1941-04-29

[Stage Direction]
On the orders of the day:
Mr. CLARENCE GILLIS (Cape Breton South):: I should like to ask the Minister of Labour a question arising out of a telegram I have received-too late, I regret, to send the minister notification of my question. The telegram is from the executive director of the steel workers' organizing committee in charge of organizational work in and around Hamilton. The telegram informs me that the situation at Hamilton has taken a serious turn in that the tactics employed by the operator, intimidation, agitation and so forth, are apt to lead to serious repercussions in that section. In view of the fact that war materials are the most important thing that Canada has to consider to-day, has the Minister of Labour any statement that he would care to make to the house with reference to the situation at Hamilton?


Hon. N. A. McLARTY (Minister of Labour):: Mr. Speaker, I received a similar
wire about five minutes ago. The Department of Labour is giving this matter its most careful attention. I think a statement at this time would not be helpful, but I trust that the apprehended difficulties which Mr. Dal-rymple contemplates will not arise.


Mr. ANGUS MacINNIS (Vancouver East):: I wish to ask the Minister of Labour a further question in regard to this matter. Has he been informed that the stoppage of work in other steel industries in Canada is in contemplation?


Norman Alexander McLarty: The only mention I have seen of that is in the press of Canada. I can assure the hon. member that the Department of Labour is taking every possible step it can to see that the Hamilton difficulty shall cease immediately.


Mr. M. J. COLDWELL (Rosetown-Biggar):: Has the Minister of Labour been in contact with the president of the National Steel Car Corporation, Mr. R. G. Magor? Has he been invited to Ottawa to discuss the situation, and what has been his attitude in regard to this difficulty?


Norman Alexander McLarty: I think, Mr. Speaker, I
would prefer not to answer that question unless the hon. member for Rosetown-Biggar insists, except to this extent, that I was in touch with the president of the company over the telephone for the better part of an hour last evening. The matter is one that is receiving very definite consideration, but I seriously doubt the advantage at this time of making a statement that might prejudice the negotiations which we hope will be successful in ending the strike.



THE BUDGET


Hon. J. L. ILSLEY (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, this is our third war-time budget. The first was presented in September of 1939, the second in June of 1940.
In these budgets the basic principles of our war-time finance were stated with definiteness and clarity. Such criticism of those principles as there may have been has not been based on their obscurity. We have repeatedly thrown them on the screen in bold outline and appealed to the people of Canada to help us in making them succeed.
To-day's budget will further apply those principles. Those who are looking for interesting departures from them will be disappointed. But there will be no disappointment for those who believe that the financial burden of war should be distributed on a basis of equality of sacrifice, having regard to ability to pay.
Let me first review very briefly some of the economic and financial events and policies of the past fiscal year. This review will, I hope, assist the house to understand the reasons for the measures which I shall propose, and at

The Budget-Mr. Ilsley
feast some of the difficulties of formulating practical and equitable ways and means of providing for the unprecedented appropriations which we have asked for.
As explained by my predecessor in the budget speech of June 24, 1940, the budgetary task of these years of war is that of devising financial policies which will assist in attaining the single object of both the government and parliament, the mobilizing of the maximum war strength of this country. In planning these policies, the government set for itself two objectives:
First, to bring the country as rapidly as possible to the full use of its resources and man-power. For this, financial policy could not be the sole nor even the chief instrument, but it was necessary that it should' help and not hinder, that it should keep step with the work of industrial and military organization.
The government's second objective was to follow "as far as may be practicable a pay-as-you-go policy". This it derived not from any dogma of financial orthodoxy, whatever that may be, but from the known and proved inequities and the disorganizing and shattering effects of inflationary rises in prices and incomes.
At the time the budget was introduced last June, the country had made substantial progress on the road to full war mobilization. It had become clear, further, that speed during the coming months would be greatly accelerated. In contrast, therefore, with the very moderate tax increases of the special budget of September, 1939, we proposed, and parliament approved, increases in taxation which by any standard in our country's history were very great. These increases in taxation were specifically designed to conserve foreign exchange which had already become one of the scarcest of the sinews of war, and to recapture, for the purpose of meeting war expenditures, more substantial proportions of the rapidly rising incomes of our people. It was not assumed that at that time we had already reached the full use of our resources and manpower; rather, it was assumed that, in view of the expenditures proposed and the plans approved, we would within the fiscal year approach it. Having recommended tax increases then estimated to yield $280,000,000 in the full year and $110,500,000 in the fiscal year 1940-41, the government proposed to borrow the remainder of its requirements then thought to be in the neighbourhood of $550,000,000.

FINANCING OPERATION:
During the past fiscal year, the government found it necessary to borrow for the following purposes: first, to finance its deficit which, as I shall intimate later; has turned out to be considerably smaller than was forecast; second, in financing the Canadian dollar deficit of the United Kingdom, to provide for the repatriation from the United Kingdom and the cancellation of dominion and dominion guaranteed securities held there to the par value of $245,700,000; third, in respect of $325,000,000, to enable the Foreign Exchange Control Board to purchase, under the Foreign Exchange Acquisition Order, the gold and foreign exchange of the Bank of Canada and others; and, fourth, to refund other maturing issues amounting to $200,000,000 and held in Canada.
In round figures, the total borrowings of the government during the past fiscal year are classified as follows:
From the public, $383,000,000 made up of $325,000,000 war loan bonds, $52,000,000 (cash value) of war savings certificates, and $6,000,000 of non-interest-bearing certificates; from the chartered banks, $291,000,000; and from the Bank of Canada, $349,000,000; making a total of $1,023,000,000.
When we take into account that $325,000,000 was borrowed to finance an operation of a very special nature almost entirely within government institutions implementing the Foreign Exchange Acquisition Order, and that the greater part of the refunded issues held in Canada was in the hands of the banks, the amount of bank borrowing has been limited to safe and reasonable proportions. It must be borne in mind that many of the tax increases imposed last June did not begin to yield revenue in the past fiscal year. It should be recalled further that it was the expressed desire and policy of the government to facilitate the rapid expansion of industry and the mobilization of our resources.
It is, however, clear that, having, in this joint struggle for survival, imposed upon ourselves the greater financial tasks of the current fiscal year, we shall have to appeal to the public and the financial institutions, other than the banks, for very much larger amounts than hitherto.
The war loan last September was oversubscribed. It was not oversubscribed in the first few days, and the success of the campaign required persistent work on the part of those promoting it. We must be under no illusions. Amounts such as the government, as the instrument of parliament and of the people, is compelled to ask for are not likely
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to be oversubscribed on a Monday forenoon, and they will be obtained only if there has been most careful organization, and the most persistent and energetic promotion, and if there is a determined will in the Canadian people to place their savings at the disposal of their government for the prosecution of the war.
The war savings campaign, which was begun at the end of May, 1940, was renewed with increased intensity in February last. In the ten months to the end of March, the War Savings Committee sold certificates and stamps to the cash value approximately of $52,000,000, which was in excess of the first objective set for a full year of operation. In the meantime, however, the objective had been raised in accordance with the increased incomes of our people and the greater needs of the present. Last month applications were at the approximate rate of $2,500,000 par value a week, a rate which will have to be maintained to achieve the new objective of $120,000,000 a year.
I would impress upon the house the great importance of this savings movement. The savings campaign is not limited to the sale of war savings certificates, but will embrace also the sale of bonds as these are offered from time to time to the public. Stamps, certificates and bonds differ only in their convenience and appropriateness to the circumstances of subscribers. What is desired and what is necessary is that people should subscribe to their utmost out of their savings for the purpose of financing the prosecution of the war. Particularly is it essential that those, whose family incomes have increased since the outbreak of war, should contribute to a greater degree than others in the same income groups.
As we approach the point where, within practical limits, and having regard to the seasonal variations inherent in business in this country, we are making full use of our resources, those who place their savings at the disposal of the government are not only making provision for their own future, postponing their expenditures to the time when there will be labour and resources available to provide goods and services for them, but they are in a very direct way promoting the mobilization of resources and man-power for war to the utmost extent of which this country is capable.



ECONOMIC CONDITIONS

[Stage Direction]
It has been customary in the past to review the economic and business changes which have taken place since the last budget, and it is a particularly helpful custom at this time, because the record of the past year
[Mr. Bsley.l
throws some light on the progress made in bringing the full resources of this country into use for the furtherance of our war effort and for the maintenance of our people. It is also the background against which we must view the budget proposals.
It should be borne in mind that the financial forces bringing our resources into full use are the war expenditures of our own government, the purchases which the United Kingdom government is making here, and the exports which are sold to other countries. Financial policy has been a condition rather than a cause of the heightened tempo of Canadian business.
Taking the twelve months to the end of March as a basis of comparison, our exports to the United Kingdom increased by 45 per cent in the past year. Our exports to the United States have increased by about 21 per cent. To all countries the increase has been 26 per cent. Exports of gold increased by about 8 per cent, but, unfortunately, our receipts from tourists declined substantially. Our net receipts were increased only because of the travel restrictions imposed on Canadians.
For the first quarter of this calendar year, our rapidly rising war expenditures were five times the figure of the same quarter of last year and at the rate of more than $1,000,000,000 annually.
In comparison with the same period a year ago, the physical volume of business in Canada in January and February was 15 per cent higher while the volume of manufacturing was 11 per cent higher. It is at first a surprise that these increases are considerably smaller than those which took place in the preceding period of twelve months. When we turn, however, to the value of construction contracts, which in the first three months of 1941 stood 100 per cent higher than in the same period last year, we see that what was taking place, and is still taking place, is a great expansion in our capacity to produce, and that from now on a greatly increased output will be flowing from our war plants.
Whereas in March, 1940, the number of persons employed had increased by less than 7 per cent over the previous March, the increase shown in March of this year is approximately 20 per cent. In the early period of the war, increased output was obtained by employing more fully and for more days in the week those people who were already counted as employed. During the past year, it is apparent that increases in production have required the employment of additional workers. Clearly from now on, aside from some increases in efficiency, any

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enlargement in our scale of production will be dependent upon our ability to add more workers to our working force. It has already been indicated that we shall probably need this year for both the armed forces and industry an additional 300,000 persons. How near we are at present to full employment is a point open to prolonged argument. As long as there is rapid change in industrial needs, there will necessarily be some temporary unemployment. It is significant that the number of employable persons on relief during the past winter has been only a third of the number shown for the previous winter, that the percentage of trade unionists unemployed has been only slightly above the figure for the winter of 1928-29, and that industries necessarily seasonal in the operations are finding it increasingly difficult to maintain their working forces. It is undesirable that we should try to force the expansion of production to the point where our seasonal industries would be stripped of workers and some of our most important exports restricted. As our seasonal requirements and as our war requirements mount between now and next autumn, we shall have to forgo some of the less essential of our civilian requirements in the interests of maximum war production.
The greatly increased volume of business activity during the past year has resulted in very substantial increases in income. It has been estimated that our national income for the calendar year 1940 was $600,000,000 in excess of the figure for 1939. Of that $600,000,000, $348,000,000 was in salaries and wages, the remainder in business, professional, agricultural and investment income.
While we cannot trace all the ramifications of the expenditures of income, we can see easily enough where some substantial portions of the increase in, income have gone. Something like $300,000,000 went into increased dominion revenues. Without increased rates some provinces and municipalities have experienced large fortuitous gains in revenue. For the first two months of 1941, retail sales in Canada were about 13 per cent higher than in the same period of the previous year. Purchases of passenger automobiles were slightly below the level of the previous year, which was, however, the highest level on record for January and February. Expenditures on residential construction during the first three months are reported to 'be 19 per cent higher than in the same period a year ago. The greatest increase in construction, of course, has been in industrial construction where the first quarter's figures are about four
times those of last year. Most, but by no means all of this, has been occasioned by the expansion of war industries.
These few figures give some impression of a country which has greatly increased its capacity for war production, and, at the same time, increased its production for civilian use; a country which has drawn nearly all of its working force into active work, and will encounter more and more difficulty in expanding the scale of production still further. They indicate that far from there being any reduction in civilian consumption there has been a very substantial increase as war activity has developed.
We do not know what tremendous events are shaping to emerge in the year ahead of us. We are bound, nevertheless, to take account of the results of the programmes which have already been put into effect in the United Kingdom, the United States and in this country.
That our own plans call for war expenditures of $1,450,000,000, nearly double those of last year, is, already known. The government of the United Kingdom has intimated that it expects that purchases for all purposes will be made in Canada to the value of $1,500,000000. As the rapid acceleration of the United States defence programme proceeds, our exporters to that country will be called upon for larger and larger shipments. Rapidly developing industrial cooperation between ourselves and our neighbours will intensify this demand. These tremendous requirements of goods are additions to our normal requirements for consumption and maintenance of our capital equipment.
Under the stimulus of these purchases, it is expected that our national income will increase greatly. Against an estimated increase of $600,000,000 from the calendar year 1939 to 1940, it has been estimated that the national income in the fiscal year 1941-42 is likely to rise $950,000,000 above the figure for 1940. The achievement of this increase depends, of course, on realizing a great increase in our industrial output. For the attainment of that increase we rely mainly on the expansion of industrial capacity which has taken place in the past year.
Such an increase in our national income, to a level 35 per cent above that of 1939, will make possible a powerful contribution to the success of the struggle in which we are engaged jointly with the other British countries and the United States. It will make it possible without any serious encroachment on the basic standard of living of the people of this country. It will not, however, make it
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[Stage Direction]
possible for us to expand our consumption still further nor will it be possible for us generally, while we are engaged in this struggle, to enlarge, remodel and reequip our houses, buy larger and faster motor cars and respond to each and every appeal of the alluring advertisement. We can postpone till after the war the purchase of many wholly desirable and convenient products, and thereby give right of way to the equipping and maintaining of the forces that stand between us and Hitler.

[Stage Direction]
The house does not need to be told that some of the most difficult and intricate of the financial problems of the country arise from our relations with the United Kingdom and the United States. Since the outbreak of war, Great Britain has suffered in common with us an acute shortage of United States dollars. In addition, Great Britain has been short of Canadian dollars.
Up to March 31, Britain's deficit in her balance of payments with Canada was approximately $795,000,000. Of this amount only 31-4 per cent was met by the transfer of gold to Canada. Canada financed the remainder by the repatriation of Canadian securities held in Britain, and by the accumulation of sterling balances in London. The first of these methods accounted for 42-4 per cent of the total deficit and the second for 26-2 per cent of that deficit. Since early December no gold has been received from the United Kingdom, and Canada is at present making Canadian dollars available to the United Kingdom for the full amount of her deficit with us, which for the first quarter of 1941 amounted to approximately $186,000,000. During the present fiscal year our shipments of munitions of war, raw materials, and agricultural products are expected to increase very rapidly and, as has already been indicated to the house by the Prime Minister, they are estimated to reach approximately $1,500,000,000 for the fiscal year as a whole.
On this basis it was estimated that the deficit in the balance of payments with Canada of Britain, or, more accurately, of the sterling area, would be approximately $1,150,000,000. This would be a colossal sum to think of adding to Canada's direct war expenditures of perhaps $1,450,000,000. The house, however, I am sure will agree that it would be unthinkable that Britain should be unable to purchase vitally needed supplies in Canada because of a lack of Canadian dollars. For that reason it has been necessary for us to assure Britain that Canada would meet such proportion of

that total deficit as Britain herself would not be able to meet by the transfer of gold or United States dollars to Canada.
In view of the changed aspect of this problem as a result of events of the last few days, I wish now to turn for a few moments to Canada's own exchange problem vis-a-vis the United States. As the house is aware, Canada has normally had a deficit in her balance of payments with the United States, but in the pre-war years that deficit was met by the conversion of our surplus sterling into United States dollars in the free market in New York. Since the outbreak of this war it has not been possible to convert this surplus sterling into dollars, with the result that we have had to face the prospect of a growing shortage of United States dollars coincident with an increasing accumulation of surplus sterling. This deficit in our United States account has been a continuing problem from the outbreak of war. Our nearness to the United States is such and the commercial and industrial relations of the two countries are such that as long as United States industry is working at less than capacity, any shortage of resources, plant, material or labour could be made up by the expenditure of United States dollars- Thus, all other shortages tended to be converted into this shortage of hard currency.	,
The house is familiar with the series of measures by which the acuteness of this deficiency has been mitigated. The original Foreign Exchange Control Order prohibited the export of capital. Strenuous efforts have been made to extend our exports, our tourist traffic and our gold production. In May last, under the Foreign Exchange Acquisition Order the gold and foreign exchange of the Bank of Canada and private holders were taken over by the board. In June the war exchange tax of 10 per cent was imposed. In July the board was instructed to refuse dollar exchange for purposes of pleasure travel. In December the War Exchange Conservation Act prohibited, in effect, the importation of a large number of products from non-sterling countries, restricted the importation of others, and reduced, or, in most cases, eliminated, the duties on large classes of imports from the United Kingdom. In addition, heavy excise taxes were imposed, largely for exchange reasons, on automobiles and a considerable list of other articles which occasion substantial imports of parts and materials from the United States. These steps were taken in the conviction that it was only common sense that, when we were being forced to dispose of our United States assets to meet a shortage of United States dollars, we should do what.

The Budget-Mr. Ilsley
we could without handicapping our war effort to reduce our non-essential expenditures in dollar exchange.
However, despite all the measures that were adopted, we experienced a continuing deficit in our dollar transactions with the United States. From September 15, 1939 (the date on which foreign exchange control was established in Canada) until March 31, 1941, Canada's net deficit with the United States on both current and capital account amounted to approximately $477,000,000. (This figure, as well as the others which I shall use, is in terms of Canadian dollars). As I have already explained, we received from the United Kingdom in the early part of the period a substantial amount of gold, which was, of course, used to meet part of our deficit with the United States. It was, however, necessary to cover the balance of approximately $225,000,000 by depleting our holdings of gold and United States dollar balances and by the liquidation of certain of our holdings of other United States assets. The rapid expansion of Canada's own direct war effort and the increase in British purchases in Canada already referred to were bound to bring, unless offset by other factors, a substantial increase in our deficit with the United States. In spite of the measures taken to curtail non-essential imports, we have estimated that our imports from the United States this fiscal year will reach the huge figure of $953,000,000, of which $428,000,000 will represent purchases for war purposes. More than half of this latter total would be accounted for by components and materials required to be purchased in the United States to execute British war orders placed in Canada. Our exports to the United States for the same period are estimated at $475,000,000.
Another important item on the debit side of our account with the United States is the payments we have to make for interest and dividends to United States investors estimated at $238,000,000, which is only offset to the extent of about $28,000,000 by interest and dividend payments coming the other way.
The house is also aware that our net tourist receipts last year proved very disappointing, and, while w-e hope that United States tourists will come to Canada in increasing numbers and for longer periods this year, it is probably not safe to count on net receipts from this source of more than $130,000,000.
Taking these and other relevant items into consideration, the best estimate we were able to make a few weeks ago indicated a probable deficit in our balance of payments on both capital and current account with the United States for the current fiscal year of approximately $478,000,000. This has recently been reduced by $11,000,000 as a result of a partial renewal of a dominion obligation maturing on May 1st next.
Perhaps I have said enough to indicate to the house something of the magnitude of these complex exchange problems. A dramatic and magnificent contribution to their solution was made by the Hyde Park Declaration which the Prime Minister explained to the house yesterday. In that declaration, the thrice welcome progeny of the "good-neighbour" and "aid-to-Britain" policies, the President of the United States and our own Prime Minister made public an agreement under which the government of the United States will make available to Britain, under the lease-lend act, the United States components of British purchases in this country, and undertakes to purchase from us such war materials and equipment as we may find it possible to produce by an intelligently planned integration of the industrial capacities of this North American arsenal, having regard always to the requirements of Canada and the United Kingdom.
It is difficult to make any precise quantitative estimate of the contribution which the agreement may make to reducing our shortage of United States dollars. In the first place, while elimination of the necessity of our paying United States dollars for the United States components of British war orders in Canada should result in a substantial reduction in the drain on our United States dollars, administrative difficulties may be encountered which will make it difficult to apply the lease-lend procedure immediately to all items in this category, particularly certain raw materials purchased directly by private contractors. In the second place, while the Hyde Park Declaration referred to a total of between $200,000,000 and $300,000,000, the amount of the additional war purchases by the United States in Canada will depend on the practicable limits of production and integration, and it will, of course, take some months for them to reach their expected peak volume. The most reasonable estimates of the magnitude of these two factors still leave a considerable deficit in our balance of payments with the United States, but we hope this may be further lessened by continuing negotiations between the three governments.
However, I must warn the house that the Hyde Park Agreement, most generous and helpful as it was, does not remove all need for the conservation of foreign exchange. It is a magnificent contribution to the success of our common struggle, not to the ease and convenience of the Canadian people. It would be foolish, for instance, to assume that it will mean the restoration to par of the
The Budget-Mr. Ilsley
[Stage Direction]
Canadian dollar in New York, a proposal which has recently been mooted by persons not familiar with the hard facts, or to assume that it will enable us to remove the present restriction upon the use of United States dollars for pleasure travel purposes in the United States.
It was only with the greatest reluctance that the government accepted the necessity of imposing these travel restrictions, and, as the Prime Minister stated upon his return from his recent visit with the President of the United States, this administration would abandon that prohibition immediately if it could be done without injury to Canada's war effort. Such action, however, cannot be taken at the present time, as the plain fact of the matter is that even taking into account the probable benefits of the Hyde Park Agreement, we have not sufficient United States dollars available to permit us to undertake additional commitments. If all restrictions were removed, I am of the opinion that we would have to find some $70,000,000 to $80,000,000 for pleasure travel.
While on this subject I would like to refer to certain misapprehensions which appear to exist in some quarters in regard to the policy which is being followed in permitting visits to the United States. In general, funds will be provided for any trip which is required for business reasons. Further, visits for necessary medical treatment or other types of health purposes are allowed, and, in certain cases, limits are established for educational courses not available in Canada. No funds will be provided for vacation or pleasure trips, but if any Canadian has arranged to visit relatives or friends in the United States who provide the United States dollars for the purpose, no objection will be raised. From time to time we hear criticism that certain people are allowed to visit the United States, and not others. I am advised by the Board that I can assure all concerned that absolutely no discrimination is exercised in considering applications and that exactly the same principle applies to every applicant. If the application falls within a class that is prohibited, it is refused without regard to the personalities concerned, and if it is in a permitted class it is granted on the same basis.

[Stage Direction]
I wish now, Mr. Speaker, to review the government accounts for the fiscal year which closed on March 31st. In accordance with the procedure which has been followed in the last two budgets, I shall merely at this time summarize the results of the year's operations

and at the close of this address I shall table a white paper which will include all the significant details in regard to our revenues and expenditures, our direct and indirect liabilities, our active investments and our financing operations during the past year.
The house will realize that, while we are now past the end of March, our books for the fiscal year 1940-41 will not be closed for some time. For this reason the figures which I shall present to the house represent merely estimates, although I believe they are close estimates, of our revenues and expenditures for the past fiscal year.
In this connection, my first duty is a pleasant one-that is, to report the fact that our revenues during the past year were of unprecedented magnitude. Our present estimate is that they will reach a total of $871,571,000, an increase over the previous year of over $309,000,000 or approximately 55 per cent. For no earlier year in our history have our receipts approached this huge total. Even the somewhat courageous estimates made by my precedessor last June were exceeded by more than $100,000,000. If hon. members contrast the huge total I have given with the dominion's revenues in the corresponding year of the great war, they will, I believe, find reason for confidence, not only in the increased strength of the dominion to bear the greater burdens of to-day, but also in the different methods which are being followed to finance this war. In 1915-16 the aggregate revenues of the dominion amounted to only $172 million, and even in the closing year of the last war they had risen to only $313,000,000.
The very large increase in our revenues as compared with those for 1939-40 is to be explained by several factors. In the first place, we imposed last year a number of new taxes and we increased the rates on several of our existing taxes. In the second place, the substantial increase in business activity, in personal and corporate incomes, and in consumer expenditures, to which I have already referred, have provided a broader base for all or nearly all our taxes. Finally, there was a much less important factor, the prepayment of income taxes not normally payable until April 30.
In these remarks I shall restrict myself to a brief discussion of our tax revenues and shall make no reference to our revenues from non-tax sources, such as post office receipts, return on investments, and various miscellaneous items. Total tax revenues are now estimated at $778,290,000, as compared with $468 million in the preceding fiscal year. The largest contribution to this total was made by

The Budget-Mr. Ilsley
our various excise taxes which account for aggregate receipts of $284 million as compared with $166 million for the previous year. Sales tax alone was responsible for total receipts of $180,750,000 and the war exchange tax for $62,000,000.
The income tax was the second most important source of revenue. From the graduated tax on personal incomes, the 18 per cent tax on corporate incomes and the special tax on interest and dividends, we received a total of $220 million, or more than 50 per cent in excess of any previous year in our history. The national defence tax produced a total revenue of $28 million, while under the excess profits tax we collected $24 million. In this connection, however, I wish to emphasize that it will not be until after April 30 this year that we will receive the very large returns which we expect from the excess profits tax, as well as from the increases in personal income taxes which were imposed last June. It is not as yet possible to determine with- any precise accuracy the total amount of prepayment of income tax which normally would not have been paid until April 30, 1941, although it is estimated that about 110,000 taxpayers took advantage of the instalment prepayment plan and that prepayments were about $45,000,000.
Despite the important steps we have taken to restrict non-essential imports, our imports have shown a substantial increase and as a result our revenues from customs duties rose from $104 million in 1939-40 to an estimated $131 million in 1940-41. This is larger than in any year since 1931, but still considerably below most of the pre-depression years.
As a result of the tax changes imposed in the two earlier war budgets and of increased consumer incomes, our revenues from excise duties, mainly on liquors and tobacco, increased from $61 million to $89 million.
I turn now to some brief comments on our expenditures for the past fiscal year. We now estimate that our ordinary expenditures will be slightly over $393 million, of which total approximately 70 per cent is accounted for by interest and other charges on. the public debt, civil and military pensions, cost of operating the postal service, and subsidies and special grants to provinces. Although it includes over $11 million additional interest and other charges on the public debt, this total is $5 million less than the corresponding figure for the previous year. Capital expenditures decreased to $3,405,000 from slightly over $7 million in 1939-40.
The largest decrease in our expenditures took place in the category of so-called special expenditures, representing chiefly the cost
of unemployment relief, payments under the Prairie Farm Assistance Act, and provision for losses in respect of wheat. In connection with the last named item, I have thought it wise to set up a reserve in our books of $10,500,000 which is the deficit shown, not previously provided for, in the operations of the Canadian Wheat Board calculated as at July 31, 1940. Including this reserve for wheat losses, our total special expenditures for the year are estimated at $42,613,000, which compares with an expenditure of $89,113,000 under the same category in 1939-40.
As the house already knows, there was also a substantial decrease in losses of, and nonactive advances to, government-owned enterprises, chiefly the government-owned railway system. During the past year our expenditure on this account was $18,182,000 as compared with $42,079,000 during the preceding year.
I come now to the last important category of dominion expenditures, namely, those on war account. By this time hon. members will, I am sure, realize how difficult it is to make precise estimates of war expenditures in advance, even for short periods. Our latest estimates indicate that our total cash disbursements for this purpose charged to the fiscal year which has just closed will approximate $816,150,000, of which $791,862,000 will represent expenditures charged to consolidated fund and $24,288,000 will represent outgo in respect of items which we treat as active assets in our accounts. For the sake of comparison it may be interesting to note that in the corresponding fiscal year of the last war, namely 1915-16, the war expenditures of the dominion amounted to only slightly over $166 million, and even in 1918-19, the last year of the war, to only $447 million.
If we add the amounts which I have given you for the various categories of expenditure charged to consolidated fund together with certain miscellaneous other charges representing chiefly write-down of assets, we get an aggregate expenditure for the year of $1,266,627,000, which total I need hardly say also represents a new record for the dominion. Deducting total revenues of $871,571,000 we reach an over-all deficit for the year of $395,056,000. This is, of course, a very large deficit, but nevertheless it is substantially smaller than that which was estimated by my predecessor last June. It compares with a deficit of $118,700,000 in 1939-40.
As a result of the over-all deficit of $395 million, the net debt of the dominion rose to approximately $3,666,316,000 as at March 31, 1941. Gross liabilities at that date are
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estimated at $4,744,057,000. On the other side of the balance sheet, offsetting these liabilities in part, the dominion has active assets, including cash on hand, sinking funds, and active loans and investments amounting to SI,077,741,000.
At the close of the fiscal year there was outstanding unmatured direct funded debt (including treasury bills) amounting to $4,371,891,000, of which $5,233,000 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 totalled $984,016,379, as at March 31, 1941. These guaranteed securities were decreased by $100,462,853 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 I shall table at the close of my address.
[Stage Direction]
BUDGET FORECAST 1941-42 AND PROPOSALS Estimate of Expenditures
What I have said relates to the past, and what the house will now be interested in is the estimates of our expenditures for the new fiscal year and the measures and policies we propose for raising the necessary funds to meet these expenditures.
The house has approved estimated expenditures on non-war activities for the fiscal year ending March 31, 1942, amounting to $433,131,639.50. To this should be added supplementary estimates before the house, amounting to $35,000,000, to provide for payments to stimulate reductions in wheat acreage.
The house will recall that the war expenditures for the fiscal year ending March 31, 1942, were tentatively estimated at $1,450,000,000. As was pointed out, however, when the 1941 war appropriation bill was introduced, these estimates are dependent upon a number of factors which cannot be determined in advance and for that reason authority was asked for an appropriation which is approximately $150,000,000 less than the war estimates of the various departments. In asking the house for an appropriation of $1,300,000,000, I said:
"It may be that the total cost of our war effort expenditures during the coming fiscal year will exceed this figure by a considerable amount, and if it does, it will be necessary for me to come back for an additional appropriation at a later date."

It is not necessary for me to repeat the impossibility of estimating in advance with any degree of accuracy what our war expenditures will be during the new fiscal year. Obviously, this will depend in large measure upon events over which we have no control.
With these reservations, I shall add $1,300,000,000, which I think is an inside figure for war expenditures, to the total expenditures on non-war activities of $468,000,000. These two amounts together come to the tremendous sum of $1,768,000,000 for dominion government expenditures during the fiscal year
1941-42. If war expenditures exceed the present appropriation and reach the original estimate upon which the war program was based, our total expenditures would be $1,918,000,000.
Estimate of Revenues
To meet the expenditures which I have outlined, we estimate that our total revenues for the new fiscal year on the basis of the taxes which are now in force, will amount to approximately $1,150,000,000. These revenues are made up as follows:
Customs	 $ 137,000,000
Excise duties	 98.000,000
Sales tax	 190,000,000
War exchange tax	 81,000,000
Other excise taxes	 51,000,000
Income taxes-
Personal	 135,000,000
Corporation	 165,000,000
5 per cent tax	 15,000,000
National defence tax	 55,000,000
Excess profits tax	 140,000,000
Miscellaneous	 2,000,000
Total tax revenue	$1,069,000,000
Non-tax revenue	 81,000,000
Total ordinary revenue.. $1,150,000,000
This means that if our expenditures do not exceed $1,768,000,000, and if our revenues from present taxes produce $1,150,000,000, we should be faced with an apparent deficit of $618,000,000 to be covered by new taxes or by borrowings. On the higher estimate of war expenditures that deficit would be $768,000,000. If that were all, the problem would be difficult enough, but as everyone knows, the real magnitude of this country's war effort greatly exceeds the cost of our direct military programme, and for this reason the total amount which we must find through new taxes and by borrowing will greatly exceed whatever the government's budgetary deficit itself may amount to.
In an earlier part of this address I dealt with our exchange position with the United Kingdom and with the United States and pointed out the difficulties of estimating the amount of the British deficit with us or the

The Budget-Mr. Ilsley
amount of our deficit with the United States for the present year until the measures agreed to at Hyde Park have been worked out. Our immediate interest in these questions is in their effects upon our internal financing problem this year.
In order to appraise the magnitude of this problem we should first add to our own budgetary deficit the amount of Britain's deficit in her balance of payments with us. We should then deduct the amount of our exchange deficit with the United States because to the extent that we meet this by selling gold or foreign exchange or other capital assets it does not represent an immediate burden upon our current production.
On the basis of the information which is presently available to us, we estimate that the difference between Britain's deficit with us and our deficit with the United States will be between $800,000,000 and $900,000,000 in the current year. If this is added to the estimates I have given of our prospective budgetary deficit we arrive at a total of between $1,418,000,000 and $1,668,000,000 which we must raise by additional taxation and borrowing during the present fiscal year. For our present purposes, I think, we will not be far wrong if we assume the figure to be $1,500,000,000. It is unnecessary for me to emphasize the staggering task which this places upon the Canadian people. It can be done without any doubt, but it will not be easy.
I should like to point out to the house, however, the importance of keeping the magnitude of our task well before us when we consider the specific proposals which I now present. It is only by doing so that we can hope to consider the individual measures in their proper perspective.

[Stage Direction]
To provide these funds, I shall lay proposals before the house designed to raise, by new taxes and increased rates of existing taxes, the amount of $300,000,000 in a full fiscal year. Of this amount, roughly $220,000,000 will be derived from direct personal and business taxes, $68,000,000 will be raised by indirect taxes which fall on commodities and services which, however desirable they may be, are not, in general, essential, and $12,000,000 from an indirect tax which will affect the family budgets of all. All of this will not, however, be collected within this fiscal year. In 1941-42, it is expected to obtain $250,000,000.
This leaves an estimated amount of $1,250,000,000 to be financed otherwise. Increases in certain government open and trust accounts such as annuities and superannuation, the unemployment insurance fund, war savings
certificates and non-interest-bearing loans may be expected to provide a source of funds amounting to about $200,000,000. For the remainder, we shall have to appeal to the people, the business firms, and institutions of the country.
I need not tell the house that to raise such an amount will require such a great increase in the savings of the Canadian people that the help of every man, woman and child will be required. It will require also the careful limitation of our commercial and industrial investment to such plant and equipment as will aid in carrying on the war and as is necessary to the maintenance of essential services. With this object an order in council, effective from to-day, will shortly be passed making it necessary for any person or firm erecting or extending building structures for industrial and commercial use or installing machinery and equipment, to apply for and obtain a licence. To facilitate administration, small extensions and replacements will be excluded from the coverage of the order, and plant and equipment for primary industries and housing accommodation will be exempt. The order will be administered by the Director General of Priorities under the Department of Munitions and Supply.
This policy of controlling investment will have the important effect of providing a larger market for government bonds, but it will have other important effects as well. It will limit the demand on steel, machine tools and skilled labour; it will prevent some unsound extensions of industry under the stimulus of the War Exchange Conservation Act; and it will provide a backlog of investment and construction requirements for the post-war reequipment and modernization of Canadian industry.
I have already indicated that the new tax proposals involve very important increases in direct taxation. That will surprise no one who is aware of the magnitude of our financial requirements and who is familiar with the financial policy which this government has followed from the beginning of the war. As my colleague said when discussing the increases in personal income taxes which he proposed in the budget of June, 1940, "this is the tax which 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". Our views upon the type of additional taxes which should best be imposed have not changed. We still believe that if there must be increased taxes, then it is better to increase the direct taxes as much as we possibly can. And in this most critical
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year of our history when the future existence of all the important things that matter to us is at stake, I do not think it unreasonable to ask our people to accept further drastic increases in both personal and corporation income taxes. I think they are prepared to shoulder the increased burdens which we must ask them to bear.
But when we come to the point of increasing personal and corporation income taxes still further, we are confronted by the situation to which reference was made last year in the following terms. I quote from my predecessor's speech:
"The dominion is not the only taxing authority levying steeply graduated rates on large 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."
Since these words were spoken the tax structures of some of the provinces have been changed to some extent.	It was recently
announced that British Columbia intends to repeal its surtaxes on higher incomes. The treasurer of the province of Quebec has intimated that the municipal income tax levied by the city of Montreal will be discontinued. On the other hand, New Brunswick has now entered the corporation income tax field. But in spite of these particular changes, the general problem which was explained to the house last June remains unchanged.
We hoped that some solution of those difficulties would 'be found at the dominion-provincial conference which was held in January to consider the recommendations contained in the Sirois report, but as everyone knows the conference failed. There is nothing to be gained by reviewing the events which led up to the conference or discussing the causes of its failure. We must accept the differences of opinion expressed at that time* without resentment or disappointment and get on with our jobs. And in case there may be any lingering doubts in any one's mind, I should like to state categorically that the question of the Sirois report will not be reopened at the instance of this government

until after the war at least. What has proven to be such a contentious domestic issue must not be allowed to weaken our national unity in this critical year.
If I may be permitted to digress for a moment at this point, I should like to assert as strongly and as definitely as I can that while we may have differed in the past and may differ in the future about the best solution for some of our domestic problems there is no disagreement among Canadians upon our main purpose. And that is to put forth the maximum effort of which we are capable in the struggle with the forces of evil and of darkness, in the struggle with the common foe of all decent men. If the house will consider the estimated war expenditure for the fiscal year commencing April 1, 1941, and the amount of our financial assistance to Britain, which I gave the house a few moments ago and will think of what these expenditures mean in terms of hours of labour and of raw materials, I believe all members will agree that the .Canadian people must pull together in their common purpose. Such a tremendous effort would not be possible unless we were united in our determination that the enemy and all he stands for shall be overcome.
To return to the problem of the different levels of direct taxation between provinces, it has been suggested that the dominion government should impose whatever taxes it thinks necessary without any regard whatever to the difference in the provincial rates. But the situation to which my predecessor referred last June still exists. In fact, it becomes worse and the differences between the provinces become aggravated as the general scale of taxes increases.
The combined rates of tax on the lower income levels are relatively moderate at present and under these conditions the differences in the taxes paid by residents of different provinces are tolerable. But if the taxes are to be increased as they must be, those differences will become progressively less tolerable. This means that if the dominion government introduces tax rates which together with the existing provincial rates are appropriate to the situation in some provinces the result would be that residents of other provinces where the provincial income taxes are relatively higher, would pay more than the maximum which it is thought people with similar incomes elsewhere can be asked to bear.
A further difficulty arises because of the fact that provincial income taxes in western Canada in combination with dominion rates rise more steeply than they do in the east. As a result, it is particularly difficult to

The Budget-Mr. Ilsley
increase the taxes in the higher income brackets. However, if the dominion rates on higher incomes are not increased then the combined taxes on such higher incomes in eastern Canada will be unfairly low as compared with the proposed increased taxes on lower incomes. Since the taxes on lower incomes must be increased substantially in order to produce the revenues required, it is only proper that we should also increase the taxes on the higher incomes if we are to preserve the principle of spreading the burden in proportion to ability to pay. But at this point, the progressive provincial taxes in the western provinces interfere with the course of action which should be taken to produce an equitable result in eastern Canada.
After the most careful study we have come to the conclusion that the dominion in establishing its rates of taxation cannot ignore the differences in the levels of direct provincial taxes to which I have referred. On the other hand, in view of the magnitude of the problem before us we cannot permit those differences in provincial taxes to influence us to the point where we refrain from imposing the maximum rates of dominion taxes which we think the public can fairly be expected to stand. We cannot permit ourselves to forget that we must raise 81,500,000,000 this year by additional taxation or borrowing.
After the most careful consideration of all the questions involved we have reached the conclusion that the rates of personal and corporation incomes taxes should be raised by the dominion to the maximum levels which would be reasonable at this time, if the provinces were not in those fields. Our plans are drawn, therefore, on that basis, and in due course I shall outline proposals to increase the minimum rates of corporation income tax to 40 per cent; to increase the rates of personal income taxes very considerably and to increase the national defence tax.
But these increases if taken together with the existing provincial rates would result in too heavy a burden and it is proposed, therefore, as a temporary expedient for the duration of the war only, to ask the provinces to vacate these two tax fields.
I am writing to the provincial premiers informing them that the dominion will offer to pay each year for the duration of the war, to any province which, together with its municipalities, will temporarily vacate the personal income tax and corporation tax fields either
(a)	The revenues which the province and its municipalities actually obtained from these sources during the fiscal year ending nearest to December 31, 1940, or
(b)	The cost of the net debt service actually paid by the province during the fiscal year ending nearest to December 31, 1940 (not including contributions to sinking funds), less the revenue obtained from succession duties during that period.
Such payments will be augmented by appropriate fiscal-need subsidies where it can be shown that these are necessary. At the same time, it is proposed to discontinue the present special grants which are voted annually by parliament.
I should like to emphasize that this is not an attempt to get the provinces out of these tax fields permanently. While it is proposed that the dominion should increase the tax on corporation incomes this will be done by raising the minimum rates under the Excess Profits Tax Act which is not and never was intended to be a permanent fixture in our tax structure. Furthermore, it will be noticed that succession duties are specifically excluded from the proposal which is being made to the provinces.
It is not intended that the dominion should interfere in any way with the royalties or special taxes which the provinces now levy upon timber limits, oil wells, mining or other natural resources. It is obvious that in war time as well as peace time the provinces have a special interest in the development of their natural resources and that they must be left in a position to raise the necessary revenues for this purpose.
I should also like to emphasize that no province is being forced to accept this offer and any province which does accept will have the right to withdraw from the plan at the end of any year subject to reasonable notice. Furthermore, the arrangement with the provinces will be discontinued and the dominion will cease making the payments which are contemplated in the proposal and will agree to reduce its taxes in these two fields proportionately, within one complete fiscal year after the termination of the war.
The plan which I have outlined for alleviating the present difficulties is by no means perfect and is not intended to be more than a temporary war-time expedient. However, it has the merits of simplicity. It will permit the dominion government to levy the necessary taxes without injustice to residents of different sections of the country or to different income groups. As far as the provinces are concerned, it will ensure them a fixed revenue for each year during which the war continues, based upon the level of such revenues during the past year. In other words, the dominion guarantees the provinces an annual payment equivalent in all probability
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to the maximum amount which they have ever received from the two tax fields under discussion. It is true that if incomes continue to rise the provinces might receive even larger revenues from these two sources in the future than they did in the year 1940, but this would depend in part upon the course and nature of the war, in part upon the level and nature of dominion taxation and upon many other questions which cannot be foreseen or assessed at this time.
The alternative offer of the dominion to pay the cost of a province's debt service is intended for those provinces which have not developed to the same extent the personal income tax and corporation tax fields and for those provinces which represent that they must be given some measure of relief pending a final solution of their present difficulties.
I sincerely trust that all provincial governments will consider that these proposals are fair to them and that they will accept them in a spirit of cooperation and with a desire to help us in our considerable task. I sincerely trust that all sections of the community will unite in supporting the plan as a temporary expedient but one that is necessary if we are to apportion the burden of the tremendous effort which this country is making among our citizens in as fair and reasonable a manner as is humanly possible.
There are two other matters which I should refer to in connection with this proposal to the provinces. If the plan is accepted, the provinces will cancel the great variety of flat rate or specific taxes which are now levied on corporations. In general, these will be more than offset by the proposed increase of 10 per cent in the corporation income tax. It is possible, however, that certain classes of companies-such as the banks, railways, insurance companies and possibly one or two other groups-would benefit from the change. To avoid this it is proposed to introduce a limited number of specific taxes on the types of enterprises I have mentioned. These will not be decided upon until after a careful study has been made of the details of the existing provincial taxes which will be discontinued. When they are introduced these specific taxes will be made retroactive so that there will be no interval between the date when the provincial taxes come off and the date when the dominion taxes go on.
The second matter to which I should refer briefly at this point and which I shall discuss more fully later on, is the proposal to introduce a special excise tax of 3 cents per gallon on gasoline sales. This proposal is necessary both for revenue and for exchange conservation but it may have the effect of cutting into provincial revenues. It is, therefore, proposed in order to assist the provinces [Mr. Haley.)
which agree to vacate temporarily the personal income tax and corporation tax fields, to guarantee to them an amount equivalent to the revenues which such provinces actually receive from gasoline taxes during the fiscal year ending nearest to December 31, 1940, provided they do not change their present gasoline tax rates. In other words, if their revenues from this source, in any year during which the proposed plan is in force, should fall below the 1940 level, the dominion will make up the difference.
It is difficult to estimate accurately the amount of the annual payments to the provinces which are contemplated in the plan which I have described or the additional revenues which will accrue from the proposed increases in the personal and corporation income taxes. Many questions of detail will have to be worked out with the provinces. However, if these questions of detail are approached on both sides by a determination to reach a fair conclusion they should not prove to be too difficult of solution. With these reservations I may say that we estimate that after making the required payments to the provinces, the net increase in dominion revenues from the changes now proposed in the personal income taxes and corporation taxes will be approximately $90,000,000.
In coming now to state in some detail the tax measures that are being proposed, I shall deal first with the direct taxes levied on individuals, then with those levied on corporations and non-residents, and finally with the indirect or commodity taxes. There are important changes in each of these fields. As I have already indicated, and with the object of keeping our entire tax structure as equitable as possible at a time when rates are being increased very greatly, and even minor inequities become serious, we have decided to place our main reliance for increased revenue on direct taxes levied on the income and property of individuals. These are the fairest taxes, for their amount depends upon the best measures that can be found for ability to pay, and their burden is not shifted on to other shoulders as may be the case with other taxes. Consequently, I have endeavoured to raise the rates of direct taxation to the highest level which I think the Canadian people can be asked to bear in this historic year. No longer do we need delay at all for fear of diminishing purchasing power. We must still have some regard for incentive and efficiency, but I think we can certainly assume that other motives than those of personal gain are dominant in the minds of Canadians to-day, whatever their incomes or positions.
The major source of additional revenue will be a substantial increase in the income tax, both in the graduated rates of tax and in the

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national defence tax. Dealing first with the national defence tax, the changes are simple but significant. Commencing on the first of July it is proposed that the rates of this tax will be increased from two per cent at present to five per cent, and from three per cent at present to seven per cent. The only other substantial change in this tax will be an increase from $600 to $660 in the minimum annual income below which no single person is liable for this tax.
Nearly all hon. members, and indeed most Canadians, will have expected a substantial increase in the rates of this tax in view of the enormous size of our financial requirements, which have been frankly explained on many occasions in this past six months. In judging the amount of the increase it should be realized that we are not increasing the rate of the general sales tax which is practically the only other alternative source of such a large amount of revenue. I have chosen to recommend a substantial increase in the national defence tax, and the graduated income tax rates rather than the sales tax, because these income taxes are very much fairer in their distribution, as I think every one of us will admit. We do not see the sales tax clearly when we pay it, but an increase in it would affect us just as severely and less equitably than an equivalent increase in the national defence tax.
I am proposing an increase from 600 to 660 dollars in the exemption from this tax because
1	believe that the heavier rate is a little too heavy right at the bottom in the case of single persons living away from home. The new figure is less than SI 00 below the regular income tax exemption. The amount to be deducted for children or dependents under the new rates will be at the rate of $20 per annum instead of $8, being equivalent to the 5 per cent rate of tax on $400.
It will be noted that in raising the rates the present 1 per cent margin between the tax on married persons and single persons with incomes over $1,200 has been increased to
2	per cent. This, I am sure, you will consider reasonable because when the general weight of our taxes is being increased so substantially the relative importance of the differing circumstances of individuals having equal incomes becomes increasingly significant.
The general principles of this tax and the methods of its collection are being left as they are at present. The tax will continue to be deducted at the source as far as possible, and the provisions in regard to refunds will be continued. I am glad to acknowledge the cooperation which we have had from businesses and their employees in
the efficient collection of this tax. Their continued assistance is essential to its successful functioning. I would also like to pay a tribute to the efficient work of the Income Tax division of the Department of National Revenue whose burdens have been increased enormously by this and other war taxes. One is apt to forget that the tax collector is most decidedly a hard-working and vital unit in a great war industry.
It is estimated that the increase in the rates of this tax would, in a full year, result in an increase of about 80 million dollars in revenue. As they will be in effect for only part of this fiscal year I anticipate an increase of about $55 million in this year's revenue because of these changes in rates.
I am proposing substantial increases in the graduated rates of income tax made up in such a way that in combination with the increase in the national defence tax they will result in a progressively rising rate of increase in relation to the income now left with taxpayers after payment of taxes at existing rates. The new graduated rates will commence at 15 per cent on the first thousand dollars of net taxable income, in place of six or eight per cent at present, and they will be 20 per cent on the next thousand, 25 per cent on the third thousand, and so on upwards until they reach 80 per cent on the block of net taxable income, if any, between $300,000 and $500,000, and, finally, 85 per cent of that over $500,000. Of course these rates do not include the national defence tax rate applying on the same income. If that be included, income over the amount of exemptions will be taxed at rates ranging from 20 per cent at the bottom to 90 or 92 per cent at the top. These rates apply both to earned income and investment income. In addition I am proposing a new surtax of 4 per cent on actual investment income, with a moderate amount exempted. The present so-called investment income surtax, which is almost entirely a simple surtax on all income over $14,000, is to be absorbed into the new graduated rates, which have been increased additionally to take this into account.
Now that the general level of our income tax has reached this height, I believe we should make a more significant distinction between earned income and investment income. The man who must work for a given income, whatever its amount, is in a less favourable position than a man with the same income derived from investments. To take but only one aspect, the man earning his income must set something aside if he wishes to provide for his own old age, or for his family when he can work no longer, while the other has his capital as security for the
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future. Our present surtax only taxes investment income within the narrow range between
85,000	and $14,000, and at a low rate. The new surtax is to tax all true investment income of more than $1,500, or of more than the sum of one's exemptions and allowances if these are more than $1,500.
No change is being suggested in the basic exemptions for the graduated income tax, $750 for single persons and $1,500 for married, nor in the allowance for children and dependents of $400 each. The exemptions were reduced last year, and those with children will, I believe, experience enough difficulty in adjusting themselves to these new rates without any reduction in the allowance they receive for their children. The persons with incomes immediately below the exemptions for the graduated tax are being adequately and more efficiently reached by the increase in national defence tax.
In accordance with the announcement I made in February, it is proposed to reduce from 50 per cent to 10 per cent of income the maximum amount to be allowed as a deduction for gifts to all charitable or patriotic organizations, with a minor exception for the arrangement already made for the National War Services Fund.
It is proposed to change the date at which the income tax becomes due from April 30
to March 31. At the same time it is proposed to extend the arrangements for payment of the tax by instalments, and to provide that if one-twelfth of the tax, estimated on the base of the previous year's income, is paid in each of the months September to December, and one-eighth of the balance, recalculated after the end of the year, is paid in each of the months January to August, then no interest will be chargeable on the instalments after March 31. I wish to recommend strongly this method of payment by instalments. Now that we have again raised the rates, our Canadian income tax is something which the average family must budget for each month. As many of us have discovered recently, no longer can we hope to find the tax money in a month or two in the spring.
The house will, I know, be interested to see how the new schedules work out in relation to various incomes. Consequently, I would like to place on Hansard at this point a table showing the total tax payable at these new rates and at the present rates, including national defence tax at the rates for a full year. The taxes are shown for single persons, married persons without dependents and married persons with two children. Because of the offer which is being made to provinces, I have arranged that this table show simply the dominion tax.

[Stage Direction]
(Dominion Taxes only)
Income	Single Persons	Married Persons	Married Persons 2 Dependents	Present Tax	Proposed Tax	Present Tax	Proposed Tax	Present Tax	Proposed Tax$	$ cts.	S cts.	S cts.	S ct.s.	S cts.	S cts.700	14 00	35 00	750	15 00	37 50	1,000	35 00	87 50	1,250	72 50	162 50	25 00	50 00	9 00	22 501.500	100 00	217 50	30 00	75 00	14 00	35 002,000	165 00	340 00	75 00	175 00	24 00	60 002,500	240 00	475 00	125 00	275 00	46 00	115 003,000	325 00	622 50	195 00	400 00	95 00	215 004,000	525 00	955 00	355 00	675 00	223 00	450 005,000	765 00	1,332 50	555 00	1,000 00	391 00	735 007,500	1,515 00	2,400 00	1,215 00	1,905 00	983 00	1,637 0010,000	2.4.37 50	3,600 00	2,070 00	3,0S0 00	1.7S0 00	2,710 0015,000	4,552 50	6.277 50	4,110 00	5,625 00	3,732 00	5,209 0020,000	6,802 50	9,105 00	6,310 00	8,330 00	5,982 00	7,890 0030,000	11,587 50	15,082 50	10,980 00	14,085 00	10.636 00	13,621 0050,000	22.242 50	28,392 50	21,390 00	26.965 00	20.998 00	20,437 0075,000	36.970 00	45,877 50	35,845 00	43,935 00	35,429 00	43,391 00100,000	52,697 50	64,347 50	51,300 00	61,875 00	50.860 00	61,299 00150,000	86,175 00	103,317 50	84,255 00	99,815 00	83.791 00	99,207 00200,000	121,652 50	143,795 00	119,210 00	139,270 00	118.722 00	138,638 00500,000	362,555 00	411.720 00	357.015 00	401,120 00	356.423 00	400,408 00
Note.-In calculating the above taxes it has been assumed that all incomes up to $30,000 are entirely earned incomes, and that incomes of more than S30.000 include earned income of that amount and additional investment income to make up the total.
[Mr. tlsley.l

The Budget-Mr. llsley
A few examples will illustrate the scale of the increases. A married man with an income of 12,000 would pay a tax of $75 at present rates, including $40 national defence tax, and and at the new rates he would pay a tax of $175. A single man with the same income, at present rates, is liable for $165, and under the new rates would pay $340. This illustrates most clearly the extent to which we must tax even modest incomes, and will put in perspective the increases at higher levels. A married man with $4,000 a year, under the present rates, pays the dominion $355 a year, of which $80 is national defence tax. Under the new rates his tax will be $675. If he has two children his present tax is $223, and his new tax will be $450. Going further up, at $10,000 a year a married man pays at present rates $2,070, and at the new rates would pay $3,080. If he adds a dollar to his earnings at this level his tax increases by 49 cents. The very rich bachelor with a salary of $30,000 and investment income of $470,000 pays us now $362,555, and under the new rates would pay us $411,720. If a single man with a net taxable income of over $500,000 gets an extra dollar of income from his investments he will pay us 96 cents of it.
These new income taxes are heavy, without question, but they are not beyond our ability to pay. The costs of the war are very great, far greater in fact than the amount we can collect from these taxes. We have undertaken to meet as much as possible of these costs from taxes, and to tax in accordance with ability to pay. Cold logic forces us to admit that income taxes of less than these levels would amount either to shutting our eyes to reality, since we must reduce our civilian consumption by more than this total amount anyway, or else it would amount to an unfair distribution of the burden by imposing less equitable forms of tax to restrict consumption.
Perhaps I should point out that these rates of tax, particularly on what may loosely be termed the middle class, are still substantially less than the rates that have just been introduced by the British government. However, our maximum rates come very close to theirs and in making any comparison, one must, of course, remember that corporation income in this country is subject first to a corporation income tax and then to personal income taxes in addition when it is paid out as dividends. In Britain there is no corporation income tax, nor any minimum flat rate of excess profits tax.
The increase in revenues to be expected as a result of the increase in the rates of the graduated income tax and the surtax on investment income should be about 75 million
dollars for a full year. This estimate cannot be a precise one because the numbers of new taxpayers brought in by the reduction in the exemptions last year are not yet known, and we can only guess as vet at the effects of the war upon the distribution of incomes. Normally we should expect none of the revenue from income tax on 1941 incomes to be received in this fiscal year, but with the new plan of instalment payments, under which payments commence in September, and with the moving of the date on which the tax is due from April 30 to March 31, there will be a very substantial amount of revenue collected during this fiscal year from the tax on 1941 incomes. If the rates had been left at their present level we should have expected a net increase of $45 millions in our revenue this fiscal year due simply to these new arrangements as to payments. Under these new conditions it is also expected that $45 millions of the revenue resulting from the increase in rates will be received in this fiscal year.
I indicated some months ago that in our search for new and yet equitable sources of revenue the dominion would probably need to enter the field of inheritance taxes. We propose now to do this and one of the resolutions I am going to move will provide for the introduction of a bill establishing a new dominion succession duty. This field of taxation has previously been used by the provinces and not by the dominion, though neither has any exclusive legal rights in it. Some of the provincial legislatures have exploited this field to a greater degree than others, but on the whole I believe they have not fully occupied it and that there is room for an additional and independent dominion tax at moderate rates, made up in the light of the existing provincial rates. The compelling need for revenue which induces us to enter this new field arises from the war, but I would not suggest that this new dominion tax is a temporary war-time tax only. It would be manifestly unfair to pick out for special heavy taxation that minority of the population whose parents or husbands happened to die during the war rather than after it. Consequently, one should regard this measure as something of more permanence than, say, our proposed increases in income taxes or indirect taxes. The rates of tax proposed must also be judged in this light.
Death duties, in general, are a very good type of tax. second only to income tax in their essential fairness and the possibilities of adjusting them progressively to ability to pay. They are even better than income tax in so far as they do not have as much tendency to
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reduce an individual's incentive to hard work and initiative. It is reasonable and just that one should be able to provide something for his wife and children, and others, after his death. It is also reasonable and just, however, that the state should share in what one leaves, at a rate dependent upon the amount of wealth being transferred. Indeed, I find this view so generally held in this country that it is not necessary to do more than call it to mind.
There are quite a number of possible forms of death duties which can be used, and which are used by other countries, and their states. They differ, for example, in regard to whether the tax is levied upon the estate itself, or upon the property received by each heir. They differ widely in the way in which the rate of tax is determined. In many cases it depends simply upon the size of the estate; in other cases upon the size of the amount received and, frequently, as well, upon the relationship of the deceased to those receiving the property. After' considerable study I have decided to propose a composite type of tax similar to that used by most of the provinces in this country. The tax will apply to the amount passing to each sharing in the estate. The rate of tax will be determined mainly by the size of the amount which the individual receives, but also by the size of the estate itself, and the relationship of the beneficiary to the deceased. The table of rates given in the resolution gives effect to these factors. In determining the rate, we are laying more emphasis upon the size of the amount received than do the provinces, and I think this is fair since it is much the best method of judging ability to pay. On the other hand, we are proposing a smaller difference between the rates of tax applicable to children of the deceased and to collateral relatives and to friends than many of the provinces have. This is done because our rates will be in addition to theirs and I believe the combination will produce a reasonable total variation. Again, the provinces have, not unnaturally, tended to approach closer to a reasonable total rate on the large estates than on the small and, consequently, they have left relatively more room for us in the lower and middle ranges than at the top. Consequently, our tax cannot be quite as progressive on the very large estates as I would otherwise suggest. I should add that the differences in the rates in various provinces do prevent us from going as far in this field as we might in some parts of Canada because of the results we should produce in other parts.

The general level of the rates I am proposing is roughly comparable with the level of the provincial taxes, but probably somewhat lighter on the average than the rates in most provinces. The combination of these new dominion rates and. the provincial rates, should result in a total tax of about the same general magnitude as the British death duties, but with considerable differences in detail due to the different and complex natures of the taxes. The total Canadian rates would be somewhat higher than the British rates on others than close relatives, while they will tend to be lower where an estate is divided among a number of members of the deceased's own family.
We are proposing a fairly generous exemption of $20,000 for property passing to the widow of the deceased, so that if she receives less than that she will pay no tax, and if she receives more than that she pays only on the excess over that amount.	A similar
exemption of $5,000 is provided for young children, or children dependent on the deceased by reason of physical or mental incapacity. These children and the widow are also subject to a lower rate of tax than other children or grandchildren. In other cases, anyone will be subject to tax on the whole amount received if it is over $1,000. Estates of less than $5,000, and amounts received from them, will not be subject to tax, in order to cut down somewhat the need for investigating and assessing small estates on which, in most cases, the tax would be very small anyway.
I might give a few examples to the house of the way in which the tax would be calculated, and the amount it would reach. For example, suppose a man left $50,000, one-half to his widow, one-quarter to a young daughter, and one-quarter to a grown-up son. The widow receives $25,000 and is taxed at a rate of 1-5 per cent, based on an estate of $50,000, plus 2-5 per cent based on the amount received, or 4 per cent in all. This applies, however, only to the $5,000 which she receives in excess of the $20,000 exemption, so she would pay $200 tax. Similarly, the young daughter would pay a rate of 14 per cent plus 2| per cent or 3f per cent on the $12,500 which she receives, less $5,000 exemption, or approximately $281 in all. The grown-up son would pay a rate of 14 per cent plus 2-5 per cent, or 4 per cent in all on the total amount he receives, that is, S12,500, that is a tax of about $500. To take a simpler example, if an estate oi $100,000 were all left to a grown-up son, he would pay on it a rate of 24 per cent because of the size of the estate, plus 6 per

The Budget-Mr. llsley
cent because he receives $100,000, or 8J per cent in all, $8,500. If it were divided among four such sons, however, they would each pay a rate of 2-£ per cent plus only 3 per cent, or 5J per cent in all. On the other hand, if they were four brothers of the deceased the rate would be ^ per cent higher, if four friends, another one-half per cent higher. The provincial taxes on the brothers or friends would, however, be much higher than on the sons.
This new tax will apply to all the property of those domiciled in Canada at the time of their death, with the exception of real estate in other countries. It is a usual international practice, I understand, to exempt foreign real estate in this way, and permit it to be taxed solely in the country where it is situated. Our tax will also apply to property in Canada, real and personal, of persons dying domiciled in other countries. As you will note in section 2 of the resolution, the tax will apply not only to property owned by the deceased at the time of his death, but also to certain other properties passing at the time of death, or transferred by the deceased in contemplation of death, or given within three years of his death, and various other specified transfers. There are, of course, a number of rather intricate legal questions involved in this type of taxation into which some members of the house may later wish to go, but I shall not attempt to discuss them at this time.
We are providing special increased exemptions for the family of any member of our armed forces who dies or is killed in such circumstances as would enable his widow or dependent children to receive a pension under the Pension Act, and in addition the amount of tax payable on property passing on his death to widows and lineal heirs will be reduced by taking only the present value, at 3 per cent, of the amount of the tax, assuming it to be deferred for the normal expectation of life for a person of that age. This means, in effect, that the tax is reduced in accordance with the extent to which the length of the man's life has been cut short.
This new tax will come into force on the date^ on which it receives assent. It will be administered by the Income Tax division of the Department of National Revenue. In speaking of administration I might say that we quite realize that there are bound to be difficulties involved in the evaluation of properties and interests in estates, and in liquidating estates for the payment of taxes. We have endeavoured to be fair in drafting the law in this regard and I think I may assure any who may be concerned over these
points that every effort will be made to value properties fairly and to allow for the difficulties of liquidation.
It will be noted that we include in the property passing and taxable under this proposed measure any gifts made by the deceased above a reasonable minimum within three years of his death, though any gift tax paid to the treasury on such gifts will be credited toward the amount of the succession duty payable thereon. In order to cover gifts made more than three years before death we propose to increase the rates of gift tax in accordance with the new schedule set forth in the resolution relating to income tax. These higher rates will also be more in accord with the higher rates of income tax that will be payable. In speaking of gifts, I might point out that no gifts made prior to the date of this budget will be subject to this succession duty, though gifts made from now onwards may be subject if made within three years of death, or made in contemplation of death.
It is extremely difficult to estimate with any accuracy at all the probable yield of these new succession duties, because there is such a scarcity of statistics on the number and value of estates passing in Canada each year. Basing my opinion upon a comparison with provincial rates and a study of the relative frequency of estates of different sizes in other countries, I would guess that in a full year we might expect to get about $20,000,000 out of this tax, but we may get substantially more than this. However, because of the lag that naturally occurs in the assessing and collection of this tax, we cannot expect much revenue from it this fiscal year-perhaps ten million dollars.
Taking together the substantial increases in the graduated income tax, and in the national defence tax, the more effective surtax on investment income, the greatly increased gift tax and, finally, the new succession duties, I have presented a far-reaching programme of direct, personal taxation. It is intended to create an efficient and equitable system of raising enormous amounts of money by really progressive taxation. It is most certainly not a system under which great fortunes are going to be accumulated, particularly when we remember as well the taxes on corporations.
This concludes the outline of the changes in direct taxes affecting individuals in Canada. However, in view of the very drastic increases in taxes upon Canadian residents since the outbreak of the war we think it reasonable to increase the tax on non-residents under the Income War Tax Act from 5 per cent to
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15 per cent. This rate, it will be noticed, is still lower than the effective rate of 16J per cent payable under the United States laws on income going abroad to foreign countries in general, and very much lower than the corresponding rate applied by the United Kingdom. The raising of this rate will mean that the United States will be released from the requirements of the reciprocal tax convention of December, 1936. In addition to the change in rate it is also proposed to eliminate the restriction which limits the tax in the case of interest to payments made solely in Canadian funds. In future the tax will be payable on all interest other than interest on bonds of or guaranteed by the Dominion of Canada irrespective of the currency of payment.
It is estimated that the increase in the rate of this tax, together with the removal of the restriction referred to, will result in a net increase in revenue of $28,000,000 per annum.
Before the house rose for the Easter recess I read a statement respecting a number of amendments which it is proposed to make to the Excess Profits Tax Act. In doing so, I emphasized that the changes are in the nature of improvements in the structure of the legislation for the purpose of removing inequities and anomalies and to simplify and expedite administration. The changes proposed are not intended and will not result in any general relief from the weight of the excess profits tax. In fact, as I have already intimated, it is proposed to increase the minimum rate of tax under this act from 12 per cent to 22 per cent. This, taken with the 18 per cent levied under the Income War Tax Act will mean a tax of at least 40 per cent upon the incomes of all corporations.
I will not burden the house by repeating the detailed changes which are proposed and which I announced before Easter, but there are several additional points to be mentioned. The first of these relates to the lumber industry. Since the war the lumber industry has been requested to increase production both to meet the additional domestic and overseas demand, and also in order that our exports to the United States may be increased with a resulting increase in our receipts of foreign exchange. The industry is complying with the government's request to increase production. In doing so valuable timber limits are being depleted at a faster rate than would normally occur. These limits cannot be replaced at anything like their original cost and this is the cause of serious concern to the operators. Because of the expansion of their operations above pre-war levels, their profits have increased

and they are subject to tax at the rate of 75 per cent, plus the taxes levied by the provinces. The margin of profit remaining is very small in relation to the value of the limits which are being exhausted at a rapid rate and which cannot be replaced except at much higher cost. We are satisfied that the lumber industry is entitled to some relief for these reasons, but it has been difficult to decide how this should be provided. After the most careful study, we have come to the conclusion that the best way of dealing with the problem, and the most logical, is to permit an additional allowance for depletion on that portion of their production which is in excess of the level prevailing during the standard period. The allowances will be determined by the Minister of National Revenue in accordance with the principle which I have just enunciated.
An amendment will be introduced to exempt from excess profits tax companies whose sole purpose is that of holding investments in securities. It is difficult to defend a high additional tax in this case where a group of persons hold their investments in collective form rather than separately, which they might well do, and avoid the tax. To eliminate this admittedly harsh treatment it was decided to follow the practice of the United States and exclude investment trusts from the tax entirely.
In two cases the amendments to be introduced will differ slightly from those indicated before Easter. The amendment relating to the selection of three years out of four as a standard period if the profits of the fourth are less than half the average of the other three will be reworded to provide that this rule shall apply after adjusting profits for capital additions or withdrawals.
Another change relates to inventory reserves and provides that the taxpayer must add any unutilized portion of such reserve existing at the beginning of the second year following the year of termination of the act to the profits of the last year of the application of the act to the taxpayer.
I turn now to indirect taxes. The emphasis in the measures proposed has been on direct taxation, and despite the ease with which many indirect taxes are collected they are not to be increased without careful discrimination. It has already been announced that the tax on sugar is to be increased from 1 cent to 2 cents per pound. This is a tax which is highly productive. To a considerable degree, it is paid by purchasers of candy, confectionery, and soft drinks, but it also affects the

The Budget

Mr. Ilsley
family living expenses of everyone. It is the only tax of that character which I have to propose.
An increase in the sales tax has, I think, been fairly generally expected. At least, there are evidences of a good deal of buying in anticipation of such an increase. This tax, while comparatively easy of administration and collection and extremely productive, has marked defects as a fiscal instrument. After extended consideration, we decided on balance against any increase. In coming to this decision, we were not forgetful of the problems of agriculture, which would have been intensified had the sales tax been raised.
The other indirect taxes proposed are taxes on expenditures but on expenditures which are, to a considerable degree, overt evidence of the existence of surplus income. At other times, taxes on expenditures are undesirable deterrents to the expansion of employment. In the circumstances of to-day, this defect becomes a virtue. We need revenue. We need to hold down the consumption of nonessential goods and services.
I have already intimated that it is proposed to impose a dominion tax of 3 cents a gallon on gasoline. Imports of crude oil make a heavy drain on our supplies of foreign exchange. The consumption of gasoline has been increasing rapidly. Its purchase is a channel into which increased personal expenditures are flowing. The imposition of a much higher tax than 3 cents coupled with a system of refunds to tourists, farmers, fishermen and others was considered. It has been decided, however, to recommend a smaller tax and make no provision for refunds. In support of this decision, I would remind the house of three considerations. Provincial gasoline taxes are closely linked to highway expenditures and rebates are properly given for gasoline used elsewhere than on the highways. The new dominion tax does not provide for highway maintenance. The United States treasury is proposing a federal tax of 2i cents a gallon on gasoline. Since our good neighbours measure gasoline as we measure wine, this is equivalent to our proposed new tax of 3 cents. Finally, the tax is a small one and does not justify assuming the administrative burden and incurring the risks of abuse inseparable from a system of refunds. There will be two criticisms of the new tax: that it encroaches on a tax source traditionally belonging to the provinces, and that it will endanger the tourist trade. In respect of the provinces, it has been clear for a long time that the dominion could not ignore the growing demands for foreign exchange which the expanding consumption of gasoline entails; we are undertaking to protect the provincial
gasoline revenues at last year's highly satisfactory level. In respect of the tourist trade, the new tax is no higher than the proposed rate of the United States federal tax. The amount is an insignificant addition to the expenses of any tourist. It will not be a deterrent to visitors from the United States if those Canadians, who may reasonably dislike this tax because it affects their pleasure or business, will refrain from the unfair and, I may add, unpatriotic use of the tourist argument against it. It is expected that the tax will yield $25,000,000 in the full year and $23,000,000 in the current fiscal year.
Related to the gasoline tax is an increased rate on automobiles. The Motor Vehicles Controller has imposed on Canadian producers a limited production quota for passenger cars from April 1 last. Imports of complete automobiles are on a 20 per cent quota. Under these circumstances, since cars available for sale are to be limited, it is proposed to increase the basic excise rate on passenger automobiles from 20 per cent to 25 per cent. The higher rates on values in excess of $900, already 40 and 80 per cent, are not to be changed. There is at present an excise tax on motor buses of 5 per cent and a maximum limit of $250 on the tax. At this time when we are having to grant permits for the importation of a great many buses, it is considered that, though it is not recommended that the rate be changed, the limit on the tax should be removed. The anticipated revenue from these changes is $3,000,000 in a full year and $2,700,000 in the current fiscal year.
I shall recommend also an excise tax of 10 per cent on railway, steamship, motor bus, and airplane fares. Travel between points for which the single fare is less than 50 cents will be exempt. Otherwise all fares collected in Canada will be subject to tax except that fares on passenger vessels will be taxable only between Canadian ports. I notice that the United States treasury is also recommending a tax on travel and we need anticipate no effect on our tourist trade. This tax is likely to produce about $6,500,000 in the full year and about $6,000,000 in 1941-42.
Very large expenditures are made each year by the Canadian people on moving picture entertainment. I note that the Dominion Bureau of Statistics reports paid admissions of over $34,000,000 in 1939. Currently, they are very much higher and the increase extends to every part of the country. It is proposed to impose an excise tax on the receipts of motion picture houses of 20 per cent. I expect to derive at least $8,000,000 from this tax in the full year and about $7,300,000 in the present fiscal year. There are many other
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amusements on which expenditures might legitimately be taxed but unfortunately the problems of administering a comprehensive amusement tax are very great. I shall recommend, however, a 5 per cent tax on the amounts wagered at horse-racing meets and anticipate that it will produce SI,000,000 in revenue, virtually all of which will be collected in this fiscal year.
The excise taxes on alcoholic drinks were raised substantially in September, 1939. Increases in these taxes may have serious effects on provincial revenues and render the problems of controlling illicit manufacture and sale extremely difficult. Viewing sales from the standpoint of revenue and relying upon the provinces to apply such regulations to the trade as are proper, I note that sales of spirits have not increased during the past year, the sales of wine have remained fairly stable despite the gradual disappearance of stocks of European wines, and beer sales have increased sharply. I, therefore, propose that the tax on malt be increased by 20 per cent from 10 cents a pound to 12 cents and that related taxes on beer and malt syrups be increased correspondingly. In respect of wines, the proposal is that the tax be increased from 15 to 40 cents per gallon and that on sparkling wines from $1.50 to $2.00. These increases should produce, in the full year, $3,500,000 on beer and $1,000,000 on wine or about $3,200,000 and $900,000 respectively in the current fiscal year.
Turning to another type of beverage, it is recommended that the excise tax on carbonic acid gas, the essential component of what are popularly known as "soft drinks," be increased. It has required some experience to learn the proportion which the present tax of 5 cents a pound bears to the sale price of the product. It is now proposed to increase the tax drastically, raising it from 5 cents to 25 cents a pound. At this rate, the tax will still not exceed the proposed United States tax of one cent a bottle and should produce an additional $2,000,000 of revenue, of which probably $1,900,000 will be collected in this fiscal year.
In addition to the above, there are a number of other proposals. The excise tax on playing cards is to be raised from 10 to 15 cents a pack. That on cosmetics and toilet preparations it is proposed to increase from 10 per cent to 25 per cent. It is recommended that the tax on long-distance telephone messages be increased from 6 to 10 per cent. To offset the match tax there is at present a tax of 20 per cent on lighters or 10 per cent if the lighter is a part of some other article. Since the excise tax on a wide range of mechanical, metal products for household and personal use is 25 per cent, it is proposed

to apply the same rate to lighters whether combined with other articles or not. For the purpose of protecting the revenue, it is recommended that the excise on cigarette tubes be raised from 5 to 10 cents a hundred. It appears that the tube in contrast to the paper gives rise to some illicit commercial manufacture. It is estimated that these changes will produce in the full year $3,310,000, of which $3,105,000 will be collected in 1941-42.
There is one more change in the indirect taxes. Having refrained during nearly two years of war from suggesting any discouragement to building, it has now been decided to recommend the removal of building materials from the list of exemptions under the sales tax. In the meantime, the provision for home improvement loans has been exhausted, the application of the National Housing Act has been narrowed, and the Wartime Housing Corporation has been set up to provide for the more urgent housing needs. At a time when we have many extraordinary needs for building construction, it is desirable to reserve, where possible, building operations for the post-war period. The withdrawals of this exemption, which I consider to be temporary, should provide $15,000,000 in revenue, of which perhaps $13,500,000 will be collected in this fiscal year.
I have already mentioned the increase in the tax on sugar from 1 cent to 2 cents a pound. A corresponding increase from 4 cent to 1 cent is recommended for glucose and grape sugar retroactive to the date when the sugar administrator increased the price of cane sugar. It is also recommended that the new rate of 2 cents a pound apply to corn syrup in tins of 10 pounds or less. To some slight degree, molasses is competitive with corn syrup, but in view of the extensive use of molasses in live stock feeds the tax is not extended to molasses.
These indirect taxes are not such as I should be comfortable in recommending in normal times but when the need for revenue is great and when the need for concentrating our energies on the successful prosecution of the war is so vitally necessary, we must have recourse to taxes which if not good taxes are better than others which we have rejected. Each of us will be affected by one or more of these taxes, but no one need pay all of them. If people choose to avoid some of these taxes by saving rather than spending, I shall be satisfied.
There are some changes to be recommended in the War Exchange Conservation Act which I shall enumerate. It is proposed to add black tea to part I of schedule I under which the house will recall, permits are refused. Adequate supplies of black tea can be obtained

The Budget-Mr. Ilsley
for sterling payment. Two other items, games and puzzles, and woven fabrics of cut pile are added to clear up anomalies. A more important change is recommended in the addition of vegetable oils to part II of schedule I. It is the intention to issue permits for the importation of vegetable oils, endeavouring to obtain as much as possible of them for sterling or Canadian dollars. The Department of National Revenue will be assisted in administering permits by the oils administrator under the Wartime Prices and Trade Board.
No goods are removed from the prohibited classification by the resolutions about to be tabled, although for technical reasons four items are being struck out of both part I of schedule I and out of the Customs Tariff.
Very substantial changes are recommended in respect of schedule II of the act, the schedule extending war-time treatment to imports from the United Kingdom. Though a large number of items are affected, I can explain briefly what is recommended. For the cotton and artificial silk items, now free under the act, no change is recommended. Certain items, on which the United Kingdom has asked for concessions, viz., cellophane, bathroom fixtures and earthenware, glass manufactures n.o.p., nickel-plated ware, and needles are to be made free, it is recommended under schedule II. It is further recommended that the British preferential rates be subject to a discount of 25 per cent in the case of woollen and worsted yarns, warps, fabrics, and clothing, and boots and shoes, that duties on fabrics and articles of linen, jute, hemp, and mixed fibres, oilcloth and linoleum, carpets, rugs, and carpeting, and all items (not already free) in groups I, V, VI, VII, VIII, IX and XI of the Customs Tariff (with the exception already mentioned of boots and shoes) be made subject to a discount of 50 per cent. No modification of the rates on liquors, sugar, tobacco, and silks is suggested. The result will be that, aside from the revenue items just mentioned, all imports from the United Kingdom will be free or subject to British preferential duties reduced by 50 or 25 per cent. The discounts proposed are to be in lieu of and not additional to the 10 per cent reduction now applicable for direct shipment. In the case of woollens the 25 per cent reduction will apply to the British preferential ad valorem and specific rates of duty but the operation of the limitation of the duty of 50 cents per pound as a maximum will remain unaffected.
These sweeping reductions are made to facilitate movement of goods from the United Kingdom. It is not expected that imports
from the United Kingdom will increase significantly. The difficulties of shipping are well known. Labour in the United eingdom is being withdrawn even from export trades to war industries and in many cases materials are lacking. We are suggesting sweeping reductions for the express purpose of facilitating the importation of whatever goods under changing circumstances the United Kingdom wishes to export to us. It may be that she will find it desirable to curtail her exports to us. In such case, we shall do without them. We desire to leave the greatest possible scope for selling to us whatever goods she wishes to sell.
The changes proposed in the Customs Tariff are of a minor character. The resolutions about to be tabled affect twenty-two items but a very small volume of trade. Seven new items will effect a reduction in the British preferential and intermediate tariffs on film wrapping paper, inedible gelatine, kyanite, strings for musical instruments, nickel rods for spark plug electrodes, oven thermostats and automatic oven lighters for gas stoves, and wire drawing dies in the rough.
Seven additions to existing items provide for reduced rates on carbon bisulphide mixtures for fumigating grain, machines and complete parts thereof for making boxes for fruits and vegetables, machinery and apparatus, of a class or kind not made in Canada, for maintenance and testing purposes in connection with gas and oil wells, infant identification beads, juvenile construction sets of rubber, cashew nut shell oil and spoon blanks.
For three items, covering essential oils, cut pile fabrics, and collodion, new wording is suggested to simplify administration.
For two items, covering ovens for commercial bakeries and veneer-making machinery, amendments are proposed to include in the items "complete parts".
In respect of two items relating to crayons, changes are proposed to carry out the intention of the United States trade agreement concerning the rate on chalk crayons.
Finally, in respect of tire fabric of rayon, the continuance of a special but higher rate is recommended.
Summarizing the revenue results of this lengthy recital of new and increased taxes, we expect to derive from them during a full year approximately $300,000,000 of additional revenue after making allowance for payments to the provinces under the agreement which I have proposed. During the balance of the current fiscal year we hope to collect nearly $250,000,000. The estimated yields of the various tax changes are recapitulated in a table which, with the consent of the house, I shall now place on Hansard:
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Full Year
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Balance of Current Fiscal Year 1941-42
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Yields from Increases in Existing Taxes-
Graduated personal income tax	
Excess profits tax (increase in minimum rate)
75.000. 000	45,000,000
80.000. 000	40,000,000
155,000,000
85,000,000
Less payments to provinces after deducting yield from taxes to be imposed on banks, etc., and net reduction in subsidies	
65,000,000
48,000,000
Net increase	
National defence tax	
Interest and dividends payable abroad	
Automobiles and buses	
Beer, malt and wine	
Carbonic acid gas	
Cosmetics and toilet preparations	
Withdrawal of sales tax exemption on building materials	
Sugar, glucose and corn syrup	
Other excise taxes	
Increase in collections of personal income taxes resulting from change in date when payment becomes due and from change in instalment payment procedure	
90,000,000
80,000,000
30.000.	000
3.000.	000
4.500.000
2.000.	000 2,000,000
15.000.	000
12.000.	000
1.310.000
37.000.	000
55.000.	000
27.500.000
2.700.000
4.100.000
1.900.000
1.900.000
13.500.000
12.000.	000
1.205.000
45,000,000
Yields from New Taxes-
Succession duties	
Gasoline	
Passenger transportation	
Motion picture entertainment Race tracks	
20,000,000
25,000,000
6,500,000
8,000,000
1,000,000
300,310,000
10,000,000
23,000,000
6,000,000
7,300,000
1,000,000
249,105,000
In appraising the extent to which we are applying a pay-as-you-go policy, it is appropriate to consider total governmental revenues in relation to total governmental expenditures. While the assistance which we must give to enable Great Britain to meet the deficit in her balance of payments with Canada must be financed, it is not in quite the same category as actual governmental expenditures. This is particularly true of that portion which is used to repatriate securities. If our estimates of the yields of the new and increased taxes during the balance of the current fiscal year are reasonably accurate, the dominion's total revenues during 1941-42 should be approximately $1,400,000,000. This will leave a budgetary deficit of $365,000,000 or $515,000,000 according as the lower or higher of the estimates of war expenditure is realized. Under the lower estimate we shall have paid 79 per cent of our war and non-war budgetary expenditures out of revenue, and under the higher we shall have paid 73 per cent. On this basis I think it will be agreed that the dominion is attempting to carry the pay-as-you-go policy as far as is reasonably practicable.
The financial policy set forth in this budget is not framed lightly nor are the financial tasks still to be performed belittled. I offer this budget to the house as the sober and

necessary counterpart of our decision to stand side by side with our sister nations and allies and with the welcome and powerful aid of the United States to uphold the cause on which we believe the future of civilized, humane, and Christian living to depend.
We do not face physical destruction nor live under the terror that flies by night. How small are the changes that have come over our day-to-day life. Some of us are being forced to live more simply, to plan our expenditures more carefully, and to see where we can economize for the time being on the maintenance of our homes and the physical equipment of living. Some of us have larger incomes after taxes than before and are being asked to postpone the spending of those increases until, after the war is over, we can obtain what we desire without interfering with the war effort and give employment which will be needed then as it is not now.
The business community is experiencing great activity and, after taxes, in most cases reduced profits. Management is having to shift operations to produce new products and to avoid the use of materials that are hard to obtain. Labour has encountered longer hours and has, in many cases, changed occupations or moved to new areas. The finding of jobs has become an easier matter.
The financial task of the Canadian people in this fiscal year is, by any precedent,

The Budget-Mr. Ilsley
colossal, but it is, in no sense, impracticable. It will require strict economy, but not deprivation. It will require hard work and the foregoing of profits which pass through our treasuries into that of the nation, but it will not endanger the soundness of our business structure nor the value of our resources. It will require intense and patient effort for the duration of the war but it will result in a secure future. As the Canadian people believe that they are engaged in a war to defend the highest qualities of our common life from destruction, we can accomplish this financial task, not with ease, but without catastrophe and with triumph too.
Mr. CHURCH:: There is not much sunshine in that. It means the doom of all private enterprise.



RESOLUTIONS

[Stage Direction]
Mr. Speaker, I desire 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 introduce a measure .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 schedules:
[Stage Direction]
A. Rates of tax .applicable to persons other than corporations and joint stock companies:
On the first $1,000 of net income or any portion thereof in excess of exemptions, 15 per centum, or
$150 upon net income of $1,000 and 20 per centum upon the amount by which the income exceeds $1,000 and does not exceed $2,000, or
$350 upon net income of $2,000, and 25 per centum upon the amount by which the income exceeds $2,000 and does not exceed $3,000, or
$600 upon net income of $3,000, .and 30 per centum upon the amount by which the income exceeds $3,000 and does not exceed $4,000, or
$900 upon net income of $4,000, .and 33 per centum upon the amount by which the income exceeds $4,000 and does not exceed $5,000, or
$1,230 upon net income of $5,000, and 36 per centum upon the amount by which the income exceeds $5,000 and does not exceed $6,000, or
$1,590 upon net income of $6,000, .and 38 per centum upon the .amount by which the income	exceeds	$6,000	and	does	not	exceed
$7,000, or
$1,970 upon net income of $7,000, and 40 per centum upon the amount by which the income	exceeds	$7,000	and	does	not	exceed
$8,000, or
$2,370 upon net income of $8,000 and 42 per centum upon the amount by which the income	exceeds	$8,000	and	does	not	exceed
$9,000, or
$2,790 upon net income of $9,000, and 44 per centum upon the amount by which the income exceeds $9,000 and does not exceed $10,000, or 14873-1491
$3,230 upon net	income of $10,000, and	47per	centum	upon	the	amount	by	which	the
income exceeds $10,000 and does not exceed $15,000, or
$5,580 upon net income of $15,000, and 50 per	centum	upon	the	amount	by	which	the
income exceeds $15,000 and does not exceed $20,000, or
$8,080 upon net income of $20,000 and 53 per	centum	upon	the	amount	by	which	the
income exceeds $20,000 and does not exceed $30,000, or
$13,380 upon net income of $30,000, and 55 per	centum	upon	the	amount	by	which	the
income exceeds $30,000 and does not exceed $40,000, or
$18,880 upon net income of $40,000 and 57 per	centum	upon	the	amount	by	which	the
income exceeds $40,000 and does not exceed $50,000, or
$24,580 upon net income of $50,000 and 59 per	centum	upon	the	amount	by	which	the
income exceeds $50,000 and does not exceed $75,000, or
$39,330 upon net income of $75,000, and 63 per	centum	upon	the	amount	by	which	the
income exceeds $75,000 and does not exceed $100,000, or
$55,080 upon net income of $100,000, and 67 per centum upon the .amount by which the income exceeds $100,000 and does not exceed $150,000, or
$88,580 upon net income of $150,000, and 70 per centum upon the amount by which the income exceeds $150,000 and does not exceed $200,000, or
$123,580 upon net income of $200,000, and 75 per centum upon the amount by which the income exceeds $200,000 and does not exceed $300,000, or
$198,580 upon net income of $300,000, and 80 per centum upon the amount by which the income exceeds $300,000 and does not exceed $500,000, or
$358,580 upon net income of $500,000, and 85 per centum upon the amount by which the income exceeds $500,000.
2.	That paragraph AA of the first schedule to the .act be repealed and in lieu thereof there be imposed a tax of 4 per centum on the investment income defined to. include dividends, interest, rents, royalties and other like income and not to include salary, wages, fees or other like income from any office or employment of profit or income derived from the carrying on of a trade, vocation or calling.
3.	That the schedule of taxes payable under section 88 of the act on gifts made after April 29, 1941, be repealed and in lieu thereof there be substituted the following schedule:
On gifts up to and including $5,000-7 per cent.
On gifts exceeding-
$5,000 but not exceeding $10,000-8 per cent.
$10,000 but not exceeding $20,000-9 per cent.
$20,000 but not exceeding $30,000-10 per cent.
$30,000 but not exceeding $40,000-11 per cent.
$40,000 but not exceeding $50,000-12 per cent.
$50,000 but not exceeding $75,000-13 per cent.
$75,000 but not exceeding $100,000-14 per cent.
$100,000 but not exceeding $150,000-15 per
cent.
$150,000 but not exceeding $200,000-16 per cent.
The Budget-Mr. Ilsley
[Stage Direction]
cent.
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cent.
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cent.
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cent.
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cent.
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cent.
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cent.
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cent.
but not exceeding $250,000-17 but not exceeding $300,000-18 but not exceeding $400,000-19 but not exceeding $500,000-20 but not exceeding $600,000-21 *but not exceeding $700,000-22 but not exceeding $800,000-23 but not exceeding $1,000,000-24
$1,000,000-25 per cent, and that section 88 (8) (e) of the act repealed.
per
per
per
per
per
per
per
per
be
. 4. That the rates of national defence tax be increased from 2 per centum to 5 per centum wherever 2 per centum is mentioned and from 3 per centum to 7 per centum wherever 3 per centum is mentioned, and that these rates be effective from the first day of July, 1941.
5. That the amount of $600 mentioned in the national defence tax section be raised to $660 for the calendar year 1941 and for each year thereafter.
6. That the maximum allowance for a dependent under the national defence tax be $4 for the calendar year 1940; $14 for the calendar year 1941 and $20 for each year thereafter.
7.	That the tax imposed by section 9B(1) shall not be exigible if no part of the premium is paid to the taxpayer.
8.	That the rate of tax imposed by section 9B (2) of the act on all non-residents be increased from -5 per centum to 15 per centum and that the exemption in respect of interest payable in a currency other than Canadian be repealed.
9.	That the rate of tax applicable to nonresident-owned investment corporations be increased from 9 per centum to 22J per centum.
10.	That the tax of five per centum on nonresident persons, other than corporations, in respect of the total amount of the royalties, rentals or similar payments for the use in Canada of patents, real or personal property, or for anything used or sold in Canada, be increased to 15 per centum.
11.	That the date of filing annual returns of income by taxpayers, other than corporations, be the 31st day of March in each year in lieu of the 30th April as heretofore.
12.	(a) That the provision granting a deduction not exceeding 50 per centum of the net taxable income of any taxpayer which has been paid to any patriotic organization shall be repealed.
(b)	That donations to charitable organizations described in the act, up to 10 per centum of the net income of any taxpayer other than a corporation, be allowed, provided that this 10 per centum may be increased to 40 per centum of the taxpayer's net income in respect of gifts to the Canadian War Services Fund if subscribed on or before April 7, 1941, and paid on or before December 31, 1941.
13.	That donations to charitable organizations made in 1942 and during any fiscal period ending therein or any fiscal period thereafter by any corporation be allowed up to five per centum of the net income of such corporation,
[Mr. Ilsley.1
provided that this five per centum may be increased to thirty-five per centum of the corporate net income in respect of gifts to the Canadian War Services Fund if subscribed on or before April 7, 1941, an dpaid on or before December 31, 1941.
14.	That the exemptions provided in paragraphs (c), (e) and (i) of subsection 1 of section 5 be allowed only if such dependents are maintained in Canada or within the territory composing the British Commonwealth of Nations or in a country contiguous to Canada; and similarly that for the purposes of national defence tax a taxpayer's marital status and any credit to which he is entitled for dependents be allowed only in respect of dependents maintained in Canada or within the territory composing the British Commonwealth of Nations or in a country contiguous to Canada.
15.	That any taxpayer, other than a corporation, who enters upon a monthly, instalment basis of tax payment on or before the 30th September each year, may pay, without interest, in respect of the income of that year, provided at least
one-twelfth of the estimated tax based on the income of the prior year is paid in each of the months September, October, November and December, and
one-eighth of the unpaid balance of the newly estimated tax based on the income of the calendar year in respect of which the tax is payable is paid in each of the months January to August inclusive.
16.	That any corporation which enters upon a monthly instalment basis of tax payment before the commencement of the third month before the close of the fiscal period may pay, without interest, in respect of the income of that year, provided that at least
one-twelfth of the estimated tax based on the income of the prior year is paid in each of the four months immediately prior to the close of the said fiscal period, and one-eighth of the unpaid balance of the newly estimated tax based on the income of the fiscal year in respect of which the tax is payable is paid in each of the immediately succeeding eight months following the close of the fiscal period.
17.	That the resolutions numbered 1, 2, 5, 9, 11, 12, 14 and 15 shall be applicable to the income of the 1941 taxation period and fiscal periods ending therein and all subsequent periods.
18.	That any enactment founded on resolutions numbered 3, 7, 8, 10 and 16 shall come into force on April 30, 1941.

[Stage Direction]
Resolved, that it is expedient to introduce a measure to amend the Excess Profits Tax Act, and to provide:
1.	That the definition of profits in the case of a corporation be amended if and to the extent that the corporation is subject to the tax on excess profits set out in the second part of the second schedule so as to exclude from profits for such purpose any dividends deemed to have been received by it as a result of distribution of assets on the winding up or discontinuance of business of any other Canadian corporation, which distribution is by section 19 of the Income War Tax Act deemed to be a dividend and to be taxable income of the company receiving the

The Budget-Mr. Ilsley
said dividend, provided that if the company receiving the said dividend is owned to the extent of fifty per centum or more of all its issued capital stock and bonds and any other type of security by or on behalf of twenty-five individual stockholders or security holders or less or is in fact controlled by such number of individual stockholders, this provision shall not apply.
2.	That the definition of standard period, and also of standard profits, be amended to require the taxpayer to apportion to the four calendar years, 1936, 1937, 1938 and 1939 the profits of their corresponding fiscal periods which do not coincide with the calendar year. The apportionment must be on an equal daily basis
3.	That the definition of standard period, and also of standard profits, be amended to allow standard profits to be computed from the time of actual commencement of business rather than from the legal date of commencement of business, the date of actual commencement to be determined by the minister in his discretion in the light of the circumstances of the particular taxpayer.
4.	That the definition of standard period be amended to give the taxpayer the choice of his three best years if the profits of his fourth standard year after adjusting for capital additions or withdrawals were less than fifty per centum of the average of the profits of the other standard years.
In the case of taxpayers who have been in business only three out of the four standard years and the profits of one of the three years after adjusting for capital additions or withdrawals -were below fifty per centum of the average of the other two years the proposed amendment will allow them to use the profits of the two best years in computing their standard.
5.	That the definition of standard profits be amended by adding thereto a proviso that in no case shall a taxpayer's standard profits be less than five thousand dollars.
6.	That the adjustment to standard profits by reference to any increase or decrease in depreciation allowances or other charges as provided by paragraph (d) of subsection 1 of section 4 be repealed.
7.	That the adjustment to standard profits by reference to increases or decreases in capital be amended to provide for an adjustment at a fixed rate of seven and one-half per centum on the capital change, with the proviso that if new capital to the extent of thirty-three and one-third per centum has been added since the standard period the taxpayer will have the option of being considered a new business.
8.	That the procedure for a depressed business applying to have its standard profits determined by the board of referees on a capital-standard basis be altered so that the taxpayer may file his return and pay his tax on the basis of a standard profits computed by the taxpayer himself, at a percentage on capital which he deems fair and reasonable but being not more than ten per centum on "capital employed" as defined in the act, with the right of the minister to refer any case to the board of referees to have the standard profits finally determined by that body.
9.	That power be given to the board of referees in the case of both new businesses and depressed businesses to ascertain a fair and reasonable standard profits on some basis other
than the capital-standard basis in those cases where the capital employed in the business is so small when compared with the earning power of the business or where other special circumstances of the taxpayer are such that to utilize the capital-standard basis would result in an unjustifiable hardship or would create extreme discrimination or jeopardize the continued existence of the business of the taxpayer.
10.	That the inventory-reserve provisions in the act be amended:
(a)	to give the taxpayer the right to provide against a decline in inventory values having regard to a normal quantity of stock in trade as indicated by the quantity on hand during the standard period;
(b)	to give the taxpayer the right to provide against a decline in inventory values either to the prices obtaining at the close of his 1939 period or to the prices obtaining during the month of August, 1939; and
(c)	to provide that a taxpayer who has any unutilized inventory reserve on hand at the end of the year when this act terminates shall have only the year following the said year of termination in which to utilize such reserve against any possible price decline and must add any unutilized portion of such reserve existing at the beginning of the second year following the said year of termination to the profits of the last year of the application to the taxpayer of this act.
11.	That the exemption from the provisions of this act given to taxpayers with profits of five thousand dollars or less be amended by a proviso to the effect that in the case of taxpayers with profits above five thousand dollars the tax imposed by the act shall not reduce the profits below five thousand dollars.
12.	That the profits of diversified investment companies the capital of which is to the extent of eighty per centum or more invested in stocks, bonds or securities, and the gross income of which is to the extent of ninety-five per centum or more derived from dividends or interest on such investments, shall be exempt from taxation under this act provided that not more than 5 per cent of the capital of such companies is invested in stock, bonds or other securities of any one company or debtor, and provided further that the shares of such diversified investment companies have been offered for public subscription or are listed on any recognized stock exchange in Canada or elsewhere, and provided further that each year the profits of such diversified investment companies have been distributed to the extent of eighty-five per centum or more to its shareholders.
13.	That the allowance for excess profits taxes and income taxes paid to Great Britain, other British dominions or dependencies or to any foreign country allowing reciprocal deduction with respect to Canadian-paid taxes, be enlarged to provide a combined deduction of the British or foreign income and excess profits taxes from the combined liabilities to Canada for income and excess profits taxes.
14.	That the provision for time and manner of payment of any tax exigible under the act be amended in accordance with the amendment proposed for the Income War Tax Act in this respect, namely to provide an optional instalment basis of payment with respect to taxes on 1940 income and fiscal periods ending December 31. 1940, and also to provide an optional instalment basis of payment for taxes on the profits of 1941 and future years.
The Budget-Mr. Ilsley
[Stage Direction]
15.	That the definition of capital he amended to require the deduction from the original asset values of the total amount of depreciation which has been taken into account in computing net income or loss for income tax purposes plus any accumulated depreciation reserves as at January, 1917, as recognized by the minister for purposes of the Income War Tax Act, and further that the definition of capital be amended to require the deduction of such amount of depletion as the board of referees deems fair and reasonable.
16.	That the definition of capital be amended to enable the non-interest-bearing advances from parent to subsidiary corporations, which advances are of a permanent nature and in fact represent invested capital actually employed rather than borrowed capital, to rank as equity capital rather than debts of the subsidiary.
17.	That the requirement in the first schedule that dividends paid during the taxation year shall constitute a deduction from the capital employed at the commencement of the period to the extent of one-half the dividends, shall be amended to make it clear that this applies only to cash dividends and not to stock dividends.
18.	That the rate of tax on profits provided by the first part of the second schedule shall be increased from twelve per centum to .twenty-two per centum.
19.	That all proposals above mentioned except proposals 12. 14 and 18 shall apply to the profits of the year 1940 and the profits of fiscal periods and portions thereof ending in 1940 and to the profits of all years and fiscal periods thereafter, and that proposals 12 and 18 shall apply to the profits of the year 1941 and of fiscal periods ending in 1941, and to the profits of all years and fiscal periods thereafter.
20.	That every person liable to tax under
the Excess Profits Tax Act in respect of the 1940 taxation period shall have until the 30th April, 1941, to estimate and pay their excess profits tax for 1940 without interest. Thereafter interest will be paid as in the Income War Tax Act provided, as if the fiscal period of all such companies had ended on 31st December, 1941.	.

[Stage Direction]
Resolved, that it is expedient to introduce a measure to amend the Special War Revenue Act and to provide:
1.	That the definition of "British company" in section thirteen of the said act be amended by deleting therefrom the following words "and includes any association of persons formed in the said Kingdom or in any such dominion or possession on the plan known as Lloyds whereby each associate underwriter becomes liable for a stated, limited or proportionate part of the whole amount insured by a policy."
2.	That subsection one of section sixteen of the said act be amended by deleting the words "or of any province thereof" where they appear in the fourteenth line thereof.
3.	That the tax on long distance telephone calls be increased from six per cent of the charge made to ten per cent; provided however that upon long distance telephone calls made from any public pay station there shall be paid in lieu of the tax hereinbefore provided

for the sum of five cents for each such call for which a charge of more than twenty-five cents and not more than fifty cents is made and five cents for each additional charge of fifty cents or any fraction of fifty cents; and provided further that the tax imposed shall in no case be greater than fifty cents on any one call.
4.	That part V of the said act be amended to provide that every purchaser of a ticket or right entitling the purchaser to transportation by railway, bus or aircraft to any place in or outside of Canada or by vessel^ between places in Canada or from a place in Canada and return thereto shall, in addition to the regular charge for the ticket or right, pay to the person selling such ticket or right, for the consolidated revenue fund in addition to the price paid therefor, a tax equal to ten per cent of the said price, provided that such tax shall not apply on the charge for a ticket or right of transportation, if the regular one way charge for such ticket or right to any place in or outside of Canada is fifty cents or less.
5.	That the excise tax on cigarette paper tubes be increased from five cents for each one hundred cigarette paper tubes or fraction thereof to ten cents.
6.	That there shall be imposed, levied and collected an excise tax of three cents per imperial gallon on gasoline imported or produced or manufactured in Canada; and that where the gasoline is imported, such excise tax shall be paid by the importer or transferee who takes the gasoline out of bond for consumption at the time when the gasoline is imported or taken out of warehouse for consumption, and where the gasoline is manufactured or produced and sold in Canada, such excise tax shall be paid by the manufacturer or producer at the time of delivery of such gasoline to the purchaser thereof.
7.	That the excise tax on playing cards be increased from ten cents per pack to fifteen cents per pack.
8.	That the excise taxes on wines of all kinds, except sparkling wines, containing not more than forty per cent of proof spirit be increased from fifteen cents per gallon to forty cents per gallon, and that the excise tax on champagne and all other sparkling wines be increased from one dollar and fifty cents per gallon to two dollars per gallon.
9.	That there shall be imposed, levied and collected an excise tax of twenty per cent on the admission price to a moving picture theatre, payable by the moving picture exhibitor.
10.	That there shall be imposed, levied and collected an excise tax of five per cent of the total amount of bets made through the agency of a pari mutuel system on any horse race run at a lawful race meeting, such tax to be payable by the person conducting the race meeting.
11.	That paragraphs (a) and (b) of section one of schedule I to the said act be repealed and the following substituted therefor:-
"1. (a) Automobiles adapted or adaptable for passenger use, with seating capacity for not more than ten persons, each valued at $900 or less-25 per cent.
Over $900 but not more than $1,200-25 per cent on $900 plus 40 per cent on the amount in excess of $900.
Over $1,200-25 per cent on $900 plus 40 per cent on $300 plus 80 per cent on the amount in excess of $1,200.

The Budget-Mr. Ilsley
(b)	Automobiles adapted or adaptable for passenger use with seating capacity for more than ten persons-5 per cent" and that the first proviso to the said section be repealed, which reads as follows:-
"Provided that the tax collected under paragraph (b) above shall in no case exceed 1250 per automobile;"
12.	That the tax on toilet articles provided for in section two of schedule I to the said act be increased from ten per cent to twenty-five per cent.
13.	That the tax on lighters provided for in schedule I to the said act whether or not combined with pencils, cigarette or other cases, be increased to twenty-five per cent.
14.	That section five of schedule I to the said act be amended by striking out the words
"Cameras, phonographs, radio broadcast receiving sets and tubes therefor" and replacing them by the following words:
"Cameras, phonographs, record playing devices, radio broadcasting receiving sets and tubes therefor".
15.	That paragraph (b) of section six of schedule I to the said act be amended by inserting after the word "refrigerators" the words "including coils, condensing units, cabinets, boxes, evaporators and expansion valves therefor."
16.	That paragraph (d) of section six of schedule I to the said act be amended by inserting after the words "permanent waving machines" the words "and spacers or clamps, rods and heaters therefor."
17.	That section two of schedule II to the said act be amended by repealing paragraphs
(a)	and (b) thereof and substituting therefor the following:-
"2. Sugar, etc.:-
(a)	Materials enumerated in customs tariff items 134, 135, 135 (a)., 135 (b), 139 (except glucose and grape sugar), 140 (except molasses) invert sugar and syrup-two cents per pound;
(b)	Glucose and grape sugar (except when for use exclusively in the manufacture of leather and artificial silk)-one cent per pound;"
and striking out the proviso thereto reading as follows:-
"Provided that the tax hereby imposed under paragraph (a) shall not apply to the materials enumerated in customs tariff items 139 and 140, when sold in packages containing not more than ten pounds each."
18.	That the tax on carbonic acid gas and similar preparations used for aerating nonalcoholic beverages provided for in section four of schedule II to the said act be increased from five cents per pound to twenty-five cents per pound.
19.	That schedule III to the said act setting out the exemptions from sales tax be amended by striking out under the heading "Farm and Forest" in the seventeenth and eighteenth lines the words "Forest products, when produced and sold by the individual settler or farmer" and replacing them by the following words:
"Forest products, not to include lumber, when produced and sold by the individual settler or farmer;"
20.	That the said schedule III be further amended by deleting therefrom the items under
the caption "Building materials".
21.	That any enactment founded on this resolution shall be deemed to have come into force on the thirtieth day of April, one thousand nine hundred and forty-one 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; provided however that any enactment increasing the tax on glucose and grape sugar in accordance with resolution No. 17 shall be deemed to have come into force on March 31, 1941.

[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 sections 3, 4 and 5 of the schedule to the said act be repealed and the following substituted therefor:
"3. Beer.
Upon all beer or malt liquor:-
(a)	brewed in whole or in part from any substance other than malt, per gallon thirty-five cents;
(b)	imported into Canada and entered for consumption, per gallon-twelve cents.
4.	Malt.
Upon all malt:-
(a)	manufactured or produced in Canada and screened (that is, malt from which the coomings have been removed) subject to the regulations of the Governor in Council with respect to absorption of moisture in warehouse, per pound-twelve cents;
(b)	imported into Canada and entered for consumption, per pound-twelve cents.
5.	Malt syrup.
Upon all malt syrup as defined by paragraph (c) of section six of the Excise Act, 1934:-	.
(a)	manufactured or produced in Canada, per pound-eighteen cents;
(b)	imported into Canada and entered for consumption, per pound-thirty cents.'
2.	That any enactment founded on paragraph one of this resolution shall come into force on the thirtieth day of April, one thousand nine hundred and forty-one.
. SUCCESSION DUTIES ACT
Resolved, that it is expedient to enact a Succession Duties Act to provide inter alia:
1.	That succession duties be levied upon or in respect of the following, that is to say:
(a)	The succession to property, wherever situated, and beneficial interests therein, except real property situated outside of Canada, where the deceased was at the time of his death domiciled in Canada or in one of the provinces thereof:
(b)	The succession to property situated in Canada, or to beneficial interests therein, where the deceased _ was at the time of his death domiciled outside of Canada.
2.	That, in addition to the properties owned by the deceased at his death, the succession shall be deemed to include, for purposes of taxation, the following properties, namely:
(al Property transferred by the deceased in his lifetime in contemplation of death;
The Budget-Mr. Ilsley
[Stage Direction]
(b)	Property transferred by way of donatio mortis causa;
(c)	Property transferred by gift in the lifetime of the deceased after April 29, 1941, and within three years prior to his death;
(d)	Property transferred by gift in the lifetime of the deceased where benefits are reserved to the deceased during his lifetime;
(e)	Property held jointly by the deceased and one or more persons and payable to or passing to the survivor or survivors, except that part of such property which was contributed by the survivor or survivors, provided that where the joint tenancy or holding is created by a person other than the deceased and the Rurvivor or survivors, such property shall be deemed to have been contributed to equally by the deceased and the survivor or equally by the deceased and each of the survivors;
(f)	Property comprised in a settlement;
(g)	Annuities or other interests purchased or provided by the deceased to the extent of the beneficial interest arising on his death;
(h)	Money received or receivable under policies of insurance effected by the deceased or by a personal corporation on his life in proportion to the premiums paid by the deceased or by such personal corporation;
(i)	Property of which the deceased was at the time of his death competent to dispose;
(j)	Property transferred to or settled on any person after April 29, 1941, by the deceased afid within three years before his death, in consideration of marriage;
(k)	Property transferred for nominal or insufficient consideration to the extent of the difference between the consideration and the value thereof;
(l)	Estates in dower or by the courtesy.
3.	That the rates of taxation be based upon the following factors, namely:
(a) The "aggregate value" of the succession, that is to say, the fair market value of all
property, wherever situated, owned by the deceased at the time of his death together with the fair market value of the properties mentioned in paragraph two of this resolution, after funeral expenses and debts are deducted therefrom;
(b)	The value of the individual property or benefit passing to each successor; and
(c)	The relationship, if any, existing between the successor and the deceased.
4.	That, for the purposes of taxation, the successors or beneficiaries shall be divided into four classes, as follows:
(a)	Class A.-The widow of the deceased, any child under eighteen years of age at the date of the death of the deceased, and any child who at that date was dependent upon the deceased for support on account of mental or physical infirmity;
(b)	Class B.-The grandfather, grandmother, father, mother, husband, son-in-law, or daughter-in-law of the deceased or a child of the deceased eighteen years of age and over at the date of the death of the deceased, and who, at that date, was not dependent upon the deceased for support on account of mental or physical infirmity;
(c) Class C.-A lineal ancestor of the deceased (except the grandfather, grandmother, father or mother) a brother or sister of the deceased or any descendant of a brother or sister, or a brother or sister of the father or mother of the deceased or any descendant of any such brother or sister;
(d)	Class D.-Any person in any other degree of consanguinity to the deceased than as previously mentioned, or a stranger in blood to the deceased.
5.	That the rates of taxation shall be according to the following scale for the values mentioned, the rates for intervening amounts to be specified in greater detail in the bill:
[Stage Direction]
Aggregate value ol the succession to property passing in the case of initial duties dependent on such value	Initial rates dependent on aggregate value	Value of individual benefits, including exemptions in the case of additional duties	Additional rates dependent on value of the individual benefits, including exemptions	Class A	Class B	Class C	Class D$	%	$	%	%	%	%1,000	1,000	1	2	5,000	5,000	2	2	2-5	310,000	10,000	2-25	2-5	3	3-525,000	0-5	25,000	2-5	3	3-5	435,000	1	35,000	3	3-5	4	550,000	1-5	50,000	3-5	4	5	675,000	2	75,000	4	5	6	7100,000	2-5	100,000	5	6	7	8125,000	3	125,000	6	7	8	9150,000	3'5	150,000	7	8	9	10200,000	4	200,000	8	9	10	11300,000	4'5	300,000	9	10	11	12400,000	5	400,000	10	11	12	13500,000	5-5	500,000	11	12	13	14750,000	6	750,000	12	13	14	151,000,000	6-5	1,000,000	13	14	15	161,500,000	7	1,500,000	14	15	16	172,000,000	8	2,000,000	15	16	17	173,000,000	9	3,000,000	16	17	17	175,000,000	10	5,000,000	17	17	17	17
[Stage Direction]
The Budget

Mr. Ilsley
6.	That the exemptions from duty under the said Succession Duties Act shall be as follows:-
(a)	Where the whole property passing does not exceed $5,000 no duties shall be payable;
(b)	Property passing to or for the benefit of the widow of the deceased to the extent of the first $20,000 in value or amount;
(c)	Property passing to or for the benefit of the widow to the extent of $5,000 for each child of the deceased under 18 years of age at the time of the death of the deceased or dependent upon him for support at that time, if such child does not benefit in respect of property passing on the death of the deceased, provided that if such child does benefit the exemption shall be $5,000 less the amount of the benefit;
(d)	Property passing to or for the benefit of a child of the deceased under the age of eighteen years or dependent upon him for support at that time on account of mental or physical infirmity to the extent of the first $5,000 in value or amount;
(e)	Property passing to or for the benefit of the orphan child or children of the deceased under eighteen years of age at the time of his death or dependent upon him for supjmrt at that time on account of mental or physical infirmity, where such property does not exceed $15,000 in value or amount, provided that this exemption shall be in addition to those provided for in the preceding paragraph (d), and provided further that where more than one child benefits the exemption herein provided for shall be divided among such children in proportion to the value of the property or benefit passing to each of them;
(f)	If the deceased died from wounds inflicted, accident occurring or disease contracted on active service with the Canadian naval, military or air forces in or beyond Canada, in such circumstances that if the deceased left a widow she would be entitled to receive a pension in respect of his death under the Canadian Pension Act; (i) the exemptions granted in the preceeding paragraphs (b), (c),
(d)	and (e) shall be increased by 50 per cent;
(ii)	the amount of the tax payable in respect of the succession by persons in class A and class B shall be reduced to the sum which, if accumulated at compound interest tat the rate of 3 per cent per annum from the date of death with half-yearly rests, would at the expiration of the period of the normal expectation of life of a person of the age of the deceased at the time of death (calculated in accordance with ,approved mortality tables) amount to the tax which would otherwise be payable;
(g)	Property passing to any one person and not exceeding $1,000 in value or amount;
(h)	Property passing to or for the benefit of any charitable organization in Canada operated exclusively as such and not operated for the benefit or private gain or profit of any person, member or shareholder thereof;
(i)	Property passing to or for the benefit of the Dominion of Canada or any province or political subdivision thereof;
(j)	Property given by the deceased in his lifetime and representing the ordinary or normal expenditure of the deceased:
(k)	Property on which gift tax has been paid under the provisions of the Income War Tax Act, except to the extent to which the duty payable under the act exceeds the gift tax so paid.
7.	That there shall be a provision in the said Succession Duties Act making the executor or administrator liable in his representative capacity for all the duties imposed thereby, and making each successor personally liable for the duty on the share of the property or benefit passing to him, with the proviso that if the executor or administrator pays the duty he shall have the right to deduct the same from the property or benefit passing to the successor.
8.	That any enactment founded on the foregoing resolution shall come into force on the date when it is assented to and shall apply to deaths occurring after that date.

[Stage Direction]
Resolved, that it is expedient to introduce a measure to amend the War Exchange Conservation Act, 1940, and to provide:
1.	That section 7 of the said act be repealed and the following substituted therefor:
"7. (1) Goods enumerated in schedule two to this act, the growth, produce or manufacture of the United Kingdom, when imported into Canada in a manner and under conditions which entitle such goods to entry under the British preferential tariff of Canada, shall be exempt from the rates of duty set out in schedule A to the customs tariff and shall, in lieu thereof, be free of duties of customs.
(2) Goods enumerated in this subsection (other than those enumerated in schedule two to this act) the growth, produce or manufacture of the United Kingdom, when imported into Canada in a manner and under conditions which entitle such goods to entry under the British preferential tariff of Canada, shall be accorded discounts on the amount of duties or customs computed under the British preferential tariff as follows:
Goods enumerated in items 551, 551a, 552, 553, 554, 554b, 554d, 554e, 555, 568. 568a (i), 611 and 611a of the customs tariff-25 per cent.
Goods enumerated in groups I, V, VI, VII, VIII, IX, X, and XI of the customs tariff (but not to include goods enumerated in tariff items 551, 551a, 552, 553, 554, 554b, 554d, 554e, 555, 568, 568a (i), 611 and 611a, and not to include fabrics composed wholly or in part of silk or goods of any kind in which silk is the component material of chief value)-50 per cent.
Provided, that the discounts established by this subsection shall be accorded in lieu of, not in addition to, any discount to which the said goods otherwise might be entitled under section 5 of the customs tariff."
2.	That part one of schedule one to the said act be amended by deleting therefrom items 560d, 560e, 569d and 634 (ii).
3.	That part one of schedule one to the said act be further amended by inserting therein the following items and enumerations:
ex 28a, ex 29a-Black tea.
ex 506, et al-Games and puzzles: mirror frames.
[Stage Direction]
The Budget-Mr. Ilsley
[Stage Direction]
560c-Woven fabrics with cut pile, whether or not coated or impregnated, wholly or in part of silk or artificial silk, but not containing wool, n.o.p.
Provided, that any enactment founded on this resolution shall not apply to goods which on or before the twenty-ninth day of April, 1941, were in Canada or in transit to Canada.
4.	That part two of schedule one to the said act be amended by inserting therein the following item:
ex 711, et al-Vegetable oils provided for in items 258, 259a, 259b, 262, 266, 276, 276a, 276b, 277, 277a, 278, 278a, 278b, 278c, 278d, 280, ex 711, 824 and 831 of the customs tariff.
Provided, that any enactment founded on this resolution shall not apply to goods which on or before the twenty-ninth day of April, 1941, were in Canada or in transit to Canada.
5.	That schedule two to the said act be amended by deleting therefrom tariff items 220(a) and (b), 228, ex 284, 288, 429(b) and
(e), 439, 439a, 445f, 445g, 445k, 451b, 572 and 573, and by inserting therein the following items and enumerations:
Item 238e:	Regenerated	cellulose, and
cellulose acetate, transparent, in sheets, not printed, and manufactures of regenerated cellulose or of cellulose acetate, n.o.p.-Free.
Item 289: Baths, bathtubs, basins, closets, closet seats and covers, closet tanks, lavatories, urinals, sinks and laundry tubs of earthenware, stone, cement, clay or other material, n.o.p.-Free.
Item 326a: Manufactures of glass, n.o.p.- Free.
Item 362c: Nickel-plated ware, gilt or electro-plated ware, n.o.p.-Free.
Item 451a(ii): Needles, of any material or kind, n.o.p.-Free.
6.	That any enactment founded on these resolutions shall be deemed to have come into force on the thirtieth day of April, 1941, and to have applied to goods imported or taken out of warehouse for consumption on or after that date and to have applied to goods previously imported for which no entry for consumption was made before the said date.

[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,	chapterthirty-nine of	the	statutes	of	1929,	chapterthirteen 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 the statutes of 1936,	chapters twenty-five andtwenty-six of	the	statutes	of	1937,	chapter
forty-one of the statutes of 1939 (first session), chapter two of the statutes of 1939 (second session) and chapter twenty-nine of the statutes of 1940, be further amended by striking thi reout tariff items 219e, 264, subdivision (ii) of item 409e, 410d, 427f, subdivision (a) of item 429, 443a, 476a, 560d, 560e, 569d, subdivision
(iii)	of item 624a, 634(ii), 655a, 761, 824, 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:
[Mr. Daley.)
14873-150$
Tariff Item	-	British Preferential Tariff	Intermediate Tariff199g	Duplex backing papers or wrappers including those printed and/or skived for use in the packaging of photographic roll films; interleaving and wrapping paper, black, for packaging flat photographic films and photographic papers; when imported by manufacturers of photographic films and photographic papers for use in their own factories in the packaging of such films and papers	5 p.c.	12$ p.c.211b	Kyanite, crude or calcined, but not further processed than ground	Free	5 p.c.219e	Chloropicrin, ethylene oxide, methyl formate, cyanides, carbon bisulphide, or mixtures containing any of these, for use in combating destructive insects and pests	Free	Free232g	Inedible gelatine, when imported by manufacturers of photographic films, photographic plates and/or photographic paper, for use exclusively in the manufacture of such films, plates and/or paper in their own factories, under such regulations as the Minister may prescribe	5 p.c.	12J p.c.and, per pound	2 cts.	5 cts.264	Essential oils, natural and synthetic, n.o.p.; essential oils, natural and synthetic, containing other nonalcoholic material, n.o.p., for use in the manufacture of products or preparations for medicinal, flavouring, toilet, or other purposes, under such regulations as the Minister may prescribe	Free	7J p.c.355a	Rods containing 90 per cent or more of nickel, when imported by manufacturers of nickel electrode wire for spark plugs, for use exclusively in the manufacture of such wii i for spark plugs, in their own factories	Free	5 p.c.General Tariff	Present Rates	B. P. Tariff	Intermediate Tariff	General Tariff35 p.c.	20 p.c.	32^ p.c.	35 p.c.25 p.c.	15 p.c.	25 p.c.	25 p.c.Free	Free	Free	FreeFree	15 p.c.	15 p.c.25 p.c.	17J p.c.	25 p.c.	25 p.c.5 cts.	2 cts.	5 cts.	5 cts.7i p.c.	Free	7* p.c.	7i p.c.15 p.c.	25 p.c.	25 p.c.10 p.c.	1 15 p.c.	25 p.c.	25 p.c.
The Budget-Mr. llsley
(Mr. Ilsley.]
Tariff
Item
409e
41 Od
427f
U3a
(ii) Fruit and vegetable grading, grating, washing and wiping machines and combination bagging and weighing machines, and complete parts thereof; machines for topping vegetables, and machines for bunching and/or tying cut flowers, vegetables and nursery stock, anti complete parts thereof; machines and complete parts thereof for making or lidding boxes for fruit or vegetables; egg-graders and egg-cleaners, and complete parts thereof, not including aluminum parts	
Well-drilling machinery and apparatus, and complete parts thereof, for use exclusively in drilling for water, natural gas or oil, or in prospecting for minerals, not to include motive power; machinery and apparatus of a class or kind not made in Canada for maintenance and testing purposes in connection with gas or oil wells; well-packers and complete parts thereof, for oil or gas wells; seamless iron or steel tubing of a class or kind not made in Canada, for use in casing water, natural gas or oil wells	
Machines for the manufacture of veneers and plywoods, viz.:-veneer clippers, veneer clipper knife jointers, veneer glue spreaders, veneer jointers, veneer lathes and veneer taping machines; complete parts of all the foregoing	
Cutlery of iron or steel, plated or not;
(a) Knife blades or blanks, and table forks, of iron or steel, in the rough, not handled, ground nor otherwise manufactured; spoon blanks, of iron or steel, not further manufactured than stamped to shape; blanks, of iron or steel, for scissors and shears, in the rough, not ground nor otherwise manufactured	
Ovens, of a class or kind not made in Canada, for use in commercial bakeries: complete parts of the foregoing	
British Preferential Tariff	Intermediate Tariff	General Tariff	Present Rates	B. P. Tariff	Intermediate Tariff	General TariffFree	5 p.c.	10 p.e.	Free	5 p.c.	10 p.c.Free	27* p.c.	35 p.c.Free	Free	Free	Free	Free	Free10 p.e.	27* p.c.	35 p.c.Free	10 p.c.	35 p.c.	Free	10 p.c.	35 p.c.10 p.e.	27} p.c.	35 p.c.Free	7* p.c.	10 p.c.	Free	7* p.c.	10 p.c.[DOT]	10 p.c.	27* p.c.	35 p.o.Free	10 p.e.	30 p.	Free	10 p.c.	30 p.c.15 p.c.	25 p.e.	30 p.c.
o
£
o
co
The Budget-Mr. Ilsley
443b	Oven thermostats and automatic oven lighters, for use in the manufacture of apparatus designed for cooking with gas	Free	10 p.c.470a	Glassware and other scientific apparatus for laboratory work in public hospitals; chairs and tables for surgical operating purposes, and complete parts thereof; infant incubators and complete parts thereof; infant identification bead sets including cases, and integral parts thereof; electro cardiographs and complete parts thereof, and sensitized film and paper for use therein; apparatus for sterilizing purposes, including bedpan washers and sterilizers but not including washing nor laundry machines; all for the use of any public hospital, under regulations prescribed by the Minister	Free	Free560c	Woven fabrics with cut pile, whether or not coated or impregnated, wholly or in part of silk or artificial silk, but not containing wool, n.o.p	XU P-c.	32$ p.c.597c	Strings for musical instruments	10 p.c.	20 p.e.624a	(iii) Juvenile construction sets of metal or rubber, consisting of various stampings, punched or moulded and connections therefor; parts of the foregoing....	Free	30 p.c.655a	Lead pencils and crayons, n.o.p	10 p.c.	35 p.c.655b	Crayons of chalk or chalk-like material, coloured or not	10 p.c.	20 p.c.c.	15 p.c.	25 p.c.	30 p.c.Free	Free	Free10 p.c.	25 p.c.	30 p.c.10 p.c.	35 p.c.	35 p.c.27$ p.c.	30 p.c.	45 p.c.and, per ounce	and, per ounce	and, per ounce7 cts.	7 cts.	7 cts.c.	17$ p.c.	32$ p.c.	35 p.c.27$ p.c.	30 p.c.	45 p.c.30 p.c.	40 p.c.	50 p.c.c.	10 p.c.	32$ p.c.	40 p.c.20 p.c.	27$ p.c.	30 p.c.15 p.c.	30 p.c.	30 p.c.20 p.c.	37$ p.c.	45 p.c.17$ p.c.	33$ p.c.	45 p.c.10 p.c.	27$ p.c.	35 p.c.15 p.c.	25 p.c.	25 p.c.c.	Free	30 p.c.	40 p.c.10 p.c.	30 p.c.	40 p.c.c.	10 p.c.	35 p.c.	35 p.c.c.	10 p.c.	35 p.c.	35 p.c.
>
The Budget-Mr. Ilsley

Tariff
Item
824
826
	British Preferential Tariff	Intermediate Tariff	
			Tariff
Collodion and emulsions thereof, iodizers for collodion, and stripping solutions, when imported for use exclusively by photo-engravers, lithographers, rotogravure printers, or engravers of copper rollers, in their manufacturing operations	15 p.c.	17£ p.c.	175 P-c.Perilla oil and cashew nut shell oil, for use in Canadian manufactures	Free	Free	FreeWoven 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 by manufacturers of rubber, to be incorporated by them in pneumatic tires, in their own factories	Free	17| p.c.	25 p.c.and, per pound	3§ cts.	4 cts.Wire drawing dies in the rough, not being complete parts of machinery, and materials or articles entering into their manufacture	Free	10 p.c.	35 p.c.
Present Rates
[Stage Direction]
Tariff
Intermediate
Tariff
General
Tariff
15 p.o.
175 p.o.
175 P-o-
Free 15 p.c.
Free 25 p.e.
Free 25 p.c.
Free
15 p.o.
25 p.c.
15 p.c.
25 p.c.
25 p.c.
2. Resolved, that any enactment founded upon the foregoing resolu-	of warehouse for consumption on and after that date, and to have applied
tion shall be deemed to have come into force on the thirtieth day of	to goods previously imported for which no entry for consumption was
April, one thousand nine hundred and forty-one, and to have applied	made before that date,
to all goods mentioned in the foregoing resolution imported or taken out
n
[Stage Direction]


g
o

[Stage Direction]
A.	Review of Government Accounts, 1940-41.
B.	Tables on Economic Conditions, 1940-41.
A. Government Accounts, 1940A1 Comparative Summary Statement of Revenues and Expenditures
1.	As the final figures for the fiscal year 1940-41 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 1940-41, together with comparable figures for the four preceding fiscal years:
The Budget-Mr. Ilsley

The Budget-Appendix
STATEMENT OF REVENUES FOR THE LAST FIVE FISCAL TEARS (000 omitted)
-	1936-37	1937-38	1938-39	1939-40	Estimated 1940-41$	$	$	$	$Tax Revenues-	Customs import duties	83,771	93,456	78,751	104,301	130,800Excise duties-	Spirits, malt, etc	17,681	19,626	18,530	21,267	34,650Cigars, cigarettes and tobacco	28,707	32,837	33,225	40,557	55,080Licences	39	38	34	35	12046,427	52,501	51,789	61,859	89,850Less refunds	470	464	475	827	1,10045,957	52,037	51,314	61,032	88,750Excise taxes-	Sales	116,139	141,864	125,927	141,121	185,550Manufacturers-	Automobiles, rubber tires and tubes	1,464	1,453	1,343	1,568	10,000Cigars, cigarette papers and tubes.	1,345	1,428	1,575	2,009	3,500Matches and lighters	1,687	1,769	1,819	2,135	2,250Sugar	10,583	10,833	11,004	12,302	11,700Toilet preparations and soap	1,184	1,224	1,249	1,371	1,500Electric and gas appliances	-	-	-	-	1,850Phonographs, radios and tubes	-	-	-	-	1,500Sundry	436	477	465	732	1,500Special excise (importations)	15,415	18,622	15,591	1,979	1,006Stamps, transportation, etc	7,527	6,958	6,525	6,486	6,500War exchange	-	-	-	-	62,000155,780	184,628	165,498	169,703	288,850Less refunds	3,307	3,809	3,787	3,675	4,800152,473	180,819	161,711	166,028	284,050Income tax-	Individuals	35,442	40,445	46,937	45,407	75,860Corporations	58,013	69,769	85,186	77,920	131,570Dividends, interest, etc	8,910	10,152	9,903	11,122	13,040102,365	120,366	142,026	134,449	220,470National defence tax	-	-	-	-	27,670Excess profits tax	-	-	-	-	24,000Banks, Insurance Companies, etc.-	Chartered banks	1,210	1,107	1,014	949	930Insurance companies	775	867	891	926	970Miscellaneous	483	509	587	586	650Total Revenue from taxes	387,034	449,161	436,294	468,271	778,290Non-tax Revenues-	Post Office	34,275	35,546	35,288	36,728	39,700Return on investments	12,497	14,463	14,407	14,617	16,700Bullion and coinage	1,414	1,715	2,052	3,756	6,300Service charges, rentals and sundry fees	8,017	7,398	7,305	8,249	9,000Proceeds from sales	856	910	818	1,023	1,250Premium, discount and exchange	-	27	477	7,939	6,800Refunds of expenditure	576	643	740	685	750Miscellaneous	360	435	636	349	400Total non-tax revenue	57,995	61,137	61,723	73,346	80,900Total ordinary revenues	445,029	510,298	498,017	541,617	859,190Special Receipts and Credits-	Sundry receipts and credits	0)8,464	3,010	1,256	164	(*) 8,450
(') Includes $8,000,000 from Canadian Wheat Board taken into the aecounte as an offset, in part, to the disbursements in 1935-36 re losses on 1930 wheat pool and stabilization operations.
(!) Includes $5,504,000 representing the capital gain on redemption of an estimated ±'22,500,000 of G.T.R. 4% perpetual debenture stock and taken into the accounts as an offset to a corresponding increase in the Canadian National Railways Securities Trust Stock.
The Budget-Appendix
[Stage Direction]
STATEMENT OP EE VENUES FOB THE LAST FIVE FISCAL YEARS-Concluded
(000 omitted)
-	1936-37	1937-38	1938-39	1939-40	Estimated 194041Other credits-	$	$	$	$	$Refunds on capital account	616	1,543	40	21	76Credits to non-active accounts	
Net credit resulting from various adjustments in Railway accounts authorized by Canadian National	45	819	2,858	20,292	3,855Railways Capital Revision Act, 1937	-	1,023	-	-	-Total Special Receipts and Credits	9,125	6,395	4,154	20,477	12,381Grand Total Revenue	454,154	516,693	502,171	562,094	871,571

[Stage Direction]
(000 omitted)
-	1936-37	1937-38	1938-39	1939-40	Estimated 1940-41Ordinary Expenditure	$	$	$	$	$Agriculture	8,741	9,017	9,527	11,817	8,886Auditor General's Office	423	463	473	459	454Civil Service Commission	
External Affairs, including Office of	305	358	379	398	398Prime Minister	
Finance-	1,341	1,450	1,057	1,220	1.02SInterest on Public Debt	
Cost of Loan Flotations and Annual Amortization of Bond Discounts and	137,410	132,118	127,996	129,315	139,239Commissions	3,839	4,555	4,914	4,992	6,376Premium, Discount and Exchange (net)	400	-	Subsidies to Provinces	13,735	13,735	13,752	13,769	13,769Special Grants to Provinces	3,225	7,475	7,475	5,475	5,475Other Grants and Contributions	540	560	643	660	633Civil Pensions and Superannuation	
Government contribution to Super-	787	712	638	567	536annuation Fund	
Old Age Pensions, including pensions to	2,019	2,065	2,220	2,271	2,316blind persons commencing in 1937-38.	21,149	28,653	29,044	29,977	29,924General Expenditure	3,498	3,573	3,689	3,966	3,233Fisheries	
Governor General and Lieutenant Gov-	1,691	1,850	2,036	2,320	1,711ernors	224	225	226	227	219Insurance	172	187	194	195	176Justice	2,773	2,790	2,748	2,725	2,726Penitentiaries	2,372	2,577	2,675	2,941	2,714Labour. 	720	706	788	788	835Technical Education	76	49	27	31	30Unemployment Insurance Act, 1940.... Government Annuities-	-	-	-	125Payments to maintain reserve	
Legislation-	541	8,941	-	379	500House of Commons	1,760	1,516	1,800	1,286	2,510Library of Parliament	75	79	72	76	71Senate	587	536	600	432	869General	73	57	75	68	55Dominion Franchise Office	
Chief Electoral Officer, including elec-	53	76	50	tions	
Mines and Resources	72	45	114	458	2,475Administration	-	(>) 1,491	(l) 184	(*) 186	(>) 172Immigration and Colonization	1,313	1,163	1,335	1,338	1,303
(l) Prior to 1937-38 general administration expenses were not segregated from other expenditures of the respective services of the departments which were amalgamated to form the Department of Mines and Resources. The figures from 1938-39 represent only Departmental Administration, other administration costs being included as in other departments, under the respective services.
[Stage Direction]
The Budget-Appendix

[Stage Direction]
five fiscal years-Continued (000 omitted)
Ordinary Expenditure
Mines and Resources-Concluded
Indian Affairs	
Interior	
* Lands, Parks and Forests	
Surveys and Engineering	
Mines and Geological Survey	
Movement of Coal and Subsidies under
Domestic Fuel Act	
Munitions and Supply	
National Defence-
Administration	
Militia Service	
Naval Service	
Air Service	
Sundry Services	
National Revenue (including Income
Tax)	
Pensions and National Health-
Administration	
Treatment and after-care of returned
soldiers	
Pensions, War and Military	
Health Division	
Post Office	
Privy Council	
Public Archives	
Public Printing and Stationery	
Public Works	
Royal Canadian Mounted Police	
Secretary of State	
Soldier Settlement	
Trade and Commerce	
Canada Grain Act	
Mail Subsidies and Steamship Subventions	
Transport-
Administration	
Air Service	
Marine Service	
Canadian Radio Commission	
Canadian Travel Bureau	
Railways and Canals	
Maritime Freight Rates Act	
Railway Grade Crossing Fund	
Total ordinary expenditure.
Capital Expenditure
Canals	
Railways	
Public Works	
Total Capital Expenditure. War Expenditure War (see section 16)	
Special Expenditure
Administration-Relief Acts	
Grants-in-aid to Provinces	
Material Aid to Provinces, including municipal improvements projects.
1936-37	1937-38	1938-39	1939-40	Estimated 1940-41$	$	$	$	$4,904	4,897	5,305	5,675	5,3132,887	-	-	-	-1,910	2,249	2,116	1,955933	1,325	1,301	1,2001,135	658	1,340	1,324	1,1972,277	2,521	1,921	4,532	4,352 9(«) 409	(*) 178	(*) 3211,346	17,221	15,772	5,997	1524,763	4,372	6,590	1,869	-5,822	10,018	11,216	4,852	-992	1,149	447	295	3911,205	11,870	11,899	12,064	12,138-	-	(*) H8	(*) 132	(*) 13111,579	12,109	13,453	14,771	13,66142,801	42,240	42,181	42,219	41,568873	957	1,012	1,113	1,18531,906	33,762	35,456	36,726	38,60045	48	49	59	54160	170	159	150	126169	161	191	199	28114,519	12,382	15,484	13,065	11,6005,901	6,308	6,145	5,626	5,476655	693	730	836	784806	801	758	624	5905,523	4,070	4,763	4,999	4,5541,739	1,675	1,847	1,933	1,9252,120	2,029	1,993	1,907	1,100(*) 417	(*) 371	(«) 358	(*) 368-	(5) 2,935	(3) 3,457	(!) 3.S62	(8) 3,8155,614	4,290	4,271	4,215	3,934878	-	-	-	-250	250	249	312	4963,769	3,661	4,371	3,763	3,5822,506	3,183	2,583	2,660	3,95154	180	187	255	135387,112	414,892	413,032	398,323	393,06152 203	71	26	23	73,237	4,359	5,398	7,007	3,3983,492	4,430	5,424	7,030	3,405-	-	-	118,291	791,862194	378	260	287	25228,930	19,493	17,037	-	--	-	-	19,534	14,757
«) 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.
The Budget-Appendix

[Stage Direction]
five fiscal years-Continued (000 omitted)
-	1936-37	1937-38	1938-39	1939-40	Estimated 1940-41Special Expenditure-Concluded	%	$	$	$	$Dominion share of joint Dominion-Provincial projects	12,692	8,841	6,259	7,147	2,321Dominion Projects	23,554	13,913	12,981	24,919	9,588Transportation facilities into mining areas	1,221	1,324	1,213	l' 121	50Railway Maintenance Relief Work	2,662	-	69,253	43,949	37,750	53,008	28,963Western Drought Area Relief- Direct Relief	
Feed and fodder and freight thereon...	5,144 3,517	11,9251 11,352/	8,869	1,605	Freight charges on movement of cattle.	90	Expenses of marketing cattle	337	Purchase and distribution of foodstuffs	972	277	Prairie Farm Assistance Act, 1939- Administration	350Advances to Prairie Farm Emergency Fund	-	-	-	7,500	4,8008,751	24,586	9,146	9,105	5,150Provision for reserve against estimated losses on 1938 wheat marketing guarantees	25,000	27,000	Provision for reserve to meet deficits resulting from the operations of the Canadian Wheat Board calculated as at July 31, 1940, not previously provided for...	10,500Total special expenditure	78,004	68,535	71,896	89,113	42,613Government Owned Enterprises Losses charged to Consolidated Fund- Canadian National Railway System, ex-eastern lines	37,449	37,882	48,194	34,850	14,451Eastern lines	5,854	4,464	6,120	5,245	2,514Prince Edward Island Car Ferry and Terminals	(*) 388	427	461National Harbours Board	250	289	' ' 138	94	40Trans-Canada Air Lines	111	818	412	Central Mortgage Bank	16	-Total charged to consolidated Fund	43,553	42,746	55,658	41,044	17,466Loans and advances non-active- Canadian National Steamships	Cr. 1,754	104	6	8	National Harbours Board	2,419	1,983	3,279	1,027	716Total non-active advances	665	2,087	3,285	1,035	716Total government-owned enterprises	44,218	44,833	58,943	42,079	18,182Other Charges Write-down of assets chargeable to Consolidated Fund- Drought Area Relief Loans, 1934-35- Province of Saskatchewan	1,374	Reduction in soldier and general land settlement loans	628	750	1,023	1,643	9S3Yearly established losses in seed grain and relief accounts-Department of Mines and Resources	44	14	18	10	46
(*) Included with Eastern lines in previous years. 

The Budget-Appendix
STATEMENT OF EXPENDITURES BY MAJOR CATEGORIES AND BY DEPARTMENTS FOR THE LAST five fiscal years-Concluded (000 omitted)
-	1936-37	1937-38	1938-39	1939-40	Estimated 1940-41Other Charges-Concluded Write-down of assets chargeable to Consolidated Fund-Concluded Canadian National Railways Securities Trust Stock-Reduction due to line abandonments during calendar	$	$	$	$	$years 1938, 1939 and 1940	
Canadian National Railways Securities Trust Stock-Capital loss (exclusive of loss applicable to expired service life) on sale of S.S. Prince	(*)-	2,713	2,600	2,334David and Prince Robert	
Cancellation of Canadian Farm Loan	-	"""	1,475Board-Capital Stock	20	10	14	11	12Province of Manitoba Treasury Bills.. Province of Saskatchewan Treasury	(<) 805	~	Bills	
Non-active Accounts-	-	(<) 17,682	General Land Settlement Loans	-	139	-	-	-Active assets transferred to non-active. Fulfilment of guarantees-* Saskatchewan Seed Grain Loans 1936	(*) 18,487	7,150and 1937	
Canadian National Railways Securities Trust Stock-Capital gain on redemption of £22,500,000 G.T.R.	2,638	4% Perpetual Debenture Stock	-	-	-	5,504Total other charges	19,179	1,718	3,768	25,958	17,504Grand total expenditures	532,005	534,408	553,063	680,794	1,266,627
(i) 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.
(4) These amounts are offset by a contra account on the revenue side.

[Stage Direction]
(000 omitted)
-	1936-37	1937-38	1938-39	1939-40	Estimated 1940-41$ 387,112 445,029	$ 414,892 510,298	$ 413,032 498,017	$ 398,323 541,617	$ 393,061 859,190
57,917	95,406	84,985	143,294	466,129
War and Special expenditures						
	78,004 8,464	68,535 3,010	71,896 1,256	207,404 164	834,475 8,450
					
	69,540 3,492 44,218 19,179	65,525 4,430 44,833 1,718	70,640 5,424 58,943 3,768	207,240 7,030 42,079 25,958	826,025 3,405 18,182 17,504
					
" Government owned Enterprises...					
					
	136,429 661	116,506 3,385	138,775 2,898	282,307 20,313	865,116 3,931
					
	135,768 57,917	113,121 95,406	135,877 84,985	261,994 143,294	861,185 466,129
Over-all deficit or increase of direct net debt						
	77,851	17.715	50.892	118.700	395.056
The Budget-Appendix

[Stage Direction]
3.	When the books are finally closed for the fiscal year, 1940-41, it is estimated that total revenues will reach an all-time record of $871,571,000, an increase over last year of $309,477,000, or approximately 55 per cent. This increase represents the additional revenues obtained during the year by reason of:
(a)	Imposition of new taxes.
(b)	Changes in rates and exemptions effected sinced the outbreak of war.
(c)	Expanding production and national income due to war and the consequent higher yield from our former tax structure.
(d)	Prepayment of income taxes during January, February and March, 1941, not normally payable until April 30, 1941.
4.	For purposes of ready reference, the 5-year table of revenue is shown on page 4 but the form is different from that used in previous years. This table is divided to show taxation revenues under appropriate headings with sub-headings of Excise Duties, Excise Taxes and Income Taxes. The non-tax revenue section is broken down under eight main headings, and the whole table is on a comparative basis, one year with another.
5.	Total revenues from taxation for the fiscal year just ended are estimated at $778,-
290,000	compared with $468,271,000 collected during the previous year. Revenues from taxation comprise 89 per cent of the total income. An examination of the 5-year table discloses that the greatest gain was made in income tax (including National Defence and Excess Profits Taxes) where an increase of $137,691,000 is recorded. It is not possible to estimate with any degree of accuracy the total amount of prepayments of income tax which normally would not have been paid until April 30, 1941, although it is known that about 110,000 taxpayers took advantage of the interest-free instalment payments. The estimated increase of $137,691,000 is derived from: increases in payments due to improvement in the national income; taxation changes effected by the emergency budget of September, 1939, and prepayments of the interest-free instalments, $86,021,000; National Defence Tax effective for 6 months only in 1939-40, $27,670,000, and Excess Profits Tax, $24,000,000.
The excess profits tax includes only the actual amount received to March 31, 1941, and is substantially less than the estimated revenue for a complete year.
6.	The total revenue from sales tax, less refunds, is estimated at $180,750,000 compared with $137,446,000 the previous year, an increase of $43,304,000. As provided for in the budget

of September, 1939, there was removed from the schedule of exemptions, electricity and gas used for domestic purposes, salted or smoked meats and canned fish. As this change was effective for a part of the previous year only, a portion of the above increase is due to such exemptions being applied for the full year 1940-41. With the exception of this change in taxation, the increase of $43,304,000 is considered as reflecting improvement in conditions generally, due principally to expanding activity brought about by the war.
7.	Other excise taxes as set out in the 5-year table, but excluding war exchange tax are expected to produce $41,300,000, an increase over the previous year of $12,718,000. This increase is accounted for mainly by higher yields of the excise taxes on automobiles, rubber tires and tubes and on smokers' supplies and by the new excise taxes on electric and gas appliances, phonographs, radios and tubes, etc.
8.	A total revenue of $62,000,000 is expected to be realized from the war exchange tax of 10 per cent on the value for duty purposes of all imports from non-empire countries imposed in the June, 1940, budget primarily to conserve exchange.
9.	Revenues from customs import duties for the year just closed are estimated at $130,800,000 compared with $104,301,000 received during 1939-40. This increase of $26,-
499,000	is due largely to increased imports arising out of the war.
10.	Receipts from excise duties, mainly on liquor and tobacco, are expected to total $88,750,000, an increase of $27,718,000 over the previous fiscal year. This increase is accounted for mainly by increased duties on liquors and tobacco following the budgets of September, 1939, and June, 1940. The gross duty on liquor is estimated at $34,650,000, and that on tobacco at $55,080,000.
11.	The total revenue classified as non-tax revenues is estimated at $80,900,000 compared with $73,346,000 in the previous year. The largest non-tax item is the receipts of the Post Office which it is expected will total $39,700,000, an increase of nearly $3,000,000 over the preceding fiscal year. The receipts from the Post Office will, it is expected, exceed the cost of operations by $1,100,000. As mentioned in previous budget speeches, 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 for the free use of the mails.

The Budget-Appendix
12.	Special Receipts and other credits are estimated at $12,381,000. Of this amount, $5,504,000 represents a capital gain on redemption of an estimated £22,500,000 of Grand Trunk Railway 4 per cent perpetual debenture stock, and taken into the accounts as an offset to a corresponding increase in the Canadian National Railways Securities Trust Stock. $2,334,000 of Canadian National Railways Securities Trust Stock was written off because of line abandonments during the calendar year 1940 and an additional $1,475,000 to represent the capital loss (exclusive of loss applicable to expired service life) on the sale of s.s. Prince David and Prince Robert. In addition there was a write-off of $46,000 representing the yearly established losses in the seed grain and relief accounts of the Department of Mines and Resources. All of these amounts, totalling $9,359,000, necessarily appear on the expenditure statement under the heading of "Other Charges". The balance of $3,022,000 is made up of $1,420,000 representing voluntary donations for war purposes; $1,220,000 representing refunds of previous year's war expenditures and $382,000 representing refunds of previous years' relief expenditures and sundry credits.

[Stage Direction]
13.	The comments which follow will deal with expenditures classified by the usual main categories: Ordinary Expenditures; War and Special Expenditures, Operating Deficits of, and Non-active Advances to Government-owned Enterprises, Capital Expenditures and Other Charges. All disbursements under these categories are included as expenditures in arriving at the over-all deficit or increase in net debt.

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14.	It is estimated that ordinary expenditures for the year will total $393,061,000 of which interest and other charges on the public debt, pensions, post office and subsidies and special grants to provinces, will aggregate $274,951,000, or approximately 70 per cent of the total. The remaining 30 per cent represents the general administrative expenses of the other services of government charged to Ordinary Expenditure.
The above estimated total of $393,061,000 is less than actual ordinary expenditures last year by $5,262,000. The largest decrease is in the Department of National Defence, where by reason of the war certain expenditures charged to ordinary account last year are this year charged to war expenditures. This decrease amounted to $12,968,000. Other decreases are as follows: Agriculture, $2,931,000; External Affairs. $192,000; Finance, general, $733,000; Fisheries, $609,000; Indian Affairs, $362,000;
Lands, Parks and Forests, $161,000; Surveys and Engineering $101,000; Penitentiaries, $227,000; Mines and Geological Survey, $127,000; Movement of coal, $180,000; Treatment and after-care of returned soldiers, $1,110,000; Pensions, War and Military, $651,000; Public Works, $1,465,000; Royal Canadian Mounted Police, $150,000; Trade and Commerce, $445,000; Mail Subsidies and Steamship Subventions, $807,000; Marine Services, $281,000; Railways and Canals, $181,000; Railway Grade Crossing Fund, $120,000; and Sundry, $382,000. These decreases aggregate $24,183,000.
The largest increase in ordinary expenditures was in interest and other charges on the Public Debt, which amounted to $11,308,000. Other increases are as follows; Unemployment Insurance Act, $125,000; Government Annuities, $121,000; House of Commons, $1,224,000; Senate, $437,000; Chief Electoral Officer, including elections, $2,017,000; Post Office, $1,874,000; Canadian Travel Bureau, $184,000; Maritime Freight Rates Act, $1,291,000; and Sundry, $340,000. These increases aggregate $18,921,000.

[Stage Direction]
15.	Total expenditures charged to capital are estimated to total $3,405,000 compared with $7,030,000 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 Civil airways and airports.

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16.	It is estimated that the expenditures resulting from the war which will be charged against the fiscal year ended March 31, 1941, will amount to $791,862,000. This amount represents the actual expenditures during the fiscal year; it doles not include commitments entered into but not yet paid for. Such commitments include orders for materials and supplies not delivered at March 31, 1941, or for which accounts had not been rendered and approved at that date. The expenditures for the year include a substantial part but not the whole cost of maintaining Canadian troops in the United Kingdom up to March 31, 1941. The accounts covering these maintenance costs which have been rendered by the United Kingdom goveimiment, have been paid and in addition substantial payments have been made on account. But the rendering of detailed accounts by the United Kingdom government has been delayed due to conditions presently prevailing there, with the result that some part of the costs of maintaining our troops to March 31, 1941, will not be computed or paid until after the books are
The Budget-Appendix
[Stage Direction]
closed for the last fiscal year. Such costs will be charged against the fiscal year which began on April 1st last.
There is included in the total of $791,862,000, expenditures by the Department of Munitions and Supply for the expansion of industry amounting to $84,900,000. Some part of this should eventually be recovered, including the amount of advances made to contractors for working capital and any salvage that is received for the new plants which have been constructed with moneys advanced by the government. As it is impossible to estimate the amount of such eventual recoveries in any accurate way, the full amount of the expenditures has been charged against the year in which they were incurred.
In addition to the estimated expenditures of $791,862,000, amounts aggregating $24,288,000 were paid under authority of the War Appropriation Act, 1940, and have been carried forward as active assets. These include:-
Purchases of railway equipment... $15,738,000 Working capital-Canadian Government Merchant Marine		750,000
Advances to commodity companies
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-Department of Munitions and
Supply	 7,800,000
[Stage Direction]
In addition to the above certain payments have been made under authority of Section 3 of the War Appropriation Act, 1940, which are recoverable from the United Kingdom and other Allied Governments. The estimated amount of these recoverable advances at March 31, 1941, is made up as follows:-
United Kingdom-Internment operations	$ 3,000,000
United Kingdom-Royal Air Force
Special Schools	 11,000,000
United Kingdom-Aircraft and other equipment for British Commonwealth Joint Air Training Plan.. 17,500,000 United Kingdom and Allied Governments-Militia and naval recover-ables	 6,940,000
Total (which is shown as a separate
item in the balance sheet)....$38,440,000
In addition there will be recoverable from Australia and New Zealand, substantial amounts in connection with the British Commonwealth Joint Air Training Plan.
The total expenditures of $816,160,000, not including the recoverable advances referred to above, which have been charged against the War Appropriation Act are analysed by Departments and Services as follows:-
Agriculture 				$	5,268,000
Auditor General's Office- Audit of War Expenditure				60,000
Chief Electoral Officer- Duties imposed by National Registration				5,000
Civil Service Commission- Additional War Expenses				120,000
External Affairs					379,000
Finance 	
Fisheries 	1,686,000 174,000Justice- Prize Court	
Defence of Canada Regulations	
War Measures Act	
Labour 	$	25.000 19.000 3,000	47,000 1,702,000Mines and Resources	354,000Munitions and Supply- . Administration 	
Expansion of Industry	$	2,300,000 84,900,000	87,200,000
National Defence

 Administration 	 Dependents' Allowance Board	 Military Services	 Censoring	 Internment 	 Radio Services, N.W.T. & Yukon	 Royal Military College			$	1,351,000 241.000 404,714,000 183.000 957.000 141.000 360.000	
407,947,000

The Budget-Appendix
National Defence-Naval Services	$
National Defence-Air Services-
Home War and Overseas Establishments	S 66,000,000
British Commonwealth Air Training Plan	 119,000,000
National Harbours Board	
National Research Council	
National Revenue-*
Censorship of Publications	
National War Services	
Pensions and National Health	
Post Office	
Privy Council-
Office of the Registrar of Orders in Council Public Works	
Royal Canadian Mounted Police-
Land Services, incidental to war	
Secretary of State-
Internment Operations	S	89,000
Voluntary Service Registration Bureau	 9,000
Press Censorship	 77,000
Department Generally-War Measures Act	 1,000
Commission re Revolution of National Certificates	 1,000
Trade and Commerce- Canada Shipping Board Transport	
85,192,000
185,000,000
265.000
542.000
5.000
2.543.000
3.520.000
258.000
6.000
5.539.000
2.500.000
177,000
22,000
1,351,000
Total War charged to Expenditure	 $	791,862,000
Active Assets-
Loans and Investments-
Purchase of Railway Equipment	$	15,738,000
Working Capital-Canadian Government Merchant
Marine	 750,000
[Stage Direction]
$	16,488,000
Munitions and Supply-Advances to Commodity Companies	 7,800,000
Grand Total charged to War Appropriation Acts
816,150,000

[Stage Direction]
17.	Relief expenditures for 1940-41 are estimated to total $32,113,000 compared with $62,113,000 in the previous year. Payments to Provinces under the Material Aid and Municipal Improvements Projects Agreements are estimated at $14,757,000 compared with an expenditure the previous year of $19,534,000. The Dominion's share of joint Dominion-Provincial projects, including transportation facilities into mining areas, and the development of tourist highways, decreased from $8,268,000 to $2,371,000. The total cost of Public Works and Other Projects including administration for which the Dominion assumed sole responsibility, is estimated at
$9,835,000 as compared with $25,206,000 during the preceding year.
Expenditure by the dominion under the Prairie Farm Assistance Act, in the form of advances to the Prairie Farm Emergency Fund as provided for in the act, is estimated at $4,800,000 compared with $7,500,000 for the preceding year. In addition it is estimated that administration costs will total $350,000. In the previous fiscal year these administration costs were charged to ordinary expenditures.
The following table shows a comparison of relief expenditures during each of the last two fiscal years:-
2378	COMMONS
The Budget-Appendix
-	1939-40	1940-41 (estimated)Material Aid to Provinces and Dominion's contribution to Municipal Im-	$ 19,534,000 8,268,000 3,623,000 230,000	$ 14,757,000 2.371.000 3.904.000 450.000 660.000 48,000 3.675.000 576.000 264.000 258.000
Dominion Projects- Department of Agriculture				
		
	2,751,000 137.000 13,340,000 227.000	
		
" Public Works			
" Trade and Commerce			
	4.298.000 600,000 1.605.000 7.500.000	
Sundry Departments			
Western Drought Area Relief- Direct and Agricultural Relief			
Prairie Farm Assistance Act- Payments to Emergency Fund			4,800,000 350,000
Administration			
		
	62,113,000	32,113,000
18. The following table shows the Dominion's relief expenditures	of a direct	nature since
the passing of the first Relief Act in 1930:
(000 omitted)
-	Direct ^ Relief including Grants-in-Aid	Joint Dominion-Provincial Works 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 March 31, 1935	$ 77,767 26,570 28,931 19,530 17,070 19,534 14,757	$ 49,643 10,408 12,472 10,165 7,472 8,268 2,371	S 29,977 38,132 27,585 13,847 12.919 24.919 9,583	$ (*) 15,088 (2) 4,000 8,751 24,586 9,146 (<) 9,105 («) 5,150	s	$ 3,532 306 265 407 288 287 252	$ 176,007 79,416 96,491 68,535 46,895 63,487 32,113Year ended Mar. 31/36	(*) 18,487	Year ended Mar. 31/38	Year ended Mar. 31/39	(5) 1,374	Year ended Mar. 31/41 (estimated)	Total	204,159	100,799	156,962	75,826	19,861	5,337	562,944
(l) Includes $5,000,000 Province of Saskatchewan Treasury Bills written off and charged to expenditure. (J) 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.
(4) Includes Prairie Farm Assistance Act, 1939, $7,500,000.
(«) Write off of Saskatchewan Treasury Bills re 1934-35 Drought Area Relief.
([DOT]) Prairie Farm Assistance Act, 1939, $5,150,000.
In the above table no account is taken of loans to Western Provinces under Relief Acts, loans to cover labour cost of special railway works programmes and1 losses borne by the Dominion as a result of wheat marketing operations.
19.	The remaining item in this classification is an amount of $10,500,000 to provide for a reserve to meet the deficits resulting from the operations of the Canadian Wheat Board calculated as at July 31, 1940, not previously provided for. As was shown in the Public Accounts for the year ended March 31, 1940, an advance of 852,000,000 was made by the Dominion to the Canadian Wlieat Board to
[Mr. Ilsley.l
meet possible losses of the Board in respect of 1938 Wheat. This further amount of $10,500,000, or to be exact $10,499,676.97 to be set up in the Dominion's books as a Reserve represents the exact amount necessary to meet the deficit of the Board not previously provided for on the basis of calculations made as at July 31, 1940, the close of the crop year, 1939-40.

[Stage Direction]
20.	The next major classification of expenditures comprises the losses of, and non-active advances to Government owned enterprises which are operated as separate corporations.

The Budget-Appendix
Canadian National Railways
21.	The operating revenues of the Canadian National Railways for the calendar year 1940 totalled $247,527,000, an increase of $43,707,000 or 21-4 per cent over the calendar year 1939.
Operating expenses of the Railways amounted to $202,520,000, an increase of $19,554,000 or 10-7 per cent over the preceding year. Practically all of this increase was in maintenance of way and equipment, and transportation expenses, due to the greatly increased volume of traffic.
Net .revenue available for interest on the Railway's debt was $33,474,000 compared with $10,635,000 in 1939. After payment of interest charges of $48,701,000 to the public, and interest charges of $1,738,000 due to the Government on temporary loans for capital purposes and refunding, there was a net cash deficit of $16,965,000 compared with $40,096,000 in the previous year, a decrease of $23,131,000.
The operating deficit of the Prince Edward Island Car Ferry and Terminals during 1940 was $461,000 as compared with $427,000 in 1939.
Canadian National Steamships
22.	The operations of the Canadian National (West Indies) Steamships Limited resulted in a surplus of $666,000 after payment of interest on bonds held by the public but before depreciation and interest on advances from the Government. The comparable figure for 1939 was $154,000. The operating surplus was paid to the Government in payment of interest (Current and Arrears).
National Harbours Board
23.	The operations of the facilities and harbours under the administration of the National Harbours Board in 1940 recorded a substantial gain over 1939. Operating income for the calendar year after payment of interest to the public but before depreciation and interest on Government advances, totalled $4,943,000 compared with $3,723,000 in the previous year, an increase of 33 per cent.
Financial assistance provided by the Government to the National Harbours Board and charged to Dominion expenditure in the fiscal year ended March 31, 1941, amounted to $756,000. This amount was made up as follows: $40,000 for the operating deficit of the Churchill Harbour; $425,000 for non-active advances for the deficit of the Jacques Cartier Bridge at Montreal; $48,000 for retirement of debentures of the Saint John Harbour Commission and $243,000 for capital expenditures at Halifax, Saint John, Quebec and Churchill.
The elevators at Port Colbome and Prescott operated at a profit during 1940 and the Government received $310,000 from these sources which was credited to Revenue.
Summary
24.	The total amount charged to Government expenditures resulting from operating deficits and non-active advances to all government-owned enterprises totalled $18,182,000 as compared with $42,079,000 in the fiscal year ended March 31, 1940. The decrease of $23,897,000 was due almost entirely 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.

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25.	Other charges, the final main category of expenditures, is estimated at $17,504,000.
The principal items included in this total are $7,150,000 representing the fulfilment of guarantees given by the Dominion with respect to bank loans to Municipalities in the Province of Saskatchewan pursuant to the Seed Grain Loans Guarantee Act, 1937, and $5,504,000, the amount by which the Canadian National Railways Securities Trust Stock has been increased due to capital gain on redemption at $4-45 to the pound of an estimated £22,500,000 of Grand Trunk Railway 4 per cent Perpetual Debenture Stock. This latter figure is offset by a similar amount included as a special credit to Consolidated Fund already referred to under Revenues.
Write-offs from non-active assets include $2,334,000 from the Canadian National Railways Securities Trust Stock representing line abandonments during the calendar year 1940, and $1,475,000 representing the net capital loss on the sale of the steamships Prince David and Prince Robert. In addition $46,000 is estimated as the yearly established loss in seed grain and relief accounts of the Department of Mines and Resources. The total of these three items, namely $3,855,000, 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 is estimated at $983,000, and the cancellation of Canadian Farm Loan Board Capital Stock at $12,000. These two items are write-offs from active assets and the net debt of the Dominion is increased accordingly.
The Budget-Appendix

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26.	The grand total of the preceding expenditures, i.e., Ordinary, Capital, War, Special, Government Owned Enterprises, and Other Charges, is 81,266,627,000 for the fiscal year 1940-4,1.
27.	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, 1940-41 (000 omitted)
Revenues	Amount (estimated)	Percentage of total Revenues	Percentage to total ExpenditureOrdinary Revenue-	$	%	%Income Tax	272,140	31-23	21-48Customs Import Duties	130,800	15-01	10-33Excise Duties	88,750	10-18	7-01Sales Tax	180,750	20-74	14-27War Exchange Tax	
Manufacturers', importation, stamp taxes, etc	62,000	7-11	4-8941,300	4-74	3-26Other tax revenues	2,550	0-29	0-20Total Revenue from Taxes	778,290	89-30	61-44Non-tax Revenues	80,900	9-28	6-39Total Ordinary Revenue	859,190	98-58	67-83Special Receipts and Credits	8,450	0-97	9-67Other Receipts and Credits- Refunds of capital expenditures and credits on non-active accounts	3,931	0-45	0-31Grand Total Revenues	871,571	100-00	68-81
Expenditures
Ordinary Expenditure-			
Interest on public debt	139,239	10-99	15-97Cost of loan flotations and amortization charges	6,376	0-50	0-73Public Debt Charges	145,615	11-49	16-70Subsidies and special grants to Provinces	19,244	1-52	2-21Old Age Pensions	29,924	2-36	3-43Civil pensions and superannuation	536	0-04	0-06Pensions and after-care of soldiers-	Pensions, war and military	41,568	3-28	4-77Treatment and after-care of returned soldiers	13,661	1-08	1-57Total	55,229	4-36	6-348,886	0-70	1-021,711	0-14	0-205,980	0-47	0-69Mines and Resources	15,492	1-22	1-78National Defence	223	0-02	0 0338,600	3-05	4-43Public Works	11,600	0-92	1-3316,281	1-28	1-8743,740	3-45	5-02Total Ordinary Expenditure	393,061	31-02	45-11
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The Budget-Appendix
PERCENTAGE DISTRIBUTIONS OP REVENUES AND EXPENDITURES, 1940-41-Concluded
(000 omitted)
Expenditures-Concluded	Amount (estimated)	Percentage of total Expenditure	Percentage to total Revenue$	%	%Capital Expenditure- Railways	7	-	-Public Works	3,398	0-27	0-39Total Capital Expenditure	3,405	0-27	0-39War expenditure	791,862	62-52	90-85Special Expenditure-	10,500	0-83	1-20Provision for reserve for losses on wheat	Material aid to Provinces, including improvements projects....	14,757	1*17	1-69Dominion projects	9,835	0-78	1-13Joint Dominion-Provincial Projects	2,371	0-19	0-27Prairie Farm Assistance Act, 1939	5,150	0-41	0-59Total Special Expenditure	42,613	3-38	4-88Government Owned Enterprises- Losses charged to Consolidated Fund- Canadian National Railways	17,426	1-38	2-00National Harbours Board	40	-	-Loans and Advances Non-active- National Harbours Board	716	0-06	0-08Total Government Owned Enterprises	18,182	1-44	2-08Other Charges-	4,850	0-38	0-56Write-down of assets	Fulfilment of Guarantees-The Seed Grain Loans Guarantee Act, 1937	7,150	0-56	0-82Canadian National Railways Securities Trust Stock	5,504	0-43	0-63Total Other Charges	17,504	1-37	2-01Grand Total Expenditures	1,266,627	100-00	145-32

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28,	Total revenues for 1940-41 amounted to $871,571,000, and total expenditures to $1,266,-
627,000,	resulting in an over-all deficit of $395,056,000. In the preceding fiscal year, the comparable deficit was $118,700,000.
LOANS AND INVESTMENTS Active Assets
29.	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 1940-41, the net increase in active loans and investments was $387,231,000 as compared with $46,017,000 in 1939-40. Of this increase $325,000,000 represents a loan to the Foreign Exchange Control Board.

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30.	Under authority of The Unemployment and Agricultural Assistance Act, 1940, loans have been advanced during "the present fiscal year totalling $1,971,890.96. Loans of $1,700,000 were made to Saskatchewan to enable the Province to meet in part its share of relief cost for 1940-41. A loan of $271,890.96 was made to British Columbia to cover in part the Province's share of relief costs for its fiscal year 1939-40.
31.	Pursuant to Order in Council, P.C. 4891 of September 17, 1940, passed under the authority of the War Measures Act, a loan of $57,600 was made to the Province of Saskatchewan to enable the Saskatchewan Power Commission to extend its system to a Bombing and Gunnery School at Dafoe, Saskatchewan. This loan bears interest at the rate of 34 per cent per annum, payable half-yearly, and the principal amount of the loan is to be repaid by thirty equal semi-annual instalments beginning May 15, 1941.
The Budget-Appendix
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32.	During the year repayments of loans advanced under Relief Acts were made to the amount of §457,684.03 as follows:-
Manitoba	$ 355,924 36
Saskatchewan	
62,993	77Alberta	
7,500	00British Columbia	31,265	9033.	The following tables show the net loans made to each Province under the several relief acts during each fiscal year, and a classification of such loans on the basis of the general purposes for which the loans were given:-

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-	Manitoba	Saskat- chewan	Alberta	British Columbia	Total$	$	$	$	s1931-32	2,788,812 5,171,904 2,273,283 2,874,631 2,396,226 4,626,000 2,959,188 1,405,499 1,882,493 -355,924	10,934,341 7,578,556 5,469,240 10,141,014 14,245,478 6,058,879 11,604,787 13,708,847 9,190,681 1,637,007	4,097,740 1,902,041 4,050,743 1,926,476 13,104,000 805,198 193,000	4,813,124 912,636 1,321,761 7,966,714 12,558,445 3,972,400 1,541,636 -129,500 1,546,552 240,625	22,634,017 15,565,137 13.115.027 22,908,835 42,304,149 15,462,477 16,298,611 14,984,840 12.566.028 1,514,2081932-33	1933-34	1934-35	1935-36	1936-37	1937-38	1938-39	1939^0	-53,698 -7,500	1940-41	
26,022,112	90,568,830	26,018,000	34,744,387	177,353,329
Less Write-off as provided bv					
votes 392 and 393 of further supplementary estimates, 1936-37		804,897	17,682,158			18,487,055
Less Write-off Saskatchewan					
Treasury Bills re 1934-35 Drought Area relief assumed					
by Dominion. (Principal SI 250,000; Accrued interest pre-					
vious years $123,979.81)	-	1,373,980	-	1,373,98025,217,215	71,512,692	26,018,000	34,744,387	157,492,294

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-	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	TotalManitoba	$ 1,138,455 3,934,341 8,577,000 9,818,845	$ 234,819 15,448,871 3,141,550	$ 24,647,838 71,185,618 14,299,450 24,925,542	$ 26,022,112 90,568,830 26,018,000 34,744,387Saskatchewan	Alberta	British Columbia	Less write-offs as shown in the preceding table;	23,409,641	18,825,240	135,058,448	177,353,329 19,861,035Manitoba $804	897; Saskatche	wan $19,056,138	157,492,294
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The Budget-Appendix
Canadian national bailways	.calendar year 1940, the Dominion made
oa r jj f i [DOT] ti. , j c .. advances to the Railway in the amount of
34.	In addition to paying the cash deficit	^	t
of the Canadian National Railways for the 8105,574,000, classified as follows:
Under Canadian National Railways Financing & Guarantee Act, 1940-
Capital expenditures and retirement of miscellaneous obligations.. ..	7,573,000
Purchase of Grand Trunk Railway Company of Canada 4% Perpetual
Consolidated Debenture Stock	 94,151,000
Temporary loan on account of interim deficit to March 31, 1941	 3,850,000
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As referred to in last year's budget the Dominion purchased in the current year under the authority of the War Appropriation Act and the Wajr Measures Act 88,691,000 of railway equipment which was leased to the Canadian National Railways under the terms of a hire-purchase agreement. The total amount of equipment purchased in the fiscal years
1939-	40 and 1940-41 totalled $14,880,000.
The Railway Company paid the third instalment of $517,000 under the berms of a hire-purchase agreement relating to certain railway equipment purchased by the Government in 1935-36 and 1936-37 at a cost of $6,723,000 and leased to the Railway.

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35.	During the fiscal year the Government purchased an additional $38,000 of the capital stock of the Canadian Farm Loan Board and a further S800,000 of the Board's 31 per cent bonds. Capital stock in the amount of $12,000 will, it is estimated be cancelled and written off. As at the close of the fiscal year the total of the Government's investment in the Canadian Farm Loan Board is estimated at $37,521,000.
36.	The Canadian Broadcasting Corporation repaid $364,000 on account of loans made in the fiscal years 1937-38 and 1939-40.
37.	In the fiscal year ending March 31, 1941, the Provinces of Manitoba, British Columbia, Nova Scotia and Prince Edward Island reduced by $1,633,000 loans granted by the Dominion in the post-war period for house construction. Loans for Soldier and General Land Settlement were reduced by payments of $1,332,000, and, in addition $983,000 will be written off and charged to Consolidated Fund.
38.	Investments in Sinking Funds amounted to $2,118,000. Stocks of other loans, held in the Sinking Fund of the 4 per cent
1940-	60 loan amounting to $12,943,000 were transferred to a Bond Holding account to be repurchased later for the Sinking Funds of other Sterling issues. In addition $11,988,000 4 per cent Stock held in the 1940-60 Sinking
Fund together with $169,000 of cash was used for the redemption of the 1940-60 loan called October 1, 1940.	$37,633,000 of the 3i per
cent 1930-50 Stock together with $1,348,000 of cash held in the 1930-50 Sinking Fund was used for the redemption of the 3i per cent 1930-50 loan called April 17, 1940. These transactions resulted in a net decrease in the Sinking Funds account for the year of $61,963,000.
39.	In the period April 1, 1940, to March 31, 1941, 5,302 loans were approved under the National Housing Act in the amount of $16,067,000, bringing the total to March 31, 1941, to $68,620,000. During the fiscal year it is estimated that the Dominion's share of loans actually paid out, less repayments by borrowers will total $3,827,000. The net amount of loans under the authority of the National Housing Act and the Dominion Housing Act, outstanding on the books of the Dominion at March 31, 1941, is estimated at $13,632,000. Loans under the authority of 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.
40.	Under the Municipal Improvements Assistance Act, 1938, the Government during the fiscal year approved loans in the amount of $2,529,000 to municipalities to enable them to finance the construction of municipal self-liquidating projects. From the inception of the Act to March 31, 1941, total loans approved aggregated $7,801,000. During the fiscal year, the amount actually paid out on such loans,
The Budget-Appendix
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less repayments, was $1,719,000. 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.
41.	There was advanced to the National Harbours Board during the year the sum of $264,000 for capital construction purposes at the ports of Montreal and Vancouver. In the same period, loans made in previous years were reduced by $597,000, leaving a net credit on this account of $333,000.
42.	During the fiscal year the Government made a loan of $750,000 to the Canadian Government Merchant Marine, Limited in order to provide the Company with working capital for the operation of certain ships seized in prize and either requisitioned for use by the Canadian Government or condemned by the Court as prize.

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43.	Loans to the Canadian Pacific (Railway Company made in previous years for relief purposes were further reduced by payments aggregating $211,000. In addition, the Railway paid the third 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 Company.
Under the authority of the War Measures Act and the War Appropriation Act the Government purchased railway equipment which it leased to the Canadian Pacific Railway Company under the terms of a hire-purchase agreement. During the fiscal year under review the amount actually expended was $7,048,000. The total value of the equipment purchased in the fiscal years 1939-40 and 1940-41 totalled $9,951,000.'
44.	The following statement shows the net changes in active investments during the last fiscal year together with comparable figures for the four preceding years:

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(000 omitted)
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1936-37	1937-38	1938-39	1939-40	Estimated 1940-41S	S	$	$	$Sinking Funds	3,646	3,843	4,336	Cr. 2,798	Cr. 61,963Canadian National Railways	4,573	Cr. 27,429	3,841	21,479	105,574Canadian Pacific Railway	555	Cr. 211	Cr. 211	Cr. 211	Cr. 211Canadian Farm Loan Board	10,991	3,848	2,834	2,288	838Dominion and National Housing Acts-	Loans	995	1,678	2,657	4,393	3,827Municipal Improvements Assistance Act,	1938-Loans	-	815	3,111	1,719National Harbours Board	323	1,890	692	947	Cr. 333Province of Saskatchewan-War Meas-	ures Act	58Provinces-under relief legislation	15,462	16,299	14,985	12,566	1,515Provinces-Housing Loans, 1919	Cr. 2,038	Cr. 1,422	Cr. 105	Cr. 699	Cr. 1,633Railway Equipment purchased	5,120	89	Cr. 1,399	8,135	14,781Soldier and general land settlement	Cr. 489	505	Cr. 749	Cr. 1,116	Cr. 1,332Roumanian Government	359	Bank of Canada-Capital Stock	5,100	820	Central Mortgage Bank-Capital Stock..	-	250	_Canadian Broadcasting Corporation	-	500	Cr. 50	700	Cr. 364Canadian National (West Indies) Steam-	ships	-	450	-	Canadian Government Merchant Marine.	-	750Foreign Exchange Control Board	-	-	-	-	325,000Net Advances	44,238	399	28,466	49,045	388,226Less write-offs-	Soldier and general land settlement	loans	-628	-750	-895	-1,643	-983Canadian harm Loan Board-Capital	Stock	-20	-10	-14	-11	-12Loans to Province of Saskatchewan	Drought Area Relief, 1934-35	-	-1,374	-Write-down to non-active assets-	Manitoba and Saskatchewan treasury	bills	-18,487	-	-	-	-Net change in active investments	25,103	Cr. 361	27,557	46,017	387,231
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The Budget-Appendix

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45.	In the fiscal year 1940-41, the Government issued obligations in the amount of §1,056,189,171. All these issues were floated in the Canadian market. During the same period maturing obligations in the amount of 8379,983,273 were redeemed out of the proceeds of the new issues. The remainder of the proceeds, viz., $676,205,898 provided cash for the current purposes of Government including $325,000,000 transferred to the Foreign Exchange Control Board to provide for the purchase of gold and foreign exchange from the Bank of Canada and others under the terms of the Foreign Exchange Acquisition Order, 1940.
46.	The following tables give details of the amounts, terms of the new issues and the prices at which they were sold; also bond redemptions during the year.

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Issue Date	Maturity Date	Interest Rate	Where Payable	Price	Yield at	Amount IssuedTo Public	To Govern- ment	Public Price	Price to Government	%	3	%	%	%	%1940	May 1, 1941	1	Canada	100-00	-	1-00	250,000,000Mar. 1, 1945	2	Canada	-	99-375	-	2-13	65,000,000July 1	July 1, 1941	4	Canada	-	100-00	-	4-00	33,293,471(School Lands)	Oct. 1	Oct. 1, 1952	3	Canada	98-75	98-00	3-125	3-20	324,945,7001941	July 2, 1943	n	Canada	99-695	1-625	250,000,000100-00	100-00	Nil	Nil	*6,000,000ing.	Canada	_	t3-00	|3-00	*48,950,000
War Savings	Canada	-	-	Nil	Nil	* 3,000,000
		Stamps						981,189,171
Increase in short-term Treasury Bills.								75,000,000
								1,056,189,171
Estimated.
t Yield to investor if held to maturity, seven and one-half years after issue.

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Maturity Date	Interest Rate	Where Payable	Amount
	%		$
April 17 1940* 	31	London	52,763,135H	Canada	80,000,0004	Canada	33,293,471Sept 1 1940 	41	Canada	75,000,000Oct 1 1940t 	4	London	93,926,667Mar 15 1941 	1	Canada	45,000,0008379,983,273
* This issue matures on July 1, 1950, but was called for redemption on April 17, 1940. This is the amount outstanding at the beginning of the fiscal year converted on the basis of 14 * 86 to the £1.
t This issue matures on October 1, 1960, but was called for redemption on October 1, 1940. This is the amount of the issue outstanding, converted on the basis of $4-86 to the £1.
47.	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, 1941, was sold at a discount of -609, the lowest since the outbreak of war. The amount of these treasury bills outstanding at the close of the fiscal year was $230,000,000, an increase of
$75,000,000 from the total outstanding at the close of the previous fiscal year.
48.	As at March 31, 1941, the average rate of interest on the Dominion's outstanding direct funded debt (including treasury bills) was 3-06 per cent, as compared with 3-40 per cent on March 31, 1940.
The Budget-Appendix

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49.	At the close of the fiscal year there was outstanding unmatured funded debt (including treasury bills) of the Dominion in the amount of §4,371,891,000. Of this total, securities in the amount of $5,233,000 were held in the sinking funds against certain issues payable in London. 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 $372,166,000. Without deducting sinking funds now shown as an asset, the gross liabilities of the Dominion
totalled $4,744,057,000. On the other side of its balance sheet, the Dominion had active assets of $1,077,741,000, 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 $3,666,316,000. The increase over the same date last year amounted to $395,056,000, namely, the amount of the over-all deficit for the fiscal year.
50.	The following is a preliminary statement showing the liabilities and assets of the Dominion as estimated at March 31, 1941:

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(estimated)
Bank Circulation Hedemption Fund	$
Post Office Money Orders, Postal Notes, etc., outstanding	
Post Office Savings Bank deposits	
Insurance and Superannuation Funds-
Government Annuities	$ 152,700,000
Insurance Fund-Civil Service	 14,200,000
Insurance Fund-Returned Soldiers	 19,750,000
Retirement Fund	 10,700,000
Superannuation Funds	 64,000,000
Trust Funds-
Indian Funds	 14,400,000
Common School Funds	 2,677,000
Contractors' Securities Deposits	 6,500,000
Other Trust Funds	 4,200,000
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Contingent and Special Funds	
Canadian Wheat Board-Reserve for losses on wheat merkoting Guarantees
Province Debt Accounts	
Funded Debt and Treasury Bills unmatured	 4,371,891,000
Floating Debt-
Funded Debt matured and outstanding	,	 2,500,000
Interest due and outstanding	 6,800,000
Outstanding cheques	 15,000,000
4,819,000
3,000,000
22,000,000
261,350,000
27.777.000 6,500,000
10.500.000
11.920.000
4,396,191,000
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ASSETS-MARCH 31, 1941	
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(estimated)
Active Assets-
Cash, working capital advances and other current assets	$
Recoverable Advances-
United Kingdom and Other Allied Governments. Militia. Naval and Air	
Special Deposits	
Sinking Funds	
Bank of Canada Capital Stock	
Central Mortgage Bank Capital Stock	
Canadian Broadcasting Corporation-Loan	
Canadian Government Merchant Marine-Loan	
Canadian National (West Indies) Steamships, Ltd.-Loan	
Dominion and National Housing Acts-Loans	
Municipal Improvements Assistance Act, 1938-Loans	
Loans to Provinces-
Housing Loans, O.C. of Deo. 3, 1918, and amendments	$	871,000
Unemployment Relief Loans	 157,493,000
Loan under the War Measures Act	'.__ 58,000
Alberta-Subsidy overpayment	 469,000
Loans to National Harbours Board-
Montreal	$	61,276,000
Vancouver	 25,121,000
47.149.000
38.440.000
175.000
5.233.000
5.920.000
250.000
786.000
750.000
450.000 13,632,000
5.645.000
158,891,000

86,397,000

The Budget-Appendix
assets-march 31, 1941-Concluded
(estimated)
New Westminster Harbour Commission-Loan	
Canadian Farm Loan Board-Advances and Capital Stock..
Foreign Exchange Control Board-Loan	
Railway Accounts-
Canadian National Railways-
Advances-Financing and Guarantee Act, 1938	
Advances-Refunding Act, 1938	
Advances-Financing and Guarantee Act, 1939.'	 \
Advances-Financing and Guarantee Act, 1940	
Temporary Loan	
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	
Soldier and General Land Settlement Loans	
Seed Grain and Relief Advances	
Munitions and Supply-Advances to Commodity Companies.
Canadian Government Railways Working Capital	
Bond Holding Account	
Province Debt Accounts	
Deferred Debits-
Unamortized discount and commission on loans....
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1,717,000
24.689.000
12.443.000 101,724,000
3.850.000
639.000
550.000
870.000
111.000
20.051.000
13.919.000
6,525,000
24,329,000
275,000
37,521,000
325,000,000
145,612,000
981,000
33,970,000
30.854.000
35.515.000
2.420.000
7.800.000
16.772.000
30.396.000
2.296.000
44.611.000
Net Debt, March 31, 1941 (estimated)
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Net Debt represented by-
A. Expenditure and non-active assets (estimated) March 31, 1941. 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 Pacific Railway (old)	'
Canadian National Steamships	
240.311.000
429.587.000
302.356.000 12,064,000
9,896,000
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265,707,000
	 18,000,000
	 62,791,000
	 13,873,000
National Harbours Board-
Quebec	
Chicoutimi	
Churchill	
Halifax	
St. John	'.
Three Rivers	
Montreal (Jacques Cartier Bridge)	
Seed Grain and Relief Advances	
Soldier and General Land Settlement	
Saskatchewan Seed Grain Loans Guarantee Act, 1936,
The Seed Grain Loans Guarantee Act, 1937	
Miscellaneous Advances	
27.373.000
3.838.000
10,000
12.480.000
16.542.000
3.743.000
4.473.000
68.459.000 404,000
16.526.000
2.638.000
7.150.000
3.537.000
B. Consolidated Fund-
Balance, Consolidated fund brought forward from March 31, 1940.. 1,830,805,000 Excess of expenditure over revenue, fiscal year ended March 31,1941
(estimated)	 382,212,000
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 2,213,017,000

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The Budget-Appendix
[Stage Direction]
51.	The following table gives a statement of the unmatured funded debt (including treasury bills) of the Dominion outstanding
as at March 31, 1941 and the annual interest -charges thereon:

[Stage Direction]
Date of Maturity	Rate per Cent	Where Payable	Amount of Loan	Annual Interest Charges1Q4.1 Mav 1	H	New York	$ 20,000,000 00	$ 250,000 001	Canada	250,000,000 00	2,500,000 004	Canada	33,293,470 85	1,331,738 832	Canada	200,000,000 00	4,000,000 005	Canada	141,663,000 00	7,083,150 00Canada	95,500,000 00	1,432,500 0*2	Canada	60,000,000 00	1,200,000 00Oct. 15	3	Canada	40,409,000 00	1,212,270 002i U 5	Canada	20,000,000 00	500,000 00' July 2	Canada	250,000,000 00	3,750,000 00Canada	147,000,100 00	7,350,005 001944 Jan. 15	21 2	New York	30,000,000 00	675,000 00Canada	90,625,000 00	1,812,500 00Oct. 15 	4i	Canada	50,000,000 00	2,250,000 00Canada	20,000,000 00	500,000 001945, Mar. 1	2	Canada	105,000,000 00	2,100,000 0021 4	New York	76,000,000 00	1,900,000 00Oct. 15	Canada	88,337,500 00	3,533,500 001946, Feb. 1	41	Canada	45,000,000 00	2,025,000 001947, Oct. 1 	21 31 31 31 31	London	4,888,185 64	122,204 641948, Feb. 1	Canada	50,000,000 00	1,625,000 001949, Feb. 1	Canada	50,000,000 00	1,625,000 00Canada	33,500,000 00	1,088,750 00"Canada	138,322,000 00	4,841,270 001950, Feb. 1	31 31 31 31 5	Canada	50,000,000 00	1, 625,000 001951, Feb. 1 	Canada	50,000,000 00	1,625,000 00' Nov. 15	Canada	60,000,000 00	1,950,000 00Canada	50,000,000 00	1,625,000 00New York	100,000,000 00	5,000,000 003	Canada	324,945,700 00	9,748,371 004	Canada	56,191,000 00	2,247,640 001955, May 1	31 3	London	48,666,666 67	1,581,666 67Canada	40,000,000 00	1,200,000 003	Canada	55,000,000 00	1,650,000 0041	Canada	43,125,700 00	1,940,656 501957, Nov. 1	41	Canada	37,523,200 00	1,688,544 003	Canada	88,200,000 00	2,646,000 004	London	73,000,000 00	2,920,000 0041 41	Canada	276,687,600 00	12,450,942 001959, Nov. 1 	Canada	289,693,300 00	13,036,198 501960, Oct. 1	4	New York	100,000,000 00	4,000,000 00196l| Jan. 15	31	New York	48,000,000 00	1,560,000 001963, July 1 	31	London	48,606,666 66	1,581,666 6731	Canada	54,703,000 00	1,7//,847 503	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 B ills due April 2,194 Treasury Bills due April 18,194 Treasury Bills due May 2,194 Treasury Bills due May 16,194 Treasury Bills due May 30,194 Treasury Bills due June 13,194	[DOT]643 [DOT]631 [DOT]626 [DOT]624 [DOT] 623 [DOT]609	Canada Canada Canada Canada Canada Canada	35.000.	000 00 40.000.	000 00 35.000.	000 00 40.000.	000 00 40.000.	000 00 40.000.	000 00	225,050 00 252,400 00 219,100 00 249,600 00 249,200 00 243,000 003	Canada	$4,313,941,089 82 *48,950,000 00	$132,501,371 31 1,468,500 00Canada	*3,000,000 00	-Non-Interest Bearing Certifi	Canada	*6,000,000 00	-$4,371,891,089 82	$133,969,871 31$3,727,669,570 85	85-26%Payable in New York Payable in London....	469,000,000 00	10-73%175,221,518 97	4 01%$4,371,891,089 82	100-00%
* Estimated. 

The Budget-Appendix

[Stage Direction]
52.	Bonds and debenture stocks bearing the guarantee of the Dominion outstanding in the hands of the public at the end of the fiscal year are estimated at $984,016,379, a decrease of $100,462,853 during the fiscal year. This decrease is accounted for mainly by the purchase of £20,370,091 of Grand Trunk Railway Company of Canada 4 per cent Perpetual Consolidated Debenture Stock, as part of the Government's programme of repatriating securities held by British investors.
53.	There were also outstanding at the fiscal year end other contingent liabilities arising out of guarantees given under Relief and Seed Grain legislation and other acts. The only new guarantee incurred during the fiscal year was the guaranteeing by the Government of the repayment of bank advances to the National Council of Young Men's Christian Associations (War Services Account). This association required funds for carrying on their services prior to the time that the receipts from the united war charities campaign were obtained. The amount of the bank advances carrying the guarantee of the Dominion outstanding on March 31, 1941, was $68,732.
Guaranteed bank advances to the Canadian Wheat Board outstanding on March 31, 1941, amounted to $101,052,679. This amount constituted the Board's gross liability to the banks and mainly related to the purchase of the 1939 and 1940 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 this guarantee as margin deposits are made to the Clearing Association daily.
As at October 30, 1940, 125,652 Home Improvement Loans had been made by banks and approved lending institutions to home owners for the amount of $49,990,620. As at this date, the $50,000,000 authorized under the Home Improvement Loans Guarantee Act, 1935, having been exhausted, the Government's undertaking to provide a guarantee for the encouragement of this type of loan was terminated. 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 478 loss claims for $132,000 have been paid, the maximum contingent liability as at March 31, 1941, was $7,366,000. In terms of dollar losses to total volume of loans, this loss ratio is slightly more than one-quarter of 1 per cent. Repayments to March 31, 1941, amounted to
$35,805,883 or 72 per cent of the total amount of loans made.
LTnder 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 15,361 had been approved at March 31, 1941, under the Dominion Housing Act, 1935, and the National Housing Act, 1938, in the amount of $68,620,000. Losses recorded and paid to March 31, 1941, amounted to $831, covering the Dominion's proportion of the loss on two loans. This amount represents total losses to date
The Budget-Appendix
[Stage Direction]
under both the Dominion Housing Act, 1935, and Part I of the National Housing Act, 1938. These losses are offset by a profit of $500 realized by the sale of one property, of which the Government's share is one-third.
54.	The following is a statement of bonds and debenture stocks and other indebtedness guaranteed by the Dominion estimated to be outstanding as at the close of the fiscal year.

[Stage Direction]
Date of Maturity			Issue
Jan.	15,	1942....	Canadian National	Feb.	15,	1943....	Canadian National	Feb.	1,	1944....	Canadian National	May	1,	1944....	Canadian National	Jan.	15,	1946....	Canadian National	July	1,	1946....	Canadian Northern	April	1,	1948....	New Westminster Harbour Commissioners	Dec.	15,	1950....	Canadian National	Sept.	1,	1951....	Canadian National	Feb.	1,	1952....	Canadian National	Aug.	1,	1952....	Saint John Harbour Commissioners	Feb.	15,	1953....	Canadian National	July	10,	1953....	Canadian Northern	Feb.	1,	1954....	Canadian National	Mar.	1,	1955....	Canadian National (West Indies) SteamshipsJune	15,	1955....	Canadian National	Feb.	1,	1956....	Canadian National	July	1,	1957....	Canadian National	July	20,	1958....	Canadian Northern	Jan.	15,	1959....	Canadian National	May	4,	I960....	Canadian Northern Alberta	May	19,	1961....	Canadian Northern Ontario	Jan.	1,	1962....	Grand Trunk Pacific	Jan.	1,	1962....	Grand Trunk Pacific	July	1,	1969....	Canadian National	Oct.	1,	1969....	Canadian National	Nov.	1,	1909....	Harbour Commissioners of Montreal	Feb.	1,	1970....	Canadian National	
Various dates			
1941-54..			City of Saint John Debentures assumed by Saint
			John Harbour Commissioners	
			
			
			
			
do			Northern Railway of Canada Debenture Stock..
Interest
Rate
Amount
Outstanding
%
2
3
61
3

[Stage Direction]
55.000.	000 00
15.500.000	00
35.000.	000 00
15.000.	000 00
23.897.000	00 700,000 00
50.500.000	00
50.000.	000 00
20.000.	000 00
007,953 04
25.000.	000 00 9,359,990 72
50.000.	000 00
4f
a
3
31
4
5 5 5 5 2
9,400,000 00
50.000.	000 00
70.000.	000 00
65.000.	000 00 7,896,541 81
35.000.	000 00 3,149,998 66
34,229,996 87 34,992,000 00 8,440,848 00
60.000.	000 00 60,000,000 00
19.000.	000 00
18.000.	000 00 20,432,116 00
Various
5 5 4 4
777,229 31 60,833,333 33 20,782,491 67 13,252,322 67 20,704,571 46 1,499,979 67
$	984,016,379 21

[Stage Direction]
Estimated
Principal Amount Outstanding Mar. 31, 1941
Bank Advances, re Province of Manitoba Savings Office	$	6,218,267
Bank Advances, re Government of Newfoundland	 625,000
Province of Manitoba Treasury Bill	 4,805,723
Province of British Columbia Treasury Bill	 626,534
Bank Advances, re Canadian Wheat Board	 101,052,679
Winnipeg Grain and Produce Clearing Association, Ltd. Day to day margins
of the Canadian Wheat Board (closed out daily)	
Bank Advances guaranteed under Seed Grain Loans Guarantee Act, 1938... Not determined Loans made by approved lending institutions under Dominion Housing Act,	_
1935 and National Housing Act, 1938	 Indeterminate
Loans made by approved lending institutions under The Home Improvement
Loans Guarantee Act, 1935	 7,366,347
Deposits maintained by the chartered banks in the Bank of Canada	 207,994,267
Bank Advances re Young Men's Christian Associations	 68,732
[Mr. Ilsley.i

The Budget-Appendix


[Stage Direction]
Calendar Years
	1926	1928	1932	1937	1938	1939	1940
Group I-Comprehensive Indexes (1935-39=100)							
Physical volume of business	83	98	66	102	94	102	121Volume of manufacturing	92	104	68	113	99	109	135Mining	53	82	57	100	103	113	125Forestry	84	87	57	117	88	102	123Carloadings	131	148	88	106	97	102	114Electric power output	46	61	61	106	100	109	115Employment (a). 	100	111	88	114	112	114	124National income (a)	100	114	64	07	95	98	108Retail sales	(e)	(e)	92	105	101	105	118Group 11.-Price Levels and Financial Factors (1926=100)	Wholesale prices	100	96	67	85	79	76	83Farm product prices	100	101	48	87	74	64	67Cost of living (b)	122	121	99	101	102	102	106Common stock prices (b)	91	145	51	116	95	92	77Bank deposits	100	115	100	122	125	134	141Active currency circulation	100	105	83	110	113	121	163Group m.-Gross Value of Production In Malor Industries ($ millions)	Agriculture	1,715	1,806	767	1,039	1,063	1,223	(c) 1.243Forestry	556	586	349	494	425	477	(c) 611Fisheries	73	71	34	51	53	53	(c) 60Mining (including Smelting)	277	313	265	663	654	697	(c) 749Construction	386	488	133	352	353	373	(c) 398Manufacturing	3,101	3,582	1,981	3,626	3,338	3 414	(c) 4,046Group IV.-Foreign Trade and International Transactions ($ millions)	Exports (gold excluded)	1,277	1,364	498	1,012	849	936	1,193Net non-monetary gold exports (d)	30	40	70	145	161	184	203Total exports, including non-monetary gold	1,307	1,404	568	1,157	1,010	1,120	1,396Imports (gold excluded)	1,008	1,222	453	809	677	751	1.0*2Total trade	2,315	2,626	1,021	1,966	1,687	1.871	2.478Export balance	+299	+182	+115	+348	+333	+369	+314Net tourist receipts	(e)	(e)	(e)	(e>	(e)	78	85Net interest and dividends going abroad	201	221	262	246	251	254	(c) 270Net capital export (direct estimate)	(e)	82	11	199	135	162	(e)(a)	1926 = 100.(b)	1935-39 = 100.(c)	Preliminary estimate.(d)	Adjusted for changes in stocks of earmarked gold. These figures were computed by the Bank of Canada on the basis of official trade returns.(e)	Not available.


[Stage Direction]
-		Jan.	Feb.	Mar.	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.
Group I.-Comprehensive Indexes (a)													
(19*5-39=100)													
Physical volume of business	1039	93	92	93	96	100	100	99	103	103	109	109	1091940 1941	114 131	109 126	106	120	118	120	121	129	130	129	130	128Volume of manufacturing	.1939	99	93	95	97	101	100	100	103	108	128	121	1211940	130	120	116	128	130	129	134	144	149	146	147	1421941	142	134	Mining	96	103	106	119	126	124	129	126	121	105	128	1091940	116	109	113	146	121	137	127	142	124	117	128	1241941	123	125	Forestry	1939	102	95	94	102	95	102	97	107	111	118	109	1081940	121	107	109	113	121	136	137	134	132	125	123	1171941	126	121	Carload ings	93	87	94	91	106	93	101	107	125	105	110	1081940	113	109	96	111	117	115	127	120	107	109	115	1251941	123	119	Electric power output	106	107	107	104	108	no	108	111	113	113	114	1101940	112	114	107	112	123	124	129	119	114	109	109	in1941	117	116	Employment (b)	.1939	in	111	111	110	113	114	114	115	116	118	120	1211940	119	118	119	119	121	122	124	127	130	133	136	1391941	141	141	Retail sales (c)	.1939	79	78	92	104	10S	110	91	94	116	118	113	1571940	90	90	106	110	120	121	103	113	114	132	136	1741941	102	101	Group II.-Price Levels and Financial Factors-	(1926=100)	Wholesale prices	.1939	73	73	73	73	74	73	73	72	78	79	80	821940	S3	83	83	83	82	82	82	83	83	83	84	841941	85	85	Farm product prices	1939	65	65	65	66	65	63	63	58	64	65	65	691940	70	70	71	72	68	64	65	63	64	65	67	671941	67	68	Coat of living (d)	1939	101	101	101	101	101	101	101	101	101	104	104	1041940	104	104	105	105	105	105	100	106	106	107	108	1081941	108	108	
g
o
[Stage Direction]
The Budget-Appendix﻿J.	...1939	94	95	95]	88]	90]	88	891	86	91	97	94	92 	701940	91	90	90	88	73	66	...1939	126	126	127	129	129 139	130	130	129	131	138 140	144 140	144 1391940	142	143	139	140	Active currency circulation (e)	1941 ...1939 1940	100 119	10U 101 120	103 126	105 125	104 127	103 143	105 154	106 159	119 168	129 173	128 173	130 1781941	Group III.-Other Significant Factors	...1939	71	59	70	51	81 111	78	77	76	83	91 107	99 119	102 991940	91	72	84	85	1941 ...1939	89 44	40	58	42	73 101	64	58	63	74	79 109	85 102	72 1021940	71	71	77	86	Net non-monetary gold exports (g) ($ millions)	1941 ...1939 1940	98 18 22	13 12	16 16	11 18	16 17	17 15	15 16	9 18	17 17	23 19	15 17	15 171941 ....19,39	19 977	1,019	1,028	1,005	923	839	806	803	539 262 19 52	544 251	586 272	629 307Construction contracts awarded ($ millions)	1940 ....1939 1940	714 7 9	753 11 12	773 9 12	750 12 26	18 28	25 39	22 29	26 41	14 26	13 55	9 171941	27	25	4	11	14	191940	13	24	33	10	1941	88	
>
t-1
[Stage Direction]
if.
(a)	Indexes seasonally adjusted unless otherwise indicated.
(b)	As at first of following month. 1926=100. fc) Unadjusted.
(d)	1935-39 = 100.
(e)	Based on daily average figures; index unadjusted.
(g>
Adjusted fordianges in stocks of earmarked gold. These figures were computed by the Bank of Canada on the basis of official trade returns, (h) All persons in receipt of material aid; from the National Registration, Department of Labour.
The Budget-Appendix
The Budget-Mr. Hanson
Hon. R. B. HANSON (Leader of the Opposition):: May I first of all tender to
my hon. and learned friend the Minister of Finance (Mr. Usley) my personal congratulations upon his performance this afternoon. As a physical feat alone it deserves congratulation. I tender to my hon. and learned friend my thanks and the thanks of the Canadian people for the lucidity of his presentation of a reasoned financial statement, whether or not we agree with the suggestions he has made.
The budget speech delivered to-day is at least a partial answer to the question which yesterday I asked this house and Canada to consider, searchingly and truthfully: What is it worth to be a free man in a free land? The Canadian people will not flinch at the magnitude of the tax increase proposals, provided that the war is carried on with an allout effort. I have no doubt in the world that the additional revenue that is sought will be forthcoming, because Canadians have been brought to a realization of the fact that financial effort is absolutely necessary to carry on the utmost war effort to which this country must give effect in the days to come.
_ This budget also marks for the first time in a very clear way the invasion of what has hitherto been considered the provincial field of taxation. I am not now going to traverse, or attempt to traverse, the wisdom of that invasion. In certain respects I think it has become inevitable. I had hoped that the provinces of this dominion, manned as they are to a large degree by gentlemen of the same political faith as hon. gentlemen opposite, would voluntarily have given up some of the fields of taxation which they at present occupy, in the interest of an allout Canadian war effort. Having regard to the fact that the provincial legislatures have now in many cases provided for the largest expenditures in their history, there is no evidence, so far as has been indicated to me, of any intention on the part of the provincial governments to assist by so doing. This budget will I think bring home to them in a very special way the necessity of reconsidering their own financial proposals.
There is one aspect of to-day's budget which I heard with some degree of regret; I refer to the dogmatic statement made by the Minister of Finance that so far as the Sirois report is concerned it will not, for the dura-

tion of the war, be reintroduced by this government. I think that is a matter for regret. I hope that decision has not been reached out of any spirit of pique.


Mr. MACKENZIE KING:: Quite the
opposite.


Richard Burpee Hanson: The conference was a failure. The conference failed because of certain subversive elements within the Liberal party itself, and finally the conference failed because of lack of national leadership on the part of my right hon. friend opposite.


Some hon. MEMBERS:: No.


Richard Burpee Hanson: Absolutely.


William Lyon Mackenzie King: That is not what my hon. friend said to me at the time.


Richard Burpee Hanson: Be that as it may; perhaps it is a debatable point, although I do not think it is. If the conference could not have proceeded on the basis of the Sirois report, then I suggest that there was a lack of national leadership on the part of the right hon. gentleman and those who surround him in not calling a representative conference to deal with certain recommendations of the Sirois report on the basis of the national war effort. This has not been done, and the present budget is in a degree the result.
On motion of Mr. Hanson (York-Sunbury) the debate was adjourned.


Thomas Langton Church: We are a totalitarian
state now.



AGRICULTURE-AMENDMENT TO MOTION OF MINISTER OF FINANCE

[Stage Direction]
The house resumed from Monday, April 28, consideration of the motion of Mr. Ilsley for committee of supply, the amendment thereto of Mr. Diefenbaker, and the amendment to the amendment of Mr. Douglas (Weybum).
Mr. VICTOR QUELCH (Acadia):: Mr. Speaker, when the hon. member for Battle River (Mr. Fair) spoke, he outlined the attitude of this group with regard to the government's agricultural policy. In view of that fact I do not intend to deal in detail with the wheat policy of the government but rather I would refer to it in a general

Supply-State oj Agriculture
way and mention briefly some of the statements that have been made during the course of the debate.
Just before we adjourned last night the hon. member for Brant (Mr. Wood) gave an interesting discourse. I do not think he will object if I say I do not believe his remarks should be taken too seriously, either by hon. members of this house or by his constitutents. During the course of his speech, however, the hon. member stated that he was opposed to all forms of bonuses to agriculture. That remark has been made also by other members of the Liberal party. For instance, on several occasions the hon. member for Moose Jaw (Mr. Ross) has stated that he is definitely opposed to all bonusing of agriculture. He has said that the farmers of western Canada do not want to be bonused; that they desire to be able to buy at world prices and if that situation were brought about, they would then be quite willing to sell at world prices. The point is that although the Liberal party has been in office for a number of years, the farmers never have been able to buy at world prices. Therefore I would emphasize this fact, that just as long as the farmers of western Canada are compelled to pay highly protected prices for everything they buy, they are justified in demanding protected prices for those things they have to sell; and when they do so they are not asking for charity in any shape or form. As the hon. member for Weyburn (Mr. Douglas) says, the tariff has been increased, and not only the tariff; other forms of protection and special privilege have been imposed. Other hon. members have objected that this debate is political in nature. By this they mean that in order to support the amendment or the amendment to the amendment they would have to vote want of confidence in the government. I think the hon. member for Weyburn dealt with that matter effectively when he suggested that if the Liberal party would be prepared to support the six-point programme of the Saskatchewan legislature, he would be prepared to withdraw his amendment. Therefore hon. members have been entirely relieved of that difficulty.
The strange thing I have observed about this debate so far has been that not a single member of this house has been prepared to defend in its entirety the wheat policy of the federal government. One may say that the Minister of Agriculture (Mr. Gardiner) 14873-152
defended it. I would say rather that the Minister of Agriculture apologized for it, because one could hardly call his speech a defence. I think the hon. member for Portage la Prairie (Mr. Leader) made a very good speech in connection with this matter, and I do not think the Minister of Agriculture was justified in taking such strong objection to his remarks. If other members of the Liberal party would view this matter in the light in which it should be viewed; if they would realize the absolute injustice of what I was about to call the legislation but what I should call the regulations that have been brought in with regard to the wheat policy, then I suggest they would be more prepared to support the stand that has been taken by the hon. member for Portage la Prairie. I think it would be well for at least the western Liberal members to prove conclusively to their constituents that they are not merely rubber-stamps and that they refuse to be stampeded into supporting a measure which they know to be most inequitable.
In these days we hear a great deal of criticism of the Minister of Agriculture. I appreciate, however, the magnitude of the problem with which he is confronted, particularly with reference to western Canada. I realize that the minister has a very heavy task to perform, and I do not envy him his job. I say this because I believe one of the surest ways to discredit a man to-day, no matter how able he might be, would be to place him in the present cabinet as Minister of Agriculture. I do not believe the minister has a fair chance to introduce a sound policy, even if he should have one in mind. To-day, as a result of the announced wheat policy, we hear a great deal of criticism from both the east and the west. The criticism in eastern Canada comes largely as a result of the policy announced by the Minister of Agriculture, while the criticism in the west comes largely as a result of the policy outlined by the Minister of Trade and Commerce (Mr. MacKinnon). Perhaps in view of the fact that the Minister of Agriculture cannot get any support for his policy, it may be some small consolation to him to know that he will have all the hogs in western Canada rooting for him, though he certainly will not have any farmers.
Perhaps the minister will realize what I mean when I say he has not had a fair chance to introduce a sound wheat policy,

Supply-Slate oj Agriculture

but let me explain that remark to other hon. members. In January I attended the convention of the United Farmers of Alberta, which was addressed by the Minister of Agriculture. During the question period one of the delegates read part of a speech made by the minister in this house two or three years ago with regard to the high prices charged for farm machinery. In that speech the minister severely criticized the manufacturers for maintaining their high prices and took the stand that some action should be taken to reduce those prices. The delegate asked the minister why he had not taken steps to bring about that result. The minister will remember that he replied that he still thought implement prices were too high; he still thought action should be taken, but he was only one of a number of men in the cabinet. In other words, he expressed lack of confidence in the other members of the cabinet with regard to dealing with the high prices of farm machinery.
In addition to that kind of limitation, I quite realize that the minister has been severely hampered by financial restrictions. On various occasions in this house I have attacked the government's financial policy as reactionary and unrealistic. I have attacked that policy because I believe our failure in the past to adopt a sound financial policy has made it impossible for us to deal adequately with our economic problems. I believe it has made it impossible to push the Prairie Farm Rehabilitation Act to the extent it should be pushed, and that is one of the main reasons why we have the present wheat policy before the house.
I realize there may be the fear that if farmers were paid fair prices for their commodities, their spending power would be increased, and they would be buying in competition with the government. After all, I doubt if there is any body of people in Canada who are better spenders than are the farmers, when they have the opportunity to spend. They need more. Undoubtedly, after ten years of depressed prices and drought, they find themselves in a condition where practically every part of their equipment needs replacement. They find that their house furnishings are in a deplorable state. If they received fair incomes, commensurate with those of other people, there is no doubt they would indulge in heavy spending. I would suggest, therefore, that if the government feels it would be dangerous to have such spending at this time, at least it should guarantee the farmer an income which would meet his actual costs of production. That would not release spending powers. If they received 
such incomes, they could pay their taxes and meet their mortgage payments and other necessary expenditures as they come due.
I suggest to the minister, therefore, that if the government can pay in the form of money only 70 cents a bushel to the farmer, it might very well increase the price and pay in the form of savings certificates, such savings certificates to be used to establish a sinking fund against accumulated debts. Provision could be made whereby the farmer could not cash the certificates before the expiration of six months. In this way a sinking fund would be established so that in the future the farmers would be able to meet debts as they came due, and there would be no danger of bringing about a heavy increase in spending.
Shortly after the wheat policy was announced, I spoke to a newspaper man in the lobby. He told me he believed the only way the government could deal with this policy was to get really tough. I agreed that the government had become tough, but I did not agree that this was a sound manner of dealing with the problem. Moreover, the present policy of the government with respect to agriculture is altogether inconsistent with the stand the government has taken on this question in the past.
Speaking in the house on February 16, 1939, the Minister of Agriculture stated that the purpose of his policy was to protect the small farmer. He stated that he would like to see a farmer on every half-section of land, that he would like to help build up a prosperous rural community, and he went on to say that the idea of his policy was not that of helping the farmer to increase his acreages in the production of wheat. It is interesting to note the result of the government's policy in this regard, because as a result of it, the farmers have been forced to increase their acreage in order to reduce their cost of production. Those who, owing to lack of capital, were in the unfortunate position of not being able to increase their acreage, and who were dependent entirely upon proceeds from the sale of wheat, have been forced into a state of bankruptcy. This proposal will still further aggravate the problem of the small farmer by reducing his income, without lowering his overhead.
As a result of the announcement of the bonus policy by the Minister of Agriculture, we have heard a great number of protests from hon. members from eastern Canada. They expressed the fear that as a result of this policy there will be a great expansion in the production of live stock-hogs, cattle

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and so on. I believe it is well to remember that this had already taken place, before the present policy was introduced. The reason why such expansion has taken place is this: Because the price of wheat has been maintained at such a low level, and because deliveries of wheat have been restricted, farmers have been forced to seek other avenues through which they might increase their incomes.
I would suggest to hon. members from eastern Canada that they are not on sound ground when they take that attitude to-day. It will be recalled that for a number of years hon. members from eastern Canada have said that western farmers were soil miners. They have stated time and again that farmers in western Canada should diversify. Well, to-day those farmers are diversifying, and I believe hon. members from the east will rue the day they suggested that the farmers of the west should go in for greater diversification.
If the government has come to the decision, as it would appear, that the only solution of the wheat problem is that of reducing the cost of production by turning western Canada into an area of large mechanized units, then I would suggest that instead of getting tough with regard to the matter-to use the expression used by the newspaper man-it should introduce a comprehensive programme for the reestablishment of the small grain farmer. The government should remember that to a great extent it is responsible for the settlement of western Canada on a small-farm basis. Western Canada was thrown open for settlement on the quarter and half-section basis. That was done, in spite of numerous warnings given the government by its engineers and by others that the arid plains of the west would not support settlement on that basis. For a number of years now we have been reaping the results of that mistaken policy. I would say it is due almost entirely to the protective debt legislation of the provinces that there have not been more farmers driven off their land, and absorbed by loan companies into large mechanized units.
The proposed wheat policy does not attempt in any shape or form to deal with this problem. Along with many other hon. members who have spoken, I cannot understand why the government has seen fit entirely to disregard the recommendations of the various farm organizations throughout Canada, and the resolutions which have been passed in the three prairie provinces.
On March 27 the minister said that the government's policy embodied the main 14873-152J
recommendations of the Canadian federation of agriculture. Many references have been made to that statement. The hon. member for Portage la Prairie attacked the minister for having stated that the government's policy embodied the main part of those recommendations. I do not intend to take much time in my observations, but I believe it would be well to make some brief comments on the manifesto presented by the federation.
Of the recommendations made to the government, probably the three most important, in so far as the farmer was concerned, were disregarded totally by the government. I refer to the recommendations for an increased price on deliveries, for a levy to increase the amount of the initial payment, and for advances against grain in storage. There was, however, one phase of these recommendations which I think was most important and which I do not think has been referred to during this debate. This will be found on page four where are set out the general recommendations dealing with the whole question of the agricultural policy. I should like to read what is stated in these general recommendations because the government has ignored them altogether in its proposals. They read:
In order to enable these millions of Canadians engaged in the business of agriculture to play their proper part in the greatest crisis the world has known, two things are necessary:
1.	There must be an immediate and substantial increase of farm income in relation to the national income.
I do not think the minister will suggest for one moment that this has been brought about.
2.	A properly coordinated national policy for agriculture, including marketing as well as production, must be instituted.
The Canadian federation of agriculture, therefore, proposes:
(a) That since agricultural production costs have already increased, and will inevitably continue to increase as the war develops, our governments should adopt measures to establish a proper relationship between the prices of agricultural commodities and the goods and services the farmer must purchase. Otherwise, there could easily be a decline in the efficiency of agricultural production, -which would seriously hamper the war effort.
In other words, they stated that it was absolutely essential to establish a parity as between the prices of farm commodities and the prices of those goods which the farmer had to buy. While I am dealing with this matter, I should like to quote the Searle index for April 23 to show how far we are away from establishing that parity. The Searle index of 147 items which the farmer has to buy now stands at 143, the 1913-14 index being 100. This means that at the present
239S
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Canada a strong political machine. The minister can shake his head, but they have already started to make a very good job of it, because at the head of the organization we have the former Liberal leader in Alberta, Mr. E. L. Gray.


Mr. GARDINER:: I did not shake my head, but that does not mean that I agree.


Victor Quelch: If we take the appointees under the Prairie Farm Assistance Act, we find that every political heeler seems to have a job, and I do not doubt for one minute that when the various inspectors are appointed under this measure, they will have a close connection with the Liberal party.
At six o'clock the house took recess.
After Recess
The house resumed at eight o'clock.


Victor Quelch: Just before six o'clock I had referred to the fact that all farm organizations in western Canada and the governments of Saskatchewan and Alberta had urged upon the government the necessity for increasing the amount of the initial payment on wheat. We find everyone in western Canada to-day asking the question why this government has seen fit to disregard totally these representations. Members in this house have also asked that question, and we are told that it is due to the fact that certain experts have brought forward this proposal. I wonder whether it would not be more correct to say that this policy had been brought in as a result of representations by the Department of Finance. Let me explain to the minister what I mean in that regard. When the pensions bill was brought down in this house, no member was prepared to endorse some of the modifications which it proposed-for instance, doing away with the insurance principle-and when I inquired who was responsible for bringing in that bill, seeing that no one seemed prepared to defend it, I was told that it was the result of the work of a committee that had been called by the Minister of Finance. In other words, the Minister of Finance, through that committee, was attempting to sabotage the provisions of the act. I do not doubt for one minute that to-day the Department of Finance, through the Minister of Agriculture and the' Minister of Trade and Commerce, is taking steps to sabotage agriculture in western Canada.
The hon. member for Portage la Prairie, when he spoke, said that this was the baby of the Minister of Trade and Commerce and the Minister of Agriculture. Personally I am

not prepared to accept that statement. I would say that this maverick is the offspring of the Minister of Finance. Unfortunately for them, however, notwithstanding that, in view of the fact that the Minister of Agriculture and the Minister of Trade and Commerce have agreed to become its foster parents, they will have to accept full responsibility for it.
Both the Minister of Trade and Commerce and the Minister of Agriculture are western members and they must know that this proposal is most inequitable. The member for Renfrew North (Mr. Warren) the other day said that the speeches of opposition members were spreading discontent throughout the country. I would say to the hon. member for Renfrew North that no speech that has ever been made by any member of the opposition has caused such widespread discontent throughout western Canada as the speech that w'as made by the Minister of Agriculture during the Easter recess. I went to town shortly after the minister had spoken, and time and again I was stopped by farmers who asked me if I had heard the speech which the Minister of Agriculture had delivered. I replied that I had listened to it and I asked them what they thought about it. I will not attempt to strain the rules of the house by repeating what the farmers said. I wish they could have spoken directly to the Minister of Agriculture.


James Garfield Gardiner: I saw five thousand of them.


Victor Quelch: Yes, but perhaps they did not speak as freely to the minister as they would have spoken to someone else.


James Garfield Gardiner: You don't know them.


Victor Quelch: They probably did not like to hurt his feelings. I suggest that perhaps the minister was surprised at the nice treatment he received at the united farmers' convention at Calgary. I may tell him that before he appeared at that convention, the president of that organization, Mr. Robert Gardiner, reminded the delegates that they had always had the reputation of treating their visitors courteously, and he asked them to extend to the Minister of Agriculture the same treatment that they had always accorded guest speakers.
Both the Minister of Agriculture and the Minister of Trade and Commerce must realize that this measure is unjust and inequitable, and for that reason they should both have refused to sponsor it. I will give the Minister of Agriculture my reason for that statement. A couple of years ago the deputy governor of the Bank of Canada stated that no self-

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respecting central bank would accept from its government a policy with which it disagreed. I referred that statement to the Minister of Finance and said that apparently the Bank of Canada was dictating its policy to the government, but the Minister of Finance replied, "Oh, no, it does not mean that at all; it means that if the government enforce upon the Bank of Canada a policy with which the governor does not agree, then the governor of the Bank of Canada will be forced to resign in protest". Is there any reason why a minister of the crown should be less conscientious than the governor of the Bank of Canada? If it is necessary for the governor of the Bank of Canada to resign as a protest against a measure which he considers unjust or unsound, then I maintain that both the Minister of Agriculture and the Minister of Trade and Commerce should resign to-day as a protest against this measure. Let them both go to the country and join forces with the former Minister of Agriculture (Mr. Motherwell) and raise their voices in protest.
Before sitting down, I would again urge upon the government the necessity for giving further consideration to this matter. Let them give further consideration to the recommendations of the various farm organizations -for instance, the recommendation made by the federation of agriculture. That recommendation the Prime Minister (Mr. Mackenzie King) termed moderate, and then he turned round and slapped them in the face.


Mr. DANIEL McIVOR (Fort William):: There is only one reason why I would support this amendment, and that is the hon. member for Haldimand (Mr. Senn), who first proposed it. I have seen him in action in the house; I have seen him in action out of the house, and to me he has always been an honest man. Add to that the fact that he is a farmer; therefore he belongs to the cream of the land. But that is the only argument I can conceive of in support of the amendment.
My argument against a vote of want of confidence in the government is the Prime Minister (Mr. Mackenzie King), and I think I can prove that. In the first place, the Prime Minister is Canada's greatest leader, in spite of what some people say in the house or out of it when they want to advertise their own greatness and get on the front page of the newspapers. Then they will attack the leadership of the right hon. gentleman. First of all, the Prime Minister is a pioneer in social and labour organizations in Canada, and because he is that he suits me well. I admit that before I came into the house, the two men who stood out in my estimation, in this house or in another place, were the Prime Minister
and the former leader of the opposition, Mr. R. B. Bennett. These two men, to my way of thinking, are Christian gentlemen, efficient all the way through.
As a pioneer in social and labour legislation, first as deputy minister of labour, the Prime Minister's first outstanding contribution was as author of the Industrial Disputes Investigation Act. Next he established old age pensions, and I remember the second session at which I was present in this house the support the government got-and I was one who supported them-when pensions to the blind were added. Then came the establishment of unemployment insurance, which has not altogether begun to work yet; but it is like the leaven, it will soon be all through the lump. Because of this attitude of the Prime Minister I look forward some day to seeing some form of health insurance which will take care of the man who would rather die than go into debt. Then I recall the closing words of his speech introducing that distinguished United States citizen, Mr. Wendell Willkie, in which he pictured a new world order; I think that as he pictured that new world order he will stick to it when we have won the war and because he will stick to it, he is going to have my support. Any government that does not stick to it, will not have my support.
Second, the Prime Minister was one of the founders of the British commonwealth of nations. He had a share in the imperial conferences of 1923, 1926 and 1937. He contributed to the recognition of the equality of status of members of the British commonwealth which strengthened the bonds of association and made effective common action possible in the interests of humanity.
The United States was lost to Great Britain by a mistake, and it is going to be won back to the company of the great democracies of the earth by sane, level-headed Christian gentlemen like the Prime Minister. Therefore I shall vote against this amendment.
Then -again, we see the task that the Prime Minister has taken upon himself and has performed so well, of striving to cement Canada, the United States and Great Britain together. He is using the right kind of adhesive. He was a member of the Laurier government which established the intema^-tional joint commission; he fought for reciprocity and he did not quit when reciprocity was defeated. Any man. can start a great movement, but it takes a far bigger man to stick to it, carry it through and put it into effect as the leader of the government has done. The achievement of reciprocity in 1935 stands out as the achievement of a prime minister unexcelled. The joint defence agree-
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ment of 1940 and the St. Lawrence waterway agreement of 1941 caused the Winnipeg Free Press, which is a very conservative paper as regards the Prime Minister-


Some hon. MEMBERS:: Oh, oh.


Daniel (Dan) McIvor: -to state that, "He did it again".
Then I refer to Anglo-American unity, and in that connection to the article by Mr. Leslie Howard who mentioned the vision of the new world order which the Canadian Prime Minister and other leaders of the British peoples have had such a part in bringing about. Lord Beaverbrook in his broadcast on Sunday, March 23, gave direct credit to the Prime Minister of Canada for the close collaboration between the United States and Britain as one of the crowning achievements in connection with the war. Lord Beaverbrook asked, "How has it come about?" and he gave the following answer: "Through the leadership of Churchill, through the vision of the President, through the foresight of my own countryman Mackenzie King, Prime Minister of Canada, through the heroic resistance of the British people and through the wave of comradeship and resistance they have awakened in the American nation".
It might be recalled that Lord Beaverbrook is at once a Canadian and a Conservative, and that tribute arose out of no personal partiality for the Prime Minister.
It might also be worth while to refer to the recognition of the Prime Minister's leadership of Canada expressed by two members of parliament who do not support the government. Senator A. D. McRae of Vancouver was reported by the Toronto Star of October 3, 1940, as follows:
Everybody feels that the government is making a tremendous effort. That is true of my province, where criticism was rampant before, and it struck me as evident everywhere I visited.
The hon. member for Macleod (Mr. Han-sell) is reported by the Lethbridge Herald of October 31, 1940, as follows:
Referring to Prime Minister King, Mr. Hansel! said he believed the Prime Minister is handling the war effort admirably.
Therefore, of course, I cannot support the amendment.
We know that Canada, before and during the last war and pretty well ever since up to a certain time, was divided. Hon. members remember what happened, whether they give the Prime Minister credit or not; the king and his beautiful queen visited Canada, and I believe Montreal tried to outdo the great cities of Toronto and Fort William in manifestations of loyalty. A spirit of loyalty swept
[Mr. Mclvor.l
across our great country; there was unity then and since, and Canada has gone into the war with a united front. No prime minister in the history of Canada has done a greater deed. Therefore I shall vote against the amendment.
Then there is the unity of parliament in the declaration of war and in the prosecution of the war.
Thinking of the Prime Minister, I see him brought up in a Christian home where a man is expected to keep the Sabbath and to contribute of this world's goods for the needs of others. I refer hon. members to an article by George H. Lyon in a recent issue of the Evening Citizen. Hon. members would do well to read that article which is written by a citizen of the United States, showing the character of the Prime Minister as a man who is ready to serve the state before he serves himself.
Thinking of the government that supports the Prime Minister, I take off my hat to the Minister of Agriculture (Mr. Gardiner), remembering that when there was a surplus of butter in Canada that could not be sold, he did what? He did not store it with the packers; he stored it in the relief departments of our cities, and we distributed: it freely to those in need.
In the new world order of which the Prime Minister speaks, I expect his government will support him through thick and thin. I say that because honour should be rendered to whom honour is due. Therefore, when I am asked to give a vote of want of confidence in this government, I have to satisfy my better judgment and my conscience; I believe the Prime Minister is worthy of our support, and I believe there are very few hon. members in this house who will not support him.


Mr. GORDON GRAYDON (Peel):: I do not think, Mr. Speaker, that you would expect me, nor would the house expect me, this evening to follow exactly the same line of argument as that pursued by the hon. member for Fort William (Mr. Mclvor), strong and convincing as his arguments always are. In speaking to this amendment and the subamend-ment I shall try to deal with the difficulties of agriculture in Canada to-day in a fashion that I hope will not be regarded as an attempt at a critical extravaganza or, as some hon. members have, I think, attempted to deal with it, by putting one's head in the sand and taking a complacent attitude with regard to Canadian agricultural problems in general. It seems to me that- somewhere in between those two points of view lies the commonsense approach to the problem at the present time.

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It appears to me, as I am sure it does to every member in this chamber to-night, that during this period, while the shadow of war lies across every legislative body, and every home and community of this dominion, it becomes incumbent upon each of us to deal with these problems in a manner which does not smack of an endeavour to gain some small party or political advantage. We should appreciate that we are here representing the men and women of our constituencies, and should be prepared to assist the government, in some constructive manner, by pointing out the problems with which agriculture is faced, putting up to the government fairly and squarely what we think should be done, and then leaving it to the government to take the necessary action.
I am sorry that hon. gentlemen opposite have taken the attitude that this is a mere want of confidence motion, and so they must vote against it. Those who hold that view have, I think, misunderstood the purpose of the amendment. We who are honestly trying to put forward the point of view of the farmers have no desire to overthrow the administration or to harass the government unduly. We readily understand that the government is sufficiently embarrassed when it has to face problems as broad, deep, serious and important as those now facing agriculture. I am sure we all appreciate the position in which the government finds itself. After all, however, experience has shown that unless we lay some emphasis on any proposal advanced and put some teeth into it, the government is apt to treat the whole problem as something not of paramount importance, and that is really the reason underlying the amendment which is under discussion to-night. I hope that by the time this debate concludes, the minister and the government will be so fully seized of the significance of the problem that something will be done. I hope that they will appreciate the various points of view advanced, and that when this debate is over, they will take steps materially to help agriculture on its way to better times.
I am one of those who believe that the problems now facing agriculture are not strictly the result of the war. It is true that they may have been accentuated and perhaps aggravated in some respects by the war. I would not deny that, but many times in years gone by hon. members have seriously and honestly asked the government if we could not have in Canada some sort of plan with regard to agriculture that might be followed through the years. I have listened, since I came to parliament, to many hon. members criticizing the government because of the way agricultural problems are faced. One of the major criticisms that I would advance in connection with this government-I cannot say with regard to previous governments, for I was not here-is with reference to the lack of any plan so far as agriculture in this country is concerned. When the war came on, the farming communities were so emaciated financially and economically, as a result of conditions which had existed previously, that they were much less able to withstand the rigours of a war effort than they should have been.
Of course attempts have been made in the past to develop a plan for the betterment of agriculture in this dominion. Whatever may have been its weaknesses, the Natural Products Marketing Act, which was passed in 1934, at least was a step in that direction. When that act was declared ultra vires by the privy council, after having been dealt with by the supreme court, I thought this government could very well have had the British North America Act amended, as was done with regard to unemployment insurance, in order to permit that legislation to remain in force, with such amendments as might be found necessary during the course of its operation. That, at all events, would have provided some sort of scheme or plan to assist agriculture, but that was not done.
As most hon. members realize, agriculture finds itself in a peculiar position. It has been said many times that thirty-five per cent of our population receive only nine per cent or eleven per cent of the national income. That is only too true. There are, however, some other points that I should like also to place before the house. According to the census of 1931, thirty-nine per cent of the population of Canada was rural, while sixty-one per cent was urban. That was a great change from 1871, when twenty-two per cent of the population was urban and seventy-eight per cent was rural. All through the years a steady drift from the farms to the urban centres has brought about this great change. In addition, the farmer is faced with the lack of many facilities that are possessed by people enjoying an ordinary standard of living. Perhaps it might not be out of place here to mention that, according to the last dominion census, in Ontario only one farm out of every ten had water piped into the kitchen; one farm out of every sixteen had a bathroom with water piped in; one farm out of every five had a radio, while one farm out of every six had electricity or gas. I must admit, of course, that this last figure has been somewhat changed in recent years.
Perhaps what I have said will give some picture of agricultural conditions. But may
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I remind you, Mr. Speaker, that while many, farm problems are of long standing, one of the most acute difficulties at the present time is brought about by the disparity in prices about which we have heard so much. The question of what the farmer has to pay and what he receives for his products is a matter of serious concern to every rural dweller in this dominion. The other day I saw some statistics comparing prices during the last war with prices during this war, and I noticed that as compared with February, 1916, total wholesale prices of Canadian farm products in February, 1941, showed a reduction of 18 per cent. This gives one some conception of problems the farmer faces now, in comparison with those he faced in those times. In addition to that, the difference between 1915 and 1940, so far as farm wages paid by fanners in Canada were concerned, showed a present-day increase of 50 per cent for male help and 48 per cent for female help over the 1915 figure. One can readily understand, therefore, that the problem of the farmer is not one which can be lightly brushed aside.
While I do not wish to be regarded as a demagogue in a matter of this kind, I should like to place on Hansard some comparative figures which will serve to place perhaps more clearly before lion, members the position in which the farmer finds himself when he goes to buy some of the things he requires.
[ have before me a table which I believe sets out clearly what I have in mind and, while 1 shall not read it all, I shall place one or two items on record.
Under present prices, when a farmer goes to buy a suit of clothes for himself he has to pay the equivalent of the present price of 100 bushels of oats. Two and a half acres of soil are required to grow those oats. Then, to make a further comparison, that suit of clothes would cost him the equivalent of the selling price of 100 pounds of butter. Or, if we may speak in terms of the time it takes a cow to produce the amount of butter required to buy the suit of clothes, we might say that the cow would have to work 146 days to produce the required amount.
We have heard a great deal of talk about man-hours. At this time I am going to say something about cow-hours. It takes 3,504 cow-hours for the good old dairy cow to produce enough butter to pay for the farmer's suit of clothes.


Mr. SLAGHT:: And what about the bull?


Gordon Graydon: And it would take about 7,000 cow-hours to pay for the suit worn by the hon. member for Parry Sound (Mr. Slaght), because his suit is a more expensive one.
[Mr. Graydon.1


Mr. ROSS (St. Paul's):: Which side do you milk her from?


Gordon Graydon: It may be there are
some farmers in the house who do not know which side; but I know it, for I have sat on her right side a good many times.
At any rate, to return to the figures, the farmer must sell 600 bushels of oats if he wishes to have enough money to buy an electric refrigerator. He must sow fifteen acres of ground to produce those oats. Then, we find that it would take one cow 876 days to produce sufficient to pay for a refrigerator or, if we may again make the comparison by cow-hours, we find that 21,024 cow-hours are required.
When a farmer hires a man, paying him at the rate of 8700 a year-and that is not an unfair figure, when one considers board- he must sell 2,000 bushels of oats at present prices if he wishes to pay his helper's wages. Fifty acres of land would be required to produce those oats. Or, to make a further comparison, he would have to sell 2,000 pounds of butter, and it would take one cow eight years to produce to that value. In other words, those wages would have an equivalent of 70,080 cow-hours. I shall not place further figures on the record, because those I have given will be sufficient at least to show the position in which the farmer finds himself when he makes purchases.
When we speak about the problems connected with agriculture, and the remedies which could be applied, I am the first to admit that those problems are not easy to solve. There is no use in any hon. .member rising in his place in the house and saying that agricultural problems can be solved overnight. I am not suggesting that that be done. My disagreement, with the government's action is that I am not sure that a real plan has been put into effect to help agriculture; in fact, I am sure it has not.
Permit me to place on record an example which, while perhaps not entirely comparable, goes at least part way toward illustrating the point I wish to make. When Mr. Roosevelt brought down his war appropriation bill for seven billion dollars in March of this year, we find that that bill, passed by the United States congress, placed farm commodities second on the list, so far as government expenditures are concerned. Actually one dollar out of every five spent by Mr. Roosevelt is spent on the farmers in the United States. On the other hand, in our appropriation bill for $1,450,000,000 we allocated the magnificent sum of one dollar out of every $180 to the farmers of Canada. I bring these facts to the attention of the minister,

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because I believe they are of some importance, and show the disparity between the manner in which farmers in the United States and those in Canada are treated. It shows, too, the way in which the respective governments regard the farmers, as an essential part of the war effort.
I would go one step farther in discussing the point as to how the government is meeting the problems of the farmers. I am sure the government could not have turned a deaf ear to farmers in Canada during the last few months, because those farmers have been fairly vocal, when placing their problems before governments and the people generally.
In view of these circumstances I was amazed to find what the records revealed. A committee on agriculture was set up by the house.


An hon. MEMBER:: Where is it?


Gordon Graydon: Someone asks, "Where is it?" Before I have finished, I will tell him where it has been the last while back. In 1936, the committee on agriculture sat to discuss farm implement prices. In 1937, a new, special committee dealt with the same subject. Then, in the same session, that committee sat not more than a few days to deal with two small bills which had reference to the sale of feeds, and regulations in connection therewith. In 1938, the committee sat for some considerable time on a measure to amend the Canada Grain Act. It sat again in 1939 to consider a further amendment to the Canada Grain Act, and to consider Bill No. 104, concerning stockyards, live stock and live stock products.
While those may have been the problems of earlier years, we have now arrived at a time when agriculture in Canada is facing problems more acute than were faced in any of those years. Yet, since the last general election in March, 1940, the government has not called together the committee on agriculture, except for purposes of organization and to elect a chairman. I would indict the administration on that point alone, because it seems to me that in view of the multitude of problems facing the farmers of Canada, it would surely not be too much to ask the government to call together the sixty members of the committee on agriculture, and to turn them loose on some of the problems facing our farmers. Let that committee see if it can do something toward formulating a definite plan. That is what I ask with regard to the committee on agriculture.
Members of parliament generally seem to be chafing to have something to do. They say there is no place fo" the private member. There is a place where in the last two sessions
of parliament sixty private members, with an intelligent outlook on agriculture, could have done something for that industry. Many of those members were fully qualified to bring to the solution of agricultural problems some of the best brains in Canada. The committee on agriculture should have had the opportunity to hear men representative of agriculture throughout Canada. From the evidence placed before the committee, it is possible it might have suggested something by way of a plan to remedy many of the difficulties facing agriculture at the present time.	[DOT]
Before I close my remarks I should like to make one or two suggestions to the government in addition to those which have been made already. I am prepared to acknowledge that in some lines of endeavour the Minister of Agriculture (Mr. Gardiner) seems to have done a pretty good job, but I am not so sure that it is in the line of agriculture. It seems to me that when the Department of National War Services required the services of a minister, the Department of Agriculture should not have been called upon to fill this need. If the Department of National War Services was important enough to warrant a full-time minister, the government should not have encroached upon the field of agriculture to obtain a minister. I feel sure that I voice the opinion of the farmers in my riding, and I believe the farmers in Ontario, when I say that the call now is for a full-time Minister of Agriculture. That call is insistent and incessant. This government will eventually have to wake up to the fact that there is a demand that the services of at least one farmer should be at the fulltime disposal of the Department of Agriculture here at Ottawa.
May I suggest to the minister, when he again takes over the portfolio of agriculture, that he should set up the committee on agriculture or appoint a special committee to study these matters. The farmers are asking that some evidence be produced that this government is really making an effort to solve their problems. The best brains of industry have been brought to Ottawa in order to solve the problems faced by other departments, but so far as I have been able to find out, this government has not taken the trouble to bring to Ottawa many representatives of the farmers in order that their problems may be tackled in the proper way. The problems being faced by the Department of Munitions and Supply, the Department of National Defence and other departments are important, so far as our war effort is concerned, but so are those faced by the Department of Agriculture. Representative men should be brought here in order that their
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views may be had with regard to the solution of the problems which confront the farming population.
I see no reason why farming and labouring men should not be appointed to many of the departmental boards which have been set up. The question will be asked: What do they know about these problems? We have a tendency, I fear, in this house to get away from the viewpoint of the workingman and the farmer. I should like to see many more bona fide workingmen and farmers brought to Ottawa to help in the solution of our national problems. They would be able to bring to these matters a common sense, practical viewpoint, sometimes not possessed by others of our citizens who are lauded so highly with respect to the contribution that they are making. I believe such workingmen and farmers would bring a new light to bear upon the multitudinous problems which face our country to-day.
I do not think farm products are advertised to-day as widely and as effectively as they should be. Sometimes I think we pay almost as much for the containers of certain manufactured goods as we do for the product itself. It does not seem to me right that our farm products should not be as well advertised as our manufactured products. I have been told by advertising men-and I think they are correct-that it is advertising that largely sells a product. They say that if you put a fair product in a nice package and advertise it effectively, it will sell. But these methods do not appear to be used as fully as they should be so far as our farm products are concerned.
In this connection I wish to commend the government for the move they have made in connection with apples and apple juice. The market in Great Britain for apples was lost some time ago. Two years ago no hon. member would think of asking for apple juice; he might know something about hard cider but not about apple juice. To-day I suppose that as much apple juice is consumed at the breakfast tables of Canada as is any other delectable drink with which a meal could be started. This is all due to the effect of advertising. There is no reason why the government could not do the same thing in connection with many other farm products.


James Garfield Gardiner: Apparently my hon. friend does not read the advertising. We are advertising other farm products in the Canadian papers.


Gordon Graydon: I think I have read all the advertising, but my suggestion is that we should have a more extensive advertising campaign in connection with ordinary farm
[Mr. Graydon.3
products. I do not think the minister will contend that there has been an effective campaign in this regard.


James Garfield Gardiner: I am sure my hon. friend will give us credit for having advertised apple juice.


Gordon Graydon: I know the government did that.


James Garfield Gardiner: My hon. friend did not say that the government did it. He said that it was advertised and that we should advertise other products.


Gordon Graydon: May I assure my hon. friend that I give him full credit for advertising apple juice. If he wants it more clearly, I make this public declaration that the Minister of Agriculture is responsible for every glass of apple juice to be found on the tables of Canadian homes. We like to give credit where credit is due. I know the minister with his modest manner would prefer that I make the statement rather than he.
Despite the explanation which the minister has attempted to make with regard to the feeble-I say that advisedly-advertising campaign in connection with some agricultural products, there is not one farmer in Canada who thinks that this advertising campaign to sell the average farm product is sufficiently effective at the moment. If the minister can do as good a job with other farm products as he has done with apple juice, I am sure the farmers of Canada will be well satisfied.
I am hopeful that something concrete will be done with respect to organized farming. Most of us who have come off the farm realize the difficulties faced by agriculture. This industry is not organized, but it has to deal with other industries which are highly organized, and many of our difficulties arise in that connection.
I am sure that we are all anxious to see the farming industry throughout Canada speak with one voice instead of with many voices as it has done in the past. I take the word of one of the main speakers at the annual meeting of the Canadian federation of agriculture which I attended in Toronto not many months ago, who said that some responsibility rests on the agriculture industry itself as well as on the government. I certainly would not go the length of saying that the whole responsibility must rest upon the government, but rather I would say that an organized agriculture should work in cooperation with the government; and with the two working hand in hand, plans can be formulated and put into action from which good results may reasonably be expected. Many people look

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upon agricultural problems as problems of a domestic nature only, but in fact our farm problems are related to our whole war effort. Let us never at any time minimize the importance of the production of foodstuffs in the winning of this war.
May I say to the minister who has brought down this policy of reducing the acreage in production that the considered opinion of most of the farmers with whom I have spoken is that we shall live to rue the day when we reduced the productive capacity of the farms of Canada. That view may be entirely wrong, but it is the view nevertheless of most agriculturists. I say, further, I am convinced that, as time goes on, we shall have a greater need of foodstuffs than ever before, and it will not be easy to travel back over the road once we have taken the wrong turn, because agriculture must make its plans years ahead.
We are planning now for a reduction of acreage in western Canada and for a reduction in the production of certain types of grain. The fear of the eastern farmer is that this policy means not only the curtailing of acreage in western Canada but bringing into competition with the eastern agriculturist many factors with which he has not hitherto had to compete. Whether that be true or not, I think the Minister of Agriculture might well give consideration to this point of view, that he is really asking the agriculturists of eastern Canada to pay a high price for the benefits which are going to western Canada, a higher price than the eastern agriculturists should properly be called upon to pay. If we are going to help the agriculturists of western Canada-and I am one of those who believe that we should help them-western agriculture should be helped out of the purse of Canada as a whole, and not so largely at the expense of eastern agriculture. Many farmers in my part of the country have felt throughout the years that the eastern farmer has been the forgotten man, and in many respects, Mr. Speaker, I believe that he has been the forgotten man. It is time now, if it is not too late, to formulate and bring down some plan for bringing back this war-time industry of agriculture to a position where we can see in the future something approaching a fair parity of prices, a policy that will give a fair and square and just deal to the man who makes his living from the soil.
I should like to close by quoting one sentence taken from one of the farm papers which I have had the pleasure of reading almost ever since I was a child, The Farmers' Advocate. This sentence, which appears in its issue of January 9, 1941, I think pretty well sums up the feeling which I know the average farmer to entertain. It says:
If this is an all-out total war, let it be one with the burden falling on all classes. Then the man at the desk, at the bench, in the counting house, or at the plough, will feel that he is not being exploited, and will gladly give his time and talent in the cause of liberty, equity and justice.


Mr. J. A. BLANCHETTE (Compton):: Mr. Speaker, may I at the outset offer my congratulations and compliments to the previous speaker (Mr. Graydon). On both sides of the house we have always found him an interesting speaker, and his moderation and sound reasoning have always appealed to the house. While I cannot agree with everything he has said, he made one statement which I was very glad to hear, namely, that the amendment we are discussing this evening was not brought forward in an attempt to overthrow the government, but was rather, to use his own words, for the purpose of formulating an amendment which would have a little teeth in it, the views of hon. gentlemen opposite. It so happens that, as the amendment is worded, it has not only teeth but quite a kick in it.
I feel, as does the hon. member for Peel, that the discussion of this important subject of agriculture would have been on a much higher plane had it not been brought up in the form of a want of confidence motion. The suggestion which my hon. friend has made that many of these agricultural problems should be referred to the committee on agriculture is one that should be given consideration. I believe that such a procedure would assist us in planning a solution which often we find it difficult to achieve in the house. For example, as we all know, the wheat problem has been discussed lengthily in this chamber, and rightly so, because the producer of wheat really has a problem on his hands. But if the greater part of the discussion that has taken place on wheat had taken place in the committee on agriculture, I believe that the business of parliament would have been expedited and perhaps it would have been easier to find a solution.
Coming from a dairy section of the country, I should like to speak of dairy farming in general, and in particular of the butter producer. I do not know that I shall have anything new to offer in the remarks I intend to make, but it is a human trait, I believe, to reiterate the different views which interest us. One of the things we in the eastern townships are particularly interested in is dairying, and especially the production of butter. Year after year since 1932, if not before, our dairy farmers have been living in hopes that their lot would be alleviated, and although it must be admitted that certain legislation has been passed which helped
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It has been stated during the discussion on agriculture that the index price for receipts from the sale of farm products in 1940, as compared with the returns for 1926 to 1929, prove to us that the wheat-growing areas have suffered to a greater extent than any other agricultural areas. I should like at this time to place on record not index prices, but actual prices for wheat and butter in the last eight years, together with the attendant loss or gain, compared with prices of production of both of these commodities. For the basis of my comparison I shall take, as the price of producing wheat, the price set by the Saskatchewan legislature in February,
when it recommended that a minimum price of 85 cents, Fort William, should be set on wheat. The figures I shall use in my comparison as to the cost of producing 100 pounds of milk range from $1.40 to $2. I shall, however, take the lower figure, namely, $1.40 as the price required to produce 100 pounds of milk. A comparison of both of these commodities between the years 1932 and 1940 is set out in a table I have before me. In the table I deduct 20 cents a bushel from the price quoted wheat, to allow for transportation fees to Fort William. The figures are as follows:
Dairy price to farmer,
Wheat	Return to	100 pounds	Year	price	farmer	Loss	milk	LossCents a bushel	Cents	Per cent	Cents	Per cent1932 	40	53	68	511933 	34.3	60	72	481934 	
68	48	56	77	451935 	61.9	27	79	431936 	
84.6	64.6	24	82.8	411937 	
122.7	102.7*	20	100	291938 	
131.5	111.5*	31	80	431939 	
62	42	50	88	401940 	
76.5	56.5	33	92	34
* Profit.
Added together, these figures sum up as follows: The average net loss to wheat producers for the nine years from 1932 to 1940 comes to 28 per cent of the cost of production. The average net loss to dairy producers on the cost of production for the same years comes to 40 per cent. In other words, the butter producer for the past nine years has been losing an average of 56 cents for every 100 pounds of milk produced.
In passing, may I point out there is a distinction to be noted in the treatment wheat received because, as was said in the house some time ago, the net amount paid out by the treasury on account of government wheat operations over the ten-year period ending July 31, 1940, total over $98,000,000. There is a total government capital expenditure of $400,000,000 invested in the wheat industry, by all governments in power, both past and present.
Surely, if this enormous amount were needed to take care of the wheat industry, let us not bemoan or begrudge the small amount, comparatively speaking, of financial assistance the dairy industry needs to carry on, particularly in view of the meagre amounts which have been meted out to it.


Tic ACTING SPEAKER (Mr. Fournier, Hull):: The hon. member has spoken for forty minutes.


Some hon. MEMBERS:: Go ahead.


Joseph-Adéodat Blanchette: It is all very well to speak about unfair returns to butter producers, but I believe I have shown that those returns are and have been insufficient for a number of years.
Naturally, this question arises: What can be done about the matter? That there is to be the setting of a minimum price is certain, because it has been officially announced. That the butter producer will not be satisfied with a minimum price during the winter below 33 cents is certain also, and I feel the minister will be making a mistake if that price is not established.
What should be done? What I advocated last year and what has been suggested by the federation of agriculture as recently as March 4, in the form of a resolution, is that the dominion government purchase the available summer surplus of butter for storage against winter production periods. Surely, if the government is able to finance war industries, wheat, and other industries to the extent of $400,000,000, then that is all the more reason why it should be able to finance the production of such an important commodity as butter, especially when, in so doing, it would be protecting both the consumer and the producer.

Supply-State oj Agriculture
Since the beginning of the war we have all been prone to speak of a new order-a new order in international relations, a new order in empire relations. By all means let us not forget also a new order in the economic ethics of our own nationals, upon whose welfare, wellbeing and unity depend all the other new orders which we may wave and vociferate. Let us at times pause for a moment during the hush and rush of things, and think of the poet's verse:
We have kind words for strangers,
And smiles for the sometimes guest,
But oft for our own, the bitter tone,
Though we love our own, the best.
This new order will not come upon us with some fortuitous morning awakening, but will rather be initiated by the courageous breaking away and tearing asunder of the shackles of the old order, especially wherein that old order proved to have misgivings, weaknesses and injustices.
The Minister of Agriculture (Mr. Gardiner) has admitted quite freely, as may be seen in Hansard, that "agriculture has been having a very difficult time since the war started, and it was having a difficult time for ten years before the war started." I take it from this, therefore, that he is placing agriculture in the category of the old order. I agree with him. It is recognized by all versed in the matter that agriculture has not been getting the returns it deserves. In other words, the old order has failed in this particular phase of our economic activities. Let us, therefore, discard the old order and bring in the new order by having something that is new and also something that represents order in connection with a very important class of our economic web, namely, that of agriculture.


Thomas Langton Church: Mr. Speaker, the motion before the house, moved by the Minister of Finance (Mr. Ilsley) is that you do now leave the chair in order that this house may resolve itself into committee of supply. It is under such a motion that the official opposition has the right to bring before the house and the country any grievances which it thinks should be remedied before supply is granted. An amendment to this motion has been moved by the official opposition. This amendment reads:
-it be resolved that the government should take immediate steps to create a parity of prices as between agricultural and other products in order to improve the condition of Canadian agriculture and in order that it may receive a just and fair return, and thus be enabled to make that contribution to Canada's war effort which is so desirable, and which our agricultural population so greatly desire to make.
An amendment to the amendment has been moved by the hon. member for Weybum (Mr. Douglas) in the following words:
1.	That the minimum price for the 1940 wheat crop be set at 85 cents per bushel, basis No. 1 at Fort William;
2.	That a processing tax of 50 cents a bushel be levied on all wheat processed for consumption in Canada, the proceeds of such tax to be added to the minimum price of 85 cents a bushel.
The jurisdiction of this parliament over agriculture is concurrent. If the dominion votes money for agriculture, it must be on the basis of equality of treatment for all provinces. We cannot just single out one province for special treatment. I believe it is the desire of every good citizen that agriculture should be placed in a prosperous position, but how can any business be put on a prosperous basis when we had, first, the great war, then the huge depression and then another war? There has been a dislocation, not only of agriculture but of all business. The business men of Canada are not objecting to the granting of proper aid to agriculture; no one is objecting to it, but it should be on a non-partisan basis. This whole problem was debated at the last session for three weeks, and it has taken up a great deal of time at this session. In fact, more time has been taken up in the discussion of this matter than in the discussion of our war effort, Canada's first and only real interest until victory comes. This whole matter should be dealt with by the agriculture committee. I urge that that committee be authorized to make a survey of the whole problem. The action taken in each province should be on a non-partisan basis. This matter cannot be allowed to drift any longer. Because of the war, the situation is changing from day to day, and many are suffering as a result.
I have been a consistent supporter of protection, and I believe that the application of the principle of protection during this war would solve the economic ills of all the provinces and bring about equality of treatment. The party in this section of the house has been traditionally associated with agriculture for many years. Since confederation it has been the policy of the party in all the provinces to preserve our own markets for our own products and to provide our own work for our own workmen.
Hon. gentlemen opposite have been on the tariff and wheat everything by fits and starts and on nothing long, or of any real help, to solve this great problem. As I said away back on May 5, 1924, as reported in Hansard, when similar matters were brought up by the council of agriculture:
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On the 2nd April this year the Canadian council of agriculture came to Ottawa and presented a memorandum to the cabinet in which they urged that relief be granted to the agricultural industry. They stated that protection has been an unmitigated evil for many years, and that the farmer has been exploited and plundered by those who enjoyed special privileges under it. They asked that the farmer be relieved of the artificial burden which it was claimed had been unjustly imposed on him. A declaration was made in favour of reciprocity with United States, and an immediate abolition of the tariff on the implements of production was asked.
And again:
Ontario has not yet recovered from four years of free trade preaching and blue ruin prophecy. Ontario gave a negative answer to the question, "shall a province that was saved by a Brock be ruled by a Drury?" Ontario sent the Ontario end of the Progressive party about its business. Ontario has learned that a few months -will not suffice to bring back the business opportunities that were driven away from Ontario by Hon. E. C. Drury and the other would-be Progressives who called themselves farmers.
The question of reciprocity was also raised. Here is what I said in that connection on May 5, 1924:
I may say further to the Canadian council of agriculture that free trade and reciprocity with the United States would make a Lazarus out of a country that Sir Wilfrid Laurier proposed to have made a nation. That proposal would exhibit the Canada of Queenston Heights, or St. Julien, of Vimy Ridge, of Passchendaele. of Amiens and many other fields of glory, as a heggar for the poor favour of reciprocity and free trade.
Again:
I plead for a departure from this free trade law of supply and demand and acceptance of the principles of the old National Policy in our dealings with all provinces from Yukon to Prince Edward Island. I plead for a departure from the free trade law of supply and demand and an application of the principles of the old National Policy to other industries in this country from the manufacturing of agricultural implements up to wheat growing. Leave the wheat growing industry of the west to the workings of the law' of supply and demand and that law would not fill the west with wheat growers. If that law did fill the w-est with wheat grov-ers, wheat would not be worth fifty cents a bushel.
Those were words of prophecy. I continued:
I am advised, and believe, that free trade conditions supported by those free trade organizations, the grain exchanges, keep $25,000,000 per annum out of the pockets of Canadians who raise high quality wheat, and put that $25,000,000 per annum into the pockets of the native and alien exploiters u'ho handle high grade Canadian wheat.
In connection with this matter I stated further:
The best friend of the western wheat grower is the policy of protection, as that policy has been and should be extended and administered
IMr. Church.j
by the founders and soldiers of the National Policy, the Conservative party of Canada. The western wheat grower has eaten the sour grapes of free trade. No wonder the western -wheat grow'ers' teeth are set on edge. The western wheat grower has taught himself to believe, or has allowed so-called leaders to persuade him, that wheat growing in western Canada is a continental industry, an industry that must prosper by reason of the admission of the product to the United States market or perish because of its exclusion. I submit that wheat growing in western Canada is the most truly national, the most widely imperial of all Canada's great industries. The markets of the British empire mean more and the markets of the American section of the North American continent mean less to the wheat growers of Canada than to any other class of Canadian producers.
That was proven to be true. I am not objecting to generous aid for the agricultural industry in order that it may function and be put upon a proper basis, provided the country is able to do it. But we have a war on at the present time. I have thought that during the period of the war we would forget these domestic matters and bury the party hatchet. During the last session we spent three weeks in a discussion of this matter, and much the same thing has occurred this session. In my opinion, party boundaries are flimsy things during grave times like these. The battle of London, the battle of Britain and the battle over Plymouth are continuing while this debate is going on. The enemy has been more brutal and spiteful during the past twenty-four hours; he has carried on his beastly cannibalism while we sit here and talk politics in the way we have. Party advantage should be put into cold storage for the war.
Since I have been in the house after the great war, from 1921 on, it seems to me that everyone in Ottawa has had his mind saturated with the Geneva theory. The result was that during the years when we should have been preserving our market for wheat in Europe and fortifying the Balkans, Egypt and the Mediterranean, time was wasted in peace talks and peace conferences and agreements entered into by hon. gentlemen opposite at Locarno and Stressa. There was the Kellogg pact, collective security and the League of Nations. Collective security and the league have proven to be nothing but a sham, and are dead and buried. Collective security is all right in principle, but unless there is a powerfully armed Britain behind it, it is not collective security at all. And we may find that out right here in Canada, where at the present time everything is going on just as usual, as if there were no war. We are too sanguine yet. We do not yet know to whom this country will belong a year from now, because help may come too late.

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I wish to tell the government and hon. gentlemen opposite that the time which has
been taken up in the discussion of this question does not commend itself to the wisdom or judgment of the people of this country in view of the primary grave great danger confronting us and Britain at the present time. Canada should wake up to this danger before it is too late. One might think, listening to the debate that has been going on here in the last two days, that there was some royal road to victory. There is no royal road to victory; there has never been one but service and sacrifice, and the people of this country are at this moment very much alarmed. During the Easter recess members visited their constituencies and found that there was a great deal of dissatisfaction with Canada's on-again, off-again, war effort and the way Canada has been spending money, half of it not for primary war purposes at all but for home defence. More than two-thirds of the money we have spent-and it comes to nearly two billion dollars-does not amount to a snap of the finger as far as beating Hitler is concerned. These bonuses, subventions and subsidies for grain and agriculture are all right in their way, but questions of this sort should be dealt with by a committee of the house.
Hon. gentlemen opposite have had their trade policy for this country, and it has been everything by fits and starts and nothing long. The free trade hall in Manchester was destroyed by the Huns the other day. Almost every prominent politician in Great Britain since 1860 has spoken in that hall. Free trade is forever dead in Europe. It helped to cause this war. The people over there were led to believe that free trade was the policy for Great Britain, and the farmers on the Canadian prairies were led to believe the same thing. But Richard Cobden divined the danger, and he said:
I doubt the wisdom, I certainly doubt the prudence, of a great body of industrious people to allow themselves to continually live in dependence on foreign powers for the supply of food and raw material, knowing that, at present, a system of warfare exists by which at any moment, without notice, without any help on their part or means of prevention, they are liable to have the raw material or the food withdrawn from them-cut off from them suddenly-without power to resist or hinder it.
Britain may be starved out, because she imports 80 per cent of her food, 100 per cent of her raw materials, and all her oil and gasoline. Yet we have had hon. gentlemen opposite contending for years that the graingrowing industry of western Canada was a free trade industry. The object of this debate, as I see it, is to peg and raise the price of wheat, and give it increased bonuses, subsidies
and subventions. We are so told in the articles that are being written in the Globe and Mail by the former member for Southeast Grey-rap on the door of parliament and make them boost up the price. It is all very well for us to go as far as we can in ensuring the farmer a reasonable price for his product, but there is a limit commensurate with the ability of the country to pay and having regard to the consideration that must be given to other industries, and agriculture in the other provinces as well as the prairies. The country is not pleased with our war effort.
There is no doubt that a man who has served his country splendidly in time of peace may be totally unfitted to lead it in time of war. They are two different things. Many of our political executives have not done well since the war started. It could not be expected that they would, because they have been supporting peace pacts, collective security, the league and the like, to take the place of service and sacrifice-something which in the whole history of the world has not been possible. Some of our political executives in Canada lack the elements of courage and decision which are so essential in war time, and have acted only after being compelled to do so. The country has not been given the vigorous leadership which it needs. Party politics should have been put in cold storage for the duration of the war and one year after; for if we lose, life under Hitler will not be worth living.
The Minister of Agriculture (Mr. Gardiner) visited the west in the Easter holidays. I should like to have the attention of some of the ministry. Three of the ministers on the front benches now are some of those who have been criticized for their administration, as well as the Minister of Agriculture. The Minister of Agriculture spoke in Regina in the heart of Canada's wheat belt on April 14, and this is what he said:
"There is no use sugaring the pill to try to convince you we are trying to do something for you", Mr. Gardiner said. "We are trying to do something for Canada and Britain and for the democratic way of living. It is not my intention to try to convince you that what we are asking you to do will help you financially."
If Canada grew all the wheat this year to feed "all the people Britain wants us to feed", only 230,000,000 bushels would be required. Anything over that figure, apart from some
70.000.	000 bushels required for use on the farms, could not be disposed of for three years.
Every 100,000,000 bushels produced above
300.000.	000 would cost the government $100,000,000 on top of the $450,000,000 already tied up in wheat.
But the minister said three years ago that Canada should get out of the wheat market-
Supply-State oj Agriculture

ing business altogether. We were told then by hon. gentlemen opposite that the graingrowing business was a free trade industry and needed no protection, that it operated under the law of supply and demand, and that we should get out of the wheat marketing business altogether. Yet the Liberal party came later and supported all kinds of protection and bonuses and subsidies.
In the sessions of 1938 and 1939, I saw the war coming and from these benches I urged the government to establish grain reservoirs in England. There had been a meeting of the British medical association in the city of London at which it was said that Canadian hard wheat was the best in the world and that it would last in storage for ten years. If my suggestion had been adopted then, we could have cleaned out the elevators of this country and carried and stored the grain in Britain in 1938 and 1939, before the war began. But look at the position to-day! No market for our wheat and the farmers suffering because the government of the day misjudged the whole world wheat and European war situation! The government were hardly in office when, in spite of their free trade professions, they came down with the most advanced kind of protection-a stabilization fund, pegging the price of grain, price fixing, subventions and bonuses and subsidies for storing grain, and, last but not least, this $35,000,000 vote, and nobody knows where that is going to end. If there is protection for one part of the country, I would point out that the people of Ontario are suffering just as much as the farmers on the prairies. I have seen the farms of this province and I know the conditions under which our farmers are labouring. Take the industrial workers-nearly fifty per cent of the population; they get little or no protection in this country. I am urging protection not for them alone, but for all our people, not just some, because I believe in the principle of confederation of all provinces, the old Cornish battle cry: "each for all and all for each." What is good for one province is good for all the far-flung provinces of this dominion.
There are two or three grievances on which I should like to touch, as is the right of every private member on a motion to go into supply. We in this opposition are not supposed to be a lot of yes-men. I am sorry that more members are not present in the chamber to-night. We have been sent here to represent our constituents. The rise of the dictators in Europe, in Germany and Italy, was because the yes-men and the nodders surrendered to the usurption of their rights,

privileges and prerogatives without any opposition at all to the dictators, and yielded to autocracy and surrendered to them. Once a dictator is installed, there is no way of unhorsing him except through war. We have seen the result in Italy, Germany and Russia.
It is the duty and function of this opposition not to let any prime minister, no matter who he is, go to Washington or other capitals, and sign a note or treaty on behalf of this country over the head of parliament, or the other dominions, or the mother country. Under our empire system we owe a duty to the mother country and the other dominions as well, to coordinate and cooperate, and all we have to do is agree to it because we cannot change a line. The trade with the United States treaty of 1935 was a mistake. It destroyed preferences and the duty we owed to our empire and the mother country. Our trade treaties should not be made by Washington over our heads. Even if I am the only member of this house to do so, I will oppose any proposal to substitute autocracy for the constitutional practice which has prevailed in the relations of this country with the motherland and with British connections and the other dominions of our empire. In 1844, Sir John Macdonald said that the future history of this country must be wrapped up with that of the mother country, the old mother country which up to a few months ago had to stand all alone across the seas against the beastly dictators and all their ways, and go it all alone for freedom and liberty and the generations yet unborn, and decide the fate of the world for the next 200 years.
I contend that it is the duty not only of the opposition but of all other hon. gentlemen in this house to see to it that our constitutional practices are followed in Canada. Without consulting the governor general, without consulting the crown, without consulting either house of parliament, a note is signed over our heads, binding us without any longdated foreign policy in America. I doubt if it means very much, because the first note which the government signed in the treaty of 1935 abolished preferences largely. It destroyed the preferences that had been built up under the Bennett agreements of 1932, preferences which, in my opinion, would have sounded the death knell of Hitler and led him to believe the dominions would be for isolation. But they were repealed, and the dominion, at this imperial conference, took further the stand that we would have nothing to do with shipping, that we would not follow Britain. The government supported the

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statute of Westminster, that empire-wrecking statute which practically put Canada out of the empire, and gave away the Eire bases. The government are co-founders and authors of the statute of Westminster, whereby we became a separate dominion, making our own treaties, and all that kind of thing separately from the motherland, and now following geography, and not history, which always repeats itself.
It is of the utmost importance that we should have amicable relations with our brethren, our kinsmen in the United States, and everyone, I have no doubt, rejoices to see the splendid help given, and the improved state of affairs in this regard for the freedom of the world, and the destruction of these savage dictators. We all rejoice that the United States have at last come to the help of the mother country with the lease-lend bill, although I hope that help is not too late. As I said when the war broke out, it takes two years to train a man and two years to get any munitions. The lease-lend bill has not gone as far as I for one would like to see it go. We are entitled to much more instead of half a loaf for our votes for America's protection. For one thing, it does not solve the exchange situation; according to the Prime Minister, it represents favourably S200,000,000 to
8300,000,000. He believes it amounts to that. The estimates given in the financial schedules are too rosy. The Ogdensburg agreement and the agreement of 1935 are related; one is the corollary of the other, as is the Hyde Park declaration. The first meant a loss of preferences to this country, preferences which increased trade between Britain and Canada by about 44 per cent, and between Canada and Britain by 43 per cent. I contend that we should have a treaty instead of a note, and nothing should be done over the head of parliament.
To come to some grievances with respect to the war, why was this important measure with regard to national military training delayed until now? In this connection it is interesting to note what William Pitt said in the British House of Commons in July, 1803, because the words he used then are relevant to-day. Perhaps I might make this observation in passing. Everyone seems to be afraid of the word "conscription". I am not afraid of it. Everyone runs away from that word, but I would point out that we already have conscription, imposed by hon. gentlemen opposite. On a previous occasion I have used the expression, recruiting on again, off again, on again. Now we have conscription on again, off again, on again. It was off again, on again, for thirty days, and now it is extended and on again to four months and made retroactive-in my
opinion, a most unsportsmanlike thing to do. I suggest that if we had had from the start any real effort to have a really good voluntary system which would have appealed to the enthusiasm of the youth of the country when that enthusiasm made itself manifest, instead of turning young men away when they sought to enlist, we would have had over 1,000,000 men to-day armed and trained-and this is the twentieth month of the war. This is what Pitt said on the occasion to which I have referred. It is a condemnation of our own government and their inaction and inertia in recruiting. Pitt said:
Why was this important measure, national military training, delayed?
I cannot conceive any excuse that can be alleged for such procrastination.
That was what William Pitt said in 1803, a.nd those words -are equally pertinent at the present time. Everything that Pitt said then is worth attending to. His problems were those that confront us to-day. The pace was different and the battle was waged nearer home than at present, but the difficulties were not different from our own. In 1793, as in 1939, we entered a war for our very existence. We were unprepared, and up to the last moment Pitt had hoped for peace. But when war came, then as now we were resolute. The vast international propaganda from which we have suffered has not yet touched the mass of the people. In Pitt's day it had not begun. Speaking in 1793, William Pitt made this statement:
This country has always been desirous of peace; we desire it still, but such as may be real and solid, and consistent with the interests and dignity of Britain, and with the general security of Europe. War, whenever it comes, will bo preferable to peace without honour, without security, and which is incompatible either with the external safety or with the internal happiness of this country.
The magnitude of this war calls for real sacrifice. Canada needs to wake up to the fact that there is no royal road to victory. We have been too late in everything. In my opinion, national service in the industrial field should be voluntary. Labour in the last war, and so far in this, has risen to the situation and labour must be free.
Away back in 1937, 1938 and 1939, I was urging national service for this country as a means of absorbing the high school youth and those riding the rods, and directing their energies into a worth-while channel of technical and vocational schools for youth, for peace and war alike. The country spent in all one billion dollars on the dole, dominion, provincial and municipal, without any result at all. Had the national service for youth suggestion I offered been adopted and put
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into practice, we would have had 300,000 men trained when the war broke out and 25,000 skilled air pilots and mechanics. The air training scheme began too late. I urged a compulsory national registry in 1937, and a survey of all industrial plants, but nothing was done in that connection. The government would not take any suggestions from within or from without.
We have a huge bill now, and we cannot meet it without economic reactions which will have their effect on our whole standard of living. In my opinion, if the ministry had only adopted a proper recruiting system, the situation with regard to military training would have been vastly different to-day. A great many young men, bent on giving their services to their country, went to recruiting stations only to meet with discouragement. The right spirit was there so far as these young men were concerned, but the government had not the courage to take advantage of that enthusiasm. The real spirit of service and of sacrifice was evident on the part of Canadian youth when war came, but there was no system and the respite of Munich went for naught. The fervour of patriotism on the part of Canada's youth was not directed into proper channels, and we failed in works meet for repentance in rearmament, to face the next crisis of September, 1939, which came less than a year after. The old phrase, "Strike while the iron is hot," was ignored, while the fervour for service lasted, and this fervour was wasted and allowed to cool-with recruiting, "on again, off again."
The respite should have been used after Munich to bring about national service, but the government did nothing. I saw young men going to the recruiting stations and they were rejected. Although fit, there was no place for them, and one youth said to me, "Oh, well, if they do not want us, I suppose it is all right." The initiative rested with the government and they refused to take it. The will for national service was there for the asking, but the government dampened all ardour. There were many other agencies that killed recruiting, which now no new civilian committees can cure. One of them is the hitch-hiking order, another the lack of free transportation for soldiers, another the lack of a policy with regard to soldiers' insurance. In this country everyone but the soldier is insured, or will be.
Who killed recruiting and the voluntary system? I, said the national service department. I killed it with my little hatchet of judges and juries and all that kind of thing, a department loaded with civilians who exempted wholesale; they killed recruiting. Who else

killed recruiting? I, said the railways they had such influence that they got the hitchhiking prohibition order. I, said the insurance companies. They prevented the government from bringing down an insurance policy to protect the soldiers of this country.
Gordon of Khartoum said that we are a wonderful people. He knew something about the politician. In connection with that campaign in which he lost his life he said:
We are a wonderful people. It was never our government which made us a great nation, our government has been ever the drag on our wheels.
That is found in Gordon's journal at page 191.
We do not know to whom this country is going to belong by the end of this year, or by the beginning of next year. The situation is very grave at the present time as far as this empire is concerned.
In my opinion, some of these grievances that I have mentioned should be remedied. We have such misleading information given us by the information bureau that some of these people should be dismissed. Just the other day some unknown person in the Department of National Defence gave an interview to the Toronto Globe and Mail, in which he said Toronto lags in recruiting; a falsehood, and when I made inquiry regarding it, I received a reply from the deputy minister of the department saying:
I have been able to trace the source of the "revelation" referred to in the article which accompanied your letter of April 19.
The basis of the article is a discussion between a reporter and someone here who thought he was speaking off the record, and who had no idea that he would be quoted. I am in a position to assure you that he was not speaking for the department, and that his statement was a very unofficial one, to say the least.
Why such damage to unity and recruiting? I have the enlistment figures for the last week, Ontario leading two to one. Then I have a return from September 1, 1939, to March 31, 1941, for the Canadian naval forces: Ontario, 516 officers and 4,550 ratings, total, 5,066. Toronto city has been the chief centre for recruiting.
It is for these reasons that on the motion to go into supply I assert my right to bring up these grievances against those in charge of publicity. The questions I want to raise are these:	Under this Ogdensburg note a defence
board, to consist of five people, was appointed without any authority from this parliament. Then the mayor of New York comes to this country and makes a speech in Ottawa announcing Canadian defence votes and works, which makes this parliament a laugh-

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mg stock in the old land. He said, I will go out a thousand miles with our defences; I will do this; I will do that. He has nothing to go out with; he has no war experience; his country, like ours, was wholly unready for the war and unarmed. Why does he go over the head of this parliament and Britain, and our duty to the other dominions and to the empire, and make such announcements without consulting the mother country? To cost Canada millions with parliament meeting. Are we a separate country like Brazil? Canada since the great war has been the chief drifter from the motherland. I protest. We have a grievance in that connection. The time has come for Canadian politicians to cease being for Britain in a Pickwickian sense only, Britain and the other dominions should be consulted. We have a duty to the other dominions as well as to the mother country in this emergency, to act in union, and to cooperate with them. How can we agree to notes over the heads of other dominions and without the consent of the empire or of this house?
In connection with the lease-lend bill, a month or two ago I urged the government to do their utmost to qualify under it for all the money Canada has spent for American defences. We are very thankful for this measure, but it must be observed that we have got little or nothing out of it; in the end, Washington will have to be paid, because, according to the Prime Minister's notes, Britain will have to pay sooner or later, there will be a showdown and Britain will have to pay for everything she gets by this note. Britain has had to pay Washington for all her munitions and food in cash' and carry down to the passage of the lease-lend bill, because, under the Neutrality Act, the United States gave the dictators and the free countries equal rights and equal treatment. All this getting of parts from the United States free for us to manufacture the articles and send them when finished to the mother country must be paid for. The day of reckoning will come when a bill will be put in by the United States to the mother country for that. What is Canada's foreign policy in this and other matters? She has not had one since the great war.
The people of this country are entitled to know whither they are drifting. Where are we now? When I asked a question in this house as to the handing over of the West Indies-Newfoundland bases, I was told it was a matter for the British government alone. It is not. We cannot separate ourselves from the policy indicated in connection with this matter. We will be bound by it for the next
hundred years. No one says a word. The time may come when there will be trouble and war between Japan and America, because Japan has already signed an agreement with Russia and Germany, defensive and offensive, due in part to the actions of this country in the past. We should never have lost Japan as our ally, but this was done under an appeasement plan of Britain on Canada's urging in 1921. In the great war Japan was our ally; she took care of the Pacific and protected New Zealand and Australia. Yet, to appease another country, we drove this faithful ally into the camp of the enemy and into the German orbit; and Italy as well, and to appease another country we gave up the Irish bases. The other day Mr. Churchill told the British House of Commons about the sinking of 144,000 tons of shipping off the Irish coast and the lights of Eire, guiding Hitler's planes to the cities of Britain for the work of destruction. He regretted the fact that the British navy is debarred from using the ports of southern Ireland, which were of inestimable service to the empire in the great war. He said:
The fact that we cannot use the south and west coasts of Ireland to refuel our flotillas and aircraft and thus protect trade by which Ireland, as well as Great Britain, lives, that fact is a most heavy and grievous burden and one which should never have been placed upon our shoulders, broad though they may be.
Let there be no mistake, it was not northern Ireland that placed that burden upon the broad shoulders of Britain.
That was reiterated the other day by President Roosevelt, who said that he was not going to stand any longer the sinking of ships with their munitions and food on the Atlantic by the dictators, and would take steps to meet the situation. These ports belong to the empire. Without them we would have lost the last war. An empire conference in London is needed on this and shipping matters.
I believe the time is not far distant when the government will have to decide once and for all what Canada's foreign policy is. In America and in the empire, whither are we drifting? Hitherto Canada has never had any foreign policy. We would never have had this war if the dominions had had a foreign policy, and had not one of isolation and separatism. At the last colonial conference, what happened? Hon. gentlemen opposite were represented by the present Prime Minister. When the shipping question came up and it was shown that we had 2,000 fewer merchant ships than in the great war but
5,000,000 more mouths to feed, the Prime Minister said "We have no commitments; parliament must decide." That was Canada's

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policy of hiding. Talking of empire action, we in this house or the government never did a thing to try and influence Britain on these lines of rearmament and a vast merchant marine policy until too late. Canada led Hitler to believe that the dominions would not line up with the mother country as in 1914. It was clear from the last imperial conference that Canada never had a foreign policy. We have no foreign policy to-day. The government signed a note at Ogdensburg, another one at Hyde Park; yet we have no long-term foreign policy for this continent to-day. We are, without parliament's knowledge, bound by those notes; yet there is no reason why we should have any quarrel whatever with Japan, our old ally across the Pacific. If she has a war with America, we will be involved to protect America's shores. We were told that Canada's principle of defence was (a) home defence and (b) the protection of Canada's neutrality in case a foreign power invaded America.


Mr. T. F. DONNELLY (Wood Mountain):: Mr. Speaker, I must agree with many of the things that have 'been said with regard to the condition of agriculture in Canada; but I must add that many of the things that have been said are not at all new. This condition has existed in Canada for the last ten years; it is not something that has come up overnight or within the last few weeks or months. I have heard the condition of agriculture discussed in this house off and on during the last ten years, and always the arguments advanced have been almost the same as those we have heard during the last few days. But when this war began farmers throughout the country said, "Now our condition will be better, because in every war the first prices to rise have been the prices of agricultural products. The farmer will get a better price for 'his products; he will be better off, and all his problems will be solved". For a time after the war started, prices of farm products did improve; but after Germany overran the low countries and France, farm prices either slumped or stood still, and we have had no improvement, practically speaking, since that time.
While, however, the condition of farmers throughout the country may be bad and may be critical, one class of farmers has been a real war casualty. I refer to the wheat growers. Whatever may be said with regard to the mixed farmers in respect of cheese, butter, pork and cattle, at least they can sell these commodities even though the price may not be very good. The wheat grower, however, not only has to take a poor price; he can sell

only a certain quantity of wheat. This applies to western Canada and, in particular, to Saskatchewan, because something like seventy-four per cent of the income of that province is derived from wheat. No part of western Canada is suffering so much from the situation in which we find ourselves as the constituency which I have the honour to represent. We are entirely a wheat growing country. For ten years we had no crop whatever. For ten years we had to bring in our wheat for seed and our oats and barley to feed our chickens and pigs. We had to bring in our hay and straw in carload lots to feed our cattle and horses. Then, at the end of that period, we had two good crops, but we had to sell our wheat at low prices. Now we are told that we have been producing too much wheat and we have to cut down our wheat acreage. Well, it is not very pleasant to have to do that, but the people in my constituency and in western Canada are just as loyal as the people in any other part of this country. They realize that this is a war condition, and they are willing to put up with these things in order to help win the war.
This situation in which we find ourselves is not something that has been brought about in a day or two. It began something like ten years ago, when the central European countries began to pay bonuses to their wheat growers, to impose restrictions, to impose quotas in order to prevent other nations from shipping wheat to them. Then we began to lose our markets. They bonused their wheat growers more and more, until in certain parts of Europe wheat was selling for $2, $2.50 and $3 a bushel, while our farmers were getting 40 and 50 cents. In Europe they said to themselves, "If war ever comes we will be self-contained; we will not be dependent on the rest of the world. We will be able to feed our own people from our own wheat, produced in our own country". That began ten years ago, and for that reason we may find it harder to starve out Germany than it was in the last war. Germany has been preparing for just this eventuality. Therefore, when this war started, we found many of our foreign markets gone; prices were low, and so our wheat began to pile up.
Last year we decided that we had a wheat problem. At that time the government, realizing the extent of that problem, asked the wheat board to put into effect a quota system, under which only so many bushels per acre would be accepted by the board. That quota system was put into effect, and it worked well. I want to congratulate the wheat board on the manner in which the crop was handled last year; they made a good job of it. That system was satisfactory to most of the farmers

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of western Canada, and they now say, "It is too bad we did not have a quota system in our good years. It would have taught us how to finance, and we would not have had the debts we now owe. In our good years we would sell our wheat in the fall, get our money and spend it, often foolishly. Then in the spring we would have no money, and would have to go to the bank or the loan company to borrow money in order to put in our seed. As a result we got into debt. If only the government had put in this quota system in our good years, it would have been a lot better for us in western Canada." That is what they think of the quota system. We hope the government will continue that system, because it has proved satisfactory and is working well.
The other step they took last year was to pay farmers for storing grain on their farms. In my opinion, the best and cheapest place to store grain is on the farm; that is where it should be stored. That plan worked well; the farmers are well satisfied with it, and they hope it will be continued in the years to come.


Mr. HARRIS (Danforth):: And more of it.


Thomas F. Donnelly: Yes, and we hope there will be more of it. On August 1 of this year we expect to find ourselves with a surplus of
575,000,000 bushels of wheat, with all our storage facilities filled to the roof, with no place to put any more wheat.


Joseph Henry Harris: Build more.


Thomas F. Donnelly: We did build more
storage last year. We 'built storage capacity for something like 70,000,000 bushels in annexes to our country elevators, and for about 50,000,000 bushels in additions to our terminal elevators. But the government realized that this could not go on indefinitely. It would be all right if we had plenty of storage, but we cannot go on building more and more storage space, because this war may continue for the next four or five years and we would only pile up more and more wheat.
Already we have something like 3400,000,000 invested in our wheat surplus. Therefore the government decided there would have to be a cut-off date, and fixed that date as the end of August. At that time the 575,000,000 bushels in storage will become a national responsibility, a national reserve. Then we will turn over a new leaf; we will start over again and take from the farmers only the amount of wheat we think we can sell abroad and consume at home, which will be something in the neighbourhood of 230,000,000 bushels. So the government has decided that
all it can be expected to take next year is
230,000,000 bushels. In travelling throughout the country, meeting people all over the west, I have come in contact with few who have found fault with that decision. They say they cannot expect the government to take more wheat than they can sell, and they cannot expect them to build more and more storage. I am sure I have read twenty-five or fifty different solutions for our wheat problem. Each man has his own solution; each has his own idea. One of the things we come up against, one of the stumbling blocks or bones of contention has been that of deciding what the price should be. We hear this discussed over and over again. We hear it in the House of Commons. Some are asking for 70 cents, but the majority are asking for 85 cents, 95 cents, $1 and even as high as $1.25.


Mr. MacNICOL:: And $2.


Thomas F. Donnelly: Yes, some would like to stretch it to that. I would not be backward in taking all I could get, either. You cannot blame a farmer for taking all he can get. But there are certain arguments in favour of raising the price, and there are other arguments against raising it.
The contention is that if we raise the price of wheat so that it is out of line with prices of coarse grains-out of line with the price of barley, out of line with the price of oats or any other coarse grain-the farmer would then raise more wheat and less coarse grains. The result would be that we would have more wheat. Whatever our legislation may be, it should not be such as to induce the farmer to raise more wheat. The moment we raise the price of wheat too high, just at that moment we shall have every farmer go in for raising more wheat-and do not make any mistake about that.
The wheat problem in Manitoba is not a problem, at all. We have only two or three million acres of wheat in Manitoba out of a total of 28,000,000 or 29,000,000. They grow coarse grains in Manitoba. But the moment we say we are going to do what some people say must be done, the moment we say we will pay 85 cents a bushel for wheat, then just at that moment every farmer in Manitoba will raise wheat instead of coarse grains, with the result that we shall have more wheat, and a state of confusion worse confounded.
Saskatchewan would be in the same position. In the northern part of that province there are some 30,000 or 40,000 small fanners. They grow a little wheat, a few oats and a little barley. But the moment the government says, "We are going to pay you 85 cents" -or 95 cents, or $1 or $1.25-"for your wheat",
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build any more terminal elevators at the head of the lakes, they insisted that the government sign on the dotted line and agree to continue the storage charges for another two years. If there was any patriotism or any loyalty on the part of the pool organization or the elevator companies, they would have agreed to take $30 million instead of insisting upon getting $60 million, and agreed to give the other $30 million to our farmers. Our pool elevators are no more patriotic or loy^al than our line elevator companies.
We hear a great deal to-day about industrial labour. On March 31 the Minister of Labour made an announcement with regard to industrial labour. He said that they should have a wage rate equal to that which obtained in 1926-29, and that labour should be paid an extra cost of living 'bonus because the -cost of living rose from time to time. Since that statement was made, I have looked up certain figures published by the bureau of statistics. I find that the hourly rate paid to industrial labour in 1926-29 was *91 [DOT] 2 per cent higher than the rate paid in 1913-14. The present hourly rate paid to industrial labour is 98-3 per cent higher than it was in 1913-14. In other words, wages paid to industrial labour are higher to-day than they were in 1926-29.
Let us turn over the page and look at what we find on the other side. What about wheat? At the present time the price of wheat is 14 per cent lower than it was in 1913-14, and yet the rate paid to industrial labour is 98-3 per cent higher than it was in 1913-14.	Is that equality of sacrifice?
But that is not all of it. Industrial labour has insisted that it shall receive an extra bonus as the cost of living goes up. But the cost of living to-day is lower than it was in 1926-29. If labour was satisfied with conditions as they existed in 1926-29, surely it should be willing that the whole thing should carry through, that the cost of living should rise until it was equal to the cost of living between 1926 and 1929 before labour asked for increased wages.
What does the bureau of statistics show with regard to that? It shows that the cost of living from 1926 to 1929 was SI per cent higher than it was in 1913-14, and that the cost of living now is only 36 per cent higher than it was in 1913-14. Therefore the cost of living to-day is lower than it was between 1926 and 1929, and I maintain that industrial labour should be satisfied not to ask for any increase in wages until the cost of living goes up at least to what it was between 1926 and 1929.


Gordon Graydon: If the hon. member will permit a question, does he think that, at the
[Mr. Donnelly.i
present stage, labour is getting too large a share of the national income?


Thomas F. Donnelly: Yes, I do, and if there are any profiteers in this war, if there are going to be any profiteers when this war is over, the profiteer is going to be labour. I say that without any hesitation.


Gordon Graydon: No one else will agree with the hon. member.


Thomas F. Donnelly: My hon. friend may not think so, but I do. They have decided at a time like this to strike and ask for more wages. Is that equality of sacrifice with the wheat grower? No. I think the wheat grower is taking the raps and that labour is not.
There are many more figures with which I intend to deal later on, but to-night I wished to refer to just this one fact, that there is no equality of sacrifice when one compares labour with the wheat grower. It is the wheat grower who is making the real sacrifice at the present time, and he is willing to do so from patriotic motives. But I say that other classes of workers should also be ready and willing to make their sacrifices and to play their part.
On motion of Mr. Cleaver the debate was adjourned.
On motion of Mr. Crerar the house adjourned at 10.55 p.m.
Wednesday, April 30, 1941.