the estimate of expenditures on direct relief for this year, and compared it with the amount allocated last year. I told him at the time that the estimate was predicated on figures supplied by the municipalities to the provinces, which in turn were passed on to us. In this connection I should like to give such information as I have available.
As I pointed out previously, our contribution of forty per cent will remain unchanged in Saskatchewan, and our estimate is necessarily based upon figures supplied by the municipalities to the province, and by the province to us. I know the committee will appreciate the difficulty of making a definite estimate, more especially for Saskatchewan, where so much depends on weather conditions. Of

course we will maintain the forty per cent
ratio, even though it may require the payment of an amount somewhat larger than we at present estimate. Last year the total payment to Saskatchewan by the Department of Labour, representing the 40 per cent contribution to direct relief, amounted to $2,645,729.29. On January 11 of this year Saskatchewan suggested the closest estimate they could make would be $2,665,000, based on the forty per cent contribution arrangement. This included a small amount, not exceeding $40,000, for a provision in the agreement under which the dominion government pays fifty per cent of the cost in respect to persons who have no provincial residential qualifications.
Under date of April 16 the provincial director of relief advised the Department of Labour as follows:
We have already experienced a very substantial improvement in relief conditions due to improved crop conditions and the resultant improvement in economic conditions generally. I feel that further substantial reductions in relief costs will be possible in the next two or three months, but from that point on it is most difficult to make any forecast because the crop harvested next fall will determine, to a great extent, the extent of our relief requirements.
And again:
I may say for your information that we have had some heavy snow falls recently that have greatly improved moisture conditions all over the province, and while we are experiencing a very late spring, conditions now look fairly promising.
Since then the forecasts for the early months of the year have been fully substantiated; for example, in April and May of the current year the number on urban relief in Saskatchewan was down 44 per cent as compared

Unemployment Relief
with the same months in 1939. The number on agricultural relief decreased by about 65 per cent in comparison with last year. This will necessarily involve corresponding reductions in relief costs.
With the factors I have mentioned as to the uncertainty of weather conditions and the information from the province as to the wide reduction in the numbers in receipt of direct relief, the closest estimate that the department can make as to the amount which will have to be paid to the province of Saskatchewan in the current year is approximately $2,000,000.


Clarence Gillis: Mr. Chairman, while the bill was in the resolution stage I endeavoured to give the Minister of Labour (Mr. McLarty) a picture of conditions as they existed in Nova Scotia at that particular time, and which made the payment of relief necessary. I want to make a few remarks on section 3 of this bill, which deals specifically with the agreements which are to be made between the federal government and the provinces.
Relief in Nova Scotia has been practically discontinued from March 31. My reason for rising at this time is to refer to a letter which I received from one of the town councillors of Glace Bay. This municipality is faced with a potential unemployment problem. At present there is a considerable number of unemployed in the town. This gentleman enclosed with his letter a press statement which had been given by the mayor during a recent meeting of the town council. I should like to quote from that press statement, as follows:
The request that R. H. McKay, deputy minister of labour, come here as soon as possible to confer with the council on the relief situation and get something arranged early w-as made at the town council last night after the mayor had read a letter from Mr. McKay stating that no more direct relief aid might be received from the federal government.
Mr. McKay's letter said that no assistance had been received from the federal government from April 1 and if there was none coming the provincial government would be unable to assist and the whole burden of direct relief would be placed on the town.
And further down:
In March there were 196 heads of families with 559 dependents and 73 other individuals on direct relief, three per cent of the population.
Some decision had recently been made by the federal government on direct relief, Mayor Morrison stated, but no agreement had yet come forth. Unless some aid came soon the end was in sight as the town couldn't hope to carry on the burden alone.
In other places there was a great deal of war work going on but the war had made no improvement here; in fact it was worse here now than at this time last year.
I know that statement is true. There are two mines in this district which are gradually being closed. The ranks of the unemployed are being added to weekly, and there are no war industries being carried on. As a result, unemloyment in this particular section is increasing. I received a letter this morning from the secretary of the United Mine Workers of America, an organization which represents 12,000 miners in Nova Scotia. He asks me to bring the situation to the attention of the Minister of Labour, since it is something which directly affects that department. It also dovetails into the question of unemployment relief. I may say that this morning I took the matter up with the deputy minister of the department and was informed that the situation described in this letter is true. There has been no change since the letter was written on June 21, 1940. It is addressed to me and reads:
This is for your information, and I hope you will bring to the attention of parliament the difficulty we in Nova Scotia are having in getting a conciliation board appointed.
On May 3 we made application for a conciliation board for the employees of the Old Sydney Collieries Limited at Sydney Mines, and the employees of the Acadia Coal Company at Stellarton, who are members of district No. 26, United Mine Workers of America. On May 6 we received the following reply:
He then quotes a number of telegrams which passed back and forth between the mine workers and the Department of Labour. I shall not take the time to read these, but will quote further from the letter:
You will note by these telegrams that Mr. Forsythe and Mr. Muise were appointed June 3. After Mr. Muise was notified of his appointment, he immediately got in touch with Mr. Forsythe and submitted the names of eight persons, prominent Nova Scotians, any one of whom he would be agreeable to act as chairman of the board. Mr. Muise was in telephone conversation with Mr. Forsythe, and Mr. Forsythe would not agree to any one of these men. He gave no reasons for not agreeing. neither did he submit any names himself. Since that time we are awaiting the appointment of a chairman.
The men effected are complaining to the executive officers continuously, asking why the *board is not functioning, and it is hard for the district officers to make them believe that it is being held up on account of the appointment of a chairman. This slowness of action is having a very bad effect here. _ You know the wages these men are receiving, both in the Sydney Mines and Acadia districts, and they have been working for a considerable period without a contract. No action can be taken until the conciliation board has first heard their case. I have already explained to you details in connection with the application we made for a board for the Sydney and Louisburg railway.
I trust you will bring this to the attention of the Minister of Labour, for if boards are to have the desired effect in Nova Scotia they
Unemployment Relief

must be able to function more promptly than in this case where application was made on May 3 and up to June 21 no notification of the board having been set up was received; that is, up to date, no chairman has been appointed to act in this capacity.
Mr. Muise, our representative on the board, carried out his part and submitted the names, while the company's representative did not submit any names and gave no reason for his not accepting any of the men whom Mr. Muise was willing to accept. The following are the names of men whom Mr. Muise submitted, any one^ of whom would be acceptable to him as chairman of the board.


Norman Alexander McLarty: I do not think my hon. friend should read those names. If as Minister of Labour I am to act upon a recommendation by Mr. Muise as to various representatives on the board, then the names should not be known.


Clarence Gillis: The names which Mr. Muise submitted?


Norman Alexander McLarty: I do not think it would be fair to tell me that, let alone make it known to the committee. If with that knowledge I selected one of those names, the operators might contend that I did so because I had been asked to do it. I have been very careful in selecting the chairman of a board, where a chairman cannot be agreed upon.


Clarence Gillis: That is the point at issue. The operators absolutely refuse to accept any of these men.


Norman Alexander McLarty: That, of course, is their privilege. The operators do not have to make a selection from some panel that is submitted by the local union, and on the other hand the union does not have to make a selection from some panel submitted by the operators. If they can agree upon a chairman, very well; if they cannot agree, it is iny duty as Minister of Labour to appoint a chairman.


Clarence Gillis: The point Mr. McKay had in mind in writing was that the application has been pending now for two months, and the workers' contracts have expired.


Norman Alexander McLarty: I understood the hon. member to say May 23?


Clarence Gillis: Yes, and this is the latter part of June. Their contracts expired eighteen months ago. It is felt that the operators in Nova Scotia are taking advantage of the war and the men's desire to continue at work, instead of using their only weapon, which is the strike, and that the operators are simply dragging this thing along. There is absolutely no reason why the names that have been submitted should not be acceptable. They are the names of lawyers and judges, not connected with labour in any shape or form.

One of them, in fact, is a coal company official. There is no reason why the operators should take this attitude. Their refusal to accept a chairman simply means that the thing is dragging along and they are keeping wages where they are as long as they possibly can, taking advantage of the war situation. What Mr. McKay is afraid of, and what I am afraid of, is that the miners in these two sections are going to be forced into a false position through being compelled to strike regardless of the war.


Norman Alexander McLarty: Has the board not been
set up? Is it not merely awaiting a chairman?


Clarence Gillis: It has taken since May 3
to decide upon a chairman, and I think it is prettly nearly time for the Department of Labour to select a chairman.


The ACTING CHAIRMAN (Mr. Fournier, Hull):: The hon. member is out of order.
We are discussing section 3, which concerns agreements with provinces and others.


Clarence Gillis: The reason why I brought
this matter up was that by reason of the dispute the miners of these two sections may be on the government's hands, unemployed, if something is not speedily done. I am through with that subject, Mr. Chairman.
Another matter which I wish to bring to the attention of the Minister of Labour is unemployment among the fishermen of Nova Scotia. There are approximately 40,000 fishermen in our province, and the fisherman can very well be termed the forgotten man. Almost every phase of our economic life is discussed in practically all groups where any talking is done, yet the fisherman is seldom mentioned. I know that the federal government is assisting in the establishment of cooperatives. It has made a generous gesture in that connection which is appreciated very much, but on the whole the plight of the fisherman is deplorable. What I am concerned about is the contributing factors which put the fisherman in this plight, because, apart from direct relief, there are measures which could be taken that would be of material assistance to the fisherman.
In the town of Glace Bay, for example, a man whose earnings are $200 or $300 a year is practically on relief 365 days a year. The harbour at Glace Bay is in such a condition that it is retarding the fishing industry of that town. The harbour master of Glace Bay has written me a letter in which he sets out the facts. But first let me say that if the fishermen in that section do not receive assistance in the form of harbour improvements this season, the chances are that the harbour will have to be closed. Considerable correspondence

Unemployment Relief
with regard to the matter has been, carried on with the Department of Public Works, but apparently nothing has been done. I should like to read this letter from the harbour master. He starts by wanting me to take a look at Glace Bay harbour. He says:
This harbour, the most eastern in all Canada, is directly on the Cabot strait and the easiest to make of any harbour on the east coast. It is 97 feet wide and 1,000 feet long, with wharf facilities of 400 feet on its north side.
At this date the entrance channel is less than 9 feet deep at low water. Our tides are never more than 34 to 4 feet. The channel needs dredging. The bottom is muck, and the whole harbour could be deeped to 15 feet in two or three weeks' dredging.
He goes on to speak of the lobster season, and then has this to say of the swordfishing season, which is more important.
The swordfishing season commences about the middle of July, when an average of 150 boats made this harbour their headquarters. Large collection boats follow the swordfish catch and need 13 to 15 feet of water.
With a channel only 9 feet deep at the present time, these boats are not going to be able to use the harbour. He goes on to say that some 100 Newfoundland two-masted fishing schooners as well as lumber vessels and produce vessels also use this harbour, and he continues:
If the harbour is not dredged at once it may have to be abandoned for 1940.
That is a serious situation facing the fishing industry in that section, where a fleet of 400 vessels are now outfitting to fish on the adjacent banks. He goes on to point out the possibilities for the fishing industry in that section by reason of European fishing being disrupted by the war. It should be possible to assist in the development of this fishing industry and enable it to take care of markets which now cannot be supplied from the other side of the Atlantic, where the war has disrupted the fishing industry.
I also wish to speak of conditions at Port Morien. I have received a complaint from there, and if the matter complained of were remedied it would help to relieve unemployment. About 150 boats go out of Port Morien district. A factory is established there and a certain amount of lobster fishing is done. The man who owns the factory will also buy fish of all kinds, but he has no storage facilities. According to my information, application has been made on two or three occasions for permission to establish a fish shed on the breakwater at Port Morien. At the present time men in that section lose two or three days' fishing a week because there are no storage facilities there. If permission were granted to establish a fish shed on the breakwater, these fishermen could get three or four
days' fishing a week after the lobster fishing is over, instead of having to stay at home and seek relief.
These factors, all of which enter into unemployment, are matters which the Department of Labour should check up on, in order that, if at all possible, by the government providing the facilities which are required, these men would be able to carry on fishing operations. The fishermen in this way would be kept off direct relief, which is something they do not want if work can be had. I am sure that aetion by the department would help to relieve the situation in the different places I have mentioned.


Mr. FRASER (Peterborough West):: I
understand that dependants of people interned receive relief on a higher scale sometimes than Canadians on relief. Can the minister say whether that is the situation or not?


Norman Alexander McLarty: I have no definite figures before me because the internment camps do not come under my department. We have to do with direct relief, but I shall be glad to make inquiry. I should be very much surprised if it were true, but I cannot answer the question offhand.


Gordon Knapman Fraser: I was informed over the week-end that the dependents of some of the Italians and Germans were receiving relief, and, in some instances, more than Canadians were receiving.


Norman Alexander McLarty: I shall be glad to look into that.


Mr. DOUGLAS (Weyburn):: Those of us who come from Saskatchewan are glad to have the clear statement which the minister made this afternoon with reference to the situation in that province, because we have been considerably perturbed about it, and an impression has gone abroad to the effect that the federal government had actually intimated that there would be a reduction. The Minister of Agriculture (Mr. Gardiner) used the phrase the other day that between the federal, provincial and municipal bodies there was "considerable passing of the buck", and probably that is the best description which can be given of what has actually occurred. The minister then made this statement:
The municipality is the first authority upon which is placed the responsibility of saying whether or not there is going to be any further relief. For that very reason the municipality is ask to pay 20 per cent of the cost of relief. Somebody, some time, has to begin to stop it; after the municipality has had its say, the province has its chance, and this government, as well as the previous government, has in most instances accepted the statement from the municipality, . . .
Unemployment Relief

While on paper that may be what ought to happen, it is not what happened. It is true that when application is being made for relief, the person desiring relief goes to the municipal authorities; they in turn make application to the provincial government; and they in turn to the federal government. But when relief is stopped, its cessation is not instituted by the municipal body. In fact every day there come to my desk, and no doubt to those of other hon. members, letters from reeves of municipal councils pointing out that when a meeting is held the provincial relief officer merely intimates to them that they will have to cut down the orders a certain percentage this month. In some instances it has been intimated to them that the government will not be able to pay the councils anything in a certain month. The initiative does not lie with municipal councils. They are merely told what the pattern is for the particular month and they have to cut their cloth accordingly. There may be a reason for that. Probably the provincial government has only a limited amount of money which it can spend for relief in the particular month. But I think it is an erroneous impression to give that the municipal body decides that relief will be cut and so notifies the provincial government, and they in turn the federal government.
Regarding the minister's statement to-day, and in view of the stand which, I know, most of these municipal bodies have taken-for the fact of the matter is that the reductions which have occurred in Saskatchewan have to a large extent been the result of the financial condition of the province-I am convinced that the minister's statement will be welcomed when he says that the federal government will be prepared to continue to pay forty per cent, as they have done in other years, and that, contrary to what was feared, no maximum limit will be set.
Could I now ask the minister, unless the question would more appropriately come under the next section, whether the government has decided to abandon the farm placement scheme? It has not been used this year. Has it been decided to abandon it completely?


Norman Alexander McLarty: I do not believe there has been any definite decision upon that. Negotiations with the provinces have been continuing;
I cannot advise definitely what state they are in; but there is no intention of abandoning the scheme.


Thomas Clement (Tommy) Douglas: It was not in operation this last year. rMr. T. C. Douglas.]


Norman Alexander McLarty: I believe that was because certain provinces were content not to have it this last year.


Mr. CASTLEDEN:: Speaking to this
measure, one reason I have for rising is that the other day the hon. member for Wood Mountain (Mr. Donnelly) accused me of having made some statements which insulted certain people. I rose at the time to ask him a question and to request him to read the statement which I made, but he would neither read the statement nor permit the question. If he will read what I said he will find that I merely repeated a story which had been told, to illustrate the fact that it might be possible for a person in gaol to receive better medical attention than a poor person who was unemployed. I did not insult the medical profession. I wish 'to pay tribute to that profession and, in particular, to those noble men who have remained in the drought-stricken areas along with the teachers and farmers, and fought on. I paid particular tribute at that time to the work for the prevention of tuberculosis in Saskatchewan. I believe that this work should be continued and spread across Canada, and that preventive work should be applied not only to tuberculosis but also to other diseases. There are many thousands of cases which, although not so acute as to require an immediate operation, call for preventive treatment, and the absence of it occasions much needless suffering.
With further reference to this measure, I wish to endorse the suggestion of the hon. member for Lake Centre (Mr. Diefenbaker) that there should be some federal supervision of the administration of this money. If the dominion government is making a forty per cent contribution to a province, I believe it is only just, and in conformity with the wishes of every hon. member of this committee, that we should know that that money is being properly distributed.
I should like also to endorse what the hon. member for Weyburn (Mr. Douglas) has said this afternoon. I am in receipt of a communication from the reeve of a municipality in the constituency of Yorkton, in which he states that all provincial assistance for relief for indigents was being cut off as from the end of April, 1940; and, he was instructed, henceforth the responsibility for this relief would have to rest entirely with the municipality. Hundreds of municipalities in Saskatchewan are absolutely bankrupt. Many mortgages are being foreclosed and the owners thrown off their farms; there is no hope

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for them except in the way of relief, and if relief is cut off I do not know what the results will be.
I was pleased to hear this afternoon that the minister through his department intends to make grants, based upon the requests which come from the provincial government and from the municipalities. I hope that the discrepancies which have occurred in the past will not occur again.


Richard Burpee Hanson: I have not intervened at any great length in this debate. But as it is now the 23rd of June, and about half the calendar year has expired, surely the provinces must have made their representations for relief for the remaining period of the fiscal year and the remaining period of the calendar year. If such is the case, would the minister be good enough to place on the record, at some time before this bill passes out of the committee stage, a statement of just what the provinces propose for this year? I have in mind my own province. As he is aware, we have no registered direct relief there, but do not let him or any other hon. member think for a minute that there is no occasion for some direct relief.


Norman Alexander McLarty: My impression is that
the province of New Brunswick in some instances gives grants in aid to the municipalities, but we do not make any contribution.


Richard Burpee Hanson: 
Norman Alexander McLarty: I will endeavour to get as much information as I can during the dinner
recess.


Richard Burpee Hanson: I do not ask for it now, but it might be given before the bill passes out of the committee stage or, if that is not convenient, before the third reading.


Norman Alexander McLarty: I was hoping that we could get out of the committee stage to-day.


Percy Chapman Black: Has any
special agreement been entered into or has there been any understanding with the provincial governments with regard to the technical training of youth? The minister stated earlier in the discussion that he hoped steps had been taken to keep open the technical schools in Canada with a view to giving summer training to some 4,000 or 4,500 of our young people. I wonder if any agreement has been entered into with Nova Scotia to this end and, if so, whether any steps have been taken in a community such as Amherst where there is considerable activity in the

Unemployment Relief

construction of aeroplanes. It is expected that a reconditioning establishment will be set up there for the reconditioning of aeroplanes. Have any steps been taken for training to be given in Amherst? There are mechanical schools there. They have not the advantage of a technical college, but there are a great many young men, some of whom unfortunately have been on relief, who have an aptitude for this work and desire to obtain training so as to fit themselves for service in this direction.


Norman Alexander McLarty: All the provinces have been approached, but I should not like to speak from memory as to the town of Amherst which the hon. gentleman mentions. However, I will get information on the question.


Percy Chapman Black: On what basis would such an agreement be entered into? Does the department make the entire contribution or does the province contribute a proportion?


Norman Alexander McLarty: It varies in different
provinces. We are going to have to be somewhat generous in our contributions to the provinces. On the question of equipment we have not finally decided upon anything. We are anxious to get it going and we have allowed some details to take care of themselves so far, because the present is the time for us to be getting underway.


Mr. POULIOT:: I have three questions to ask. First, what are the actual conditions upon which direct relief may be granted to individuals in each province? Second, what is the amount of direct relief paid to each recipient in each province? Third, are the conditions of granting relief and the amount of relief to be paid to individuals decided by the dominion Department of Labour or by the province or by both?


Norman Alexander McLarty: The answer will have to be a general one. In the first place the aid is granted to those in necessitous circumstances; in the second place the quantum which each individual receives is determined by the municipality and the province, and our contribution is forty per cent of that of the province. I have not, however, the figures. I think the question should be asked on the estimates when the officials of the department are here. As to the amount of direct relief paid to each recipient in each province, I cannot give any information at the 'moment.


Jean-François Pouliot: I do not want to take the minister into a corner to get the information. I shall be satisfied if he will instruct his officials to send me the answer.


Norman Alexander McLarty: I shall be glad to.


Richard Burpee Hanson: Just a word with regard to a check-up on expenditures. Last week we heard a good deal of criticism of the manner in which they are made. In New Brunswick a very large portion of the money that this government grants in aid to the province has been spent for political effect. That ought not to be, and it never was the intention. The intention was that public works should take men off relief. Men on relief were obliged to give political assurances. What check has the department on such activities and on particular expenditures? Does the department follow the money through in any way? I am afraid it does not.
I would suggest to the minister that we forget about the past. Let us for this year, and for succeeding years if we have to have this sort of thing, have,some follow-up system, apart from the question of auditing, which I think is all we have at the present time. There should be some follow-up to see that the moneys granted to assist the provinces and municipalities to perform their constitutional function are not abused for political purposes. That is stating the situation succinctly and without going into details. I hope that will be done, even if it is a departure from the experience of the past. I know there has been an audit, which is based largely on the terms of the individual agreements with the provinces, but in my view that is not enough. We should have some kind of follow-up by inspection or otherwise. And let us not have political inspectors. If I interpret my hon. friends to my left correctly, the charge in the west, if I can dignify it by that term, is that the inspection has been more or less political. These are public funds, for the alleviation of human distress, and it does seem to me that we ought not to assent to any trading on that sort of thing. I would not like to be guilty of that myself.
In 1934, 1935 and other years instructions were sent out definitely by the then government that there should be no discrimination. But I venture to say that in some instances those instructions were not followed out. Partisans will be zealous. The intention of the then government, however, was as I have said, and if we erred at all at that time it was because we did not follow it up with a check. I am not seeking to escape any responsibility that attaches to me or to the former government. If these things have happened, that is all the more reason and inducement to correct a situation which I apprehend exists in certain places, and which I know existed last year in New Brunswick. Let us treat this matter from a humanitarian point of view, not from the point of view of

Unemployment Relief
political gain. In fact I doubt very much whether it produces political gain. I have an idea that in the provincial election in New Brunswick last fall the government of the day lost hundreds of votes by the way in which they attempted to handle this relief proposition. I have no doubt that it reacted against them, because people resent being led to the polls. There is a certain element of coercion, and fear may be inspired.
Let me give an illustration, not of abuse of relief money, but of the way in which provincial governments treat moneys sent them by this government. I was surprised to learn the other day that some thousands of dollars had been sent out to the various provinces by the Department of Pensions and National Health for air raid precautions. The sum of $5,000 was allocated to New Brunswick. If anything substantial was to have been done in that regard, of course $5,000 would be a very small amount, even for the seaport city of Saint John. But all the money that ever was spent for air raid precautions in the city of Saint John was spent by the municipality itself, and as far as I have been able to ascertain

I speak subject to correction, because we do not want to be dogmatic about these matters-not one dollar of that $5,000 was spent for air raid precautions. If it has not been spent the money ought to be returned to the dominion treasury. It is not under the minister's department, and when the appropriate minister comes with his estimates I am going to ask him about this, but it illustrates the principle for which I am contending. If it is not checked up, that money will just go into the consolidated revenue fund of the province, a contribution from this dominion to the province, never expended and never returned.
Would the minister during the dinner recess give some consideration to the two points I have raised, namely the question of what arrangements have been or are being made or negotiated with the provinces, and the question of a check-up on the expenditure? I know he will agree with me one hundred per cent in respect of the principle which I am advocating.


Mr. MacNICOL:: Section 3 provides:
The governor in council may enter into agreements:
(b) with corporations or partnerships or individuals engaged in industry respecting the expansion of industrial employment.
If the minister has the information, would he give the committee an outline of what it is proposed to do under paragraph (b), particularly in reference to Ontario? I notice on 95826-
page 6 of the report of the dominion commission of unemployment relief under the 1939 act, in reference to Ontario, under the heading "Rehabilitation of older unemployed," it speaks of agricultural training, training in skilled trades and industrial occupations. Then on page 12, in reference to Ontario, the statement is that for the rehabilitation of higher age people, $27,500 was spent. The minister should tell us how that money was spent, how they were rehabilitated, if it means rehabilitating men who were mechanics but who through unemployment, had perhaps lost the finesse of their trade, and if so, how that money was applied to industry under paragraph (b).


Norman Alexander McLarty: I shall be glad to. But I may point out that many questions have been asked that I would be much freer to answer on the estimates, if that is satisfactory.


John Ritchie MacNicol: I do not want to press it.


Norman Alexander McLarty: I shall be glad to give the information.
At six o'clock the committee took recess.
After Recess
The committee resumed at eight o'clock.


Norman Alexander McLarty: The hon. member for
Davenport asked a question as to what is being done with regard to the development of technical schools in Ontario, and elsewhere throughout Canada. In that connection I shall make a statement which, I believe, will cover the matter rather fully.
Arrangements have been made in eight provinces for the use of the vocational shops in technical schools during the summer vacation period. These shops will be used to provide instruction in occupations connected with industries engaged in war contract work and will be devoted chiefly to machine-shop, sheet-metal work, moulding, welding, production workers for aircraft manufacturing and, where there is a demand, motor mechanics and wood working.
The minimum age of admission is sixteen years, and at the outset a large proportion of the trainees will be drawn from the students in the senior years of the technical schools. Older men will also be admitted to these courses, provided they have had some previous experience in the trade for which training is desired.
The technical schools' facilities are being placed at the disposal of the government without charge for rental or depreciation as
Unemployment Relief

the municipalities' contribution. Approximately fifty-five technical schools have been offered for this purpose distributed as follows:
Ontario	 24
British Columbia	 5
Alberta	 2
Saskatchewan	 3
Manitoba	 2
Quebec	 12
New Brunswick	 6
Nova Scotia	 1
In answer to the hon. member for Cumberland, may I point out that the one in Nova Scotia is the Nova Scotia Technical college. The supervisor of youth training advises me that this is the only college really available in Nova Scotia.
The first schools were opened a week ago, and it is expected that all schools will be in operation by the beginning of July, according training facilities to a minimum of 5,000. Where necessary, a second shift will be operated in the schools with eight hours instruction a day, with a total of 350 to 500 hours during the course. These schools are in addition to those that are being operated under the regular youth training programme, but they will be coordinated with its activities.


Mr. HARRIS (Danforth):: AVill night
classes be organized and arranged for those in regular employment during the day?


Norman Alexander McLarty: That is being presently
organized, but they might not be night classes. The suggestion is an eight-hour day, with a break at about three o'clock in the afternoon. But in some circumstances if might be possible to establish night classes for the training of youth.


Joseph Henry Harris: That condition presently obtains under the curriculum of the technical schools. They have night classes on at least three nights in the week, in connection with the mechanical trades.


Norman Alexander McLarty: Those are in the vocational schools, under the regular youth training plan, I believe.


Mr. PERLEY:: Section 3 provides for
agreements with the provinces for the alleviation of unemployment and agricultural distress. I have listened to the discussions which have taken place on the bill, and the discussion on the resolution which preceded the bill. I have listened to the debate with considerable interest, and I have felt as did the hon. member for Wood Mountain (Mr. Donnelly) who prefaced his remarks the other night by saying he had not intended speaking, but after listening to the speeches from hon. members in the extreme left-hand corner of the house he had decided to say something.

After having listened to the speech of the hon. member for Wood Mountain, I avail myself of this opportunity to say a few words.
I believe I have not trespassed unduly on the time of the house thus far. The question of unemployment and agricultural distress has long since reached the point where it is a national problem. The Minister of Labour (Mr. McLarty), the Minister of Agriculture (Mr. Gardiner) and the hon. member for Wood Mountain stressed the point that the rural municipalities had the first responsibility, the province the second and the federal government the third. To my mind the rural municipalities and the provinces can no longer cope with this problem.
Why do I say that? First, many of the rural municipalities in Saskatchewan have reached the point where they cannot finance their own obligations, carry on their own road work and perform other necessary tasks. For any expenditures in connection with relief they must depend upon the guarantee of the province which they must give the bank before they can obtain any money. In turn the province comes to the federal government.
When we were discussing the resolution I heard the hon. member for Peel (Mr. Graydon) ask why men are out of work to-day. It must be remembered that we are at war, and that industry has been asked to step up production. His question was a reasonable one, namely: Why are men out of work to-day? Possibly there is a reason for that, but I think hon. members will agree with me when I say that agricultural distress involves a further question, namely, that of production and marketing. I believe the government cannot divorce itself from these problems, when it deals with matters connected with unemployment and agricultural distress, and particularly is that so when it is dealing with the provinces.
In his opening observations respecting the estimates of his department, the Minister of Agriculture outlined the reorganization which had been taking place in his department in the last year or so along lines of production and marketing. I believe that is a splendid idea. Had his department been properly organized with a view to what was going to take place in the future in connection with agriculture, and had the minister in the last year or so been giving his department the attention it deserves, thousands of men could have found employment on the farms in Saskatchewan.
Someone may ask me how that could have been done. It seems to me obvious that in the future years we shall have to change our whole system of agriculture. We must change to meet changed conditions, and that change

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10S5
will involve intensified agriculture and the development and production on the farms of Saskatchewan of commodities they are not producing at the present time. It was only a day or so ago that the Minister of Agriculture made a statement at a point in Ontario with respect to the production of cheese and described how the production of that commodity had been stepped up. That is just one evidence of what will take place in the future.
In the last few years the Department of Labour has never had a real or constructive policy. Of course we cannot blame the present minister, because two or three years ago he did not head that department. To prove that the department has not approached the problem of unemployment in a constructive way, I need only refer to the first report of the Purvis commission which made certain recommendations. A great many of those recommendations were never carried out, and there has been no evidence that the Department of Labour intended to carry them out.
Resolution after resolution are coming to hand. I have received many of them from my province and other provinces in the west. I have received them from organized bodies, farmers' organizations, heads of industries, pool organizations, and other groups, stressing the point that the recommendations of the Purvis commission at least to some extent should have been carried out. I think hon. members will agree that the heads of all types of industry, and of agriculture in particular, should have been called into action a year or so ago.
I agree with what the hon. member for Winnipeg South (Mr. Mutch) said the other evening, that in western Canada much could be done to alleviate unemployment by paying some attention to the development of industry. He referred to Winnipeg in particular. I should like to call attention to what has happened in connection with the General Motors plant in Regina. Labour could be employed in industry in western Canada just as well as in agriculture. There would be a great saving in freight to the agriculturists of western Canada if certain lines of the implements of production were produced in the west.
The federal government is just passing the buck. On Friday afternoon 'the Minister of Labour said that he had never been asked by the provincial government to diminish relief distribution. That may be so, but I notice that to-day he tabled the details of the appropriation being asked for by Saskatchewan. That is considerably less than it was last year, which is all to the good.


Norman Alexander McLarty: I would not want to mislead the hon. member for Qu'Appeile. The figures I gave were the estimates made by the department, which were based on the figures that came in. I would not want to suggest that that appropriation was asked for by Saskatchewan.


Ernest Edward Perley: But the minister will admit that on Friday afternoon he said that he had never been asked by the province to diminish relief distribution? I am not objecting to that, but I do contend that relief was withheld. There was considerable distress and suffering last year because relief was withheld in those areas in Saskatchewan which qualified for the bonus plan provided by the Prairie Farm Assistance Act. That relief was withheld, I believe on the direct order of the Minister of Agriculture, who has charge more or less of relief in that province. Those townships which qualified for bonuses under the Prairie Farm Assistance Act had relief payments withheld.


Mr. GARDINER:: I know the hon. member does not want to make any statement which is not correct. I believe relief was paid in every municipality in Saskatchewan in which the acreage bonus was paid.


Ernest Edward Perley: The provincial government stated that direct instructions were issued by the Minister of Agriculture that there would be no relief paid to those farmers who qualified for the bonus.


James Garfield Gardiner: I do not think any such statement was given out. If it was given out, it was not under my instructions.


Ernest Edward Perley: There was a relief distribution under the arrangement which the Department of Labour had with the provincial government and the .municipalities.


James Garfield Gardiner: That is the way it has been done.


Ernest Edward Perley: If the minister will just bide his time, I saw letter after letter which had been sent out by the municipalities, under instructions of the provincial government, stating that farmers who had qualified for the bonus would not receive any more relief.


Mr. SLAGHT:: Why do you not change your provincial government?


Ernest Edward Perley: I think if they had had a fair show up there, no politics being played such as the hon. member for Lake Centre (Mr. Diefenbaker) described the other evening, the situation might have been different. He told the committee how relief orders were handed out in the polling booths on election day.
Unemployment Relief


James Garfield Gardiner: If you would not make bo many agreements with other groups, perhaps you would get somewhere.


Ernest Edward Perley: We will attend to that a little later. I may say that in the last session there used to be many of these interruptions. I should like to make just one speech while the Minister of Agriculture was glued to his seat. I was going to give him a little credit. The Prairie Farm Assistance Act which was passed at the regular session of 1939 was a relief measure and it cannot be dissociated from this measure. But as I say, many of the farmers who qualified for the bonus did not receive it in time to have it do good. It was provided that sixty per cent of the bonus would be paid in December and forty per cent in March. Under the survey which was made '[DOT]"rtain townships qualified, but that survey was inefficient. I believe politics were played to quite an extent. I could show a number of letters in proof of that, if I so desired.
The bonus cheques which should have been delivered in December were withheld or delayed until March. Many of these were not received until March 21, a day or so before the election. Hon. members will appreciate the distress which the non-receipt of these cheques would cause to farmers having a crop of only five, eight or twelve bushels to the acre. These bonus cheques were not received in time, and the farmers were cut off relief. The municipalities should have made the survey in the first place. They eventually had to do it during the election campaign. If these farmers had received their bonus cheques in December they could have provided-


James Garfield Gardiner: On a point of order, if I attempted to answer the hon. member at this time I would be declared out of order. When we come to discuss the estimates dealing with this matter, there will be plenty of opportunity for debate. I think the hon. member is out of order.


Ernest Edward Perley: Not at all. The minister spoke the other night, and he was allowed what the hon. member for Temiscouata (Mr. Pouliot) referred to as lots of latitude and longitude.


The ACTING CHAIRMAN (Mr. Jean):: I am not giving a decision on the point of order, but I think the hon. member should restrict his remarks to section 3 of the bill.


Ernest Edward Perley: That section provides for agreements to be made with the provinces for the relief of agricultural distress. This bill is a relief measure, as was the Prairie Farm Assistance Act. That act was an insurance and relief measure; a little of both, but not enough of either.
iMr. Perley.]


James Garfield Gardiner: Nothing to do with this bill at all.


Ernest Edward Perley: I am making a point that farmers were cut off relief last fall because they had qualified for the bonus. If that bonus had been received in time they would have been able to acquire their seed oats and seed barley before they advanced in price. Seed oats went up ten cents a bushel and barley advanced fifteen to twenty cents a bushel. It would have been a fair relief measure if it had been properly administered.
At this session many problems should be dealt with which would relieve agricultural distress in Saskatchewan. On Friday afternoon the hon. member for Wood Mountain stated that no politics had been played in connection with the distribution of relief in Saskatchewan. I think he was generous enough to say that politics had not been played by any party. He was really funny; that was a joke. Of course, he was addressing himself to the extreme left-hand corner of the chamber, but when he spoke I was reminded of the group that used to sit here to my right from 1930 to 1935. Some hon. members will recall the time when matters pertaining to relief were brought forward by the government of the day; they will remember the opposition and the terrible wails which came from that row.
Let me recall some of them. There was the then hon. member for Assiniboia, who graciously gave up his seat to the Minister of Agriculture. No politics there! Oh, no! But he has a good job now, has he not? Then there was the hon. member for Wood Mountain (Mr. Donnelly), formerly the member for Willow Bunch. He has not been given a job yet, but I think his speech the other evening was a bid for a seat in the other chamber. He has mellowed somewhat, and he may yet be taken care of. Then there was the former hon. member for Yorkton. He was defeated. Where is he now? No politics there, of course! The then hon. member for Weyburn was defeated. Where is he now? And the then hon. member for Humboldt, where is he now? There was the then hon. member for North Battleford; I think we shall hear more of him. There was another hon. member on the government side who was defeated in the last election, the former hon member for Melfort, who was vociferous in the last house, and I say, sir, that when the people of Canada are demanding national government and that the best brains be brought in to serve the country, to bring that man down here to be a liaison officer between the Minister of National Defence for Air

Unemployment RelieJ
(Mr. Power) and the members of this house- well, he 'knows as much about aeroplanes as I do about elephants.


Mr. MACKENZIE (Vancouver Centre):: A very good man.


Ernest Edward Perley: The people of the west will express themselves about these matters, and I am mentioning them in reply to the member for Wood Mountain, who said the other evening that there was no politics being played.


Mr. WOOD:: Do not overlook the former member for Hamilton West.


Ernest Edward Perley: Probably a few were taken on as a just reward for their ability if the government was looking for brains. Naturally in that instance the government had to go a little far afield.


Mr. MAYBANK:: Do not forget my former colleague from Winnipeg North. There was no politics there, of course.


Ernest Edward Perley: Again I answer that the government was looking for brains, apparently, and the former member for Winnipeg North displayed that he had brains on several occasions in this house.


George Ernest Wood: Is that why you have never been asked?


Ernest Edward Perley: How do you know I have never been asked?
The hon. member for Wood Mountain said that the farmers of the west should help themselves, and that is the statement I protest against. The farmers of the west are just as anxious to help themselves as any other class of people upon whom misfortune has fallen during the last few years, and they would have dug their wells and built their chimneys -he referred to that-if they had been given the opportunity. Under the Agricultural Assistance Act provision was made for the farmers to build their own dug-outs, in order to give them work, and they were to be paid for that work. Money was voted at the last regular session for that purpose. But no matter how much they wanted this work, they were not allowed to do it because the Minister of Agriculture allowed contractors to do the work with power machinery, drag-lines, and so on. They did so much work and did it so fast that the appropriation for that purpose was overspent by 30 per cent, and one of the first acts of the government this session was to ask the house to pass an interim supply bill to provide, among other items, payment for that work.
The hon. member for Lake Centre (Mr. Diefenbaker) the other evening gave the committee some idea of how relief was handled
during the provincial campaign, and it was a good answer to the hon. member for Wood Mountain. There should be a proper administration of relief money and a proper check made. I endorse the plea that was made this afternoon by our leader, the leader of the opposition (Mr. Hanson), that the government should see to it that a proper check and a proper administration of relief expenditures be provided.
The farmers of Saskatchewan who have been forced to go on relief, not of their own will at all but owing to conditions over which they had no control, appreciate very much the assistance given them by the other provinces, .and I want to go on record as endorsing what has already been said in that respect. I am sure that ninety-five per cent of our farmers want the chance to earn their relief, and if they had that opportunity conditions would be quite different. I have dozens and dozens of letters telling of the distress in certain parts of Saskatchewan; but as the hon. member for Wood Mountain has protested against the reading of letters, many of which have already been read by the group in the corner of the house to my left, I shall not read them.
Unemployment and agricultural distress now constitute a national problem and a national responsibility. The municipalities cannot even provide their twenty per cent. If about seventy-five per cent of the inspectors and government officials who are engaged in connection with the expenditure of relief moneys were fired, the money would do much more good because a great deal of it now goes to those officials.


Mr. HOMUTH:: If you fired them, the organization would break down.


Ernest Edward Perley: I want to urge upon the Minister of Labour the necessity of a proper check, proper supervision and the elimination of extravagance and waste in the expenditure of the moneys to be voted for the relief of unemployment and agricultural distress.


Mr. CHURCH:: The bill now before the
committee deals with two matters, the alleviation of unemployment and the alleviation of agricultural distress. The hon. member who has just sat down (Mr. Perley) has spoken of conditions in his riding, but as I see it, that is not a subject for discussion on this bill. We must not forget that the agreements made under this bill are three-part, agreements, as between the dominion, the provinces and the municipalities. Over ten years ago, in 1927, when I first brought this matter to the attention of the house and asked for a three-way split in this expenditure, I was told by Mr. Unemployment Reliej

Heenan, who was then Minister of Labour, that under the British North America Act unemployment relief and agricultural assistance were matters for the provinces and municipalities, not for this parliament. But in 1930, during the depression, parliament was forced to do something, and it passed the first clause of this section, giving the governor in council power to enter into agreements with the provinces and municipalities for the relief of unemployment and agricultural distress.
The conditions in a particular riding have nothing to do with these agieements. There are two other parties to the agreement who will have something to say about those conditions and the relief thereof-three-fold by agreement. Saskatchewan got something which no other province ever got in the way of several votes and also a capital vote, a maintenance vote and other aids and assistance for agricultural distress directly handed over to the province. My contention, Mr. Chairman, is that if any relief is to be given, there should be a standard agreement, with equality of treatment for all the provinces. We have had a lot of useless commissions handling relief. Mr. Hopkins, over in the United States, handled relief for ten years for 127,000,000 people, and he insisted upon having a standard agreement for the state or the municipality or other relief area. The result was that he obtained more value for the money than this parliament has got.
Canada has spent one billion dollars on relief works and agricultural assistance. That is the total of federal, provincial and municipal aid herein, and what is there to show for it? Very little. The government in the past had one policy in respect of one province and another for another province, and no uniform standard aid to each and all of the provinces. Tor example, take the industrial provinces: the agreement in the past was lop-sided, one-sided. In the province of Quebec, where the provincial government, the municipalities and the federal administration were of one mind, it appears, according to a return to the house which I read four sessions ago to the minister, that relief was disbursed in all sorts of municipal ways-on public works, roadways, sidewalks, sewers, schools, hospitals, botanical gardens, while similar federal aid was not given to Ontario. In addition, they had what was known as the federal municipal assistance act. Ontario was not so favoured, because the provincial government did not see fit to allow the Ontario municipalities to come under that act. They did not get a single dollar by way of a municipal assist-
ance act, as other provinces did, nor any of these municipal works which the other provinces have had.
My point is this, that if we are going to make an agreement with the provinces, it should be a hard and fast, standard agreement, uniform for one and all alike. Every province has some agricultural relief problems; every province has many unemployed on relief. Why, then, should there not be a standard agreement? Why give favours to the one at the expense of the rest of the country? I have been through the ridings of the hon. gentlemen who sit for the districts of north Muskoka, Parry Sound, new Ontario, and many other counties, including Brant, and I have observed that agriculture is suffering badly in many counties in the forgotten province of Ontario, if not as seriously as in Saskatchewan, yet to an extent which requires assistance from this government.
My second point is this. Six or seven years ago there was added a clause which is now paragraph (b) of section 3, "agreements with provinces and others", because the Canadian Pacific Railway Company and the Canadian National Railways wanted votes from the federal power or loans to aid building necessary equipment. The paragraph reads:
The governor in council may enter into agreements: . . .
(b) with corporations or partnerships or individuals engaged in industry respecting the expansion of industrial employment.
Owing to the war, the minister with the provinces will have to consider a new urgent factor of aiding individuals and firms in industry. Owing to the loss of business by Canada, the fifth trading nation that we are, the dominion will now have to take into consideration the results of the loss to it of markets by this war in France, Italy, Belgium, Holland, Denmark, Norway, Finland, the Baltic States, some Mediterranean countries and the Black sea ports. I have here a telegram which I will hand to the minister. I do not wish to mention the name of the firm, but it is one of the largest employers of labour in Toronto. Up to the present time they have never known what it is to close their doors, but they have closed them within the last twenty-four hours. The message reads:
Factory closed due loss entire European trade. Urgently need government contracts for munitions chemicals explosives shells or anything. Have ample space and excellent organization. Coming to Ottawa later in the week. Meanwhile will you think matter over and be prepared to advise me?
This firm did a great deal for the rebuilding of the east end of Toronto and the waterfront of that city; they used to employ nearly 900 men; latterly I believe they have had

Unemployment Relief
350 or 375. Now they close up and the workers are virtually out on the street. Their case comes under paragraph (b):
. . . corporations or partnerships or individuals engaged in industry respecting the expansion of industrial employment.
If their employees are unable to get other work they will have to go on relief. That is one of the matters which the minister should take up with the provinces and the munitions board because the telegram suggests the use of the plant for war orders.
Notwithstanding all the commissions which the government has appointed, I have not heard one new constructive suggestion in this chamber in the last three years. It is three years ago since I proposed that we should have a system of national service for the youth of this country for peace and war alike, whereby they could learn a trade in one of many industries, meanwhile receiving pocket-money, lodging, deferred pay, clothing and food, and undergo a certain amount of military training. Had that been done in the period during which the government has been spending a billion dollars, the youth of this country could have long ago helped to furnish five or six hundred thousand men capable of manufacturing shells, tanks and other necessary equipment, and helped in enlisting. But the government did not do a thing about the matter or for a survey of large and small plants and a national register.
I was here three years ago with the Toronto board of education. It was on that board years ago that I started. They have three large technical schools-Western Technical, Danforth Technical, and Central Technical and vocational schools-and they proposed to give the government the use of their buildings and plant and sought federal aid. Our young people are being trained in the evenings; the city of Toronto is spending $12,000,000 a year on all kinds of education. Central Technical and Danforth Technical have eight to ten thousand young people trying to learn various trades, including the metal trade, one of the twelve key industries which the British government has brought under the national service act in the last four years. A few years ago the federal government struck off any grants for technical education, as formerly, although it is federal work in relation to industry and commerce. Let me plead with the minister that in making an agreement with the provinces he should include a vote to enable federal power and the provinces to maintain these technical schools, now doing war work for industry.
Nearly a month ago I called the attention of the government to the fact that the high
schools, colleges and universities this spring and summer were turning out great numbers of pupils, and wanted to know what they were to do to use their services in the vacation.
I asked for the opening, as in other years, of cadet camps for training, and in addition I suggested, as was proposed when the Toronto board of education were down here three years ago, that the technical schools be kept open for three months in the summer time and the staffs utilized to train the youth of the country, and that student labour be used in the summer months to develop Canada's natural resources. Yet nothing was done; the government would not even give the matter a thought. For some days they even declined to see the board of education delegation, telling the board to go to the provinces and to the municipalities. I suggest that the government, instead of providing some assistance to keep these schools open in the three summer months so that the employees of the John Inglis company and other munitions companies may obtain a certain amount of training at night for their help, should have the schools open the full twleve months with federal and provincial aid. I made that suggestion two years ago. The war branch work of these schools should be expanded, and the dominion should pay one-third of the cost all the year round, not merely for three months, and the province should pay one-third. The municipality should not bear the brunt of the whole thing.
Another matter I should like to mention in connection with this agreement-for, as I read Hansard, the minister has not said a word about it-is, what is to become of people forty-five years of age and over? The other evening I pointed out that there are industries which will not employ a man after he is forty or forty-five years old. What is to become of these people? They are the forgotten people in industry. The United States have a policy for them; but in Canada the man of forty to forty-five is to-day the forgotten man in industry. He cannot get a job; he cannot enlist.
It was said in this chamber the other day that as a consequence of recruiting something is going ,to be done to lessen relief costs. I can tell the committee that in the Royal Canadian Air Force and the army and navy at Toronto, when young people come to enlist, they are told, "We won't take you on until next fall," and they cannot get enlisted. I can name the schools from which these young men came; I can mention some of the names of those who were unable to join up as recently as last week. I tried to find out from the officers what was the reason, but
Unemployment Relief

I was unable to find out anything. In fact, since the present heads of that district have been in control, there is not a member of parliament who has been asked to cooperate with the military heads of No. 2 district, as the former minister wrote asking us to do last September. They have never been invited once to visit the camps and other institutions or buildings and see what is going on in that district or city. The minister, if he wants progress before next winter, should see to it that recruiting shall go on at once, day by day-not on again, off again, and on again- and that the offices are kept open, if necessary at nights, in order that young people may be enrolled for war work and voluntary recruiting encouraged.
Three years ago I asked for an apprenticeship system and urged the need of controlling the entry of juveniles into employment. Hon. members will see a report of the matter in Hansard of the 31st March and a few days in April, 1936.
In our educational example, one of the chief weaknesses of the body politic is the dislike manifested by many of the most enlightened industrialists, who are really keen on education, for any organized system of part-time education and part-time employment. The problems -of internal factory organization which such a system must create are many and serious; yet unless they can be solved, unless the inhibition can be removed, no thorough educational reform is possible. There is one obvious way of removing the inhibition: the five-day working week, during which the employed juvenile would receive his specific draft training in the factory, with a universal system of Saturday morning continuation classes.
This suggestion has been made but nothing has been done. I urge further that during the coming summer those who were formerly taken care of in the militia department at the cadet high school camps should be given a period of military training as in the last war as an aid to employment. In reply to a question of mine, certain figures on this matter by provinces were given some weeks ago and will be found at page 346 of Hansard. I urge that high schools, universities, students out of work and others should be taken care of by such national service training with pay.
The agreements under this section should cover all the provinces and not just some of them. There is no reason why some provinces should receive a hand-out while others are denied any benefits. There should be a better working arrangement with Ontario, which, as I have pointed out on many previous occasions, has been discriminated against.

Ontario is the forgotten province so far as expenditures under this vote are concerned. The municipalities of that province cannot qualify under the two statutes that I have named, and in my opinion the money for the larger municipalities should be earmarked when given for them to the provinces.
I hope the minister will give some consideration to these matters and to the question of real estate relief which I raised the other night, in addition to the matter of national registration for jobs. They are not new questions; far from it. In fact, I have not heard of any new suggestions made here, nor have I read of any that have been put forward in the debates since this subject has been under discussion. There should be protection for all the people of Canada. I believe in doing everything we possibly can for the youth of the country, but as regards a ministry for youth, I suggest that the whole population, should be protected. Why should we make provision only for the youth of the country? I believe in protection, not just for some of the people some of the time, but for all the people all the time, including the forgotten class, those of forty and forty-five, our industrial workers who have been driven out of their jobs through no fault of their own. I believe in unemployment insurance and other aids for the rest of the population after they have passed the allotted span, and protection for all.
It seems to me that these agreements are one-sided. In this debate we are simply conducting a postmortem on the agreement that expired on March 31. Parliament was not sitting then and we are near the end of June, yet we have no agreement as passed by this house. As I say, we may be simply holding a postmortem on the money that has been or will be spent probably to the end of June.
I wish to commend the minister because he has been most active since taking charge of the department, and I trust that he will be receptive to any suggestions which will help to solve the problem that faces him. There is no reason why we should not adopt a policy of national service such as I have indicated, adapted to Canada's circumstances, in the high and public schools, nor can I see any objection to putting into force a similar policy adapted to Canada as a whole. Why should there not have been long ago a survey of all plants, large and small? Had such a survey been carried out before the war broke out, we would have been in a much better position in our struggle against the enemy.
In these agreements with the provinces there should be equality of treatment, and standard

Unemployment Relief
forms of agreements for each and all, and regarding the larger corporations I suggest that there should be some consideration for those industries that have closed and for those who have lost their jobs as a result of the war in Europe, as in the case of the industry I mentioned.


Mr. McNIVEN:: The discussion this afternoon and to-night seems to have centred round the establishment of the fact that relief is carried on in a political atmosphere, and there seems to be a determination to convey to members of this house the impression that the centre of that activity is in Saskatchewan. It is only necessary to assure the committee that that was the burden of the campaign speeches in the provincial election of 1938, with disastrous results to those who expounded that policy, and likewise in the campaign that has recently concluded. I notice at page 1001 of Hansard that the hon. member for Lake Centre (Mr. Diefenbaker) uses this language:
The minister wants to know about the administration of relief in Saskatchewan. Let me point out to him what happened in connection with employment upon public projects in Regina. The provincial member for Regina took the stand that unless a man had been able to get his application for work initialed by the president of the Liberal association or, better still, by the Liberal member, he could not obtain employment on a public project.
I would remind hon. members that the subject matter referred to in this speech was also referred to in the last session by the hon. member for Weyburn (Mr. Douglas) and the hon. member for Qu'Appelle (Mr. Perley), and at that time I made an explanation which I thought was satisfactory to the members of the house. Undoubtedly it has not been called to the attention of the hon. member for Lake Centre (Mr. Diefenbaker), and if he has me in mind when he makes the statement that on relief works it is necessary to have the application initialed by the Liberal member, then I want to assure him that he is mistaken. The provincial member to whom reference is made did make some statement in 1939 and used casual employment at the post office in the city of Regina as the horrible example. In reply I cited that in the Regina post office in Christmas of 1938 there were 143 casual employees, of whom thirty-one were on the eligible list. Of the remaining 112, sixty-nine were returned soldiers, married men with dependants. One was a single returned soldier. Of the other forty-two, eleven were single men and the other thirty-one, married men with dependants. The system followed in selecting these employees was to advise the various veterans' associations that so many positions
were available and to send in their recommendations. Their recommendations having been sent in, the postmaster and I made the selections on the principle of the greatest good to the greatest number.


John Ritchie MacNicol: Why would the postmaster consult a member of parliament? We have not experienced such a thing in our district.


Donald Alexander McNiven: Well, it is the policy of the member for Regina City to be of service to any government employee wherever it is possible and to render the maximum of service to the largest possible number of constituents.


John Ritchie MacNicol: Why would not the postmaster ask the defeated candidate his opinion?


Donald Alexander McNiven: Because he was defeated.


Mr. ROSS (St. Paul's):: Would he not be just as reputable a man in the community?
I think both sides should be consulted, both the member and the defeated candidate.


Donald Alexander McNiven: We had some experience between 1930 and 1935, and I do not know of any defeated candidate or anybody prominently or otherwise identified with the Liberal party ever being consulted or ever getting any employment. There was a decided difference in the administration of employment following 1936 from what obtained prior to 1935. The attack seems to centre on the Minister of Agriculture. My own city was made the centre for the distribution of fruits and vegetables, fish, cheese, beans, et cetera, in 1937, and again in 1938, and I can say for the Minister of Agriculture that he instructed us that the employment incidental to those enterprises was given on exactly the same basis as I mentioned a moment ago. Time and again I have approached the Minister of Agriculture for employment for needy persons on what is known as the prairie farm rehabilitation plan, and have been told by him that, since there was no farm rehabilitation in my constituency, the employment would be given in those centres where the work was being done, the work being undertaken there in order to give employment for people who needed it in that locality. And I had never heard it suggested that employment on projects of that kind was administered on a political basis.


Karl Kenneth Homuth: You would never do
thatl


Donald Alexander McNiven: For the benefit of the
hon. member who has just spoken, I can say that in the last five years I have never asked any man or woman what his or her political convictions were.
Unemployment Relief

There is another act that comes under the administration of the Minister of Labour, and was designed to alleviate unemployment in urban centres. I refer to the Municipal Improvements Assistance Act. Surely no one will suggest that politics entered into the giving of employment under the terms of that act or in its administration. If it did anywhere else, it certainly did not in Saskatchewan, and more particularly in the city of Regina. In Saskatchewan the federal government had a representative, a Mr. Bingham, and the minister directed that employment on civic projects under that act should be under the direction of a committee of three, the federal representative Mr. Bingham, a nominee of the department of labour of the provincial government, and the city relief officer. As far as the city of Regina is concerned, those three men selected those who should be employed, and employment was given to those who were most in need of it, without reference to political alignment at all.
May I refer now for a moment to a remark made by the hon. member for Qu'Appelle (Mr. Perley). I was really surprised to hear him make reference to the former member for Melfort constituency, Mr. Malcolm McLean, in the terms in which he did. It is not like the hon. member for Qu'Appelle to use language of that sort towards a former member of this house. May I say to hon. members who are not acquainted with the former member for Melfort that he sat in this house for ten years and was a good member, that he is a student, and a cultured, talented gentleman. What is more, he served in the great war along with the present Minister of National Defence for Air (Mr. Power), and there is no one in the house who knows his qualifications and ability to adapt himself to circumstances better than does the Minister of National Defence for Air. May I ask who, a year ago, six months ago, three months ago, knew very much about air administration? The Minister for National Defence for Air selected a man whom he knew and who, he thought had the ability to adapt himself to a new department and render a national service at this time. It was unkind of the hon. gentleman to refer to other appointments, and some which might be anticipated. If we were inclined to indulge in recriminations we could go back prior to 1935, and refer to the deputy postmaster general, the deputy minister of marine, and reference was made a moment ago to a member of the civil service commission; all of these were former members of this house from 1930 to 1935, and on or about Augutst 16, 1935, sought their present havens of refuge rather than face the electors.

I should like now to bring to the attention of the minister the plant of General Motors in Regina. That plant was built in 1928; it comprises eleven city blocks or about fifty acres in the city. If my memory serves me aright, the main building is between eleven hundred and twelve hundred feet long and from three hundred to three hundred and fifty feet wide, not including the power plant or heating plant. On the property there is another large warehouse which is used for parts. At one time that plant on an eight-hour shift was turning out 210 cars a day and giving employment to over 1,100 men in the plant, with an office staff of about 200. The plant was operated last winter and is still operating five days a week employing between 500 and 530 men, and on that basis it turns out sixty-five cars a day. It is a modern, up-to-date, well-built plant. It will be closed at the end of June, and should be very suitable for the manufacture of either munitions or aircraft. In making that suggestion I have a distinct recollection of a commitment made at the outbreak of the war by Mr. Carmichael, the vice-president and general manager of General Motors, who stated publicly that the facilities of General Motors plants would be available for w'ar work. Here is an opportunity to give employment to large numbers of people in Saskatchewan, and at the same time render a valuable service to the nation at large at this hour of crisis.
Our province has had a most difficult time for the last ten or eleven years, but it is not doing our province any good to do as was done this afternoon by the hon. member for Yorkton (Mr. Castleden) when he said that hundreds of municipalities in our province were bankrupt. A number of our municipalities are in difficult circumstances, but to say that hundreds are bankrupt when the total number does not exceed 350 is, to say the least, an exaggeration. Then the hon. gentleman went on to say that hundreds of farmers were being foreclosed and put off their land. I do not know of any such situation. I know that for a period of four years up to about a year ago there had been only some 700 foreclosures permitted in the whole province. Those foreclosures were permitted because the farmers had abandoned their land, nobody was living on it and it was necessary to obtain title in order to do something with the land itself. It does not do my province or any other province any good to hear the assertion that there are hundreds of farmers being thrown off their land, when such is not the fact.


George Hugh Castleden: Would the hon. member permit a question?

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Donald Alexander McNiven: Ask a question if you
wish, but make a speech later.


George Hugh Castleden: I have evidence to support my statement, and, if you wish, can give the name.


Donald Alexander McNiven: The other evening the hon. member made reference to a situation which he described, and said that a sick man could not get proper medical care. He said that subsequently the person in question committed some minor offence and was sent to gaol, and that thereafter he received proper medical treatment. That, sir, is not correct, so far as Saskatchewan is concerned. It is not correct to say that one must commit an offence and be sent to gaol in order to receive necessary medical treatment. That is a direct reflection upon the medical profession, upon the hospitals and upon the good common sense of the people of Saskatchewan.
Rather than cite these cases which are exceptions, far better would it be if the hon. member were to tell the committee that the medical profession has done yeoman service, at great disadvantage and under great hardships. It has done great service throughout the drought areas, receiving little or nothing in return by way of compensation. He might have said that a rural municipality in Saskatchewan was the first to adopt the plan of having a municipal doctor. That was away back in 1922, and since that time the scheme has spread throughout Canada and into the United States. Better would it have been to tell how groups of citizens have formed themselves into cooperatives in Saskatchewan, to supply themselves with medical and hospital services. Better would it have been to tell how certain doctors in certain urban centres in Saskatchewan have grouped together and, for a monthly consideration, are giving hospital and medical services to the citizens of that province.
The hon. member did make some passing reference to what has been accomplished in the various sanatoria for the treatment of tuberculosis, but he might have pointed with pride and satisfaction to the fact that the treatment of tuberculosis in Saskatchewan has been so effective that that province has a lower mortality rate from tuberculosis than has any other province in Canada.


James Garfield Gardiner: And it is free to the individual.


Donald Alexander McNiven: Yes; as the minister has said, it is free to the individual. We have gone through trying and difficult times. Today Saskatchewan does not occupy the proud position she once occupied in the family
of Canadian provinces. The spirit of the Saskatchewan people in the face of unprecedented difficulty has aroused the admiration of Canadians everywhere, and we will be ever grateful for the assistance rendered by both governments in the last ten years. In common with all Canadians, we are anxious to serve not only Canada but the empire to the maximum of our resources in the grave crisis which confronts the world.


George Hugh Castleden: Mr. Chairman, I regret that the hon. member for Regina City, along with about 150 of his colleagues, was absent this afternoon, at about five-thirty o'clock, when I dealt with the subject to which he has referred, and when I paid tribute to those doctors who had rendered noble service to the farmers and others of the west. If he will read to-morrow my statement as it appears in Hansard I believe he will find that I stated in the house this afternoon what he has just intimated he would have wished me to state.


Mr. ROSS (Souris):: I had not intended to speak on this particular occasion, but my good friend the hon. member for Regina City brought to my mind the thought that I am interested in the welfare of the returned men, and in assisting them in securing employment. I am unfortunate in some respects, particularly because I happen to be a member of the opposition. The hon. member told us of his experience in assisting the Postmaster General to pick out certain individuals requiring employment. I have had some experience along those lines, and in that connection I should like to read a letter under date of April 17, 1940, received by one of those chaps. It states:
I beg to acknowledge the receipt of your letter of the 15th instant advising that you have been recommended by the legion as collector of radio licences for Malita district. In reply I would suggest that you communicate with Mr. G. W. McDonald of Boissevain, who was the former member for the constituency of Souris.
Probably that is proof that I am on the wrong side of the house, if I am to be gainfully employed on behalf of those chaps, or that patronage does now prevail.
I should like to say a word respecting the bill. As has been pointed out by other hon. members, I believe there should be closer contact between the Minister of Labour and the Minister of Agriculture. In my view the Prairie Farm Assistance Act has a distinct bearing on the problem of relief, and at the proper time I shall make further references to that matter. I can well remember the speech delivered last summer by the minister
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when that measure was brought into effect, when he pointed out that it was hoped the institution of the Prairie Farm Assistance Act would do away with relief problems in agricultural areas. I wish to commend the minister upon having taken a step in the right direction. In connection with administration there are several matters with which at the proper time I shall deal. Nevertheless it must be remembered that that measure has a distinct bearing on relief problems.
Many people in townships have received the acreage bonus, on account of the average being over twelve bushels; yet within those townships there are individuals whose yield averaged less than their seed and who have received no consideration for their seed. They require more than their average bonus to live on. That is a most unfortunate situation, and has arisen because of the set-up. Those people have undergone tremendous hardships. True enough, while the minister did make the statement that this was to take the place of direct relief in every respect, yet some months later he said to western Canada that those people should also receive direct relief. I must say that, in all fairness to the minister.


James Garfield Gardiner: I took the position all the way through, that individuals in those townships should receive consideration for relief.


James Arthur Ross: Then there was great misunderstanding between the minister and provincial governments in the west.


James Garfield Gardiner: The hon. member should read Hansard.


James Arthur Ross: That information was distinctly passed on from the provincial departments to the municipalities-and nobody knows it better than I do, because I have been intensely interested in the municipalities.


An hon. MEMBER:: You have got it
wrong.


James Arthur Ross: I think it was a misunderstanding. I wish to give the minister credit. It was later cleared up, when he said those people should have been receiving relief. But there should be a further arrangement whereby departments of labour and agriculture would work in much closer contact. As was pointed out this evening by the hon. member for Qu'Appelle (Mr. Perley), of necessity a great change must take place in the agriculture of the prairie provinces, if we are to exist in the future. In that respect I believe the Department of Labour could do a great deal by working in conjunction with the Department of Agriculture. Much detail alight be developed along those lines.


Douglas Gooderham Ross: How much money was spent last year, and how much is it expected will be spent this year on the rehabilitation of the older unemployed?


Norman Alexander McLarty: The amount of $78,836 is given on page 13 of the report.


The CHAIRMAN:: I would point out that this matter is more closely related to the estimates than to this section of the bill.


Douglas Gooderham Ross: It is stated on
page 13 of the report on the Unemployment and Agricultural Assistance Act, 1939, that $78,836 was spent on the rehabilitation of the unemployed. Is that right?


Norman Alexander McLarty: I feel it would not be in the report if it were not correct.


Douglas Gooderham Ross: As I said once
before, the most important matter we have to deal with is the rehabilitation of these middle-aged people. I should like to quote from page 83 of the Purvis commission report, where under the heading of "retraining essential" it states:
As repeatedly emphasized by the national employment commission retraining and reconditioning of Canada's unemployed for employment is an imperative need. In the last issue of this bulletin it was shown that approximately forty-six per cent of those on aid and employable were in the age group from twenty-six to forty-five inclusive. Many of these had previously worked in positions demanding skill. But that was years ago and their use and value in industry consequently has been much reduced.
It is stated here that $19,843,795 was expended for unemployment and agricultural assistance in Canada, with the magnificent sum of $78,836 being expended on these poor fellows to rehabilitate them. The other night we heard how well this government had followed the recommendations made by the employment commission. As far as that is concerned, it is just like throwing a peanut to an elephant. The trouble is that this government has tried to work from the bottom up instead of from the top down. There has been no guidance whatever. The employment commission recommended the setting up of an administrative body to take care of this whole problem. When we suggest that this be done, we are met with the argument that it will have to be done in the near future because it is intended to have unemployment insurance. But the government say they do not want to do it now because there are certain difficulties in the way. As I said before, surely the best brains on the other side ought to be able to get over that little difficulty and carry out the recommendation of the employment commission.

Unemployment Reliej
We are just in the same old boat with this bill. Not only that, at the present time there is a definite lack of enterprise on the part of this government. I should like to know what steps are being taken in order to get these middle-aged people back into skilled jobs. All the way through its report the employment commission refers to the need of trained help. We are going to need experienced workmen and we have done nothing about the matter. We have spent only a pittance upon rehabilitating these people who are now useless. The government opposite are perfectly content to hand out just sufficient relief to these people to keep them alive. The excuse is always given that Ontario or some other province will not cooperate with them. Something must be done, and I think we ought to have a statement from the minister as to what is proposed to be done in connection with the setting up of this administrative body recommended by the employment commission. We should know if we are going to get somewhere with regard to training skilled workers for our war effort.


Percy Chapman Black: After recess
the minister gave us some further information with respect to technical training in our technical schools and colleges. Any appropriation made for that purpose would appeal to the people to a greater extent than anything else. This will make young men available for mechanical work in connection with the war. The information brought down by the minister was not complete as to the distribution of the funds that are to be made available. According to the report there are twenty-four technical schools in Ontario, but only one in Nova Scotia and six in New Brunswick. Steps should be taken to make this training available to those young men in Nova Scotia who want to be mechanics. There is only the one technical college at Halifax, but something else should be done. Aeroplanes are now being built at Amherst, and they are establishing an industry there to recondition aeroplanes. Amherst is an industrial community, and many of the young citizens are anxious that some provision should be made to provide training for them. Cape Breton Island is an industrial centre, but no provision is being made for that area at all. The minister should bring down a supplementary report stating what his department proposes to do in order to serve the requirements of Nova Scotia.


Norman Alexander McLarty: We are endeavouring to use every technical school in Canada regardless of what province it may be in. During the recess I discussed the question asked by
the hon. member with the supervisor of youth training. He advised me that there was only one technical school or college in Nova Scotia which was available. I asked him to give me a further report in connection with the Amherst school, and I shall be glad to advise my hon. friend as soon as we have that.


Douglas Gooderham Ross: I wonder if I could have an answer to my question? How much money is it proposed to spend on the rehabilitation of the middle-aged or older unemployed this year? I note that $78,000 was spent last year. Surely we should have some idea of how much it is proposed to spend this year in order that we may have some idea of whether this bill is any good or not.


Norman Alexander McLarty: That $78,000 represents the contribution of the dominion only, which is supplemented by the provinces. In some instances-the hon. member was kind enough to mention the fact-we are anxious to move faster than some of the provinces, but we have more or less to govern ourselves by the amount of their contribution. In reply to the hon. member's question, if he will refer to page 17 of the estimates, he will find that the vote being asked for this year is a revote of $45,000 plus an additional $250,000, or a total of $295,000.


Mr. NICHOLSON:: My deskmate was called out, but he wished to ask a question with reference to an item in the table of dominion disbursements under relief legislation on page 40 of the commissioner's report. It shows $93,757.81 disbursed to the Dominion Steel and Coal corporation under the provisions of the 1933 act, and I should like to know how this appropriation comes to be there.


Norman Alexander McLarty: I am afraid, Mr. Chairman, we shall have to leave some of these questions to be answered on the estimates. Offhand I could not state the specific purpose of that appropriation under the 1933 act. I do not want to mislead the committee. At the same time I think it will be appreciated that many of these questions would ordinarily come on the estimates, when they can be thoroughly gone into and discussed.


Karl Kenneth Homuth: The other day the Minister of Munitions and Supply (Mr. Howe) was speaking of the establishment of new industries. A great many old industries will also start up again. I have in mind certain sections of western Canada, certain towns of Saskatchewan and Alberta, with buildings which might be available for the production of war material. The time may come when we shall want to have some of our industries far inland; we do not know. In Ontario, where we have a high degree of industrial activity,
Unemployment Relief

one does not hear anything about farm relief because our farmers have a good local market, and the small produce from their farms keeps them in spending money week after week. Ontario and Quebec for a great many years have been looked upon by the western provinces with a certain amount of suspicion. They felt that these two provinces were more fortunate in being highly industrialized, with many industrial plants making profits, and conditions generally throughout these provinces better than in western Canada.
I know of nothing that would do more to promote unity and a better understanding among our several provinces than a vast industrial expansion in western Canada. Industrial Ontario and industrial Quebec are not jealous of any industrial expansion in western Canada. It is not many years ago that Winnipeg was looked upon almost as a trading centre, but to-day it is a big industrial city which provides a wonderful market for the surrounding country. I think the Minister of Labour (Mr. McLarty), the Minister of Agriculture (Mr. Gardiner), as one representing the west, and the Minister of Munitions and Supply (Mr. Howe) could accomplish something of benefit to the whole country by assisting the west, particularly Alberta and Saskatchewan, to develop industrially. No province in this country has power available more cheaply than Alberta. A good many mechanics have gone out to the west, following the old slogan, "Go west, young man"; many of them have failed through no fault of their own; and if industries could be started up out there to manufacture munitions, for example, it would not only provide these men with employment but be of benefit to the country. I see no reason why textile mills could not be established in western Canada. I sometimes think we are not handling this problem on a large enough scale. Certainly nothing could do more to bind this country together than a great industrial development out in western Canada. It would do much to bring about a better understanding between the provinces. When the war is over, our war-time industries will revert to peace-time activities, and I am just wondering if it would not be possible to have developed in western Canada some of the war industries which are to be established under the Ministry of Munitions.


Douglas Gooderham Ross: I did not quite hear what the minister said in reply to my question as to the expenditure on the rehabilitation of the older unemployed, but I understood that there was $250,000 more in the estimates this year.


Norman Alexander McLarty: Correct.


Douglas Gooderham Ross: Last year $203,000 was appropriated. I refer to the report of the dominion commissioner of unemployment relief, page 12, left-hand column, "approved undertakings". If you add together the figures for the rehabilitation of the younger men and the older age group, you have a total of $203,600, and out of that $203,600 the minister says we spent only $78,800 last year. Is it proposed this year to spend $250,000 plus what we have here, or just to do no more than we did last year?


Norman Alexander McLarty: It is a question which I think could be better answered on the estimates, but I can say that this amount is put in for the express purpose of being used. In exactly what provinces or localities it will be spent I shall be glad to advise my hon. friend when the estimates come up.


Douglas Gooderham Ross: But the bill providing for the expenditure of this money is before us now.
Mr. McLARTY': The only answer I can give is that the amount provided is $250,000, and I assume it is estimated at the present time that that will be the amount spent.


Douglas Gooderham Ross: What I am interested in finding out is whether the government propose to do anything further, seeing that we are in a national emergency.


Norman Alexander McLarty: The answer is yes.


Douglas Gooderham Ross: Many of these men who have had training and experience will probably have to go into the army, and we shall need these men in the worst way. This is a national emergency and we must do something about it. Certainly 1250,000 will not go very far. The rehabilitation of these men takes time, and there ought to be a plan laid out and plenty of money made available. Instead of doing just what we did before, spending $78,000 out of an appropriation of $203,000, we ought to spend more than $250,000 and get something done.


Mr. LEADER:: I am sorry to take up the time of the committee, but I wish to make one or two observations prompted by the remarks that have been made by the hon. member for Wellington South (Mr. Homuth). I represent as part of my constituency a fine little town of almost 7,000 inhabitants. Formerly it had a larger population. I refer to Portage la Prairie. At one time quite a number of important industries and factories were located in that city. One by one they have " folded up " and have departed to the parent company in eastern Canada.

Unemployment Relief
I agree with the hon. member who said that we should have in Canada a more balanced economy, and I cannot think of anything that would balance our economy more effectively and more quickly than for eastern manufacturers to set up industries in western Canada. They did so in the past, but when depression struck the west, and the purchasing power declined, they closed up and came back east.
In Portage la Prairie there is one particular industry which provides, I think, a legitimate grievance. I refer to a flour mill which flourished there for forty-five years. Just recently this mill was modernized. It is quite large; I believe it will produce about 1,000 barrels of flour a day; and it provided employment for many people in our city. But because the export trade had fallen off, and because flour could be manufactured more cheaply in Ontario, the mill was closed and the employees and their families, some of whom had grown up within the shelter of the mill, were thrown on their own resources. Some of them, I understand, are on relief. If there is any industry which should succeed, it is one which has the raw material right at its doors. There we had a milling industry, situated in the heart of the greatest graingrowing district in western Canada, enjoying protection, as regards their product, provided by the rest of the people of Canada, and enabled to buy their grain from the farmer at the Port William price. The farmers of Portage la Prairie pay the freight on that wheat to Fort William; but the wheat which was sold to the mill did not go to the head of the lakes, it was ground into flour in Portage la Prairie, the freight from Fort William to the loading point was deducted, and for a payment of one cent per hundred pounds, or per bushel, they had the privilege of loading this car, after the grain had been unloaded, with their own flour and shipping it to Fort William; and the farmers paid the freight. The mill enjoyed all these concessions from the people of Canada; yet, when hard times came, your eastern industry folded up and went back to the east. The point I want to make is, has the government no influence with the manufacturers of eastern Canada? Is there no way of persuading them; yes, is there no way to force them to go out to western Canada and try to build up that country so that we may have a more balanced economy?
We buy our goods from the east and pay the freight on them to the west. I now come to another sore spot. I refer to agricultural machinery, which for the most part is made in eastern Canada, and we pay the freight
to the west. To-day we are paying almost twice as much for a binder as we did in 1914, yet we are receiving the same price for our grain as we did then. It is not fair. We in the western country are up in arms. The governments of the three prairie provinces have met to discuss what should be done, and it was suggested that machinery might be manufactured in western Canada. That is an invitation to the Massey-Harris company, the Cockshutt company or any other Canadian company to establish a factory in western Canada and manufacture their goods there. I believe that such transfers of industry would conduce to a more balanced economy and a more contented people.


Mr. HATFIELD:: Would the minister consider making the same agreement with New Brunswick when the new agreements are made as with the other provinces?


Norman Alexander McLarty: Oh, yes. We deal impartially with all the provinces. It is a matter of the request coming from the province itself. We are quite willing to enter into the same kind of agreement with New Brunswick as with any other province.


Heber Harold Hatfield: The department should have a uniform basis of agreement throughout Canada. I do not think New Brunswick should be discriminated against.


Norman Alexander McLarty: Any discrimination is not the fault of this government. Whatever request comes from New Brunswick, or from any other province, will be considered and acted upon. By that I mean that there is no intention on the part of the federal government to discriminate against New Brunswick.


[Stage Direction]
Section agreed to.
Section 4 agreed to.
On section 5-Conditions of financial assistance.
John George Diefenbaker: Would the minister explain the system of control used by the dominion government in reference to moneys advanced to the provinces? What is the nature of the control? What executive officers represent the dominion?


Norman Alexander McLarty: I wonder if I understand my hon. friend correctly. Does he mean advances for material aid or for works? The matter of loans to the provinces?


John George Diefenbaker: Yes.


Norman Alexander McLarty: That is handled by the comptroller of finance. He makes the loans to the provinces; they are not made by the Department of Labour.


[Stage Direction]
Section agreed to.
109?
Unemployment Relief
[Stage Direction]
On section 6-Orders and regulations.
Mr. ADAMSON:: I would suggest to the
minister that, when he considers such orders, he should regard this bill as a three-point programme: first, for unemployment insurance; second, for health insurance; and, third, -I see the item on the next page-for youth training. I come from an industrial riding where this is a vital subject. All these items are interlocking, and unless they are carried out as one and the same programme, we shall not get as far with this measure as we should do. I have had as many as 14,000 people on relief at the same time in my riding. These orders should be made so that unemployment, health insurance and these other items shall be dealt with in an interlocking operation.


Norman Alexander McLarty: As the hon. member
knows, we are proceeding with unemployment insurance, so that a further answer is not needed on that point. In the matter of health insurance I speak now from recollection, but in the recommendation of the dominion-provincial commission it is stated, as part of the general programme, set out in that report, that health insurance is one of those subjects which properly fall within the jurisdiction of the provinces. The matter of youth training we can go into fully when we are on the estimates.


[Stage Direction]
Section agreed to.
Sections 7 and 8 agreed to.
On section 9-Appointment of officers, clerks and employees.
Jean-François Pouliot: We look at page 18 of the estimates for details of the vote on unemployment relief, but we find no details there. There is an expenditure of $155,000, but there are no details on another page as in the case of other items of the Department of Labour, at page 17 for instance.


Norman Alexander McLarty: To which item is the
hon. member referring?


Jean-François Pouliot: This section of the bill
provides for the employment of a larger number of officers, clerks and employees in the relief branch. There are two arrangements with regard to staffs in the various branches of the Department of Labour. For some branches details are given showing the number of employees. I refer the minister to page 17. On page 18 there are no details of employees of the unemployment relief branch. Would it not be possible to have details for all branches of the department? There are some men in the department receiving salaries -one in particular who receives $6,000 and his work is mentioned nowhere. He is here at 
times in the gallery; I sometimes see him. In my humble view he does absolutely nothing. There are some others who are not working very hard, not earning their salaries by the sweat of their brow. I wonder why there are more officers, clerks and employees.


Norman Alexander McLarty: This merely provides, as
has been done in previous years, that these officers responsible for the administration of youth training shall be paid out of the Unemployment and Agricultural Assistance Act. It is not intended to have additional employees taken on. This just carries on in the same manner as before and details will be available when the estimates are before the committee.


Jean-François Pouliot: I would ask the minister to take a note of what I have said and to have the details of the unemployment relief branch given in connection with the estimates.


Douglas Gooderham Ross: Should not the details of administration under this act be given in the report?


Norman Alexander McLarty: This clause is in the act by reason of the fact that no provision is made in the Youth Training Act; consequently payment of expenses is made by virtue of this act. The details of employment will be brought down in the estimates.


[Stage Direction]
Section agreed to.
Sections 10 and 11 agreed to.
Bill reported.
[Stage Direction]
The house in committee of supply, Mr. Vien in the chair.

[Stage Direction]
Administration service.
1. Departmental administration, $120,005.
Mr. SENN:: I wish to bring to the attention of the minister a matter that concerns the activities of the department. I have the highest regard for the officials, many of whom I know personally, and I think they are capable men, but there is one matter in regard to which there seems to have been some mistake on the part of some of the officials. I would refer the minister to a return to an order of the house, sessional paper No. 1150 brought down on June 12, 1940, at the request of the mover the hon. member for York East (Mr. McGregor). It asked for a copy of all agreements entered into between the government of Canada, the Canadian Department of Agriculture, the Canadian bacon board or any other governmental body and the British government, the British supply

Supply

Agriculture-Administration
board or any organization in Great Britain, relating to the price to be paid for Canadian exports of pork products to Great Britain, and for the amount of such products to be shipped to Great Britain. It also asked for copies of all letters, telegrams, correspondence, orders in council and other documents exchanged between the two governments, or organizations representing them, regarding the matter in question.
In my opinion, and in the opinion of many others, there was some kind of agreement between the government of Canada and some governmental body in Great Britain respecting exports of bacon and pork products to Great Britain. I have before me a copy of bacon board bulletins Nos. 1 to 4. No. 1 makes the statement that the board and its advisory committee were appointed by the government on December 20, 1939, to implement the terms of the agreement made with the United Kingdom government for the delivery to the British ministry of food of 5,600,000 pounds of bacon weekly, and such additional quantities as might be required. Then it goes on to state:
The contract price is $20.18 per 112 pounds, equivalent to $18.01 per 100 pounds, f.o.b. port of export for grade A Wiltshires and relative prices for B grade and the various cuts, as provided for in the schedule of prices included in the agreement. The contract price is retroactive to include all bacon arriving in England from November 17, 1939, to October 31, 1940.
In response to this order I find the answer given: "So far as the Department of Agriculture is concerned complete bacon agreement information between British government and government of Canada not available for publication." That is signed by the assistant deputy minister. There is also a reply from the under-secretary of state for external affairs stating that there is no information available, and one also from the Department of Trade and Commerce making the same statement. I think there must be an error, because evidently there was an agreement, and I would ask the minister if he would table those agreements.


James Garfield Gardiner: There is no error. The Department of Agriculture has no information on the matter. The agreement is made through the Department of External Affairs, and the British government have made it conditional that the heads of that agreement are not to be made available to the public. That is what the statement, "no information available", means.


Richard Burpee Hanson: The statement is a little misleading, is it not? If it said what the minister has now stated, that the British government do not want this
information to be made available, it would have been clear, and perhaps the question would not have been asked.


James Garfield Gardiner: It is a question answered by two different departments, and we did not wish to make explanations concerning the Department of External Affairs.


Mark Cecil Senn: Does the minister mean by the statement, "the heads of that agreement are not to be made known", that the agreements were not supposed to be made known?


James Garfield Gardiner: The request of the British government was that the agreement as such was not to be published. The matter of prices has been discussed publicly, but we were asked not to publish the agreement as such.


James Arthur Ross: In the item "travelling expenses" on page 59 there is a reduction from $11,000 to $7,000. How does the minister estimate that reduction?


James Garfield Gardiner: As I stated on a previous occasion, we have been asked to cut down our expenditures for this year to assist in the war effort. We have made cuts all the way through. There are cuts in staff, and more particularly in the part-time staff, and that has made it possible for us to reduce travelling expenses somewhat in connection with certain activities.


Richard Burpee Hanson: The cut in the total vote is not substantial. In the summary on page 2 of the estimates the decrease is shown as $4,827,273. I have not looked at these estimates for a number of years, and am not very familiar with them. But $18,000,000 for 1939-40 shows a substantial growth from 1930. I remember when the Department of Agriculture estimates were about $12,000,000, and we always thought that pretty large. Last year the amount was
S18,000,000, and now it is back to $13,266,000 That is some progress in the right direction I should like to know about one item, the general executive assistant. How long has that official been on the payroll? I do not recall having heard of an officer by that title before.


James Garfield Gardiner: The general executive assistant is Mr. Hamer, who has been on the staff for many years, and was appointed to this position on the reorganization of the department three years ago, 1937, I think.


Richard Burpee Hanson: I suppose when he was appointed to that job he got an increase of salary?


James Garfield Gardiner: Yes, there was an
increase in his salary.


Richard Burpee Hanson: That is what usually happens.
1100	COMMONS
Supply-Agriculture-Administration


George Hugh Castleden: What is the relation between permanent staff as compared with temporary?


James Garfield Gardiner: It is rather difficult to explain the basis on which temporaries are made permanent. I found that difficulty when I came to Ottawa. In the province I had always been accustomed to a temporary being a person who was on the 'temporary list for six months and then became permanent. That is not the practice here. There are persons who have been on the staff for twenty years and are still temporaries.


Mr. STIRLING:: Yes, thirty years.


James Garfield Gardiner: Yes, I presume some have been there thirty years. Those on the permanent staff have certain rights that the temporary staff do not have; they become subject to the provisions of the superannuation and other such acts. There is a ratio set in all the departments; in the Department of Agriculture we are supposed to keep our temporary list up to fifteen per cent; eighty-five per cent of the employees are permanent and at least fifteen per cent are suppose to be kept temporary under the regulations of the treasury board.


Alexander Malcolm Nicholson: Are those about the percentages as they are in the department?


James Garfield Gardiner: Yes, very close to that, I think almost exactly that at the present time.


Richard Burpee Hanson: What is the policy of the minister with respect to savings in the case of vacancies occurring by death or retirement? Is it the intention promptly to fill such vacancies, or will 'the minister attempt to save something in war time by not filling those positions which might be considered as extra help? I mentioned this to the Minister of Trade and Commerce some weeks ago, and recommended that in war time an honest attempt should be made to save on the civil list of this country. The Minister of Finance this afternoon, speaking of salaries, intimated that it cost this country $80,000,000 for the civil list inside and out. That is a huge sum for Canada to be paying for the civil list, especially in war time. I would recall to the minister what I said to his colleague, that between 1930 and 1935, when this country was going through the greatest economic war in its history, a period which I hope will never be repeated in this country, the government of that day followed the practice of not filling positions that became vacant unless they were key positions and absolutely necessary. When we went out of office there were literally thousands of positions left unfilled, and the service

of the country did not suffer one iota. Will the minister say that consideration will be given to a policy of that kind now? I should think this country could be run, aside from its war effort, for a great deal less than $80,000,000, especially having regard to the fact that prior to the last war the total budget did not much exceed that figure. We should seek for quality rather than quantity in the civil service.


Mr. REID :: The government can hire but it must not fire.


Richard Burpee Hanson: The hon. member has crystallized the idea that I had in mind but to which I was not intending to give expression. Once on the government payroll, whether you are any good or not, apparently you are there for life. During all the years of my public life I have been appalled at the number of people who wanted to work for the government. I found that most of them-not all of them, I am glad to say-were men who made a failure in private life.


Some hon. MEMBERS:: Oh, oh!


Richard Burpee Hanson: Yes, most of them. That has been my own experience

and of course I can speak only from my own experience. But that experience has covered a long period of time. Of course such a situation ought not to exist. If at all possible, we should get away from that condition, and particularly in war time. I would invite the minister to make a statement of policy in regard to the very important matter to which I have alluded. We ought to be able to save something out of $80,000,000, without any detriment to the service. I believe in paying good men good salaries. I have always demanded that for myself, provided I gave the service.


Mr. GRANT:: You never did, though.


Richard Burpee Hanson: I would not say that. The hon. gentleman does not know what he is talking about-and perhaps he is not serious. I shall leave it at that.
Will the minister say what the intention of the department is to be? I notice that in the minister's office there is an increase in salaries from $87,760 to $94,150, and that increase is to a large extent made up by temporary assistance. Therefore, while the vote remains the same, the salary roll has grown. I suppose some of the difference would be made up by statutory increases.


James Garfield Gardiner: In answer to the question whether it is the intention of the department not to fill vacancies when they are created by

Supply-Agriculture-Administration
death or superannuation, it is the general intention where possible to leave the vacancies unfilled, in order to get down to the estimates for the present year. As the leader of the opposition will understand, of course, there are certain positions which, when vacated, must be filled.


Richard Burpee Hanson: I understand that.


James Garfield Gardiner: In such circumstances appointments have to be made. But the general tendency will be to move employees up, and probably leave the lower positions vacant. Of course we will take into consideration at all times what I said a moment ago, namely that there will be certain positions which, because of their importance, must be filled when they become vacant.
In connection with the increased expenditures in the department I would make one or two observations. Going back to about 1935 we find that expenditures were for certain purposes, but since that time we have had added the Prairie Farm Rehabilitation Act. That was added in 1935 by a former government. Then there was the Prairie Farm Assistance Act, under the present government. Since that time the science services building has been erected and staffs employed therein. Legislation has been passed respecting cheese and cheese factories, and provision for certain other activities was made. Then, there has been provision for the reestablishment of settlers. Since the time I mentioned all those activities have been added to the department; and yet in this year we are carrying on the department, with those additional activities, on an estimated expenditure of $13,266,323.09 whereas last year $18,093,596.50 was provided for the activities of the department.


Richard Burpee Hanson: I hope
the minister will consider this point: History has shown that once a government bureau is established, a great deal of courage is required to get rid of it. I recall having a conversation with a gentleman who at one time sat for the constituency of Renfrew South, and who a few years ago became minister of Trade and Commerce. He assumed the portfolio with all the zeal of a new minister, and directed his secretary, a very capable person, to make a survey of all departmental branches. With the survey before him he came to the conclusion that he could effect a substantial saving by cutting down personnel and doing away with some of the bureaux in his department. His personal experience as told to me was this: He called the chief of one bureau before him, but before - the interview was over the gentleman who had been summoned had convinced the minister that his branch was most
important-even the most important in the whole Department of Trade and Commerce. Before forty-eight hours had expired, the minister was convinced that he was wholly wrong, and that instead of being abolished, the personnel of the branch ought to be doubled. Judging by the number of telegrams he received from all parts of Canada urging him not to touch the department, he was forced to the conclusion that its activities ought to be increased.
To make a long story short, my friend Tom Low threw up his hands.


James Garfield Gardiner: The civil servant was let out.


Richard Burpee Hanson: That may be so. Tom went out. He found it impossible to cope with bureaucracy. That is what actually happened, and that was his personal experience as related to me some months afterward.
I hope that when the functions of these new branches have been concluded, the minister will see that they are promptly abolished. I . say that because I believe it is a fact that once they get into the governmental activities of the country, they remain there for a long time. If any useful work can be performed they will seek transfer to some other branch.
I am just throwing out a friendly word of warning.


Mr. McIVOR:: I suppose the leader of the opposition would say it is a dangerous thing to say anything about the civil service.


Richard Burpee Hanson: I did not
say that.


Mr. MacINNIS:: I notice an item of $16,140 for temporary assistance. Is that an expenditure for what are known as permanent temporaries, or for assistants who may be called in for rush work during the year?


James Garfield Gardiner: Those are temporary employees on the basic staffs of the department.


Angus MacInnis: Why are their positions not indicated in the same way as those of the permanent staff. They work from year to year, and there is no reason why their positions should not be indicated in the same manner.


James Garfield Gardiner: The reason for their not being enumerated is that the temporary positions are reestablished every six months. That is, at the end of every six-month period they are subject to removal, although in many instances they have been working for many years.

Supply-Agriculture-Administration


Angus MacInnis: Would the minister break up the amount of $16,140 and tell the committee how many are stenographers, how many are clerks, and so on.


James Garfield Gardiner: It would take some time to do that. I will have to go through the whole-staff of the department.


Mr MacINNIS:: If it will take too much time, let it go.


[Stage Direction]
Item agreed to.
Administration service.
2. Publicity and extension, $109,650.
Richard Burpee Hanson: There seems to be a substantial reduction in this item, and perhaps the minister could state briefly where the saving is being made. I notice there is a reduction of three in the personnel while there is an increase in temporary assistance. Apparently the item of $4,000 for advertising and publicity is cut out altogether.


James Garfield Gardiner: The savings are as
follows:
Permanent staff	 $ 6,860
Wages	 1,740
Advertising and publicity	 4,000
Express, freight and cartage		500
Printing and stationery	 6,020
Supplies and materials	 12,000
Telephones, telegrams and	postage. 500
Travelling expenses	 2,700
There is an increase of $3,240 in the temporary staff, which gives a net decrease of $31,080.


Mark Cecil Senn: I would judge that there will be fewer publications issued and circulated this year. Some of these publications are important and serve a useful purpose to the farmers and other people of Canada. Would the minister indicate just what publications will be done away with, or will the reduction simply be in the number of copies circulated?


James Garfield Gardiner: Some of what might be called the permanent publications will be cut down, at least in number. There would be a smaller expense for postage if a lesser number were sent out. During war time we will probably put out special publications containing information with regard to any agreements that may be entered into with Great Britain in connection with bacon, apples or other commodities. Some of our production publications may have to be reduced in number.


Mark Cecil Senn: Are the new publications
provided for in this vote or are they covered somewhere else?


Richard Burpee Hanson: They
should be in this vote.


James Garfield Gardiner: This particular item does not cover the cost of printing; it covers all services in connection with the sending out of the publications.


Mark Cecil Senn: There is a most important
annual publication sent out by the department entitled "The Agricultural Situation and Outlook". This publication forecasts to a certain extent the foreign and domestic market requirements and gives the farmer some idea of what will be the most profitable to produce. I understand it is to be discontinued this year. We are needing increased production because of the war and the government has promised to organize for war production. It seems to me that a periodical of this kind should be continued. The minister stated that certain publications having to do with production will likely be discontinued. Without wanting to offer too much criticism, it seems to me that this is the class of publication which should be continued. The farmer wants to know what to produce. He wants to know the requirements of the markets in Great Britain and other places. He wants to know whether his production is along the right channel. Is there any intention of issuing this annual publication?


James Garfield Gardiner: This publication is not put out entirely at the expense of the Department of Agriculture. Its cost is covered partly by the Department of Trade and Commerce and by the economics branch of the Department of Agriculture. Its cost is not covered by this item. I am informed that there would be some difficulty in putting out this publication in its usual form during war time. This publication made forecasts with regard to the possible happenings in connection with agriculture in different places, and it would be difficult to give that information under present conditions. It is intended to get out in its place a periodical setting forth the agricultural activities related to war in different places.


Alexander Malcolm Nicholson: Does this vote cover advertising in the British market?


James Garfield Gardiner: No; this vote does not cover the advertising which the hon. member for Mackenzie has in mind. Much larger grants are provided for that under marketing or under the War Measures Act. Advertising in Great Britain is carried on by the Department of Trade and Commerce.


Mr. MARSHALL:: If I understood the Minister of Finance correctly, he stated this afternoon that there would be no supplementary estimates brought down this year. Am I therefore correct in assuming that the

Supply-Agriculture-Administration
total amount to be expended this year by the Department of Agriculture will be $13,254,323.09?


James Garfield Gardiner: That is the amount in the estimates, and J am afraid I would have great difficulty in getting the Minister of Finance to let me expend any more. There may be less expended, but there certainly is not much likelihood of the expenditures being greater. The Minister of Finance stated that he did not expect to have any supplementary estimates this year unless they were made necessary by legislation. I do not imagine there will be any such legislation passed in connection with agriculture.


James Alexander Marshall: At the bottom of page five of the estimates is an item, "appropriations not required for 1940-41, $2,735,330." If there are to be no supplementary estimates, then it is perfectly correct to deduct that amount from these estimates. I maintain that those figures should not be included with these particular items.


James Garfield Gardiner: They are not in the estimates if they are not required.


James Alexander Marshall: Those figures have
nothing to do with the votes on those pages.


Richard Burpee Hanson: They are put in to make a balance.


Mr. TUSTIN:: Did I understand the minister to say that there was nothing in this item to cover the printing of any of the pamphlets which are sent out? As I understand it, the item simply covers advertising and publicity for this department.


James Garfield Gardiner: They do duplicating, but the original printing of bulletins is charged, not to this account but to other accounts in the different branches.


Mark Cecil Senn: A considerable proportion of this vote has been appropriated from time to time for exhibits at fairs and for bonusing of seed fairs, providing prize money, and so forth. Is it the intention to do away with that type of publicity and extension work, or will it be continued this year?


James Garfield Gardiner: The exhibits are being continued on a limited scale this year, but there is nothing in this vote for the bonusing of seed' fairs.


Richard Burpee Hanson: Does the cost of exhibits come under this vote?


James Garfield Gardiner: Yes.


Mark Cecil Senn: What is the procedure followed in having an exhibit at a fair? Does the department designate the exhibits after consulting with the fair board?


James Garfield Gardiner: We first get a request from those who are holding the fair, asking us to put on an exhibit. We consider the request, the resources we have, and the benefit we would get from such an exhibit, and then if we decide to put on an exhibit we determine how much shall be spent.


Mark Cecil Senn: In all fairness I must say that I have noticed some of these exhibits put on by the Department of Agriculture, by the health of animals branch or some other branch, and they are interesting and attract considerable attention. So far as possible I think that work should be continued.
Another portion of this vote is used for press notices sent out to the different newspapers and containing information for agriculturists all over the country. Will that be continued, and to what newspapers are these notices sent? Is there any remuneration to the newspapers for publishing such press notices? I have heard local newspaper editors at times complain that they published a good deal of this material and got very little thanks.


James Garfield Gardiner: It is the intention to continue sending out that information, but whether we do so to as great an extent as before will depend entirely on the money
available.


Richard Burpee Hanson: Do you pay for publication?


James Garfield Gardiner: No; we simply send out the notices and it is left to the judgment of the newspapers whether they publish it or not, but in many instances they do.


George Hugh Castleden: There is a reduction of about $12,000 in the item for supplies and materials, as shown on page 60 of the estimates. What is the nature of these supplies and materials?


James Garfield Gardiner: Paper, ink, stationery and supplies of that kind in connection with exhibits and so forth.


Thomas Clement (Tommy) Douglas: Is there
nothing for advertising?


James Garfield Gardiner: The advertising has been cut out. Any advertising we do will be done under the larger items, under "marketing" and so forth.


[Stage Direction]
Item agreed to.
Administration service.
S.	Advisory committee on agricultural services, $3,000.
Ernest Edward Perley: Who are the members of this committee?

Supply-Agriculture-Administration


James Garfield Gardiner: It is largely composed of persons associated with the department or with agricultural colleges and institutions of that type. The executive committee consists of: H. Barton, Deputy Minister of Agriculture, Ottawa, chairman; E. S. Archibald, Director, Experimental Farms Service; A. M. Shaw, Director, Marketing Services; J. M. Swaine, Director, Science Service; G. I. Christie, President, Ontario Agricultural College; W. R. Reek, Deputy Minister, Ontario Department of Agriculture; L. P. Roy, Deputy Minister of Agriculture, Quebec; Robert Newton, Director, Division of Biology and Agriculture, National Research Council; T. C. McQuat, General Agricultural Agent, Canadian Pacific Railway Company; H. L. Trueman, Assistant to Director, Science Service.


Thomas Clement (Tommy) Douglas: Are they all selected by the minister?


Heber Harold Hatfield: Are they paid salaries or expenses?


James Garfield Gardiner: There are no salaries for this work but there are expenses. The secretarial work is paid for.


Thomas Clement (Tommy) Douglas: How often did they meet last year?


James Garfield Gardiner: The committee meets usually once a year, but sometimes twice.


Richard Burpee Hanson: The temporary assistance I presume is for secretarial work?


James Garfield Gardiner: Yes.


Thomas Clement (Tommy) Douglas: There is a reduction of $2,000 in travelling expenses for the advisory committee. Is a meeting not contemplated 'this year?


James Garfield Gardiner: The amount provided for travelling expenses is not only for the advisory committee but for subcommittees as well which meet at different places more often. We shall have to cut down on some of those meetings, but the general meeting will be held.


[Stage Direction]
Item agreed to.
Administration service.
Jj. Contributions to empire bureaux, $33,823.34.
Richard Burpee Hanson: This seems to be a standard item. Are we continuing annual grants to these bureaux notwithstanding the war?


James Garfield Gardiner: I do not 'think there will be any difficulty about the empire bureaux functioning, but there may be some difficulty about the international institute of agriculture.


Mark Cecil Senn: That meets at Rome?


James Garfield Gardiner: Yes. If there is any difficulty about that one functioning, the money will not be paid, but I do not think we should remove the amount from the estimates. When the estimates were made up, there was not the same reason for discontinuing the item as now.


Richard Burpee Hanson: I understand what is meant by entomology, but what is meant by mycology?


James Garfield Gardiner: It is the systematic study of plant diseases, more particularly fungi.
Mr. HANSON (York-Sunbury) Perhaps this is not the proper item on which to bring this matter up, but the department has built a small laboratory at Fredericton. It was built under contract and is nearing completion. I was informed by the contractor when I was home that unless a little more money is spent on it and at least a roof put on the building, *there will be a loss. I would hope that the minister would have that building completed. I think it is needed, and if ever the building was needed it should be gone on with now because it will take only a little more money to complete 'the whole thing. I hope it may be done.


James Garfield Gardiner: If the leader of the opposition would permit me to defer the explanation until we get to the other item, Doctor Swaine will be here.


[Stage Direction]
Item agreed to.
Administration service.
5. International Institute of Agriculture,
Alexander Malcolm Nicholson: Would the minister tell the committee the nature of the services performed by the international institute?


Richard Burpee Hanson: That is the Rome conference.


James Garfield Gardiner: It is largely an international statistical service, and supplies statistics which we would find it very difficult to secure through our own staffs. The institute is an international organization and a clearing house to which different countries send statistics. We simply subscribe to it a certain amount to help pay the costs, and we are entitled to all information which is sent out.


Alexander Malcolm Nicholson: What kind of statistics?


James Garfield Gardiner: Having to do with
agriculture; for example, the amount of grain that is grown in different countries and areas, statistics regarding live stock, the treatment of diseases, and that sort of thing.

Supply-Agriculture-Science


Thomas Clement (Tommy) Douglas: Is the work still going on?


James Garfield Gardiner: As I said a moment ago, there might be some difficulty about our subscribing to an organization whose headquarters are in Rome, and if it is found impracticable either to secure the service or to make the subscription, our subscription will cease. At the time these estimates were made there was not the same reason as there is now for taking that position, and we decided to leave the item in the estimates.


Thomas Clement (Tommy) Douglas: Are we getting the service at the present time?


James Garfield Gardiner: We were, until war was declared. There is some doubt whether we shall be able to continue to get it.


[Stage Direction]
Item agreed to.
Science service.
6.	Science service administration, $25,467.
James Garfield Gardiner: There are two of a staff -a clerk grade 3, and a clerk grade 2-in addition to the staff we had previously.


Mr. COLDWELL:: What work is undertaken in this particular branch?


James Garfield Gardiner: All of the sciences are under this branch; that is, all the studies such as entomology, as indicated in item 11; the study of diseases of plants, the study of diseases of animals, the study of chemistry in relation to plant life and also in relation to the treatment of diseases.


Major James William Coldwell: The staff is rather small for that amount of work.


James Garfield Gardiner: This item provides only for the administrative staff. Many of these activities are conducted in different parts of Canada.


Alexander Malcolm Nicholson: I notice there is an item " cooperative investigations "; and that the amount is reduced from $5,000 to $2,100. Could the minister tell us something about the work covered by this item?


James Garfield Gardiner: This has to do largely with the projects carried out at the various universities and colleges associated with universities. We shall simply have to reduce the work in some directions.


Alexander Malcolm Nicholson: What sort of work?


James Garfield Gardiner: It might be in any branch of science. We carry on certain types of work at one laboratory because they have the equipment to do it; other types are handled in other universities. The cooperation is between this department and the provincial department or the university staff.


Alexander Malcolm Nicholson: Cooperative investigations?


James Garfield Gardiner: Investigations carried out on a cooperative basis. The term may not be exactly descriptive of the work.


James Alexander Marshall: Is the minister in a
position to state what amount was spent last year?


James Garfield Gardiner: The entire vote was
spent last year.


[Stage Direction]
Item agreed to.
Science service.
7.	Animal and poultry pathology, $146,615.
Thomas Reid: Is it under this item that the Langley Prairie research laboratory comes? I notice a reduction of about $11,000.


James Garfield Gardiner: Yes, it is under this item.


Thomas Reid: Is it intended to carry on that station this year?


James Garfield Gardiner: We will carry it on to the extent that it is possible with the money we have available, and in order to clear up the work which is now under way, to complete the investigations that are now being carried on. It may not be possible to start new investigations.


Thomas Reid: I hope that the minister and the department will see their way to carry on this work, because it is the only laboratory of its kind in British Columbia. It investigates animal diseases which exist in no other province. The mortality of the cows in that district is extremely high-as high as twenty-five per cent.


Richard Burpee Hanson: What is the matter? The climate?


Thomas Reid: The disease is known as bovine haematuria. I believe the ordinary name is red water. But there are districts with fifteen per cent mortality. One farmer who breeds foxes has slaughtered over 200 cows in five years. Research work was started in 1934. It has been carried on year after year, and in my opinion should be maintained, irrespective of the war and of reductions in departmental estimates, with a view of finding the cause of this disease. I believe it exists only in the Fraser valley. It has existed there for fifty or sixty years. No one has discovered the cause. It is not contagious. It does not show up until an animal is two years of age; but the losses are extremely heavy. I know that our farmers are very much worried to learn that this research work is likely to be

Supply-Agriculture-Science

eliminated, and I plead with the minister of the department not to stop this work on the Red Water farm at Langley Prairie.


Richard Burpee Hanson: According to what the hon. member has said, it seems to be a hopeless case. Why spend any more money on it?


Thomas Reid: I do not think we should give up. Because the source of the disease has not been discovered is no reason why we should throw up our hands and say that the thing is impossible. Some research work has gone on for years. A doctor there has done considerable research in an endeavour to find out the cause of the disease, and there are reasons to hope that he will come to the root of the trouble. Just to drop the research work and allow conditions to go on as they are does not seem to me to be good business, especially because the mortality is so high.


James Garfield Gardiner: Investigations in connection with red water have been carried on pretty well all over the globe, wherever this disease occurs, and it may be described as almost world wide in its ravages. The investigations at this particular point have become more or less routine. The investigators have found out certain things and have kept records of their findings. Other investigations and experiments are being carried on elsewhere with regard to the same problem. The officials think that if we are to go further we should start out on different lines from those that have been followed up to the present time. We have gone as far as we can go with the investigations now being carried on, and it is thought that this is a good time to discontinue what in our opinion has been carried as far as possible.


Mark Cecil Senn: This is an important item. A good many of the animal diseases that are being dealt with by this department could also be discussed under health of animals. For instance, there is a very contagious disease known as Bangs which is quite prevalent all through Ontario and throughout the dominion. There is another disease known as shipping fever, which occurs when cattle are brought into the stock-yards and even when they are brought into large fairs. When the farmers bring them from the stock-yards, treatment must be given from time to time or there may be losses.
Another matter I would mention is the outbreak of hog cholera in Ontario during the past year. That outbreak has been quite serious and there are different ideas as to how it originated. A good many people believe-and the contrary has not been proved -that it was probably brought into this prov-

ince and into the dominion through importations of United States pork in the past year. It is said that cholera can be carried in the skin of the animal, and when that skin is cut off and thrown into the garbage pail, unless it has been thoroughly fumigated or boiled it is apt to cause infection in animals that eat the swill. What investigation is being made into hog cholera throughout Canada? What efforts are being made to stamp out the disease? I should like to know if there is any truth in the assertion that it may be and probably is due to importations of United States pork into Canada.


James Garfield Gardiner: The proper place to
discuss the point just raised would be under item 16, health of animals. That is where the services are administered in connection with the control of these diseases, particularly hog cholera.


Mark Cecil Senn: Are they not dealt with under this item?


James Garfield Gardiner: Not in connection with this at the present time.


Mark Cecil Senn: Shipping fever is prevalent
in my own community, and it has been difficult up to the present to discover a treatment for it which was entirely satisfactory. I believe there is some kind of serum which is being produced and which, if administered at the proper time, will effect a cure, but so far there has been nothing definite or altogether satisfactory. I should like to know if this particular branch is investigating this disease. The disease has caused a good deal of loss particularly in my own community and, I fancy, throughout Canada. If any investigation has been carried on, what success has it met with?


James Garfield Gardiner: The disease is not being investigated at present. In the past there have been investigations of different kinds and in different places, and information is available as to how the disease can be treated and how it can be controlled. That information is not always acted upon; it is not always available at the time the disease may develop. It develops under peculiar circumstances. It quite often happens, as the name implies, when stock is being shipped, and as a result of weather conditions, conditions in cars and so on. If the information which is available for the treatment is followed, it is fairly effective, but no investigation is being carried on under this head at the present time.


Mark Cecil Senn: I am pleased to hear what the minister has had to say in that respect. The other disease to which I have referred is even more fatal and causes more loss

Suppl y-A g riculture-Scie nee
to live stock men and cattle producers of Canada than the others. The disease is known as Bangs. A serum is being produced at the Ontario Agricultural College, but evidently it is not allowed to be distributed by the federal department. I do not know exactly what the reason is, but so far farmers whose herds have been affected by this disease have had trouble in getting treatment. I believe there is an underground activity going on by means of which serum is being used by certain veterinarians and farmers, but I understand it is contrary to law at the present time to sell that particular remedy or to use it. This is the department that should investigate the germ which causes this disease and try to eliminate it. What is being done?


James Garfield Gardiner: An investigation is being carried on in connection with Bangs disease. It is concerned with calf's vaccination which it is hoped may be the means of preventing the disease, but it has not so far been established that it is a preventive. Experiments are being carried on by our department over at Hull across the river and at Guelph by the veterinary college there. These two experiments are being conducted in the hope that they may establish the remedy as a preventive. So far that has not been established and it is not yet recommended.


Mark Cecil Senn: The minister says it is not
being recommended. Is there any prohibition of the serum which is being produced at Guelph being used by veterinarians and sold to the public?


James Garfield Gardiner: Yes. The department
takes the position that it is not possible to release this vaccine to the public without upsetting the whole investigation that is being carried on. Until the vaccine is properly developed and produced in quantities that could be distributed properly, there will be no distribution.


Mark Cecil Senn: What reaction would there be to it? What difficulties would arise, or in what way would it damage any investigation?


James Garfield Gardiner: The present system of
control is one of testing for the purpose of getting reactions and removing the reactors. If this vaccine were distributed throughout the country and persons allowed to use it, it would render the stock susceptible to the test which is now being carried on, and while they are carrying on the present policy of trying to eradicate the disease through location of it and having animals removed from contact with other animals, it is not thought wise to put out this product. The practice would upset the whole policy which the depart-95826-70J
ment is following at present, particularly when it is not at all assured that vaccination would be a preventive.


Mark Cecil Senn: I ask this because I have been asked the same question a number of times by live stock men, and I could give no satisfactory answer as to why they were not allowed to use the serum.


Alexander Malcolm Nicholson: Last year three veterinary inspectors were provided for; this year there are two. Where are these inspectors located and what is the nature of their work?


James Garfield Gardiner: The three were in the Hull laboratories across the river, and this year there will be only two.


[Stage Direction]
Item agreed to.
Science service.
fl. Botany and plant pathology, $283,193.
Grote Stirling: What will it be necessary to cut out under this reduction?


James Garfield Gardiner: Under permanent employees the reduction is $3,135; temporary employees $1,240, wages $7,006, equipment $5,485-


Grote Stirling: Those are the particulars on page 62 of the estimates, but what work which has been considered valuable in the past will it be necessary to cut out?


James Garfield Gardiner: There is no particular service that is being eliminated; it is cutting down expenses of the service all the way through.


[Stage Direction]
Item agreed to.
Science service.
11. Entomology, $430,509.
James Arthur Ross: There is a great saving shown under this heading. What is the position relating to grasshoppers in the west, and the arrangement as between the federal and provincial authorities for combating these pests?


James Garfield Gardiner: This department does not pay what might be called the greater cost in connection with the fighting of grasshoppers,, the buying and spraying of poison and that kind of thing. That is done by the provincial government. This department gives a service which amounts to the mapping of the areas and that type of service; that is included in the general expenditures in connection with this item. I am not in a position to segregate it from the total amount.


Grote Stirling: Would the minister give the committee some information regarding the pine bug, the bug that has been working in
Supply-Agriculture-Science

the white pine and spruce trees, particularly in British Columbia? That comes under this item, does it not? There were parties out last year, I think. Will they be continued this year?


James Garfield Gardiner: The white pine bark beetle is the only one with regard to which we have been carrying on activities on the western coast. There will be activity in relation to it this year, but the expenditure will have to be less than last year.


Grote Stirling: Do those parties work directly under Ottawa, or do they come under the official at Vernon?


James Garfield Gardiner: Yes, under the Vernon laboratory.


Grote Stirling: Is it true that the Colorado potato beetle is doing excellent work in the German potato fields? I was informed the other day that a serious infestation had been discovered in Germany and neighbouring countries.


James Garfield Gardiner: There is some information to that effect.


Mark Cecil Senn: What progress is being made in fighting the corn borer in Canada?


James Garfield Gardiner: Control work in connection with the com borer is carried on entirely by the provinces. Investigational work is carried on by our department, and that is going on.


Alexander Malcolm Nicholson: The army worm has been doing a good deal of damage in northern Saskatchewan. Is provision made to deal with that under this item?


James Garfield Gardiner: Only the investigational work. All the work having to do with the combating of these different pests is carried on by the provincial governments.


Heber Harold Hatfield: Is anything being done to secure the removal of the British embargo against potatoes from Canada on account of the Colorado beetle? They cannot secure potatoes from Germany or France, Holland or Denmark at present, so it would seem to be a good time to take the matter up.


James Garfield Gardiner: Representations are made from time to time to Great Britain in an attempt to have the embargo removed, but up to date they have refused to admit them.


Heber Harold Hatfield: 
James Garfield Gardiner: We shall continue to press the matter, but of course it is for Great Britain to decide whether they will take the embargo off.


[Stage Direction]
Item agreed to.
Progress reported.
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Tuesday, June 25, 1940