1942-06-23

LACK OF SUPPLY FOR MAGDALEN ISLANDS FISHERMEN

[Stage Direction]
On the orders of the day:
Mr. J. S. ROY (Gaspe):: Mr. Speaker, I should like to direct a question to the Minister of Munitions and Supply. A few minutes ago I received a telegram which reads:
Grindstone, Magdalen Islands, June 23, 1942.
J. S. Roy, M.P.,
Ottawa, Ontario.
Carload seventy drums marked gasoline consigned to myself left in Piotou Monday on instructions government inspector. That is what is being done to relieve shortage situation. This oarload must be loaded Thursday as there is no other means transportation. Please get matter cleared in time and wire.
Oscar Delaney
Will the minister take care of this situation if possible?


Hon. C. D. HOWE (Minister of Munitions and Supply):: I drew the attention of the officers of the Department of Transport to the needs of the Magdalen Islands, and I suppose that this is an effort to relieve the situation. However, I shall see that the situation is relieved as adequately as possible.



MOBILIZATION ACT


[Stage Direction]
The house resumed from Monday, June 22, consideration of the motion of Mr. Mackenzie King for the second reading of Bill No. 80, to amend the National Resources Mobilization Act, 1940, and the amendment thereto of Mr. Roy.
Hon. J. L. RALSTON (Minister of National Defence):: Mr. Speaker, I may say for the edification of the house that I hope not to take too long in my discussion of the bill which is before us this afternoon. There has been a long debate; most of the points have already been brought out, and it seems to me that the discussion ought not to be prolonged if that can be avoided. Having said that I may disappoint myself, and you, Mr. Speaker, as well; but I hope for the best.
The bill is the result of the plebiscite which was held on April 27. There has been some talk and discussion as to the meaning of that vote. I myself have no doubt about

Mobilization Act-Mr. Ralston
what the vote meant. I do not say that it was a mandate for conscription for overseas service. I do not say that it was a direction to the government to put into effect compulsory service for overseas. But what I do believe, and what I think the vast majority of the people of this country believe, is that the voters considered and expressed themselves to this effect to the government: Raise the men in any way you think necessary to help win the war. And underneath that declaration was a definite indication of a green light to the government to go full speed ahead.
I want to express my profound appreciation of the unmistakable response which three millions of the citizens of the dominion gave in authorizing the government to do everything it considered expedient to prosecute the war effectively. I recognize that it was not a vote of confidence in any government, and it was not taken as such, but I do believe that it can be regarded throughout the world as a resounding declaration by the people of Canada that they are heart and soul in the war. The government is immediately following that up by introducing this bill to ask parliament to give to the government the legal freedom of action which the moral freedom of action given by the plebiscite would indicate.
I think, Mr. Speaker, that this debate has helped us all to get a clear view of the troublesome and inflammable question of conscription. For a long while conscription was something that was talked about almost in whispers. There is nothing sinister about conscription. It is only a method of raising men for service in the armed forces, or in any other activity, for that matter. We have conscription in Canada now. We have had it for over a year or more; there are between 30,000 and 35,000 men training or serving in Canada at this minute who were conscripted, if you want to use that term. There are about 50,000 men, including that 30,000 or 35,000, in the army, navy and air force who came in through the call-up. Nobody suggests that it is a bad method or an inefficient method for service in Canada. The only question is whether we should have power to widen the area of service in order that these men could be sent overseas if necessary. I think the real question is not whether conscription is an efficient method but whether there are considerations which override its efficiency.
Speaking of men for overseas service, I stated in February that I preferred the voluntary system if it worked, and I gave my reasons: first, because it provided volunteers for a voluntary army; and second, because of the division in this country which conscription would produce. These, I think, were substantial reasons. I would always prefer to see our Canadian army overseas purely a volunteer army. But if to maintain and reinforce and strengthen it, it should become necessary to require men to serve overseas, then obviously so far as I am concerned there can be no alternative, because we cannot let the army down, and, what is even more important, we cannot let Canada down.
. On the other point, regarding disunity, that-and we might as well face it-is the toughest problem in government to-day. We do not want disunity. But the price of unity must not be too great. We know that there is a deep-rooted antipathy to compulsory overseas service in certain sections of this dominion, and it is quite probable that that antipathy springs from a failure to realize that it is Canada's battle overseas just as much as it is in Canada. No one has explained that situation and that feeling in clearer and more informing terms than my colleague the Minister of Justice (Mr. St. Laurent), who made that excellent speech a short time ago. I am sure that the Prime Minister (Mr. Mackenzie King), and the Minister of Justice; our former colleague the member for Richelieu-Vereheres (Mr. Cardin) and many other members from Quebec, have tried to bring this fact home- that it is Canada's war overseas as well as in Canada. I am sure too, Mr. Speaker, if I may say so, that those in my department have spared no effort to bring home to our fellow citizens in the province of Quebec the importance of our overseas effort. While there will be those who doubt it, I have myself been fairly earnest and reasonably industrious in recognizing and trying to remedy the handicaps and difficulties that exist.
When the recruiting campaign was on a year ago, I took strong grounds when some members on the opposite side of the house insisted on raising this question of conscription. I urged that it should not be raised before the voluntary system was given a real trial and before the need for conscription was established. As a matter of fact, I believe I was the only member on this side of the house who did make that appeal, and I made it because I remembered what took place in 1917. I want to afford every reasonable opportunity and every possible help to those who have an aversion to compulsory service overseas, or to overseas service in general, to enable them to realize that overseas is Canada's front line. I hope most fervently that this realization will come very fast in the midst of the ominous events of these days. We are having it driven into us every day that this is a fight to a finish, and that we have to think of even more than our unity. We are facing

Mobilization Act-Mr. Ralston
the possibility of fighting for our very existence. If considerations of national unity should come into conflict with measures for our national security and existence, then surely it is the security of the nation which must count-and by that I mean the security of all the nation, both the majority and the minority. It may be that if that test comes we shall find our national unity in the mutual support which we shall have to give each other and which will be imperative by reason of the instinct of self-preservation itself.
So that this bill, Mr. Speaker, gives the government the power to require men to serve in any military, naval or air force of this country outside of this dominion whenever in the opinion of the government, to use the words of section 2, it "may be deemed necessary or expedient for the defence of Canada or the efficient prosecution of the war."
Now, why is that power required? In the speech from the throne, which has already been quoted, there was no mistaking the attitude of the government at that time. In the words of His Excellency the Governor General, which had first been prepared by the government:
The government is of the opinion that, at this time of gravest crisis in tile world's history, the administration, subject only to its responsibility to parliament, should in this connection and irrespective of any previous commitments, possess complete freedom to act in accordance with its judgment of the needs of the situation as they may arise.
That, Mr. Speaker, was after Pearl Harbour, after December 7, after the flames which broke out in Europe had spread to Africa and encircled the globe. It was about the time of Singapore and Manila. Since that time the Japanese have come back again to Midway, badly crippled; they limped back home; but since that time the Japanese have set foot on the far end of the bridge which connects Asia with north America, and the day before yesterday we had reports of the Japanese shelling Vancouver island.
Canada has three fronts. But I consider, notwithstanding all that has taken place on the Pacific, that for us in the long run the English channel is probably the most vital point in the strategy of the war. Over there the forces of Britain, the forces of Canada, and, not far away, the forces of the United States stand ready to beat off an attempted invasion. They stand ready also to attack in an offensive which must come and which must succeed if the cause of the united nations is not to perish. Over there Canada has naval units, army units, air force units: the naval units taking part in the Atlantic convoys and in the patrols; the air force fighting

not only in Britain, not only in Europe, but in the middle east and the far east as well; the army standing guard, as it has for two and a half years, doing grim vigil, sometimes in the line and then out again for training, doing boring work, waiting for the time when that training can be put into effect. Canada at the present time has in Britain three infantry divisions, an armoured division, an army tank brigade, thousands and thousands of corps, army and divisional troops; and this year we expect to send over another armoured division and another army tank brigade. Those are the commitments we have on that front. That is what we are doing with regard to the English channel.
I will not trouble to-day, because it is probably not important in connection with this discussion, to detail the extent of our forces in this country. I will only say that we have the sixth, seventh and eighth divisions mobilizing or mobilized; we have the fourth division for the time being, until it goes overseas; we have coast defence artillery and infantry, searchlights and signals and all the services that go with them; we have ninety training centres across Canada, and we have internal units guarding vulnerable points and for the purposes of internal security. In Canada the air force is patrolling this country and guarding both our coasts, as it is doing in England, and the navy is working day and night in its ceaseless patrol, not only of our coasts but in connection with the convoys which leave our shores.
That, very quickly, is a review of the mansized job which the armed forces of Canada are doing at the present time. No Canadian need apologize for the extent of the participation of the armed forces of Canada in this war. At the same time-I have said this again and again, and I repeat it, that whatever we have been doing should simply inspire us to search our hearts to find out if we cannot do more. We are now working on the 1942-43 programme, which calls for
90,000	to 100,000 men during the fiscal year. During the first two and a half months of this fiscal year we have enlisted just under 30,000 men; that is, at the rate of 12,000 a month. That number has to be cut down to some extent because a portion of these men are enlisted in units which are designated for home defence. Nevertheless they are of course available for reinforcements overseas if need be. Leaving them out entirely, we find that about 8,000 men a month have been enlisted, so that in the result voluntary enlistments have been coming in in sufficient numbers to provide what we were advised was necessary to take care of the overseas programme announced in January.

Mobilization Act-Mr. Ralston
That, Mr. Speaker, is just the beginning, because new demands are coming in. The Prime Minister mentioned in January that we expected to mobilize in Canada probably another division, at the time of th'e dispatch of the fourth division overseas. As a matter of fact we are mobilizing the seventh and eighth divisions as well as the sixth. We have mobilized a very substantial number of additional anti-aircraft units. Since I spoke in January we have called up no less than
45.000	men. That includes the requisition for the month of July, which has already been sent to my colleague the Minister of National War Services (Mr. Thorson). We have enlisted in the army since that time another
45.000	men, and we have expanded our training facilities so that we are now training men not only in these ninety training establishments across Canada, but in units as well.
Under the intensified activities we have in the army, under what might be referred to as the forced draught under which we are proceeding, we feel, and the government feels, that neither the government nor anybody else knows nor can know what is ahead'-how many men are needed, how many may be required, what casualties will be suffered, what new commitments may have to be taken on, how the system will work as the drain increases on man-power and on administration. I have the responsibility of the raising and the organization of the army, and I am asking this house to face up to these possibilities and to other possibilities-I have not mentioned them all -by voting for this amendment.
In a word, Mr. Speaker, this amendment, as I see it, will empower the government to make and to keep the Canadian army the best and the strongest army we can provide. I agree, and we all agree, that in measuring the size of that army we must take account of the vital needs for men in other war activities. I shall have a word to say about that before I sit down.
But in connection with this amendment and with the authority which will be conferred if this amendment is passed, I say to you and to this house that I shall take at its face value this freedom of action which is being given. I am not going to advocate the use of this authority to compel men to serve overseas simply for the sake of exercising power; far from it. I recognize at the same time what a heavy responsibility that authority creates. I do not want to see this country divided. If I may say so, I think I have worked as hard as a man can to preserve the good understanding and unity of our homeland. Though a lot of people may not believe it, that has been one of the dominant aims in the administration of
my department. It has permeated all our plans and efforts, as our officers will testify.
I say seriously and sincerely that I would make any personal sacrifice to keep this country together.
At the same time, Canada has a war on its hands. The fight, as I said a minute or two ago, is a fight for our existence, and I at my post cannot escape the definite responsibilities which I have. I say now, and you will expect me to say it, that so far as I am concerned compulsory service for overseas will have to be applied without fear or favour whenever its use will aid in the achievement of a maximum war effort, and that does not necessarily mean just to maintain what we are doing; it means, if we can do more, to do it. I do not believe that even those who oppose compulsory service could expect me to say otherwise.
Let me mention something else in that connection. While, as I have said, we have been engaged in these intensive efforts we have been training everybody who has come in, whether the man enlisted voluntarily or was called up for service. All of them have been getting the same training, and they will all be qualified to serve anywhere. That applies to men already called up; it applies to men who will hereafter be called, and if section 3 is repealed, then, whenever it is necessary, the government can immediately act to have these men serve wherever they are needed to fight Canada's battle. No time would be lost, because the men will have been in training. All the government would have to do would be to widen the horizon of service, and that would make every man in Canada, whether he enlisted voluntarily or was called up, available to serve wherever the need might require.
Now there are two or three points which I think I should mention, in view of the fact that they have come up in the debate. First, my hon. friend and former colleague the member for Riehelieu-Vercheres took what I thought was a rather distorted meaning from the provisions of section 5 of the National Resources Mobilization Act. His suggestion, in a word, was that the government might act under this statute and, as he said, put the order in council in the drawer and a man would be on his way overseas before anyone would know anything about it. I wish to say to my hon. friend that orders in council of that kind will not be put in the drawer. Orders in council of that kind will be laid on the table at the earliest possible moment, and if parliament is not sitting they will be, as the statute directs, immediately published in the Canada Gazette and mailed to all members of the House of Commons.

Mobilization Act-Mr. Ralston
There is only one exception in that section- it is the exception to which he was referring- and that is that publication may be deferred when it is considered to be in the "national interest". Knowing my hon. friend as I do, I do not think that he or any of those around him would for a single instant desire to be a party to jeopardizing the national interest. He knows perfectly well why that reservation was made. Section 2, which gives the government power over persons and property in the dominion in the widest possible way, has compulsory service for overseas only as one of its many objects. There are many cases I could imagine-cases of alien enemies, civilian cases, cases of highly secret devices and highly secret property-which might come under the act, in respect of which it would be extremely desirable in the national interest that publication of particulars should be deferred. That does not apply with regard to the sending of men overseas for service. As my hon. friend knows, we publish particulars of the men and of their liability for service. We do so every day, and I want to say to him and to anyone else who asks about the regulations with regard to conscription, that regulations have already been laid on the table of the house by my colleague the Minister of National War Services, and they have been in force. They are subject to change from time to time, and I have no doubt they will be changed from time to time. These regulations are already drawn in connection with the system of conscription for service in Canada which is in force in this country. My hon. friend can assure himself, therefore, that there is no danger of anybody's son being sent overseas without his knowing fully that he is liable to such service, and knowing in plenty of time before he goes.
Another point that came up which my hon. friend touched upon, although he did not make the point quite in this way, was this. He suggested that these regulations should be referred to parliament. He said that the matter of actual action in connection with conscription should come back to parliament. I do feel that those who make that suggestion have a wrong appreciation of the situation and of what has taken place. Let me remind the house what happened. A plebiscite was held, and the government asked the people of the country to give it the responsibility of deciding the question as to conscription. It was expressly said by everybody that conscription was not the issue which the public were to decide. The people of Canada voted on the question. I have the figures here: 179 constituencies voted "yes" and 65 constituencies 
voted "no," which is equivalent to pretty substantial representation in this House of Commons. That responsibility was given to the government by the people. What happened? The government now comes before parliament and says, "You have given us power over persons and property in this dominion in respect of everything, but you have missed one thing. You have put a limitation in the fact that we cannot send men to serve overseas in the armed forces of Canada. We are asking you to repeal that section."
What is left? What is left is that the government has full responsibility and full power when that section is repealed. I say to you therefore that, the government first having had the plebiscite, asking for a release from its pledge, with regard to compulsory overseas service, and having been granted that release, and, second, having come to parliament to have that release confirmed by the repeal of the very section which mentions compulsory overseas service, obviously when the section is repealed nothing is left for parliament, and the proper course is that the government should not shrink from the responsibility for which it has asked, but should act on that responsibility and act as it deems best in the light of the power given by that section. My hon. friend and those who advocate the reverse are suggesting that the government should ask for a repeal of the section which ties their hands and then the next minute decide to go back to parliament before using the power conferred. I say that that would be the same as the government at one moment having its hands untied and then the next moment having them tied again. In other words, it would be exactly the same as if we were to insert a proviso at the foot of the bill to this effect: "Section 3 is hereby repealed, provided however that none of the powers of section 2 shall be exercised until parliament is consulted once more."
It seems to me that the people of Canada would not understand anything of that sort. It would be regarded as evasion; it would be regarded as a shrinking from responsibility. All we are doing in this debate, having spent weeks at it as it is, would then be merely an idle gesture, because we would then have to come back once more to debate the whole question before exercising the power which we had expressly asked parliament to confer upon us, and which had been so conferred. Without hesitation, therefore, I say that I shall not shrink from the responsibility which has been conferred upon me as a member of the government, but shall act under the statute as amended.

Mobilization Act-Mr. Ralston
I wanted to mention two other matters which have to do particularly with the army and with man-power. I was afraid that this house had the impression, from some of the speeches which were made, that somehow or other the army was cutting into the manpower of the country at the expense of the production of munitions and of food, and was therefore unduly hampering our war effort and disrupting our man-power. That certainly was the impression left by one or two speeches that were made.


Mr. HANSON (York-Sunbury):: Some of
the minister's colleagues left that impression.


James Layton Ralston: Not only my colleagues;
others as well. I think I am right in saying that the army-I am within hearing of my colleagues the Minister of National Defence for Air (Mr. Power) and the Minister of National Defence for Naval Services (Mr. Macdonald), and they can correct me if I am wrong-is the only service which makes provision for giving leave to men who are indispensable or who are key men in industry or agriculture. The army from almost the very beginning, certainly from the time I have had anything to do with it, has had a rule- it is part of the general orders-that a man who can be shown to be a key man in connection with munitions, even though he has enlisted, even though he volunteered, may be given leave to go back to munitions work if he so applies. That was followed by the national war services regulations, which I have before me, and which by section 14 expressly provide, not that the army is to take men at the expense of munitions or at the expense of agriculture, but that boards shall be set up under the national war services department to decide, with regard to any man who is called up for service in the army, whether it is in the "national interest" to grant an advancement or postponement of that man's training.


Richard Burpee Hanson: But always on his application.


James Layton Ralston: Always on his application.


An hon. MEMBER:: Or his employer's.


James Layton Ralston: The point is that on that board sits nobody from the army and properly on that board sits no one representing the man. It is a judicial body established by the Department of National War Services. Whoever says that the army cuts into the supply of man-power for munitions or for agriculture has not read the regulations, because the regulations expressly provide, not that the army comes first but that if it is shown that a man is indispensable in agriculture or industry, the army comes last. If to-morrow I requisition my hon. friend the Minister of National War Services for 5,000 men, I do not get them automatically just because the army asks for them. They are called up; any man who claims he is essential in war industry has a right to make his application to the board, and all the army gets are those who are not excused by the board. In other words, priority is given to agriculture and industry.
I think that ought to be made clear because there has been too much of the suggestion that somehow we have built up a big army at the expense of munitions or at the expense of industry.
Another suggestion made was that we are closer to exhaustion in mobilization of manpower than anyone realizes. I admit that we are close to the calling up of the thirty-year class of single men. But the thirty-year class of single men is not the only class; there are still those from thirty to forty-five, still those from nineteen to twenty-one, and still the married class of all ages from nineteen to forty-five. I submit it is needlessly timorous to suggest that simply because we are approaching the exhaustion of the thirty-year class, there must be some question, some very serious consideration, as to where men for the army are to be raised.
Another situation mentioned was that
1,350,000	men are in agriculture at the present time, 300,000 in mining, 900,000 in munitions and industry, and 2,000,000 in civilian occupations and that the man-power situation was tight or difficult. We are not approaching the full mobilization of man-power for war purposes simply because everyone happens to be employed; the question is, what are they employed at, and can they be got out of those particular employments and either put in the armed services or made available for munitions or agriculture or some other activity which is more necessary for the war.


Richard Burpee Hanson: On the
principle of selection.


James Layton Ralston: Of course; that is exactly what the Department of Labour is doing at the present time. That is why I have said, and I repeat here, that Mr. Gordon, chairman of the wartime prices and trade board, and my colleague the Minister of Finance (Mr. Ilsley), have tough jobs. They have. But I do not think there are any men in Canada who have tougher jobs than my colleague the Minister of Labour (Mr. Mitchell), and Mr. Little, the director of national labour services, in trying to take human beings and put them where they will be most useful in carrying on the war.

Mobilization Act-Mr. Ralston
Those are the things that we have to work at and work hard. Take the 1,350,000 in agriculture. What I am about to say may not be very popular, but of those 1,350,000 men there are many who come within what is called the subsistence class, that is, the class who are perhaps not doing much more than simply raising enough for themselves and their families. The question is whether those men ought to be left in that occupation, or whether some farmer with capital and greater productive capacity and a sufficient establishment for the purpose would not better be raising the food for that man and let him go into construction work or munitions or some line of work where he could be used to the best possible purpose.
Take munitions, in which 900,000 are employed. Of that 900,000, one-sixth are women. That makes quite a sizable army-150,000 men released by those 150,000 women. In civilian occupations there are 2,000,000. Mr. Little has to work and work hard to see that many of those men in civilian occupations are made available for the armed services and for war occupations. How does he do it? Production is cut down. In order to relieve these men you and I have to tighten our belts and do without some of the ordinary civilian commodities which we can do without. You and I have to help him to find other men for civilian occupations, men who are above or below military age, or men who are physically unfit for military service. You and I have to see to it that there is a great movement, into the factories and industry and civilian occupations generally, of women to take the place of men, as there has been in the old country.
These things are just beginning. It seems to me, therefore, that at this stage the ultimate gross supply of man-power does not enter very much into the question whether we can keep up an army.
Let me say that I am not advocating the cause of the army simply because it is the army. I am advocating the army's cause because it is Canada's army, and because it has a job to do, and because without the army we cannot win this war, no matter how much we might hope to the contrary.
Now, I have mentioned these points very briefly. I did want to deal with one other matter-


Some hon. MEMBERS:: Go ahead.


Richard Burpee Hanson: With unanimous consent.


Mr. SPEAKER:: Is the consent unanimous? Some hon. MEMBERS: Yes.


James Layton Ralston: This is perhaps a small matter, but I did want to mention it. I have the greatest respect for the hon. member for Richelieu-Vercheres but he said something which cut me rather, because I felt it was something regarding which he was perhaps not informed but regarding which he might have taken the opportunity to get information. He said that trainees were scattered all over Canada among regiments composed of volunteers. He said that we have English-speaking soldiers in Montreal and that French-speaking soldiers are sent outside the province of Quebec to be trained. Let me point out that in the province of Quebec there are basic training centres for all the men to be trained, except in some special situation.
There are advanced training centres there as well; two infantry advanced training centres and as a matter of fact, in addition, Quebec has a machine gun training centre and a forestry training centre, and no other province has either. But we do not have advanced training centres for special arms of the service in every province, and it is therefore necessary in connection with training that the boys go from Quebec to other provinces, to Petawawa for artillery training, for example, and to Barryfield for signals, just as it is necessary for boys from other provinces to go to Quebec to take machine gun training or forestry training and in some cases infantry training as well. There is no sinister purpose whatever in the sending of young men from Quebec to some other province; it is done simply because the facilities are located where they are. Neither is there any sinister purpose in sending boys from Ontario or Manitoba or some other province to the machine gun training centre at Three Rivers.
With regard to service, I am sure my hon. friend knows perfectly well that we are not keeping active units in Montreal for the purpose of defending Montreal, and that the French Canadian boys in active French Canadian units go to the coasts or other vulnerable points, wherever they may be, in exactly the same way and for the same purpose as their English speaking compatriots. I am sure the hon. member would not have them kept in Montreal when he knows there is a job to be done on the Pacific or the Atlantic coast. I feel that it is due to these boys that I should say this and that it is due to the administration of the department and due to my hon. friend himself. I would add that every possible consideration is extended in connection with training and service to give these boys the opportunities for service and the posts for

Mobilization Act-Mr. Mutch
which they are fitted. At the same time I want to say that no exception is made; men are posted where they can best serve and where they are needed at the time, regardless of race, creed or class.
Now, Mr. Speaker, I want to conclude with just a word with regard to something I mentioned at the beginning, but which I feel cannot be impressed upon us too much; I refer to this thing called overseas service. That word "overseas" gives the idea of something far away, something in the nature of a crusade to help other people. I wonder if we cannot get it into our heads that "overseas" just means Canada's front line. It is Canada's war which is being fought overseas and by far the most important bulwark which has stood between us and attack on our own shores, long before this, has been that fortress in the British isles, which is not just a British fortress but a Canadian fortress as well, which is manned not only by Britishers but also by the Canadian navy and army and air force. They talk about educational campaigns. I submit that the education we need in Canada is a lesson in geography, to show how easy it would be for Hitler to hop across here if he were not pinned down by the constant dread of the British isles. If he could get that thorn out of his side we in Canada would then learn something about the real terrors of war. The fact we have to get into our heads, and those of our fellow citizens, is that this is Canada's war wherever it is being fought. We thought Hong Kong and Singapore and Java were a long way off. Those successes paved the way for the Japanese landing in the Aleutian islands, and those same successes made possible the shelling of Cape Estevan on Vancouver island the night before last. We have to protect our own coasts of course; and we are doing everything we possibly can in that direction. But what we want to do is help defeat the enemy before he gets here, or the last battle of this world conflict-and this is no idle dream-will be fought on Canadian and American soil, in Canadian and American towns, villages and countrysides. I emphasize what I believe to be sound doctrine, namely, that we cannot defend our country and save our homes and families and everything that is dear to us simply by waiting here for the enemy to attack us. Every country that has tried those tactics has been attacked sooner or later.
While we are strengthening our forces and our equipment in our own country, we must, as part of our defences, take our full share in the combat abroad. We must be prepared to meet Canada's enemies where Canada's 44561-225
war is being fought. That is part of Canada's programme; that is what we are trying to do. We have overseas an army of strength and spirit and courage; we have overseas an army to be proud of, and this measure gives the government power to go the limit to see that that army is reinforced and strengthened for the task of defending Canada wherever that task may call them.
Yesterday my colleague the Minister of National Defence for Naval Services closed a very able speech with a reference to Sir Wilfrid Laurier and his picture of a cathedral, -the component parts of which he visualized as the various races in this dominion. I could show my colleague and hon. members of this house not a mythical cathedral, not an allegorical one, but a cathedral of flesh and blood, composed of the young men of the Dominion of Canada, French and English; and I would not have to take you any further than the officers' training camp at the city of Brock-ville. This month there was a graduating class of 329, of which no less than 127 were French Canadians, and there are in attendance at the school at the present time 1,106 officers of which 305 are French Canadians. I want to say to my colleague and to this house that I should like hon. members to go there some time and see that school. I believe that there they would get a lesson in and a practical demonstration of Canadian unity that would do their hearts good. There, in spite of all our argument here, they would find a true cross-section of Canada; young men of both races, neither submerging its individuality, no thought of assimilation, but everyone contributing his best from the traditions, the heritage, the character and the personality of his own race for the good and in the service of the Dominion of Canada. Those men would inspire you to believe that it is out of this material, fashioned in the hard workshop of war and seasoned by comradeships which I am certain will never dim and never fail, that the edifice of Canada's nationhood will be built, to endure for all time.


Mr. L. A. MUTCH (Winnipeg South):: Mr. Speaker, I am not insensible of the difficulty which confronts one in attempting to follow the Minister of National Defence (Mr. Ralston), particularly in view of the fact that some of the things I desire to say closely touch his department. I should say in the beginning that on the plebiscite I personally voted "yes," and the constituents of Winnipeg South also voted "yes" by twelve to one. So that on my own and on their behalf I support this motion, and I now declare that if and

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when the time comes that it is found necessary by the government to exercise the power which the passing of this legislation will give them, I will support conscription for overseas service or the conscription of the man-power and woman-power of Canada for any purpose whatsoever.
In this debate, as in every other debate into which there enters the element of sentimentality, there has been a considerable amount of nonsense talked. In that respect it is my desire to mention one or two things which I think have not helped in deciding this issue but which have rather had the effect of disillusioning our citizens, when they consider what is being done here. We have had various descriptions of what a conscript is and what may be expected of a conscript. The general consensus, whether you take the viewpoint of the red-eyed conscriptionist or that of the dyed-in-the-wool anti-conscrip-tionist, seems to be that conscription is all right for the army; the implied suggestion is that the army is a disreputable conglomeration of people anyway, but that conscription is thoroughly impracticable for the air force or the navy, this in spite of the fact that the traditions of the navy which is described as the mother of our navy have been built up on the success of naval battles fought by sailors who had been shanghaied from every port of the island. The conception seems to have got abroad that we are still operating with a sort of bow-and-arrow army, for which any sort of mentality is sufficient.
I cannot understand why the belief is generally held that conscription is all right for the army but no good for the air force or the navy. The fact is that when a call is issued by the Department of National War Services, recruiting in the Royal Canadian Air Force, in particular, jumps by leaps and bounds. If the definition of a conscript is one who has been called by his government to do his duty, I cannot see where there is any substantial difference between a man so called up who answers the call and the man who enlists in the R.C.A.F. or the navy, or a special branch of the army, a few days before he is due to report for training. Advertisements have recently appeared in the newspapers to the effect that if a man is called up for service in the defence of Canada he will not be able to transfer to another service. The young men of Canada were told that if they had any idea of getting into the R.C.A.F. or the navy they had better do it right away. That was the type of propaganda put out by at least one of the other services. I am a little tired of this attitude, and I rather fancy 
that the public of Canada are somewhat disillusioned. The idea is abroad that the man who is conscripted would be of no use to these services. If that is so, then there must be more than a few thousand of them who could be released with advantage to the army so that soldiers could be made out of them. However, my purpose is not to introduce any recrimination into this debate.
For a moment I should like to speak for the people of my constituency in connection with the motion now before the house. The majority of the people of Winnipeg South are in favour of conscription now, and I have no doubt that almost all the people of that constituency would favour conscription at any time that the government regarded it as necessary. Knowing that, I could not, even if I wished, refuse to support the motion simply because it fails to satisfy all. Those in that constituency who cry "forward" with respect to conscription, and even those who cry "back", if there be any, would turn with a unanimous voice to rend either me or anyone else who might by his attitude on this question seek to overthrow the government at the present time.
There is another matter about which I think all the people of that constituency, perhaps all the people of the province, are in agreement. We do not want any more debate on the subject of conscription. In 1935, in 1940, and again in 1942, the people of Canada asserted their confidence in this administration and in the policies of this government. Nothing that can be said or done will add anything to the authority which this government has now. Once this motion carries, the responsibility will then lie fairly and squarely upon the shoulders of the government. Any further discussion would be regarded as temporizing or evading responsibility, and in my opinion it would merit that criticism. I welcome the assurance of the Prime Minister (Mr. Mackenzie King) that the government on their own responsibility will act when and if it is necessary and stand or fall by the result. That is the practical working out of the democratic system.
In connection with man-power I should like to draw to the attention of the Minister of National Defence and of the government generally, the fact that considerable wastage is still going on in that because of lack of education or inability to take the training required to-day for troops, volunteers who have come into the service although physically fit, have had to be discharged or used in the home establishments. They have not been able to assimilate the training [DOT] which is essential if they are themselves to have a

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chance of survival or if they are not to endanger their fellows with whom they will serve. When we consider the man-power of Canada we must take into consideration the not inconsiderable numbers who, although physically fit, have not been assimilated into the armed forces. Those who have thought that men with superior education could be used in the navy or the air force and the remainder used to fill out the ranks of the army must realize that it requires just as good physical condition and just as good education to be an operator of a tank or other motorized or mechanized equipment as it does to qualify for the other services. I know of at least one man who was refused once for the army, and another one who was refused twice, who are now training as aircrew.
Before sitting down I should like to address a word to the government as a whole with respect to Canada's war effort. Canada's part is not being adequately played up in the news of the war. The responsibility to see that Canada and Canadians are played up in the news of the war is a responsibility of the government itself. The jumble of the Royal Air Force and the Royal Canadian Air Force in England has deprived Canada and Canadians of a knowledge of what our boys have been doing in the last few weeks or months. Had this information been given to us, and I think we had a right to expect it, it would have proved an inspiration to the people all across Canada.
Canada's navy is known everywhere but in Canada. I should like to suggest to the Minister of National Defence for Naval Services (Mr. Macdonald) that he discard this tradition of the navy being a silent service, that he leave that to those who coined the expression. This is a new navy in a new world. It may be well to keep the traditions which have made the British navy what it is, but we should discard some of the snobbish ideas, one of which is that the navy should be the silent service. We should be told what is being done. No matter what happens in England, or on the continent, in north America when you have something to sell, your best idea is to advertise. This is one thing the administration has failed to realize, both in time of peace and in time of war.
We in the Dominion of Canada do not seem to have grasped the significance of nationhood, and so when we argue with each other in the house, and English-speaking Canada attempts to explain to French-speaking Canada what their conception of Frenchspeaking Canada is, and French-speaking Canada gives up the almost hopeless task of explaining to English-speaking Canada what 44561-225 i
their conception of Canadian life is we are overlooking the fact that if, instead of having so much explanation, we were living and practising the idea of all being Canadians in Canada, particularly at this time when all our energies are centred upon the war, it would no doubt have more educational value than all the speeches which have been made on this subject.
I should like to make one or two suggestions to the Minister of National Defence.
It is no sign of a lack of confidence in him or a lack of appreciation of what the Canadian armed forces are doing if I take a minute or two to examine one or two things which I think are important.
As I listened to the able speeches which* have been delivered by the ministers who have spoken, I found myself sitting back in. my chair with a comfortable feeling that perhaps everything is all right, and that scares me worse than anything else on earth. Consequently if I suggest to the minister, having followed his speech with close attention, that I am still in a questioning frame of mind, not only with respect to some of his decisions but with regard to some of the advice he gets,, and certainly wdth respect to some he takes, he will understand that I am trying to keep myself from getting into a frame of mind where I shall be convinced that the Germans will be stopped before they get to Alexandria, and that they can never get to Vancouver or Seattle, and that if we just keep rolling along, the good Lord will raise up somebody to lead us to victory.
History shows that very few of the great' conquerors of the world were professional soldiers. We need only go back to the last war. I remember as I am sure the minister and many other members do, those anxious days when we did not know just what was happening before Paris, and when we learned afterwards that the man whom the French called the little tiger, with his hard hat, was riding back and forth behind the French lines in an old taxicab, saving the day, although he gave the credit to Petain. We remember these things, and also the situations that arose in Great Britain. We remember when Lloyd George was working miracles with the civilian population, and, thank God, helping to win the war, although his actions were regarded by the military men as unwarrantable interference in the administration of the army.
There is a little disquiet in my mind when I hear the expression so often used in this house, that the government will act on the advice of their experts. Experts is a word I am suspicious of, perhaps because I come

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from the west, where some of our people believe that an expert is somebody in Montreal or Toronto who knows somebody in Ottawa very v'ell indeed. Another definition of an expert is somebody who is a considerable distance away from home. The war situation is too serious for one to feel quite content if he thinks that the strategy which is guiding the war effort of Canada is coming from the ranks of those who were satisfied with the crumbs from the table of Canada's militia during peace years. One wonders whether men with that mentality who were content with the environment of those years are capable of being transformed all of a sudden so that they can conceive of modern warfare in global terms. The senior ranks during the period of peace had become, I am inclined to think, pretty much civil servants all [DOT]dressed up, and the changes which have been made in the selection of the senior officers who &re overseas to-day is a healthy indication of the recognition of the fact that it is not enough to leave the devising of strategy solely to men who are professional soldiers.
I should like to feel more than I do now, that the leadership of Canada's war effort from a military standpoint was being more largely directed by the ministers in council. I would be happier if I felt to a lesser extent than I do, that the ministers in council too often concern themselves only with the point of view of the professional soldier. There is no doubt that men trained in technical military proficiency should be those charged with carrying out the military policies. But if I could arouse in the minds of members of this house, and especially in the mind of the government, a sense of the danger of leaving the concept of what we might call global warfare to those limited professional minds, I would have more assurance that when the day comes that Canada's sons stand in some future Tobruk or Singapore we shall not have recriminations in Canada to the effect that those in charge of directing our military effort lack the vision to think in terms of a war which is newer and vastly different from any we have had before. I hope that we shall not find ourselves looking about as this people of England are looking about today for some explanation of another unfortunate set-back, with the half-formed and ill-expressed thought in the back of their minds that they have left the problems of to-day and the security of the future too often to men whose minds belong to yesterday.


Mr. F. D. SHAW (Red Deer):: Mr. Speaker, at the outset may I say that I would not be fair if I did not give expression to a thought

of mine with regard to the speech delivered this afternoon by the Minister of National Defence (Mr. Ralston). I wish to congratulate him on its conciseness, and if I am able to judge the reaction to it among the various groups in this house I would also congratulate him upon its effectiveness. With many of the things he said I am quite in accord.
My participation in this debate to-day is undertaken with two important facts firmly established in my mind. The first has to do with the critical international situation, and in that connection I can do no better than to quote the words in which the Prime Minister (Mr. Mackenzie King) referred to it yesterday afternoon. He said:
It only goes to bear out what has been said so often that no one can take too seriously both the immediacy and the extent of the danger with which all parts of the world are confronted, and at this time our own part in particular.
One needs only to reflect upon the situations which exist in four different theatres of war, if I might characterize them as such. First, we have only recently been advised of the fall of Tobruk and Bardia, and the consequent threat to all of North Africa and our position there. It has been reported, whether correctly or not, that we lost 25,000 troops in the fall of Tobruk. Second, according to a recent report the Japanese have extended their influence in the Aleutian area. Third, the Germans have driven a wedge into the defences of Sevastopol, and, fourth, and probably of greater significance to us, there is the shelling of Vancouver island. All these serve only to emphasize the seriousness of the world situation at the present moment.
In the second place, I believe I am quite fair in saying that there is strong evidence that Canadians generally are becoming very impatient with parliament, and witness with growing dissatisfaction the apparent disregard which we are showing for time and events. When I say that I have in mind the fact that for five long months we have been toying with the man-power problem in this country. I do know, as a result of discussing the manpower question with men on the street, that they wonder what in the world is the matter with us here that we are not accomplishing something definite in that regard. I am not asserting for one moment that the man on the street knows all that goes on in here or the difficulties with which we are confronted. But I personally feel that five months is too long a period of time to devote to this particular issue. The need of the hour is far too great for that. Only a day or two ago one gentleman characterized it in this way, as nearly as I am able to recall his words: "The

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whole thing is like a great poker game, with the government reluctant to bid and afraid to lay down their cards". I feel that I am able without a great deal of difficulty to concur in that comment. I think we have been doing a great deal of stalling, and the man on the street also feels that we are stalling. So that if I confine myself to a few facts and occupy less than the time at my disposal I may be setting an example which the man on the street wishes us to set.
Since the Social Credit party first became an influence in the national political life of this country we have invariably advocated a policy of construction, not destruction. Therefore I propose to be constructive and not destructive. I know I am correct in asserting that ours is the only party in the house which has not had to trim its sails according to the political winds. We get a great deal of satisfaction out of that, and I propose to show during the course of my remarks that it is a fact.
Furthermore, consistency has been the characteristic feature of our attitude towards the question of conscription, and we may go back to pre-war days in order to determine that and establish it as a fact.
With respect to the question of conscription I am afraid-I believe the Minister of National Defence made reference to this- that conscription is misunderstood. I know that it conjures up in the minds of some people the same reaction as does the word "politician." Possibly conscription is misunderstood because it has so long been steeped in politics and juggled by politicians for purposes of political expediency that the average man to-day is, and has justification for being, fearful of the implications of the word. Conscription, whether applied to the financial, the industrial, or the man-power resources of the country means nothing more nor less than the effective organization of those resources, and there is nothing sinister about that. If I go back to pre-war days and make one or two references to the stand which we took at that time and the stand which certain others took, I wish it to be known that it is only because a deliberate attempt is being made in various parts of this country to distort and misrepresent the stand we took then, which is exactly the same. stand as we take to-day.
I have in mind an English-speaking crosssection of public opinion which believed firmly in a policy of isolationism. I believe I am correct in saying that the present Minister of National War Services (Mr. Thorson) was the leading light in that particular group. In browsing through Hansard of the short war session of 1939 I find that the present Minister of National War Services spoke as follows at page 52:
There has been a great body of opinion in Canada to the effect that we should not participate in any extraterritorial war, and should keep ourselves free from any external commitments, whether direct or indirect, which might involve us in such a war. Those who have held this view have had the best interests of Canada at heart.
I do not question that, Mr. Speaker. They may have been sincere.
I have been one of the spokesmen of that body of opinion, and have not hesitated to express my views on this subject whenever the need arose, both outside and inside this house, with such vigour as I could command. I conceived this to be my duty as a Canadian whose first and undivided loyalty is to Canada.
It seems that the present Minister of National War Services, as I said a moment ago, was at that time a recognized leader of a certain cross-section of public opinion who were definitely opposed to conscription and all the implications of it, and I have not the slightest doubt that he was responsible for building up among his followers a definite prejudice against the idea of conscription.
Then of course we have our French-speaking friends from the province of Quebec. I do not undertake at this moment to condone or condemn their attitude with regard to this matter. Personally, with my limited knowledge, I would say that they have been taken advantage of for so long, that conscription has been made a political issue there for so long, that it is more a state of confusion with respect to the whole thing than anything else. The late minister of justice, the Right Hon. Ernest Lapointe, was the recognized leader of that particular cross-section of public opinion. On September 9, 1939, he stated, as reported in Hansard, page 68, these words, which have been quoted here many times before, but which for the purpose of my argument I shall repeat:
The whole province of Quebec-and I speak with all the responsibility and all the solemnity I can give to my words-will never agree to accept compulsory service or conscription outside Canada. I will go farther than that: When I say the whole province of Quebec I mean that I personally agree w'ith them. I am authorized by my colleagues in the cabinet from the province of Quebec-the veteran leader of the senate, my good friend and colleague, the Minister of Public Works (Mr. Cardin), my friend and fellow townsman and colleague, the Minister of Pensions and National Health (Mr. Power) - to say that we will never agree to conscription and will never be members or supporters of a government that will try to enforce it.
And he asks: "Is that clear enough?"
I read that because the late minister of justice was definitely the leader of a certain
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cross-section of public opinion, and undoubtedly-I say this with all due respect-he must have been to a very great extent responsible for fostering and developing that attitude of mind among that cross-section of our Canadian public opinion.
Then we have the Prime Minister himself (Mr. Mackenzie King), speaking in the house on September 8, 1939, when he said, at page 36:
I wish now to repeat the undertaking I gave in parliament on behalf of the government on March 30 last.
That would be 1939.
The present government believe that conscription of men for overseas service will not be a necessary or an effective step. No such measure will be introduced by the present administration.
Again he was expressing the view of another cross-section of public opinion. I well recall that during those pre-war mouths and years he did his part, if I may say so. towards the development of what I call a distorted attitude to the whole question of conscription.
Then we move on to our Conservative friends, and while I have no quotations at hand at the moment, goodness knows there are many that could be given. They collaborated most fully with the Liberal party prior to the election of 1940 with respect to this question of conscription. They too must accept full responsibility for what they did in the way of giving the Canadian people a wrong slant, if I may use that expression, on the question of conscription.
It is a well-known fact, of course, that our friends of the Cooperative Commonwealth Federation were also definitely opposed to the conscription of man-power and the sending abroad of an expeditionary force. I quote all parties because it would not be fair to quote only one.
I come to the stand of the party with which I am associated. At the very time that such phrases as these were the slogans of certain groups in this country, we of this party and all those associated with it had the courage, in spite of what many suggested was political suicide, to be honest at least with ourselves and with the people, to evaluate the picture as we saw it, and to make known to the people of Canada exactly what we thought. And that is no different from what any representative of the people should do. These were some of the catch phrases found on banners and pamphlets, on walls and so on throughout the country prior to the election of 1940: "No Canadian troops to be sent overseas to take part in any hostilities, whatever the professed purpose of such hostilities may be." Here is another: "Canada .must declare herself strictly neutral in the event of another war, no

matter who the belligerents might be." And still another: "Money appropriated for national defence will surely lead to war." That was a catch phrase back in 1936, 1937 and 1938. Here is another: "We shall not fight any war proclaimed to make the world safe for democracy."
These were some of the things that were being said at the very time that we of this party, looking into the future with vision and courage, correctly determined what was going to take place within a few years. I will go back first and give the foundation of our stand, and to do so I will read part of a statement which was published in the Edmonton Journal of January 18, 1936, if you will. This is part of a statement given by the leader of this group:
The increase of armaments that is in prospect is a most disappointing development to all who want to see the reign of law established in international affairs and an end put to war. But where the responsibility lies is quite clear. No matter how peace-loving a nation may be, it has to consider the conditions which exist in the world to-day and act accordingly.
If I may interject a comment at that point, Hitler was coming to the front very rapidly at that time. He had made known his intentions, and surely any intelligent man should have been able to see what those intentions were. I continue:
Britain has been exceedingly anxious to avoid adding to their armament burdens, but in its present situation has no alternative. Nor can Canada be content with merely expressing the desire for peace. Mr. Blackmore stated that his group favoured "such steps on Canada's part as will render her powerful enough in all respects to plan an effective part in any world crisis with which the league of nations might be called upon to deal." That was why expenditures on military, air and naval forces were urged. "Is it right or just", the Social Credit leader asked, "that we should depend upon Great Britain to defend us, or on the United States?" Surely there could be only one answer to that question.
As I say, that was printed in the Edmonton Journal on January 18, 1936. I come now to
1939.	In the short session following the
declaration of war by Britain against the axis, speaking in the House of Commons at that time, the leader of this group made the following statement, as recorded in the proceedings of the session of September 8, 1939, at page 48:
Therefore New Democracy declares that justice, equality and effectiveness depend upon conscription of finance, industry and man-power.
Let me make an assertion here. If anything was ever torn to pieces and put together again to suit the purposes of the one who tore it to pieces, that statement was. We went through the campaign of 1940 and we know

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what the members of all parties tried to do with that statement, and it is true they were successful in taking seven of our men. But we retained our honour just the same. Speaking in the same debate the hon. member for Acadia (Mr. Quelch) clarified that statement somewhat as reported at page 99 of Hansard of that session. He said:
On the other hand, we have advocated conscription of, first, finance; second, industry, and third, man-power. By conscription we mean a process of effective control and direction.
I well recall the vicious type of propaganda I was confronted with in that regard, but as I have said, we have nothing to be ashamed of to-day, and I dare say there are men sitting in other parties in this house who would like to be able to refer back to similar assertions as having been made by them. They did not make them, but they wish they had done so.
When it came to the election of 1940 we still stood for the conscription of finance and industry and then the conscription of man-power. It was clearly and definitely explained that the first two were to precede the third. Those who opposed us did everything they possibly could to create another impression. On September 12, 1939, this group moved in this house that a special committee of the house be set up to determine ways and means of conscripting the financial system to make for greater equality of sacrifice and service. Hansard records the fact that every party in the house voted against that motion. We were the fathers of the idea that if we are to make a maximum contribution in this war the financial resources of the country must be conscripted. And that does not mean, as we have clearly indicated time and time again, that we ever did or ever shall advocate the conscription of bank balances. It has a far broader meaning than that. Therefore when we hear people talking about conscription of finance, about a total war effort, about the organization of our maximum resources, they are doing what they should be doing, but doing it about three years too late.
Very few people will give this group any credit for the stand they took. Few, if any, will approve it publicly, although one or two Liberal members of this house have said to me in the corridors of this building within recent days that it was the only sane and sensible stand to take.
Last January we were advised in the speech from the throne that a plebiscite would be taken in this country. It is a matter of record that while we in this group believe in the general principle of plebiscites, we could not see much that was commendable about the
one that was then proposed. It is a matter of record that we condemned the wording of that plebiscite, contending that it meant nothing. We moved to have it clarified by adding the words ''in any theatre of war," so that the people of Canada would know definitely what they were voting for or against. But our effects in that direction were futile. We also moved that the conscription of finance and the industrial resources of this country be incorporated in that measure, but once again the house saw fit to defeat our suggestion. We were completely dissatisfied with the various arguments that were advanced by many hon. members on the government side who presumed to know all about the implications of the plebiscite. We contended that it was strictly political in nature. Reading the words of the Minister of Munitions and Supply (Mr. Howe) I am satisfied that we were correct in making that assertion at that time. These are his words as reported at page 3373 of Hansard of June 16:
In this country conscription is really a political issue rather than an issue arising out of the needs of the war situation.
Later he said, referring to the York South by-election:
Since that occasion conscription has persisted as a political issue, and it was to settle this political issue that the plebiscite was taken.
It is most unfortunate that the Minister of Munitions and Supply should have made this assertion. It only adds to the dissatisfaction which is prevalent in so many parts of Canada with regard to this whole man-power question that we are supposed to be discussing and to have been discussing during the plebiscite debate. There are some in certain parts of Canada-I may make definite reference to a certain gentleman who broadcasts from Calgary and whose voice reaches my constituency- who says that we did not show leadership by not giving as a party a clear-cut direction as to whether the people should vote "yes" or "no". Well, leadership is of several kinds. I have never advocated that anybody should take my advice if I were not satisfied in my own mind as to where that advice would lead him, and if that principle were more generally adopted there would be fewer people in this country. calling themselves leaders.
I can do no better than quote the words of the hon. member for Acadia with regard to our attitude in relation to this Bill No. 80 to amend the National Resources Mobilization Act. Speaking on June 15 last the hon. member said, as reported at page 3352 of Hansard:
In passing I should like to stress the fact that this group has consistently advocated the control of industry by government.
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To-day it is so obvious that unless we defeat the enemy overseas we shall have to defeat him at home on the American continent, that no sound argument can any longer be presented that Canada ought not to participate to the greatest possible degree in the overseas conflict. That conclusion having been reached, it becomes a question of what is the most equitable way of calling up men for military service. The voluntary system to-day as imposed by this government is a policy of flogging the willing horse. It is neither just nor efficient. A continued appeal is made to a person's sense of patriotism, to his conscience, with the result that the entire personnel of some families is wiped out, while other families make no contribution whatsoever. This policy has been maintained largely no doubt as a matter of political expediency. I would call it appeasement in its very worst form, and appeasement invariably fails. If the objective is, as we have been told, national unity, I think we can say that the government has failed to achieve its objective. If the objective has been unity within the Liberal party, I think one can also say, after listening to some of the speeches that have been made in this house, that appeasement has failed even in that direction.
If the war were a minor operation, or if we had many men wishing to volunteer for foreign service, then I would say that the voluntary system would be satisfactory. So long as we had plenty of men in this country clamouring to be allowed to go overseas I would sav that the voluntary system was satisfactory. But as soon as you had a situation where you had to badger men and resort to various questionable practices in order to induce or coerce men to enlist. I would say that the voluntary system had failed and that the time for conscription had come.
The hon. member for Acadia expressed his views in unmistakable terms when he spoke thus.
I wish, Mr. Speaker, to take the very strongest exception to some of the methods now being employed to drive men into the service by means of what we call the voluntary method. It is a fact that thousands of our young Canadians have willingly volunteered to join the various branches of the armed forces, and I say all credit is due to them. On the other hand thousands have joined the active forces for other reasons. To begin with, under the National Resources Mobilization Act we called up men by age groups for compulsory military training. In my own province we have two of those training centres, one at Camrose and the other at Grande Prairie. These boys are not taken there and trained by themselves, as trainees; mingled with them are recruits in the active forces. Several months ago I asked in this house why it was found necessary to send to these particular training centres men who had volunteered for active service, and I was told that it was because of the lack of training facilities elsewhere. I accepted that explanation, but since then I have been told by an officer, one whose word cannot be readily

questioned, that at one of these training centres definite instructions were given to the active force men to mix with the trainees, to talk about joining for active service, to shame them into it if need be, but above all not to let them gather together in small groups. If that is what we mean by the voluntary method of enlistment, when by such methods we compel our boys who have been called up under the National Resources Mobilization Act to join the active force, then I say we have very little of which we may be proud.
In the second place we have throughout this country thousands of businesses which have been slowly closing up. I have in mind the hundreds of garages throughout the country employing from five to ten young men working on the floor. Restrictions were placed on the manufacture and purchase of automobiles, on the use of tires and gasoline, and finally parts were rationed. I am not complaining about that, but hundreds of these boys were forced out of work because their employers no longer had work for them. Then a long list of restricted occupations was established, in which they could not be employed; so that in many cases where these businesses were closed up the boys have had to apply to the local office of the unemployment insurance commission, where they may be given authority to take another job or where they may be told definitely, as has happened, "You join the active force." Is that a voluntary system? I say definitely it is not. I had a letter just a few days ago from a town in my constituency. According to the letter the three boys of one family have been taken into the service, either voluntarily or otherwise. Another family has four husky sons, none of whom has taken qne day's training. It is hardly fair or proper that, as the hon. member for Acadia has said, some families should be entirely wiped out while others make no contribution at all. I question some of the methods that are employed to secure men for the so-called active force, yet I do not want to leave the impression that I am for a moment questioning the patriotism or motives of any young man who enlists for service.
There is one other matter to which I should like to refer. A few days ago I happened to read a magazine in which I noticed a pertinent statement by Doctor Padilla, the foreign minister of Mexico, who was the representative of that country at the pan-American conference. The article stated that when Doctor Padilla, representing Mexico, stood up to address the gathering, not very much attention was paid to him until he had made two or three statements which I should like

Mobilization Act-Mr. Parent
to read; for I think they are worthy of consideration by certain people in this country who still feel that the place to fight the enemy is in the streets of your own town or in your own back yard. I commend these statements to their consideration. Doctor Padilla said:
All our ideas are in imminent danger of perishing. We may no longer cherish the illusion that we are living in a quiet backwater where we shall be safe from world catastrophe. Blood flows on every side and suffering lacerates all the continents. The men who gloriously fell on Wake Island have not fallen in the defence of the honour and sovereignty of the United States alone. They have, also, met their deaths in the defence of human liberties and the free destinies of the Americas.
So I say, Mr. Speaker, that we can no longer cherish the illusion that we in Canada are living in some quiet backwater far removed from world catastrophe. We know that the vicious Jap is howling at our western gate. We know that any day the roar of his planes and the thunder of his bombs may be heard over any of our towns or cities. I hope we shall not. wait until that fateful hour to bestir ourselves. This afternoon the Minister of National Defence said, and said correctly, that any country which waited until it was invaded before putting up resistance in its own defence was subjugated, and that in short order. When I think of our boys whose blood coloured the water within the shadow of Dunkirk; when I think of the blood that is flowing to-day on the hot sands of Libya; when I cast my eyes upon the other theatres of war and see the sacrifices that are being made by thousands of our young men and thousands of young men from other countries, in defence not only of their own particular territory but in defence of the territory of all the allied countries, I say that should the day ever come when they require reinforcements it would ill behoove us to say that because of certain restrictions, self-imposed if you please, we will not give them the reinforcements they need. If that should ever happen, we will live to rue that day.
In conclusion, may I say that as a member of this house I feel called upon to assume a very grave responsibility. I do not feel that it would be proper for us to attempt to escape any of our responsibilities. The parliament of Canada engaged the people of Canada in this conflict, and we must exert every ounce of energy of which we are capable. We must so organize our resources, whatever their nature may be, as to guarantee that if victory is at all possible, it shall be ours. I trust that I shall never live to see the day when any government of Canada will again declare 44561-226



REVISED

[Stage Direction]
war and at the same time burden itself to the point of strangulation with self-imposed limitations, be they moral or legal. There is only one kind of effective war effort. If you declare war you must do as you would if you undertook to engage in any contest- put everything you have into it. I am not saying that that could be done at once, but it could be done under a proper system of organization.
Mr. CHARLES PARENT (Quebec West and South):: Mr. Speaker, it is not my intention to speak at any great length in this debate. At the time of the plebiscite I took a definite stand in this house. I thought out the matter to the best of my ability, and I supported the motion for a six months' hoist. At the time I said that that measure constituted a breach of trust, since it was giving the majority the means of withdrawing a solemn pledge made to the minority. I campaigned in my province for a negative vote. I condemned the plebiscite as being a measure something in the nature of Doctor Jekyll and Mr. Hyde. It was stated in the English provinces that an affirmative vote would bring conscription, but in Quebec it was said that there would be no conscription. In other words, it meant nothing but chaos. It is needless to say that the man in the street immediately saw the nigger in the woodpile, and irrespective of the efforts made by a majority of the members from Quebec the people of Quebec refused to give an affirmative vote.
This vote meant not only that the people of Quebec did not want conscription; it meant that Baptiste was fed up with broken pledges. He recalled the pledge made that the amounts voted for armaments for the defence of Canada were to be used exclusively in the defence of Canada, yet when he looks around to-day he asks himself where are those armaments. He recalled also the references made to the declaration of the Prime Minister of Australia that the day when we would be called upon to send an expeditionary force overseas was past history. He recalled also that he accepted the mobilization act with a smile because he was told that it was for the defence of Canada. He recalled that he was brought into the military camp for a one-month training period in order to give him an idea of what military life was like. Then he was notified that he would be a better soldier for the defence of his country if he stayed there for four months, and he accepted that change with a smile because it was for his country. He recalled also that after four months he was told that he must stay for the



EDITION

[Stage Direction]
Mobilization Act-Mr. Parent
duration of the war, but that there was nothing to be alarmed about, because he was protected by section 3 of the National Resources Mobilization Act which guaranteed that no man would be sent away from Canada unless he was willing to serve of his own free will.
From these facts you will understand why it was not difficult for the eleven Liberals who voted against their party to bring home the fact that the plebiscite meant a change in the views of the government with regard to the sending of men overseas. It was not simply a ease of untying the hands of the government; the fact is that there were influences in the cabinet which were so strong, even though they were in the minority, as to influence the government to a point where it had to amend this act and send overseas those men who had been brought into the camps under the solemn pledge that they would not be sent overseas against their will. This is why the people in the province of Quebec went to the polls and voted "no". Their own common sense told them what was behind this plebiscite
I should like to pay a tribute to the former minister of public works (Mr. Cardin). We fought against him, but we realized that he was sincere. He was appealing to the people of his province, but from my experience in this house since early in 1935 something told me that he was so near to the picture that he could not see the wall. It sometimes happens that in a classroom a student at the back is able to point out an error which the professor has made on the blackboard, but that does not take away at all from the qualifications and ability of the professor.
We are here being called upon to amend a solemn pledge that was given, not under menaces at all, but through cooperation and understanding, and that understanding was ratified by the people of Canada in the election of 1940. The then Minister of Justice carried the flag of unity from one coast to another. He spoke not only in the province of Quebec, but in Ontario, British Columbia and, indeed, throughout the whole dominion and said that because of national unity there would be no conscription in this war. That pledge was renewed time and time again. Furthermore, in Australia, when Prime Minister Curtin defeated Mr. Menzies, his first declaration when he took office was that the question of conscription would not be raised in Australia in this war because it would mean disunity in Australia. If such a declaration was good in Australia why should it not be good in Canada? Is it because there is a province of Quebec?

Conscription is a national issue. It concerns not only the province of Quebec. Other countries do not have conscription. Africa does not have conscription; India does not have conscription; Ireland does not have conscription. The Minister of National Defence for Naval Services (Mr. Macdonald) told us that those countries were comparatively insignificant. But the principle remains the same. Those countries rejected conscription, and yet we never hear the people of Australia called quislings or quitters. We do not hear anyone call the people of Northern Ireland quislings or quitters. Those are words which one hears only in reference to the people of the province of Quebec, but be sure that no inferiority complex is being created by such slanders. Far from it. We are, on the contrary, stimulated by such slanders to fight on. The fight will go forward and to a better end. We will take our hats off to no one; be sure of that.
I am pleased to say, Mr. Speaker, that I shall vote, and if I had two votes I would give two votes, against Bill No. SO. Stripped of all the Prime Minister's eloquence in his three-hour speech, this bill is a measure for conscription. We are told that only the province of Quebec is against conscription, but let me remind the house that for the first time in the history of England the word "conscription" was brought before parliament in 1915 by Lord Middleton in the House of Lords, and although Great Britain was then at war, the mention of conscription created an uproar. It meant imposing on the liberty of Englishmen something they had never thought of, and although France, Great Britain's ally, had had conscription for over 125 years, and almost every other nation in Europe had conscription, conscription was not introduced in England at that time.
When the Minister of National Defence for Naval Services says that they had conscription in these other countries, we are not told how conscription works there, because that would be giving out military secrets.
In 1938, at a time when the European volcano was rumbling and smoking, when Hitler was marching into one country after another and France was calling for help, when her armies and air force and navy were not considered sufficient, Prime Minister Chamberlain had to reaffirm, and reaffirm time and again in order to satisfy British opinion, that never would conscription be imposed if Britain went to war. That is history. The reason was that conscription would have destroyed national unity at that time in Great Britain. But afterwards Prime Minister Chamberlain had to fall into line, and introduce conscription, although we do not know with what success. No one

Mobilization Act-Mr. Cloutier
has ever accused England of being quitters or quislings, because for hundreds of years they did not have conscription.
We are told now that conscription is not an end in itself but a means to an end. We are also told that it may not make better soldiers and that probably they may never be sent overseas, but that conscription would mean equality of sacrifice. Equality of sacrifice! Mr. Speaker, the province of Quebec average five children per family, as compared with one to one and a half in the other provinces. Equality of sacrifice 1 Again, wages and salaries in the province of Quebec, which are governed by the dominion government, are from 20 to 30 per cent lower than in the other provinces. Equality of sacrifice! Although Quebec represents one-third of the population of Canada, we have only from 15 to 19 per cent of the positions under the federal government and only 11 per cent of the total salaries paid by the federal government. Yet we hear talk of equality of sacrifice!
Mr. Speaker, may I ask that, if this principle of equality of sacrifice is to be adopted, it be applied in a spirit of British fair play. Raise the standard of wages in my province to compare with that of the other provinces. Give up, to those who are entitled to them, a fair proportion of the positions in this dominion, and do not ask that they be qualified 99 per cent in order to occupy a position when you are satisfied to give the same type of position to others who are qualified only 60 per cent.
I believe it is necessary that these remarks be made after all that has been said against the province of Quebec. I was reading lately in the Ottawa Journal, wherein, referring to the recent speech of the Minister of Justice (Mr. St. Laurent) they extracted from it a declaration which is absolutely untrue, namely, that the province of Quebec would be satisfied to defend its own borders. Let me state in this forum once and for all that we of Quebec consider the Dominion of Canada, the whole dominion from Vancouver to Halifax, the sacred soil of Canada; that we are ready to help and to fight on the shores of Vancouver island or British Columbia as well as on those of Nova Scotia; that the land of Canada is sacred to any Quebecker as well as his own province. The declaration made by this newspaper is the most unfair and untrue that could be made by a journal of its standing.
We are ready to defend our shores. We are also ready to help in the war overseas, but to do it of our own free will, because we have been told, we have been educated not only in our province but in this House of Commons, in the presence of every hon. member, whether of English, Irish or Jewish nationality, 44561-2261
that our effort in this war was to be a free effort in so far as it was concerned with sending men overseas.
Yesterday morning, while reading the Montreal Star, my attention was attracted to a cartoon showing a man on the cliffs of Canada's seashore. He was holding a gun aimed towards the sea; in the clouds were written the words "invasion threat," and above the sketch were inscribed the words, "Look at it this way." That means, Mr. Speaker, think of Canada first; the danger sign is ahead, defend and protect Canada. "Look at it this way." That is the way in which all the people of Quebec are thinking and doing.
Mr. ARMAND CLOUTIER (Drummond-Arthabaska) (Translation):: Mr. Speaker, I followed with attention the splendid speech delivered by the hon. member for Quebec West and South (Mr. Parent), and in the name of my electors, I wish to congratulate him warmly.
I also listened most attentively and, I may say, not without some emotion to the speech delivered in this house on June 11 by the hon. member for Richelieu-Vercheres (Mr. Cardin). A descendant of that proud line of pioneers who brought civilization to this country, he spoke as a true Canadian should. The hon. member for Richelieu-Vercheres is the very symbol of French Canada. He is a loyal gentleman, respectful of laws, but the law which comes first with him is that of his word of honour.
I consider him as the prototype of the French Canadian, Mr. Speaker, and here is the reason why. Although I have had neither the benefit nor the honour of sitting in this house for long years, I have been interested in politics for over a quarter of a century, and the hon. member's various campaigns always held my attention. He knows the mentality of his people, he knows their rights and has always defended them. His responsibilities do not escape him and he has often stated them. Canadian in his very soul, Canadian first and always, the problem of national unity has commanded his constant care. A noble ideal shaped his words and deeds. He can be said to represent the true Canadian spirit.
Mr. Speaker, each time a great national problem or a difficult situation has arisen, the French Canadian has given ground, often in spite of his legitimate and admitted rights. He has given an example of generosity and patriotism in order to ensure the maintenance and strengthening of the bonds uniting the two main racial groups in this country.
But however much one may cherish a principle as important and vital as that of national unity, there comes a time, a tragic moment
Mobilization Act-Mr. Cloutier

when it is no longer possible to give ground without abdicating. For the individual, abnegation may take the form of an almost divine generosity, but in a nation it can only be construed as cowardice or treachery.
A great deal has been asked of French Canada since confederation, and a great deal received. But it must be understood that her racial survival is a thing she prizes above all-, that national pride fills her heart, and that in her veins runs the blood of heroes who sacrificed everything save honour.
The French Canadian is loyal, faithful to his principles as well as to leaders who do not betray him. Long since has he recognized in the Liberal party that spirit of justice, of harmony, of Canadianism and of unity, embodied in the confederation pact. French Canada has pinned her faith, her hopes on the Liberal party, because to all appearances its leaders had never betrayed her.
The province of Quebec has willingly participated in the present conflict. She has accepted in many fields, and without grousing, the principle of compulsion, because her leaders had promised that such compulsion would never apply to military service overseas.
She had faith in the future of this country and every confidence in her political leaders; she believed in democracy and firmly relied on sacred pledges. Such has been the background of the French-Canadian effort, about which many people were dubious at the beginning of the war, but which can only be questioned by fanatics to-day. The character of the average French Canadian will never change. No shirker, he insists on being treated with frankness, honesty and respect. The French Canadian is smart enough to realize that if national unity means sacrifices on one side only, it is no longer unity but tyranny. He has never felt that the association of a rider with his horse can be unity. He will never accept to be led like a tamed animal.
In relinquishing the important post he held in the government, the hon. member for Riehelieu-Vercheres exemplified the spirit of the French-Canadian people. Ever loyal to his leader, giving ground, sacrificing some principles in the interest of national unity, he had to withhold his cooperation when there arose the tragic question of breaking his pledged word.
Such is also my own stand and no French Canadian will ever do otherwise.
Since 1938, the imperialists in the government have been proceeding very gradually. There was first our rearming which was accepted though reluctantly by all Canadians. From session to session, the nilitary estimates were increased. I do not wish to criticize that policy, Mr. Speaker, for in that field
tMr. Cloutier.]
the democracies made a mistake in failing to prepare early enough and on the same scale as Hitler and Mussolini. But, good heavens, why proclaim on every side that Canada would not participate again in outside wars while larger and larger estimates were being voted for military purposes.
The French Canadians accepted the principle of rearmament along with the policy of non-participation advocated by all political leaders at the last election. War came in Europe and without any hesitation those same imperialistic leaders launched Canada into that adventure.
I do not wish. Mr. Speaker, to criticize Canada's declaration of war on the axis powers, but why should there have been such eagerness to foster a paeifistic state of mind while preparations were then being made for war, and to-day, for total war?
In order to ward off popular resentment and to keep the confidence of the electorate, those same leaders suggested a compromise: "We will wage war, we will accept many sacrifices, but conscription will never be enforced".
Came 1940 and national registration followed by conscription for home defence. That was a logical move but why should it have been taken while opposite principles were being advocated?
A further compromise was suggested: "The conscription of national resources for the purpose of a total war effort, with the understanding that conscription would never be enforced for overseas service".
The French Canadian already felt, indeed quite deeply, that he had not been treated frankly, but the danger threatening his country brought about a unity of purpose and silenced a feeling of indignation which in normal times would have surely become vocal. Even though he hated constraint, he accepted it because it was intended for the defence of Canada. And believe me. Mr. Speaker, conscription is useless, unnecessary and futile. History is there to prove it. If Canada has remained under British rule, it is due to the loyalty, gallantry and military valour of the French Canadians. Once conscription for military service in Canada had been accepted, everyone sincerely believed that the government's policy in that field had reached its extreme limit.
The voluntary system of recruitment was tried out. and Quebec did more than her share. French Canada supplied the first regiments which went to the assistance of European democracies. Our young men overseas have shown heroic courage in every theatre of war and they continue to do so.

Mobilization Act-Mr. Cloutier
Our men are fighting for the principles of freedom, the respect of minorities and the sovereign right of nations. Those principles for which their forefathers so staunchly fought, are inherent to all French Canadians.
While the voluntary system was proving fully adequate, imperialistic s'ooges were heard demanding conscription for overseas service. The people became uneasy for it seemed that the limit had not yet been reached. It became necessary once again to reassure them and to adopt indirect methods. Then came the plebiscite 1 I do not oppose consulting the people on an important issue, Mr. Speaker, but why spend millions, open the door to bitter argument, trouble the population in the midst of its war effort, when the question cannot be put to them frankly?
The Prime Minister (Mr. Mackenzie King) in this very house, and his ministers over the radio and elsewhere, throughout the plebiscite campaign or before, stated in evident good faith: "There is no connection between the plebiscite and conscription." It was merely a matter of releasing the government from a pledge to which our allies seemed to take exception. United in a common belief in a sacred principle, French Canadians throughout the country refused to release the administration ; to allow the government to break a solemn pledge.
I could not have said that the government would construe a "yes" vote as favouring conscription for service overseas since I had faith in my leaders, but I had my doubts and could not urge my constituents to release me from a solemn pledge taken at election time. I was fully aware of my duty and responsibility as I went to meet my electors, despite the handicap of illness from which I suffered throughout the plebiscite campaign, and to explain that this was a free and popular vote, that they were free to hold whatever opinion they wished on the matter, but that their member could not take the responsibility for an affirmative vote and that he would vote "no". My personal opinion was the same as that of nearly 98 per cent of the people in my constituency. The province of Quebec, by an overwhelming majority, refused to release the government from its given pledge.
But the plebiscite was hardly over when a bill was introduced in this house calling for conscription for service outside of Canada. We are told that this is the outcome of the plebiscite vote. This faltering explanation does not agree with the meaning given to the plebiscite by the Prime Minister himself, to wit that the question of conscription was not an issue. But suppose conscription had been the issue, how could the government feel released from
their pledge when the very people to whom this pledge was given definitely refused to allow it? Thus spoke Quebec.
Bill No. 80 is intended to delete section 3 of the act. When that is done, compulsory military service for any theatre of war or, in other words, conscription for service outside of Canada will be the law of the land. But it is explained that conscription is not necessary-now and that it may never be. For my part, I refuse to be led blindly in this direction on, the question before the house.
The principle of this bill is the enforcement by order in council of conscription at any time it is deemed necessary to do so. But the people were given the solemn assurance that never would this measure be enforced without first consulting parliament. If section 3 is repealed never again will hon. members of this house have the opportunity of expressing their views on the question of conscription. I cannot agree to the principle of governing merely by order in council in a matter of such vital importance.
In opposing this bill, 1 am simply adhering to the political will of the great Canadian statesman who was Sir Wilfrid Laurier: "Ever against conscription." The original of this testament is in the hands of the right hon. Prime Minister who, in accepting Sir Wilfrid Laurier's successorship, pledged himself to respect it. For the last quarter of a century, every Liberal candidate received a copy of the political will of that great patriot and it was used as a guide to every speech made in all election campaigns. The repeal of section 3 would mean destroying this precious document. Never shall I have anything to do with the imperialists in the government and be a traitor to the memory of Laurier, and to my constituents who elected me on the basis of that platform.
To my mind, we have gone far enough along the lines of compulsion when we consider the size of our population. Since the voluntary system admittedly gives satisfactory results, why risk dividing irrevocably two main groups of Canadian citizens by passing a conscription measure for overseas service.
The voluntary system is already far from being such. Judging by the means employed to force our young men to enter either the active force or the war industries, I refer to the order prohibiting the employment of men between the ages of 17 and 45, which has seriously affected war production and may even have disrupted it in certain cases.
How is this problem to be solved? Where are we to look for a palliative? Female labour night and day? This is now being attempted. No public man, no citizen hav-
Mobilization Act-Mr. Cloutier

ing at heart the welfare of his fellow human beings and actuated by patriotic feelings can thus countenance the destruction of a whole race by ruining the health of its young girls. The factory girl of to-day is the mother of to-morrow and if she has to overwork herself, the very vitality of the race is threatened thereby. No doubt this will please Mr. Carson and his fellow-members of the Grand Lodge of Orange who view with alarm the "miracle of the cradles" in French Canada. But no one who is the least bit scrupulous will accept the responsibility for such a crime by either encouraging or tolerating night labour for young girls. I take the liberty of drawing the attention of the government to this matter.
Mr. Speaker, if, in spite of everything, we continue to long for the fullest cooperation, particularly with a view to national unity, knowing the price we have paid so far for that amity, it is for the sake of our native land and because we are of good heart. Because of this price we paid for national unity, I cannot allow it to be sabotaged and threatened with destruction through the enactment of conscription for overseas service.
If the question of the plebiscite had been squarely put to the Canadian people-"For or against conscription for overseas service"- one may well wonder if the result would have been the same. At a time when the enemy is sinking our ships in the St. Lawrence, attacking our Pacific coastline and landing troops on the North American continent, I wonder if there are still many Canadians who favour sending our best men overseas and running the risk of being unable to cope with the enemy's attack.
The French Canadian does not shirk from doing his share in our war effort and, despite the shameful innuendoes of a handful of Toronto imperialists, the province of Quebec is as anxious to win this war as any other province.
We can rightfully be proud of our war effort, and we shall further it with pride and patriotism, but let us be granted at least the right to safeguard a principle based primarily on the country's best interests and our home defence needs.
My own constituency set an example which might well have been followed in others reporting a majority of affirmative votes. Every appeal on behalf of war loans has met with the most gratifying response. Most of our quotas were oversubscribed to the extent of 140, 150 and 160 per cent, even though my own county of Drummond-Arthabaska is peopled entirely by farmers and labourers. It is no centre of great wealth and national revenue authorities would vainly seek there

an opportunity of lining their coffers out of large income taxes. In the last Red Cross campaign, our objective was reached almost a whole week before the closing date.
In terms of military service, our cooperation has been no less full and unstinting. Our young men have readily responded to compulsory training and many of our volunteers are now fighting on all theatres of war. Some fifteen Drummondville youths were among the heroes of Hong Kong and, only recently, the county of Arthabaska lost three of its bravest young men, one of whom died on duty with the Canadian navy while the second, Sergeant-pilot Tourville, gloriously laid down his life in Libya, and the third, Pilot Dionne, lost his life in a flying accident. May I be allowed a word of tribute to the memory of those heroes and of gratitude and sympathy for their families.
All of which, Mr. Speaker, but serves to emphasize the fact that, in opposing conscription for overseas service, we have no wish to impede the country's war effort. On the contrary, we believe that, because it provides better soldiers, the voluntary system is likely to give better results.
Once again, I regret this lack of frankness toward my fellow citizens and deplore the breach of trust in the pledged word. To sum up briefly, I may say that I shall oppose Bill No. SO and in so doing remain true to my word, comply with the views of my electors and serve my country by working for the preservation of national unity and better understanding between the two main ethnical groups in Canada.
On motion of Mr. Mulock the debate was adjourned.
At six o'clock the house took recess.
After Recess
The house resumed at eight o'clock.



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, as we approach the end of a third year of war, we find ourselves in the midst of undertakings vaster than we ever hoped to assume for the defence of the world's freedom. We are surrounded by united nations more numerous and powerful

The Budget-Mr. Ilsley
than we ever dared to expect to be allied with us. Our war programme is great and growing in size and effectiveness. More and more of our national strength is being absorbed into it. The programmes of the united nations are daily becoming more closely knit in mutual aid. Yet to-day it is bitterly plain that we have far to go before victory is in sight.
The financial task of facilitating and safeguarding these developments has also grown in size and difficulty, but in the record and plans disclosed in this fourth war-time budget speech, it has become simple and direct in principle, though increasingly difficult of execution.



ECONOMIC AND FINANCIAL REVIEW

[Stage Direction]
The budget proposals which I shall present to the house necessarily grow out of the experience of the past and are shaped by what we know of the work ahead.
Let me first recall some of the economic and financial events and policies of the past fiscal year. It was marked by great shifts and increases in production, employment, income, and private spending. The prime movers in our war economy are, obviously, our sales of goods abroad and our own government expenditures.
Taking the twelve months to the end of March as a basis of comparison, our exports to the United Kingdom increased by 36 per cent, our exports to the United States by 41 per cent, our total exports by almost 50 per cent. In the face of restrictions abroad on non-essential buying and the use of transport facilities, these increases, much greater in amount than in any preceding year may be taken as evidence of our greatly enlarged contribution of war supplies and essential goods to allied and friendly countries.
For our own war programme, in the first quarter of this calendar year, our war direct expenditures were $500 million as compared with $275 million in the same months of last year, that is, more than 80 per cent higher.
General employment at the end of the fiscal year was up 22 per cent over the level of preceding March and employment in manufacturing was up 30 per cent. From the beginning of the war, employment in manufacturing has expanded by more than 80 per cent. Average weekly earnings of employees rose throughout the year. Retail sales at the close of the fiscal year were running about 20 per cent above the previous year's level, more than 50 per cent above the pre-war level, and showed few signs of slackening.
Making allowance for the differences in prices, the quantity of goods being sold (aside from automobiles) appeared to be from 20 to 25 per cent above pre-war volume.

[Stage Direction]
As the year passed, numerous and marked shortages became apparent. The mounting war output of the united nations, greatly accelerated by the entry of the United States into the war, created scarcities of one strategic material after another. The widening of the area of conflict, the submarine menace on our coasts, and the loss of sources of supply in the far east shut off or reduced many imports on which we were accustomed to depend. The widening scope, the increasing speed of our own war programme, both in the armed services and in production, made heavy demands on our man-power until no one any longer denies the scarcity of labour. To these have been added shortage of power, congested transportation facilities, and widely ramifying limitations of productive capacity. It has been clear these many months that our economy is in the zone of full employment, a condition in which it is still possible to expand our programmes for production and the armed services but only if we are prepared to make careful and wise choices as to what is urgent, what is more urgent, and what we can do without.
This is not an unexpected nor wholly unwelcome situation. It was clearly forecast in the budget speech, which I delivered in September, 1939. For the most part, it is reassuring evidence that we, as well as other nations associated with us, have so set the scale of our war programme that it will engage our full strength and more than we knew we had.
A clear sign of developing scarcities was provided in the rapid rise in prices in the summer of 1941. By October, 1941, the index of wholesale prices had risen by approximately 22 points since the beginning of the war. Of that, 10 points of rise occurred in the four months of 1939 when our exchange rate changed and shipping rates increased. Of the remaining 12 points of rise, 8 occurred between March and October of 1941. In living costs, half the full rise of the war period occurred between March and October of 1941.
These accelerating changes in production, employment, supplies and prices produced by October of last year a situation which was substantially different in degree from that which could be discerned on April 29, 1941, when the budget of that year was presented
The Budget-Mr. Ilsley
[Stage Direction]
to the house. It was clear to the government that new fiscal measures, which could be adopted when parliament met, would be too late in effect and not sufficiently specific in application to meet the situation. It was, therefore, decided that direct controls should be established promptly over prices, wages and salaries, and that controls over production and supplies should be extended and made more rigorous.
The government's policy of over-all control on prices, wages, and salaries has already been discussed at length in the house. I would point out here four things: (1) the policy has in fact worked and has won support at home and admiration and emulation abroad;
(2)	though increases in some wage rates have been severely restricted, the earnings of labour have not been "frozen". On the contrary, depressed wage rates have been, and are being, adjusted by the war labour boards, while the Dominion Bureau of Statistics reports that for its sample of over a million and a half employees, weekly earnings per employee which reflect more continuous employment and overtime, increased nearly 8 per cent since October last. This increase in the average took place, despite the introduction of many women and other inexperienced production workers into industry; (3)	thegovernment by guaranteed prices, minimum prices, and export prices, which could not have been so	high except	for	the
terms of the War Appropriation (United Kingdom Financing) Act, and the intervention of the government, has contributed to a desired improvement in farm income while endeavouring to direct farm efforts to the most needed products. In the calendar year 1941, with relatively poor crops in many localities cash income from the sale of farm products was only 17 per cent below the income of 1928, the year of the biggest crops in our history. Good crops in 1942-43, with assured prices, will bring cash farm income close to the best records of Canadian agriculture. Excluding wheat, which has been in surplus supply since the beginning of the war and has required special measures, the prices of farm products on the average are now about 2 per cent above the level of 1926 and prices of animal products on the average are relatively still higher. Farmers are assured of these prices on a wide range of this season's crops, and will receive, by government action, higher prices than those on last year's crops for wheat, flax, soy beans, sugar beets and apples; (4) price and income control are essential weapons in combating inflation. They must be used, however, in close coordination with direct control of supplies and productive equipment,
(Mr. Ilsley.]
with direction and management of man-power, with consumer rationing, where necessary, and with fiscal policy. No one of these instruments is itself powerful and pervasive enough to do the whole job of directing our resources to the end desired.
Measures for the direct control of supplies multiplied during the year. The Minister of Munitions and Supply and the Wartime Prices and Trade Board have ordered the discontinuance or curtailment of manufacture of a large and growing number of non-essential products using metals and other scarce materials. Building construction and the installation of equipment, other than for war production, were more severely curtailed. The Wartime Prices and Trade Board is rapidly extending its orders on simplified practice to effect reductions in costs and provide the most ample supplies of essential products that the fundamental limitations will permit. Though dealers' stocks are large, it simply will not be possible during the present fiscal year for consumers to obtain the quantities of goods which they have been purchasing during the past year. Restrictions on civilian industry to save materials and manpower will unavoidably multiply. We need not anticipate severe haidship; the government will do all it can to ensure equitable distribution of essentials. There must be, however, rigorous economy in consumption if the necessary materials, productive capacity, and labour are to be available for the winning of the war.

[Stage Direction]
Since the Dominion-Provincial Taxation Agreement Act has been debated and passed by parliament and the agreements tabled, I need do no more than remind the house of the tax agreements with the provinces. In my budget speech of April 29, 1941, the provincial governments were offered compensation in respect of personal and corporation income taxes and the guarantee of gasoline tax revenues, if they would vacate the personal and corporation income tax fields for the duration of the war. This offer was accepted by the provinces, and I should like to pay tribute to the patriotic and constructive spirit in which the provincial governments cooperated in bringing the long and involved negotiations to a successful conclusion. The effect is that I am now free to recommend such tax changes as appear to the government necessary and equitable, and parliament is free to enact such changes, knowing that persons and corporations affected will be paying the same tax on similar incomes in no matter what province they are located. These are war-time agreements, and their duration is limited, but they make a

The Budget-Mr. Ilsley
great contribution to the possibility of an effective and equitable tax policy during the war.

[Stage Direction]
Concerning our exchange problems as they affect the finances of the past fiscal year. I need speak only briefly. In the last three budget speeches, they were dealt with at length because they then were to a degree separate problems requiring measures peculiar to them. They have now, by reason of events and measures taken, become merged with the general budget problem.
In introducing the resolutions on the War Appropriation (United Kingdom Financing) Act. on March 18 last, I explained fully the ways in which the government financed the United Kingdom's deficiency in Canadian dollars since the beginning of the war. During the fiscal year, 1941-42. the entire deficiency amounted to approximately $1,100 million and was financed by Canada. Of this total, slightly less than $48 million was financed by private repatriation of securities, gifts and other private transactions. Of the remaining $1,050 million, which required government financing, $365 million was financed by repatriation of government and government guaranteed dollar securities (including $223 million of the repatriation of $295 million provided for under the Act). The remaining sum, $685 million, represents sterling accumulated to our credit during the year. Such part of this as is not required for working balances, together with accumulations of $215 million prior to March 31, 1941, is being taken care of by the remainder of the $295 million repatriation, by the $700 million loan and to the extent of $76 million by a charge to the $1,000 million gift provided in the War Appropriation (United Kingdom Financing) Act.
This act, in addition to the real advantages and essential rightness of its principles which were recognized by the house, has the minor advantage of removing from our financial picture an element in our national finances, which was very confusing to the layman. For the fiscal year, 1942-43, the financing of the United Kingdom's deficiency in Canadian dollars will appear as an integral part of Canadian war expenditures.
I turn now to the problem of United States exchange which has occupied a good deal of attention since the beginning of the war and has required special legislation and administrative action from time to time. Our imports of war materials from the United States have increased from month to month;
recorded imports from the United States for both war and non-war purposes during the past fiscal year amounted to over $1,100 million, the highest figure for any twelvemonth period on record. Faced as we were with this growing need for United States dollars, our resources would not have been: sufficient to meet the calls on them, had it not been for the Hyde park agreement, especially the sales of munitions of war to the government of the United States under it. and for the legislative and administrative steps taken to conserve United States exchange to which I have referred.
As I informed the house in introducing the United Kingdom War Appropriation Bill on March 18 this year, liquid reserves of gold and United States dollars held by the Foreign Exchange Control Board and the dominion government declined by $142 million during 1941. In the first quarter of 1942, there was a marked, though in part a temporary, improvement. As a result, the decline in our liquid reserves for the fiscal year 1941-42 was only about $50 million. This welcome change was due to two factors: purchases of Canadian securities by investors in the United States, a method of obtaining exchange which cannot be depended on for really substantial amounts in view of the limited supply of securities available in Canada payable in United States dollars; and payments for sales of munitions under the Hyde Park agreement including some substantial advance payments. While we have reason to believe that these sales will increase, as new contracts are arranged and as larger deliveries are made under existing contracts, the advance payments are, of course non-recurring.
The outlook for the fiscal year, 1942-43, is distinctly more cheerful than the results of the calendar year 1941. We cannot expect, however, the full improvement which took place from January to March to continue. Other unfavourable factors have entered the picture, particularly the adverse effect on the tourist trade of the necessary restrictions on the use of gasoline and rubber and the recent decline in newsprint exports. Nevertheless, I look forward with reasonable assurance to transactions under the Hyde Park agreement being sufficient to safeguard our exchange position during the present fiscal year. The various measures which we have taken since June, 1940, have been sufficient to restrict what I may call our "civilian imports" from non-sterling countries to limits well within our ability to pay. The uncontrollable item is imports for war purposes which for the calendar year 1942 it is estimated will total approximately $500 million, of which about
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[Stage Direction]
45 per cent is to supply the United Kingdom and other Empire countries and 55 per cent for our own needs. It is our estimate that were it not for the Hyde Park transactions almost the whole of this amount would be a net drain on our resources in United States dollars, or would be as long as we had any such resources left.
As matters stand, we are hopeful that the Hyde Park agreement will ensure our ability to purchase essential materials and war supplies in the United States to the full extent that that country is able to supply them. In effect, the agreement may be thought of as eliminating the dollar sign in our war-time transactions with the United States by providing a convenient technique for an exchange of raw materials and other components of war goods for the finished war supplies we are equipped to produce. By the collaboration of our good neighbour and ally, we hope to be able to meet our exchange requirements, which arise out of our need for war materials, in the way most effective for a nation at war, namely, by the provision of munitions of war for whichever of the united nations and whichever of the world's battle fronts require them most urgently.
This is a most desirable situation, but let it not be misunderstood. We are able to do this only as long as we continue to exercise care and prudence in our non-war transactions. The restrictions on pleasure travel have now been in force for nearly two years and it can be stated with assurance that these restrictions have saved us well over 100 million United States dollars since they were imposed. The amounts saved by the War Exchange Conservation Act are also very substantial. During the past fiscal year, it is likely that the savings under both these heads have amounted to in the neighbourhood of $130 million, about equally divided between the two items. In the light of these figures, it is fully apparent that these measures have played an essential part in the past and that we are not at present in a position to relax them.

[Stage Direction]
Against this background, I wish now, Mr. Speaker, to review the government accounts for the past fiscal year and report on the financing which has been carried out. Following the useful custom which has now been established,- I shall only summarize the estimates of our revenues and expenditures, and, before I resume my seat, I shall table a White Paper which will include full information concerning these estimates. The house will recall that, though these estimates are close approxima-

tions to the final figures, the Public Accounts will not be available until towards the end of this calendar year.

[Stage Direction]
Revenues are again very greatly increased, Our present estimate is that they will total $1,481 million, an increase over the previous year of $609 million, or approximately 70 per cent. This is some $34 million higher than I forecast in presenting the budget last year, and is nearly three times the Dominion's prewar revenue.
Total tax revenues are now estimated at $1,360,915,000 as compared with $778 million in the preceding fiscal year. In contrast with previous years, direct taxes on incomes and profits made the largest contribution to this total. The graduated tax on personal incomes, the 18 per cent corporation tax and the special tax on dividends and interest produced $404 million, more than 80 per cent in excess of last year's yield. The national defence tax produced $107 million and the excess profits tax, for what was really its first full year of operation, as it is collected on the profits of the previous year, yielded $135 million.
Succession duties, first introduced in last year's budget, produced $7 million, a figure which gives little indication of the future revenue to be derived from this source.
Excise taxes, though no longer the largest source of revenue showed a greater increase than that for the preceding year, rising from $284 million to $453 million. The largest item in this group, the sales tax, at $236 million was $56 million or 31 per cent higher than the previous year. The other excise taxes including the new taxes imposed last year fully reached or exceeded the estimates of the last budget.
Excise duties yielded $110 million as compared with $89 million in the preceding year. Customs duties, as was expected, showed the smallest increase recorded during the year, from $131 million to $142 million.
Non-tax revenue, to which the largest contributor is the Post Office, is estimated to be $103 million. Special receipts and credits will be approximately $18 million.

[Stage Direction]
Turning to our expenditures, we now estimate that ordinary expenditures for 1941-42 were slightly under $444 million, about $53 million more than last year. Of this increase, $15 million is attributable to increased interest on the public debt, $10 million to increased cost of loan flotations and bond amortization, $21 million to compensation to the provinces under the tax agreements and $10 million to

The Budget-Mr. Ilsley
the Unemployment Insurance Act. Other items of ordinary expenditure are slightly reduced. Capital expenditures at $3,357,000 were about the same as the previous year. The category of so-called special expenditures, which includes the costs of unemployment and agricultural relief, Prairie Farm Assistance Act, wheat acreage reduction payments, and prairie farm income payments will, it is estimated, show expenditures of $62,879,000. Expenditures for relief and works projects have fallen to small figures, but payments under the Prairie Farm Assistance Act, the wheat acreage reduction and the prairie farm income payments have offset this decrease and occasioned an increase of $20 million in the total. To meet deficits resulting from the operations of the Canadian Wheat Board, which had not been previously provided for, $12,571,000 has been placed in reserve.
In 1940-41, government-owned enterprises required $18 million. In 1941-42, because of the immense increase in railway earnings, this was reduced to $1,215,000, only the Prince Edward Island car ferry and terminals and the National Harbours Board requiring such expenditures.
In the last budget, I estimated that war expenditures for 1941-42 would be between $1,300,000,000 and $1,450,000,000. It is now estimated that they will be $1,351,553,000, excluding outlays of $42,480,000 charged to active assets. This compares with $752 million spent in the preceding year.

[Stage Direction]
Adding to the amounts, which I have given, miscellaneous other charges representing chiefly write-down of assets, we get an aggregate expenditure for the year 1941-42 of $1,894,966,000, an amount more than 50 per cent higher than the expenditures of 1940-41, viz., $1,250 million. Deduction of total revenues of $1,481,285,000 gives $413,681,000 as the overall deficit or increase in the direct net debt, which on March 31, 1942, was approximately $4,062,372,000. I estimated last year that we would pay between 73 and 79 per cent of our direct expenditures out of revenue. It now appears that we will have paid 78 per cent.
On March 31, 1942, the outstanding unmatured funded debt (including treasury bills) was $5,866,071,000 on which the average rate of interest was 2-90 per cent as compared with 3-06 per cent a year previously. In addition, there were outstanding bonds and debentures bearing the guarantee of the Dominion to the amount of $818,842,000, a decrease of $165 million during the fiscal year.

[Stage Direction]
Total borrowings during the year, excluding debentures of over $33 million reissued to the western provinces in continuation of the school lands settlement, amounted to approximately $2,424 million. Of this total, $1,834 million was borrowed from the public in the two victory loans; $85,294,000 represents the sale of war savings certificates and stamps; $4,553,000 non-interest bearing certificates; $10,000,000 was borrowed in New York for refunding; $450 million was borrowed from the Bank of Canada and the chartered banks, replacing issues of identical amounts held by them and which matured during the year; the remainder, $40,000,000, is the increase in treasury bills outstanding during the year. Thus, aside from the increase in treasury bills, there was no new direct borrowing from the Bank of Canada or the chartered banks during the year.
[Stage Direction]
Dominion of Canada direct obligations in the amount of $931,042,000 (excluding school lands debentures) were redeemed during 1941-42, leaving net borrowings for the year of $1,493,000,000. This sum was used to meet the over-all deficit of $413,681,000, to advance $400 million to the Foreign Exchange Control Board, for use in financing the sterling area's Canadian-dollar deficit, to advance $252 million to the Canadian National Railways (nearly all of which was used to effect a redemption of railway securities), and the remainder ($427 million) to make various other advances and raise the working balances of the government.
To obtain from the people of this country loans to the amount of $1,673 million (allowing for the redemption of securities in New York and London), to obtain from the people and corporations of this country such an amount after they had contributed nearly $1,500 million in revenue is a great financial achievement. It reflects the willingness of Canadians to do what is necessary in finance as in other fields to resolve this conflict in complete victory. It is an achievement which reflects the greatest credit on the National War Finance Committee and on the campaigns which it has so successfully carried out for the sale of war savings certificates and stamps and victory bonds. To them, to the press, radio, and other agencies, which have made special contributions to this success, and to the thousands of workers who cooperated in the campaigns, the government and the people of this country are grateful.
Our whole financial record for 1941-42 is an achievement but I wish to add a word of
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[Stage Direction]
warning. When we say that 78 per cent of our expenditures was paid out of revenues we are perfectly correct by the principles of bookkeeping, but the figure is open to misconstruction. In addition to our expenditures, we must take account of the financing of the United Kingdom. It was necessary during the year for the government to find approximately $1,050 million for this purpose. In exchange for the Canadian dollars transferred to the United Kingdom, we acquired assets, certain Canadian government obligations held in London and sterling balances which have now been converted into the $700,000,000 loan. Since we acquired assets, the accountants are quite correct in classifying these outlays as investments. But just as an individual faces the same immediate financial problem in finding $100 whether it is to be used to pay for the winter's coal, buy a government bond or make a gift to his son, so the immediate financial and economic problem of our financing of United Kingdom purchases has been the same as that of our own war expenditures. We must realize that though it is correct to say that in 1941-42 we paid 78 per cent of our expenditures out of revenue, the significant thing to say is that we paid just over 50 per cent of our expenditures and war advances out of revenue.
Further, we must not be misled by our achievements in borrowing from the public and the corporations. The conditions, under which a government may most easily borrow from its people and have its loans always oversubscribed, are the conditions in which there is a considerable inflation of incomes and of bank balances. The government is committed to a policy of "pay as you go as far as it may be practicable"; it has set its face against distributing the cost of war through the medium of inflation. We must bear in mind that if it is easy for some of the people of this country to lend, easy for the government to borrow, there is a presumption, unless most of the opportunities for expenditure have been blocked, that we are falling short of our declared policy. I shall have occasion to say something further on this subject a little later.

[Stage Direction]
So much for the past. I have given a brief, and. I hope, lucid account of the financial policies of the past year and the results of the budget of 1941-42. I realize, however, that the house has a greater interest in the 
estimates of our expenditures for the new fiscal year and in the measures and policies we propose to meet these expenditures.

[Stage Direction]
For the fiscal ending March 31, 1943, the house has before it estimates of non-war expenditure amounting to $455 million. To this will have to be added supplementary and possibly further supplementary estimates, including about $20 million to provide for payments under the Wheat Acreage Reduction Act, and perhaps amounting altogether to, say, $30 million.
The Dominion-Provincial Taxation Agreement Act provides for payments to the provinces of $84,428,000. This does not include any payments which it may be necessary to make as a result of the guarantee of provincial gasoline tax revenue. However, any amount which will fall due on this guarantee in the present fiscal year is likely to be small.
It will be recalled that the War Appropriation Act makes provision for war expenditures of $2,000 million. In the early years of the war actual expenditures were likely to fall short of estimates. At this stage, they are more likely to reach or exceed the estimates and I may have to ask the house for an additional appropriation at a later date. Indeed, as I pointed out to the house in March, though the total appropriation requested was $2,000 million, the individual items in the estimates, submitted by the departments at that time, totalled $2,200 million.
The War Appropriation (United Kingdom Financing) Act provides for expenditures of $1,000 million to furnish food, raw materials, and munitions of war to the United Kingdom. Of this amount, the sum of $76 million was used to purchase sterling accumulated during the month of March and this sum logically, and as intended, should have been charged to expenditures for the year 1941-42. It was, however, impossible to determine the amount and effect the necessary accounting entries before April 30, the last date on which charges could be taken into the accounts for the last fiscal year. While the gift to the United Kingdom is limited to $1,000 million, it already appears likely that ways and means will have to be found to finance further shipments before March 31, 1943.
Adding these estimates together, we arrive at a total of $3,570 million. In view of the considerations I have mentioned, the figure is likely to be exceeded. I feel, therefore, that it would not be safe nor fair to the house and the people of Canada to make financial plans for less than expenditures of $3,900 million.

The Budget-Mr. Ilsley

[Stage Direction]
To meet these requirements, it is estimated that with present taxes and tax rates, our total ordinary revenues for the fiscal year 1942-43 will be approximately $1,672 million. The following statement shows how the estimate is made up and, for comparative purposes, the estimated yields for 1941-42:
	1912-43	1941-42
	(millions)	(millions)
Customs duties	. $ 135	$ 142Excise duties	. 123	110Sales tax	. 218	236W'ar exchange tax	. 95	101Other excise taxes	. 85	116Income taxes- Personal 	. 240	190Corporate 	. 200	186Interest and dividends.	. 28	28National defence tax....	. 150	107Excess profits tax	. 275	135Succession duties	,. 15	7Miscellaneous 	. 3	3$1,567	$1,361Non-tax revenue	.. 105	103Total ordinary revenue.,	.. $1,672	$1,463
It will be noted that we anticipate substantial increases in revenues from national defence tax and personal income tax and a very large increase in the yield of the excess profits tax. These will result from increases in incomes and the application of the rates of the 1941 budget to incomes for a full year. We also look for a sizable increase from excise duties. We anticipate that the yields of the sales tax, the war exchange tax, and other commodity taxes will decline by about $55 million since a large number of goods subject to tax will not be available in the quantities purchased last year and inventories being used up will have already been taxed. Obviously, the amount of such decreases is very hard to estimate with accuracy. The figures which I have given are the most careful guesses which we have been able to achieve.

[Stage Direction]
Expenditures of $3,900 million and revenues of $1,672 million will leave an apparent deficit of $2,228 million to be covered by new taxes and borrowing. On the basis of these estimates, we should be paying less than 43 per cent of our expenditures out of revenue. To make a comparison with last year, we can exclude the United Kingdom financing and reach a deficit of $1,228 million as compared with $414 million as estimated for the past fiscal year.
Last year, I referred to the financial requirements of 1941-42, which were difficult to define clearly, as "staggering." Confronted now with
much larger requirements, set out as the simplest of sums in arithmetic, I must perforce drop all adjectives and try to state, as clearly as one who isn't a prophet may state, what they mean in terms of the future.
During the last fiscal year, we appeared to achieve the impossible. Rough estimates indicate that we increased the dollar value of our national output of goods and services by nearly 25 per cent, (bringing the increase during the war to about 80 per cent), but we increased our expenditures on war (including expenditures for United Kingdom purchases) by a greater absolute amount. One might have expected that this would necessitate reduced expenditures for private consumption. On the contrary, estimates indicate that expenditures for private consumption were substantially increased. Our own observation confirms this.
The explanation of this seeming paradox is twofold. On the side of goods and services, some of the goods, which were purchased last year, did not come out of our own current output. Apparently, we reduced our inventories somewhat during the fiscal year, and ended the year with lower stocks on hand than we had at the beginning, having used more than we produced in the interval. We did not maintain our capital equipment by expending on repairs and replacements the full depreciation charged as an expense. Shortage of materials, in many cases, made such maintenance impossible. We did not pay for all our imports from the United States out of current production. Decline in our reserves of United States funds and imports of capital provided in the neighbourhood of $200 million of imports paid for out of capital not out of income.
On the side of money, not all the funds which the government acquired by taxation and borrowing came out of income, even out of gross income. A substantial amount, in fact, came in this the first year in which really big bond-selling campaigns were carried on, from idle bank balances or directly or indirectly from private bank loans. We obtained from an increase in our treasury bill issues $40 million.
As I read the experience of the past fiscal year, we were not able to draw enough goods from sources other than our current output to match the idle balances and bank credit which were drawn into the treasury and paid out again in incomes. Of the $1,673 million which we borrowed from the people of this country, by no means all could have come out of current saving. This, and similar situations in countries with which we trade, together with the insatiable demands of war for goods and services, occasioned the rapid rise of prices last
The Budget-Mr. Ilsley
[Stage Direction]
summer, and, but for the prompt action of the government in imposing drastic restrictions on prices and incomes, would have led to a further and disastrous inflation.
In the present year, we must and can again increase our total output but by no such amount as was added to it last year. Shortages of materials are daily growing more stringent. Scarcities of power, transport facilities and labour have placed narrow limits on the production of almost everything. The need for war production, and it is only too apparent how urgent that need is this year, will absorb all our capacity to expand output and more.
Looking at the problem from the side of goods and services, we shall not be able to obtain substantial imports from the United States without paying for them out of current output, for we expect to meet, or nearly meet, our exchange problem by deliveries of goods under the Hyde Park agreement. We can probably again draw on inventories of civilian goods but by how much I do not know, for information as to inventories is very deficient. Deferred maintenance and replacement must again contribute a substantial sum. Making allowances for these sources outside of current output, the conclusion is inescapable that industry will not be able to supply goods for civilian consumption and private investment on the scale of last year.
Looking at money income, the conclusion is the same. Increased government expenditures of the amounts which I have given will, with present rates of taxation, leave in the hands of persons and corporations spendable income far in excess of what can be matched at current prices by goods and services. In our borrowing, it would be dangerous folly to depend on the investment of idle balances. Even if we needed to borrow from the public no more than we borrowed last year, there must be a very substantial increase in current saving.
It is a most difficult task to deal with sums of the magnitude involved here. It is an even more difficult and sobering experience to reach decisions affecting such large fractions of the incomes of our people. I have given the most careful and earnest consideration to the problem confronting us, and have inevitably come to the clear decision that my proposals in this budget must include measures to increase our revenues within the fiscal year substantially, at least to the point where our dependence on borrowing will be more nearly within the limits of our current saving; they must provide for increased saving, both corporate and personal; they must include also measures to ensure that 
the task of contributing to the required increase in current saving is more widely and equitably distributed.
These fiscal measures are necessary if we are to follow honestly our declared policy to pay as we go in so far as it is practicable. They are necessary if our war debt is not to create post-war difficulties. It is not the size of the debt that is a matter of chief concern for after all it is an obligation of the people of Canada through their government to the people of Canada. Rather, we are concerned about the distribution of it. It is a matter of the first importance that those who have the right to receive payments on government obligations shall be those who will use the repayments to provide needed improvements in their standard of living, maintain themselves against insecurity, and contribute to the improvement of our productive equipment.
These fiscal measures are necessary also to success in our four-front battle against inflation. The price ceiling, control and rationing of supplies, the direction of man-power, and fiscal policy are complementary, not alternative measures. The offensive must be maintained on all four fronts. No one front can be held unless the others are held. The price ceiling, a sound policy which is being administered with great courage and imagination, cannot itself defeat inflation. If I may venture another military metaphor, it can prevent the enemy from winning by infiltration.

[Stage Direction]
From what has been said it is evident that fiscal necessity forces us to look again to the income tax on individuals, or some similar device, for a large amount of additional funds. In devising measures to meet this need I have had to keep in mind three other important considerations-the need for equity, for incentive, and for savings.
As regards equity, I am sure we all agree that the income tax on individuals is the fairest method of taxation. By and large, a person's income is the best single measure of his taxable capacity, particularly when we take into account the number of persons dependent on him. It is by no means a perfect measure, however, and as we increase the rates to higher levels we must attempt to take into account other factors affecting ability to pay. Therefore I have several suggestions to put forward in a few minutes, intended to take into account additional special circumstances affecting ability to pay.
The problem in regard to incentive is less easy to assess but more fundamental and therefore more difficult to overcome. A pro-

The Budget-Mr. Ilsley
gressive income tax must of necessity take more out of an additional dollar of earnings than it does out of the average djllar of earnings. Consequently it must bear heavily on additional income earned through extra effort or efficiency. There is a danger that high progressive rates of income tax may interfere with the incentive for harder and better work for efficient production. We can and must rely upon other than economic motives to a large extent these days. Nevertheless we cannot afford to dispense entirely with the incentive of improved earnings as a stimulus in the continual week-in, week-out production work of the nation at a time when production is of vital importance. I have endeavoured therefore, to frame these income tax measures so as to preserve as much as possible of the earnings incentive for the great majority of the working population.
The third consideration is the need to ensure that the increase in taxes is reflected in a decrease in expenditures and not in reduced saving. There would be little net gain if the putting into effect of higher income tax rates resulted in a corresponding decline in saving. It is vitally necessary that, while tax revenues increase, the flow of savings into the treasury shall also increase greatly.
Equity, incentive, and the encouragement of saving-these are the considerations which I have kept in mind, but fiscal necessity and the rude facts of war press us hard.
In order to obtain the increased yield from income tax which is required, I am proposing that we combine the present national defence tax and the graduated income tax into a single assessment to be collected as far as possible by deduction at the source, or, where that is impracticable, by a compulsory instalment plan. This total assessment will consist in part of a flat rate tax on the total income like the present national defence tax. and in part of a steeply graduated tax at substantially higher rates than the present. It will be assessed in respect of incomes of the calendar year 1942, but will be collected and payable over the twelve months from September 1 of this year to August 31 of next year. Returns are to be filed, as at present, on or before March 31. National defence tax already deducted from 1942 incomes will be credited toward the total payable under the new tax; this will afford considerable alleviation of the immediate burden for those in the lower brackets.
As at present, single persons with incomes of less than $660 per year and married persons with less than SI,200 a year will be exempt from tax, and the tax will not reduce incomes
below these starting points. The flat rate tax corresponding to the present national defence tax, will be at the rate of 7 per cent for married persons, and at the same rate for single persons with incomes not exceeding $1,800; it will be 8 per cent on single persons with incomes exceeding $1,800 but not exceeding $3,000, and 9 per cent on single persons with incomes exceeding $3,000. The allowance of $20 for a child under the national defence tax has been increased to $28 for this flat rate tax-that is, in direct proportion to the increase in the rate. It will be noted that the differentiation between the single and married in the rate of tax comes more gradually and at a higher income than in the present national defence tax; the effect of this on the relative tax payable will be more than counterbalanced in the brackets between $1,200 per year and $3,000 by the changes in the graduated tax and by other means to be noted in a moment.
The changes in the graduated tax are more complicated. In place of the present exemptions of $750 for single persons, $1,500 for married persons and $400 for each child, we are shifting over to a single basic exemption of $660-which is also the present starting point for national defence tax-and a flat allowance off the tax for married persons and for children. Married persons will deduct $150 from the graduated tax, and the allowance for children (or other dependents) will be $80 each. These figures were reached by taking the present exemptions of $750 for a wife and $400 for a child and evaluating them in terms of a tax saving at the rate of 20 per cent, which is not the lowest rate of the present graduated tax, but the rate in the second thousand of taxable income. In effect, therefore, we are "freezing" the value of these present exemptions at about the amount they have been worth to a taxpayer having an income of around $2,500 or $3,000. This, I believe to be a better way of increasing the tax on persons with families than reducing the current exemptions, particularly under present circumstances when other changes are being made which will have the effect of widening the difference between the levies on the single, the married, and those with children.
The proposed rates of the graduated tax are set forth in detail in the resolution. They are substantially higher than the present rates. The first thousand dollars of net taxable income (i.e., after the exemptions are deducted) is now taxed at the rate of 15 per cent. Under the new schedule the first $500 is to be subject to a rate of 30 per
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The Budget-Mr. Ilsley
cent, the next $500 to 33 per cent, and the following $1,000 to a rate of 37 per cent- compared with the 20 per cent rate on the second thousand in the present schedule. I shall give a number of examples in a moment to illustrate the effects of these increases.
These new rates, together with the changes in exemptions and allowances, will increase very substantially the amounts to be obtained from taxpayers, although they will not impose taxes on any who would not be liable for taxes under present rates and exemptions. For example, these new rates would require from a married man without children and having an income of $3,000 a year a total of $884, in place of the amount of $400 under the present law. While the total yield these rates will produce is still something short of the amounts we should like to obtain and therefore they cannot be considered more than enough from the point of view of our war requirements, they place such a severe burden upon many taxpayers that I believe we must now be prepared to make certain new types of adjustments in order to meet the considerations which I mentioned a few moments ago-considerations of equity, incentive and savings.
One type of special provision which I am suggesting, although not the most important, is to permit an exemption from taxable income in respect of unusually large medical or hospital expenses which a taxpayer has had to meet during the year out of the income on which he is being taxed. This will take the form of permitting as a deduction from income, for the purpose of calculating tax, amounts spent by the taxpayer during the tax year on medical, dental, hospital and nursing services to the extent that these exceed 5 per cent of the taxpayer's income. A limit is to be set on the amounts that may be claimed in this way, of $400 for one taxpayer, plus $200 for his wife and $100 for each child, up to a maximum of $1,000. I should point out that while a family of five, for example, is more likely to have a large excess of these expenses in any year than a single person, it is not likely to have five times the amount for it is not to be expected that all five will be subject to serious illness or accident in the same year. I may say by way of explanation of the 5 per cent that studies of family expenditure indicate that the average expenditure on
IMr, Ilsley.]
medical services, et cetera, are in the neighbourhood of 4 or 5 per cent of income, and we desire only to provide exemption for those who have more than average expenditures of this kind. Those claiming this exemption will be required to submit evidence that these payments have, in fact, been made in respect of services received by the taxpayer or his dependents within a specified period.

[Stage Direction]
The second and most important type of alleviation I wish to recommend in order to render equitable the increased rates which I have outlined involves a substantial innovation in our tax machinery. I am proposing to make a portion of the increased tax refundable within a specified period after the war, with accrued interest at 2 per cent. This portion of the assessment on his income will therefore constitute a form of savings for the taxpayer, rather than simply a tax. This saving will be a part of the taxpayer's wartime earnings, kept for him until after the war, when it can be spent to better advantage. By means of this principle we are able to meet our immediate fiscal needs to a substantial degree without endangering the incentive afforded by the possibility of higher earnings for more and better work. In the case of those with incomes in the lowest brackets subject to tax, the refundable portion will be greater than the increase in the total taken, so that the net tax on these lower paid groups will be somewhat lighter than at present, although they will be required to provide a fair share of the increased total assessment.
This refundable portion of the tax we may term a "minimum savings requirement". It will ensure that the taxpayer not only pays his taxes but saves a certain minimum amount, dependent on his income, his tax, and his family responsibilities. In general, it will be collected in the same way and at the same time as the income tax. Allowance is to be made, however, in this refundable portion of the tax for certain types of savings already being made by the taxpayer under contract, which the taxpayer cannot cease making without substantial loss or danger. Payments made by the taxpayer within the tax years as net premiums on life insurance contracts in force to-day, or as principal payments on a mortgage on one residence, or

The Budget-Mr. Ilsley
as payments into a pension fund, retirement fund or superannuation fund, will be accepted as an alternative to the liability to turn over funds directly to the treasury as part of the minimum savings requirement. These alternative types of savings cannot readily be drawn upon during the war, and of course to the extent they are drawn upon in any year, they cannot be included. The use of funds for these purposes by the taxpayer does not compete with war requirements for goods or services, nor add to the problems of price control and rationing, as does the use of funds for expenditure. By permitting these savings under existing contracts to be counted a part of the minimum savings requirements, we are able to ensure that everyone saves the minimum amount without creating hardship for those who have contracted to save substantial amounts by means of life insurance, mortgage payments or pension funds.
Let me emphasize clearly that this minimum of savings to be required of all does not release any of us from the obligation to save as much as is humanly possible in addition to this, and to invest it in war savings certificates or victory loans. We are not substituting compulsory for voluntary savings. On the contrary, we must secure a very large increase in voluntary savings from individuals this year, in addition to the minimum savings now to be required by law. The figures I shall give in a few minutes of the amount we shall have to borrow in addition to the revenue to be obtained from existing and increased taxes will make it quite evident that savings must greatly increase.
There is no doubt that Canadians as a whole have the financial means to make such savings. Under the pressure of vast war expenditures their aggregate income is reaching levels which would have seemed impossible a few years ago or even in the palmy days of 1929. Under the measures being proposed we are going as far as we feel we can to ensure a reasonable minimum degree of equity in respect of war saving. But the great majority of Canadians can save more than this basic minimum, and some can save very much more. I have in mind, for instance, family groups whose total income has increased very substantially because of the war. Under a fiscal system which is based on the individual rather than the family as a unit, the full mobilization of possible savings by such groups can only take place on the voluntary principle.	/
It is therefore clear that the National War Finance Committee, which directs our savings campaigns, has an even bigger and more difficult job to do than it has had in the past. The magnitude and the character of its task is such that the committee does not believe it can succeed unless it becomes to an even greater extent than it is now a people's organization. Success will depend upon the extent to which it can draw upon every group in the community for men and women who will help in planning its activities as well as in carrying them out, and organization is now proceeding with this end in view.
The taxes and minimum savings required from persons with various incomes are illustrated in a table which I would like to place on Hansard at this point, with the consent of the house.
The table gives the figures for single persons, married persons without children and married persons with two children, for selected incomes from the exemption limits up to high figures. The amount of tax payable at current rates, including national defence tax, is shown for the purpose of comparison:
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[Stage Direction]
(Amounts shown in even dollars for purposes of illustration)
Tax at	Proposed	Tax at	Refundable Portion, or	Total, i.e., New Tax plus RefundableAnnual	Present	Increase	Proposed	Minimum	Portion orIncome	Rates	in Tax Alone	New Rates	Savings Require- ment	Minimum Savings Require- ment
Single Persons, Without Dependents
700	35	-15	20	20	40850	57	1	58	58	1161,000	87	5	92	80	1721,250	162	5	167	100	2671,500	217	30	247	120	3671,750	273	58	331	140	4712,000	340	101	441	160	6012,500	475	151	626	200	8263,000	622	202	824	240	1,0644,000	955	319	1,274	320	1.5945,000	1,332	396	1,728	400	2,1287,500	2,400	570	2,970	600	3.57010.000	3,600	712	4,312	800	5,11220,000	9,105	1,924	11,029	800	11,82930,000	15,082	3,314	18,396	800	19,19650,000	28.392	6,511	34,903	800	35,703100,000	64,347	15,990	80,337	800	81.137500,000	411,720	60,584	472,304	800	473,104
Married Persons, Without Children
1,250	50	-25	25	25	501,300	65	-15	50	50	1001,500	75	34	109	108	2171,750	125	36	161	160	3212,000	175	56	231	200	4312,250	225	91	316	225	5412,500	275	126	401	250	6513,000	400	184	584	300	884,000	675	289	964	400	1,3645,000	1,000	378	1,378	500	1.8787,500	1,965	555	2.520	750	3,27010.000	3,080	682	3.762	1,000	4,76220,000 	8,330	1,949	10,279	1,000	11.27930,000	14,085	3,361	17.446	1,000	18,44650.000	26.965	6,588	33,553	1,000	34.553100.000	61,875	16,112	77,987	1,000	78.987500,000	401,120	60,834	461,954	1,000	462,954
fMr, Ilsley.]

The Budget-Mr. Ilsley
TABLE ILLUSTRATING EFFECT OF PROPOSED INCOME TAX RATES WITH REFUNDABLE FEATURE-Concluded
(Amounts shown in even dollars for purposes of illustration)
Tax at Present	Proposed Increase	Tax at Proposed	Refundable Portion, or Minimum	Total, i.e.. New Tax plus Refundable Portion orIncome	Rates	in Tax	New Rates	Savings	MinimumAlone	Require- ment	Savings Require- ment
Married Persons, With 2 Children
1 250	22	-6	16	16	32 35 42 491 366 	25	-7	18	17	1 400 	30	-9	21	21	L500	35	-10	25	24	1 750 	48	5	53	52	105 215 325 4352 000 	60	47	107	108	2 250 	73	90	163	162	2 ,500	115	102	217	218	3 000 	215	119	334	334	668 1,148 1.662 3,0544 666 	450	218	668	480	5 666 	735	327	1.062	600	Y, 500	1,637	517	2.154	900	10 000 	2,710	636	3,346	1,200	4,541 11,063 18,23020 000 	7,890	1,973	9,863	1,200	30.000	13,621	3,409	17,030	1,200	50 000 	26,437	6,700	33,137	1,200	34,337 78,771 462,738loo ooo 	61,299	16,272	77,571	1,200	500 000 	400,408	61,130	461,538	1,200	-
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 $30,000 include earned income of that amount and additional investment income to make up the total.
Let me give a few examples from the table. A married man without children and with an income of $2,000 a year is liable under the present law for a tax of $175. Under the rates proposed he would be liable for a total amount of $431, of which $231 would be tax and $200 would be his minimum savings requirement to be refunded after the war, with interest. A single man with the same income would be paying $340 under the present rates, and would pay a total of $601 under the new rates, of which $160 would be refundable and $441 would be tax. A single man with an income of $1,000 is at present rates subject to a tax of $87A0, and at the new rates would be subject to a tax of $92-only a slight increase-and as well to a minimum savings requirement of $80. Going up to the middle income brackets, a married man without children, earning $4,000 a year, who is subject to a tax of $675 at present rates, would under the new rates be liable for a tax of $964, and, in addition, for a minimum savings
requirement of $400. If he had two dependent children, the tax liability would be only $668, compared with $450 at present, and the refundable portion of the total assessment would be $480, making a total of $1,148. A married man with two children and an income of $1,500 is at present liable for a national defence tax of $35. Under the new plan his tax liability would be reduced to $24.50, and he would have a minium savings requirement of an equal amount. I should point out that in many of these cases at least a portion of the minimum savings requirement will undoubtedly be met by the contractual savings already being made by the taxpayer in the form of life insurance premiums or pension fund deductions from wages or salaries.
It will be noted that on the amount of any income in excess of $100,000, the rate of graduated tax is 85 per cent to which, of course, must be added *he flat rate tax of 7 per cent for married persons and 9 per cent for single persons. In addition to this we must
The Budget-Mr. Ilsley
[Stage Direction]
add the 4 per cent surtax on investment income, since any income in excess of $100,000 is almost certain to be investment income in this country.
Therefore we have an effective top rate of tax of 96 per cent for married persons and 98 per cent for single persons. This leaves what for such persons will amount to only a token residual of 2 per cent or 4 per cent. The effect of these rates will be that while a married person with a $100,000 income, of which $30,000 is earned income, will be left with about $21,000, another having a total income of $500,000 will be left with about $37,000.
I have considered the suggestion that a maximum level should be set for net income after tax that we should place a "roof,n so to speak, on what a person may be allowed to retain, whatever his actual income may be. In the United States, where there is an awkward problem arising from the existence of large incomes from tax-exempt securities, there may be some special need for legislation of this character. In this country, however, there would be no substantial amount of revenue to be gained from imposing a 100 per cent top rate rather than the 98 per cent rate I am proposing. There may be some political allurement in the principle of establishing by legislation an absolute limit on personal incomes, instead of adhering to the principles of progressive taxation even though at very high rates. I can only say that there have been too many difficult and far-reaching decisions to be made in framing this budget for me to give any consideration to its political adornment.
. 1 would estimate the yield of the present income tax, including national defence tax, for a full year at the present rates on the current level of incomes, at about $410 million. The increase in rates, and changes in exemptions, which are proposed would, I believe, yield an additional $115 million in a full year in the form of tax revenue proper. It would also impose a minimum savings requirement of about $250 million in addition, but we must expect a very substantial portion of this to be met by the alternative contractual forms of saving, leaving possibly $125 million as the yield of refundable taxes. I am not including this refundable tax with the estimates of revenue, however, as it is properly regarded as borrowing rather than revenue.

[Stage Direction]
I mentioned that it was proposed to collect as much as possible of the new tax at the source or by a compulsory instalment pl4n. 
The instalment plans that have been in effect on a voluntary basis for the last two years have been welcomed by many, but they have been used by only a minority of taxpayers. With the higher rates now being put into effect, including the refundable portion of the tax, it is obvious that the income tax is something for which almost everyone subject to it must budget the year round. From the national point of view, it is necessary that these higher rates should be reflected in reduced spending power as soon as reasonably possible, and regularly thereafter rather than in fits and starts. Consequently it is proposed to commence in September of this year to deduct at the source as much as is practicable of the new income tax rates, including the refundable portion. It will not be administratively possible to deduct 100 per cent of the tax liability as is the case with the national defence tax in some cases, but we shall aim at something like 85 per cent or 90 per cent, leaving only a moderate remainder to be paid when the return is filed. During the first four months the deductions will not be on the full scale that will be in effect from January 1943 to August of that year, but will be at an intermediate level between that and the present national defence tax level, in order to give taxpayers an opportunity to adjust themselves to the change. As I have noted, the national defence tax deducted during the first 8 months of 1942 will be credited against the tax payable on 1942 incomes, and this will be reflected in the scale of the deductions, particularly in the first four months.
The actual details of the deduction plans remain to be worked out and are not provided for in the resolution that I am moving. In general, it is expected that employers will be asked to deduct specified amounts from employees of a specified family status within a specified earnings range. Thus, for example, it may be that for married employees without children earning between, say $33 and $36 per week, the employer will be asked to deduct, say, $5.50 a week to be forwarded to the income tax office and to be credited to the employee's tax liability and minimum savings requirements. Tables will have to be prepared showing the amounts to be deducted for various wage and salary ranges for single and married persons and so forth. It is believed that though the amounts to be deducted by employers will be much greater, the work of calculating and recording will not be greatly increased. Deductions will be based upon the income of the pay period against which they are made. It will be necessary for each taxpayer to meet any excess of his tax and savings liability over the amounts

The Budget-Mr. Ilsley
actually deducted during the twelve months of deductions or to claim a refund in case of over-deductions.
It will obviously not be possible to deduct the major part of the tax at the source on all forms of income. It is therefore proposed that those persons having incomes in such forms as are not subject to deduction at the source shall be required to pay their taxes and their minimum savings requirements on a compulsory instalment plan extending over the same period as the deductions from other incomes. For this purpose it will be necessary to provide for only four instalments rather than twelve in order to reduce the administrative work involved in such frequent payments.
The collection of most of the income tax at the source, beginning in September, and the compulsory use of the instalment plan of payment for those types of income where the tax is not deducted at the source, would have the effect of increasing the amount of income tax to be received in the current fiscal year, but this effect is offset by the fact that the national defence tax deducted during the first eight months of 1942 will apply toward the payment of the new total tax, and part of the revenue from these national defence tax deductions has already been taken into last year's accounts. As a consequence of the several factors affecting the time of payment, as well as the changes in rates and exemptions, it is estimated that we shall receive from income tax on individuals, including deductions for national defence tax, a total of $435 million in this fiscal year, which amounts to an increase of $45 million over the figure I gave a few minutes ago for the potential yield this year of income tax and national defence tax under the existing law. These figures do not include the portion of the tax which will be refundable; we might expect $140 million of refundable tax or minimum savings requirement during the fiscal year, but a large portion . of this-we may say $70 million-is likely to be accounted for in the alternative forms of contractual saving.
There are some minor changes proposed in the personal income tax which I will mention only briefly. I am proposing that the age up to which children may normally be claimed as dependents should be reduced from the twenty-first birthday to the eighteenth birthday except in cases where the child is attending school or college. Under present circumstances all ablebodied persons of eighteen years of age or over should, I believe, be engaged in some useful work or service unless they are completing their education, and consequently children of this age should no longer be presumed to be dependent on their parents. Those
dependent by reason of physical or mental infirmity will, of course, continue to be regarded as dependent for the purpose of income tax, irrespective of age.
For those at the other end of their working lives I am proposing some alleviation by providing that anyone over the age of 65 years shall not be liable for the minimum savings requirement, if their incomes do not exceed $3,000 per year. Old persons with small incomes cannot reasonably be forced to save a substantial amount for a future which they may not live to enjoy. I would hope, however, that a large proportion of those entitled to this exemption will choose not to avail themselves of it, or to save even more in other forms, so that they may share with their younger compatriots the burdens of these historic years.

[Stage Direction]
In addition to the changes in the rate structure and the other proposals which I have just mentioned there are several other items which are of general interest. I am pleased to announce that I am going to recommend to the house an exemption from all taxes under the Income War Tax Act in respect of war service pensions, regardless of whether they arise out of the past war or the present one. I feel sure that this will meet with a hearty response not only in the house but in the country as a whole.

[Stage Direction]
Legislation will be introduced to prevent tax avoidance in certain directions. For example, it is proposed that- income received from oil or gas wells organized on the so-called royalty basis shall be deemed to be income received by the person or persons actually operating the oil or gas wells on behalf of the royalty holders and taxed at that point. Also, when property is sold on an instalment basis the capital payments shall be deemed to include interest at a reasonable rate in cases where there is no interest provided for or where the interest provided for is unduly low.
Our tax on non-residents which now applies to interest, dividends, rents, royalties and cert tain other income will be extended to cover salaries and annuities. This will bring our tax on non-residents more nearly into line with those imposed by other governments on our citizens. At the same time I propose to remove the present limitation on the personal exemption applying to non-residents who but for this limitation would pay tax under our law on the same basis as residents. This provision, which will be on a reciprocal basis, will be
[Stage Direction]
The Budget-Mr. llsley
of particular interest to persons who commute across our international border. Several other minor changes in the law will be introduced which I need not mention here but which will appear in the resolutions. Rates of tax in the gift tax schedule will be increased 3 per cent.
This concludes the section on proposals relating to personal income taxes. I wish to turn now to some proposals concerning the excess profits tax.

[Stage Direction]
The excess profits tax as it was drafted in the budget of June, 1940, and revised in many details in last year's budget, has been appropriate to the period of expansion during the early years of the war. During this time it has produced substantial revenues for the treasury in a reasonably equitable manner. It has imposed a heavy tax on increases in profits. It has served to keep the over-all increase in profits of all corporations within moderate limits, so that the total of all profits has increased by only a small percentage from year to year despite the very much larger increases in the total of business carried on. At the same time it has permitted rapidly expanding businesses to retain a fraction of their increased profits in order to meet their requirements for additional working capital during this expansion period.
The time has now come when we can and should make the excess profits tax more severe The rate of expansion in business will now be much less than it has been heretofore. In the case of many civilian businesses the volume of their production or turn-over is likely to decline rather than expand. Even in the field of war production we are getting close to the levels of full capacity. Consequently, businesses in general no longer need to retain substantial amounts of their current profits for reinvestment in working capital. and can afford to pay a large proportion to the treasury. Secondly, the machinery required to administer the excess profits tax has now been built up and is operating efficiently. We are, therefore, able to undertake changes in the tax which could not be readily undertaken when we did not have the administrative machinery to carry them out effec-, tively. Finally, in the past year we have adopted a much more rigorous general economic policy, involving control over many forms of incomes as well as over production and distribution. This more rigorous economic policy makes appropriate the more rigorous excess profits tax.
I have given a good deal of consideration to various alternative means of increasing

the excess profits tax. I believe that the increase should affect the tax on excess profits rather than on profits that have not increased substantially over pre-war levels. Already the tax on profits that have not increased is heavy when we bear in mind that those profits when distributed as dividends are snh-ject to all the personal income taxes in addition to the corporation taxes. This involves, in effect, a discrimination against income earned in the form of corporate profits as distinct from other types of income, such as interest. Some discrimination may be justified, but I believe we have already gone far enough in that direction. Consequently, I propose to increase the rate of tax on excess profits but not the flat rate of tax which applies to profits generally.
In proposing this increase I think it important that we should not remove entirely the continuing, day to day, incentive for economy and efficiency in production. If that incentive were entirely removed by making the tax such that it would take the whole of any increase in profits, leaving no benefit to the producer, then we would be exposing ourselves to the danger of slackness and carelessness in regard to costs and efficiency. I am not suggesting that Canadian producers, or distributors for that matter, or those engaged in any other type of business would in any way sabotage our national effort at this time, but simply that t}ie complete removal of the standard, by which business men are accustomed to determine whether expenditures are justifiable or not, might make them forget the minor economies and opportunities for increased efficiency which do not appear significant in themselves in relation to the national effort but which in the aggregate have very great importance. We cannot afford now to waste labour, materials or time. We need to preserve efficiency by every reasonable means at our disposal. Secondly, I believe that in making any change we should not deprive businesses of all chance to build up reserves for the post-war period. Some reserves will be needed if business is to press ahead actively after the war with the conversion of its operations from war purposes to peace purposes, to modernize its plant and thereby place itself in the best position to provide employment in the post-war period. Thirdly, we must beware of making too severe an instrument of taxation that can never be perfectly fair and equitable, however much we endeavour to provide for various types of cases and situations. If we had a tax that was extremely severe in its treatment of so-called excess profits, yet something short of perfect in determining standard profits, we

The Budget-Mr. Ilsley
should be continually tempted to make special allowances of one kind or another to temper its severity in hard cases in an endeavour to be equitable and these would be apt to add up in total to a tax that was far less severe than was intended.
On the other hand our need for funds at the present time is very pressing, as I have already emphasized in connection with the personal income taxes. We must obtain every dollar that we can. Moreover, it is desirable at the present time not to permit those who have substantially increased profits to disperse them in higher current dividends since this would be directly contrary to the government's policy of stabilizing incomes. Any increase in profits would better be reserved to enable the business to play an active part in post-war reconstruction.
Balancing these various considerations I have decided to propose that the rate of tax on excess profits be raised from 75 per cent to 100 per cent, and, at the same time, that provision be made for refunding after the war 20 per cent of the excess profits taken, over the range where this 100 per cent rate is effective.
I am also proposing another more complicated change which is less spectacular but serves to increase the effective rate of tax very substantially on businesses whose profits have increased significantly over pre-war levels. Let me remind the house that under the present act a corporate taxpayer pays an 18 per cent corporation income tax on all of its profits and then under the Excess Profits Tax Act pays either (a) 75 per cent of the excess profits over standard profits after deducting the corporation income tax paid on this excess or (b) 22 per cent of its total profits, whichever is the greater. I am now proposing that under the Excess Profits Tax Act a company shall pay a flat rate of 12 per cent on its total profits in addition to the 18 per cent corporation income tax, and then shall pay as well either 10 per cent of its total profits or 100 per cent of its excess profits after deduction of the corporation income tax and the 12 per cent rate thereon, whichever is the greater. In effect, therefore, I am taking the 22 per cent in the present act and splitting it into 12 per cent to apply to total profits in any event, and 10 per cent to apply as an alternative where that is greater than the amount produced by the rate on excess profits. The effect of this change, which may appear inconsequential at first sight, is to increase substantially the tax liability of all those whose profits have increased by more than one-sixth of their standard profits.
The amount to be refunded to those corporations which are subject to the 100 per cent rate on excess profits will be 20 per cent of the amount of profits in excess of the amount at which the 100 per cent tax on the excess after the deduction of corporation income tax and the 12 per cent flat rate equals the 10 per cent tax on the total profit. This rather complicated provision results in the 20 per cent refund applying only where the 100 per cent rate effectively applies on any additional profits. The amount to be refunded will not bear interest but will be returned unconditionally to the taxpayer after the war, provided only that his tax liabilities have been paid.
The result of these changes in the rate structure of the excess profits tax will be that no corporation will be permitted to retain more than 70 per cent of its pre-war standard profits, though it will be given the opportunity to earn a post-war credit through economies and efficiencies and increased production that enable it to earn higher profits before tax. This limitation on the amount of profits which may be retained may eventually require some corporations whose profits or dividends have increased substantially in recent years to reduce their current rates of dividends. If certain reductions of dividends should be required by the measure I am proposing I do not believe it will be too much of a burden to place on these corporations or their shareholders at this critical time. The amount of tax which will be refunded will not be lost to the corporation but will enable it to safeguard its post-war position and to make itself ready to take part in the important work of reconstruction.
Because these changes impose a 100 per cent rate on many corporations and because in many cases available earnings have already been disposed of, I have decided that it would be impossible to make it retroactive. Consequently, these new rates of excess profits tax will apply as from the 1st of July onwards. In order to ensure that the taxes payable under this act and by corporations under the Income War Tax Act are remitted at as early a date as possible to the treasury it is proposed to require monthly instalment payments on account of the tax liability, including the refundable portion. The payments made before the end of the fiscal period of the business will have to be based upon anticipated earnings or earnings in the preceding period. The result of this change in timing will mean a very substantial increase in the amount of revenues to be obtained from the excess profits tax during the current fiscal year.
The Budget-Mr. llsley
[Stage Direction]
Certain other amendments to the Excess Profits Tax Act will be brought in. For example, the tax exemption designed to encourage mineral production which previously was obtained in the Income War Tax Act will be transferred to the Excess Profits Tax Act. The house may recall that the present exemption expires December 31, 1942. It is proposed that a generally similar exemption shall be granted under the Excess Profits Tax Act where the tax relief is greater rather than under the Income War Tax Act. The new exemption will apply to producers of base metals and strategic minerals. This exemption may be regarded as complementary to the measure of assistance being granted under the Income War Tax Act which encourages the search for these minerals.
In the interests of achieving greater equity in our taxes on business enterprises which now of necessity are at such very high levels, I propose to allow in future a one-year carry-forward of losses. This will apply in the case of corporations to both income and excess profits tax and in the case of sole proprietorships and partnerships to excess profits tax.
The law at present gives complete exemption to small businesses with profits of $5,000 or less. Under a proposed amendment this exemption will be withdrawn in respect of the new 12 per cent flat rate which applies generally to total profits of corporations. Other changes of a technical nature which I need not explain here will be found in the resolutions.
I have already given an estimate of $275 million as the yield in this fiscal year of the excess profits tax if there were to be no changes made in it. This revenue would be largely derived from the tax on profits earned in 1941. The introduction of the compulsory instalment plan for the payment of this tax will increase substantially the revenue to be expected from it during this fiscal year from taxes on income earned during 1942. Excluding the effects of the changes in rates, this increase would be about $145 million. The changes in the rates of the excess profits tax which I am proposing would, it is estimated, yield an increase in revenue of about $58 million on the basis of a full year's application with profits at their current levels. Because of the instalment plan, we shall get some of this increase during the current fiscal year, and allowing for the fact that the changes go into effect from July 1, it is estimated that the amount will be about $20 million. In addition to these amounts of actual revenue, the amount we shall receive in the form of refundable tax under the excess profits tax is estimated at about $60 million on the basis of

a full year's application with profits at current levels, of which we may anticipate receipts of about $25 million during the current fiscal year.
The application of the instalment plan to the corporation income tax will bring about an increase in revenues from that tax during the present fiscal year, even though the rates are not changed at all. It is estimated this will amount to $105 million.
In the Succession Duty Act there will be few significant changes. The rate structure will not be altered. As a matter of general interest, however, I may call attention to. the new form of exemption which will allow charitable gifts up to one-half the estate to pass entirely tax free where previously the duty was one-half the ordinary rate. It is also proposed to offer exemption on a reciprocal basis to representatives of foreign governments. Certain other minor changes will be made with a view to clarifying the law and assisting in its administration.

[Stage Direction]
I come now to indirect taxes. I would remind the house that, in the three previous war budgets, we have made a highly selective approach to indirect taxes. We have attempted to collect revenues on specific expenditures rather than on all expenditures. Remembering that we already had an 8 per cent sales tax at the outbreak of war, we have avoided, since the first war budget, except in last year's increase in the sugar tax, indirect taxes which would raise the cost of the necessaries of life. The imposition of the price ceiling has added conclusively to the weight of argument against general rather than selective increases in consumption taxes. I propose to follow again, therefore, a selective approach and recommend substantial increases in taxes which fall on luxury expenditures. It is hoped that these taxes will discourage such expenditure. To the extent that they do, current savings will be increased. To the extent that such expenditures persist, the treasury will benefit from the revenue.
The excise duties on alcoholic beverages have already been increased substantially since the outbreak of war, but the record of sales leads me to conclude that further large increases can again be made. I shall recommend that the excise duty on spirits, which was increased from $4 to $7 a gallon in September, 1939, be raised to $9 and that on Canadian brandy from $6 to $7. The pre-war excise duty on malt was 6 cents a pound and was increased to 10 cents in September, 1939, and to 12 cents in April, 1941. My recommendation is that it

The Budget-Mr. Ilsley.
be now increased to 16 cents a pound and that corresponding increases be imposed on malt syrup and on beer imported as such. It is proposed that the excise tax on wines be raised from 40 to 50 cents and on sparkling wines from $2 to $2.50 per gallon. It is anticipated that these changes will result in an increase of revenue of 811,650.000 in this fiscal year and $15,600,000 in a full year.
It is recognized that the provinces, as well as the dominion, derive revenue from the taxation or sale of alcoholic beverages. They have also the responsibility for regulation of the sale. If the tax increase here proposed should seem likely to affect their revenues they have it in their own power to raise their prices or taxes. The purpose of these increases is to provide additional revenue for the dominion at the expense of the consumer, not to make inroads on provincial revenifts.
Sales of cigarettes, now taxed at 86 per thousand, have increased very rapidly despite war-time increases in excise duties of 50 per cent. It is proposed, therefore, to amend the Special War Revenue Act to provide for an additional excise tax of one cent for each five cigarettes or fraction thereof contained in any package. Relative to cigarettes, smoking tobacco has been less highly taxed. While not seeking to equalize the rates, I propose an additional tax of one cent per ounce on manufactured tobacco. It will be recommended further that the rate on raw leaf tobacco be raised from 10 to 20 cents a pound. It will be recommended also that the tax on cigars be increased by 25 per cent, the tax on cigarette papers be increased from 5 cents to 6 cents per 100 and that on cigarette tubes be raised from 10 cents to 12 cents per hundred. It is estimated that these increases on tobacco, in its various forms and uses, will produce additional revenue of S17,205,000 in the fiscal year and $22,950,000 in the full year.
I shall recommend that a number of excise taxes be increased and that some new taxes be imposed. The increases proposed are briefly as follows: On soft drinks, of which the supply is at present inadequate to meet the demand, a specific tax of 1 cent a bottle in addition to the present 25 per cent tax; on carbonic acid gas, a corresponding increase from 25 cents to 50 cents a pound; on playing cards, an increase from 15 cents to 20 cents a pack; on passenger transportation, a rise from 10 per cent to 15 per cent with the exemption limit raised from 50 to 75 cents; on berths, from 10 per cent to 15 per cent with a minimum tax of 35 cents, and on
parlour-car seats, from 10 cents to 15 cents; on long distance telephone calls an advance from 10 per cent to 15 per cent with a corresponding adjustment of the rates on pay-station calls, the maximum tax being limited to 75 cents; and on telegrams, cables and radiograms an increase from 5 cents to 7 cents per message. On furs, which are at present subject to sales tax at 12 per cent, it is proposed to advance the rate to 25 per cent and change the form of tax from a sales tax to an excise tax.
I shall propose new excise taxes to be levied, at the manufacturer's level, on candy and chewing gum at a rate of 30 per cent and photographic films and plates, except for industrial and professional use, at the rate now imposed on cameras, 25 per cent. I shall further recommend a new tax of 25 cents per month on telephone extensions in private households. The treasury will be glad to have the revenue but, if anyone chooses to discontinue their use of such extensions, the telephone companies will be glad to have the instruments.
It was my opinion, at the time of the last budget, that expenditures in dance halls and cabarets were a proper occasion for taxation, but I was unable at that time to find a suitable formula. I shall recommend that a tax of 20 per cent be collected on all expenditures in dance halls, night clubs, cabarets and other such establishments which combine any two of the following features: provision for dancing by the patrons, the sale of alcoholic beverages, the offering of musical or other entertainment by paid performers. This tax is to be payable by excise stamps affixed to the bill or account which must be rendered by the proprietor to the patron. It is proposed that this tax take effect on July 1 next.
I shall recommend also that excise taxes be levied on the retail purchases of certain luxury articles. The tax of 25 per cent of the retail price is to be accounted for by the affixing of excise stamps to the bill, cash slip or the article itself. The articles, on the retail price of which it is recommended that this tax be applied, are (1) articles of personal luggage, brief cases, jewel cases, purses, handbags, sports bags, etc., with an exemption of articles selling for $1 or less; (2) diamonds, jewellery and imitation jewellery and all goldsmiths' and silversmiths' products, articles of ivory, jet, amber, mother-of-pearl, etc., with exemption of articles selling for 50 cents or less; (3) articles of cut glass or crystal, articles selling for 50 cents or less
[Stage Direction]


The Budget-Mr. Ilsley.
being exempt; (4) articles of china, porcelain, stoneware, etc., except such articles for use in the preparation or serving of food or drink, the 50 cent exemption also applying to this category; (5) clocks and watches; (6) ash trays, tobacco pipes, cigar and cigarette holders, and cigarette rolling devices and other smokers' accessories; (7) fountain pens, propelling pencils, desk sets and desk accessories. In respect of the last three groups of articles the tax will not apply to articles selling for $1 or less.
I am sure that the house will agree that these excise taxes will fall on articles which it is not essential to purchase in war time and that they will fall almost wholly on persons who make unnecessary expenditures, and thus give evidence that they are in a position to contribute to the revenues of the country. I expect that the increases in excise taxes will produce additional revenue in the fiscal year of $20,995,000 and $28,025,000 in the full year.
In the case of taxes on commodities and services which are levied on the retail price and paid by the consumer or patron when his bill is paid, the tax will be stated separately from the price and will be deemed not to be part of the price for the purposes of the maximum prices regulations. Of the commodities on which new or increased taxes are assessed on the manufacturers' price it may be noted that furs are exempt from the maximum prices regulations, as are also sales of alcoholic beverages by provincial liquor boards. The other commodities affected are subject to the maximum prices regulations, viz., alcoholic beverages sold otherwise, cigarettes and tobacco, cigarette papers and tubes, candy and chewing gum, photographic films and plates, soft drinks and playing cards. On cigarettes and tobacco, the new taxes are separately stated and will be so indicated by stamps on the packages. The tax will not be considered part of the price for purposes of the maximum prices regulations. In respect of the other commodities, the wartime prices and trade board will permit such adjustments as are necessary and equitable.
Expenditures on one commodity and one service affected by tax increases, cigarettes and passenger transportation, are included in the Dominion Bureau of Statistics cost of living index. That index has since the institution of price and income control acquired an importance which it did not previously have. It is calculated by precisely the same methods that have been used since its inception. No considerations of policy or expedi-

ency can be permitted to affect it. However, these tax increases will be separately stated and clearly identifiable as taxes on the com-sumer. I propose that in the case of cigarettes which, desirable as they may be in other circumstances, are clearly not necessaries of life for the population as a whole, the new tax shall not be deemed part of the price for the calculation of the cost of living index.
In announcing the offer to provincial governments regarding tax agreements last year, I stated that if certain taxes were given up by the provinces it was possible that the dominion, in order to prevent certain classes of companies from benefiting by the change, might impose special taxes in these directions. On reviewing the situation, it has been decided to levy a tax of 2 per cent on premiums paid on. life, fire and casualty insurance, in addition to the taxes we at present impose which are confined to fire and casualty insurance. In the case of other classes of companies it was found that the increase in dominion taxes on profits more than offset the special taxes -which they had been paying to the provinces and accordingly no special taxes by the dominion are necessary. Since the taxes collected in this fiscal year will cover both 1941 and 1942 the revenue in the fiscal year should be $13 million or double the annual yield.
The changes proposed in the customs tariff provide for a number of tariff reductions and amend the wording of several items to facilitate administration. The resolutions about to be tabled affect twenty-five items and also provide for increased additional duties on imports of alcoholic beverages. The changes being made in these additional duties equalize the increases being made on the same commodities under the Excise Act. The existing excise duty on beer is being removed from the schedule to the Excise Act and replaced by a gallonage tax in the customs tariff.
New duty free items are being provided to cover machinery and apparatus for operating oil sands by mining operations and for extracting oil from the sands so mined, fuel injection pumps and nozzles for diesel and semi-diesel engines, magnesium scrap and crude cotton seed oil for canning fish.'
Additions to existing items provide for reduced rates on semi-finished piston castings of any material, parts of saggers, glass tubing for use in the 'manufacture of vials and ampoules, especially designed pins for marking systems, unbraided wick for the manufacture of wax candles or tapers, belting, non-elastic woven fabrics for the manufacture of abdom-

The Budget-Mr. llsley.
inal supporters and spinal braces, mouthpieces and wood bowls for the manufacture of tobacco pipes.
The wording is being amended to facilitate the administration of the items covering parts for use in the manufacture of motor trucks, motor buses, motor truck bodies, motor bus bodies, prepared or preserved vegetables, blended orange and grapefruit juice, silicate of soda and resin or rosin.
This completes the tax changes which I am-recommending and I shall put on Hansard two tables, one showing the estimated increases in. revenue which are expected in the remainder of this fiscal year and in a full year from the; new and increased taxes, and the other showing the full revenue estimates for the present fiscal year after giving effect to all the changes and tax rates and time of payment:
Yields from Proposed Changes in Taxation
Increased yields from changes in existing taxes-
Personal Income Tax	
Corporate Income Tax	
Excess Profits Tax	
Insurance Premiums	
Excise Duties-
Spirits (potable)	
Malt	
Malt Syrup and Beer	
Tobacco (raw leaf)	
Excise Taxes
[Stage Direction]
Wines	
Cigarettes	
Tobacco (manufactured)	
Cigars	
Cigarette Papers and Tubes..
Soft Drinks	
Carbonic Acid Gas	
Playing Cards	
Passenger Transportation....
Berths and Parlor Car Seats. Long Distance Telephone Calls
Telegrams and Cables	
Furs	
Yields from New Excise Taxes-
Candy and Chewing Gum	
Films and Photographic Supplies	
Telephone Extensions	
Cabarets, Dance Halls, etc	
Stamp Tax on
[Stage Direction]
Luggage	
Jewellery, Clocks, Watches	
Cut Glass and China	
Ash Trays, Pipes, Fountain Pens, Pencils, etc...
[Stage Direction]
Full year
[Stage Direction]
58,ooo'.66o
6,500,000
6,000,000
9,000,000
200.000
350,000
[Stage Direction]
$	400,000
17,600,000
4.000.	000 100,000
900.000
5.000.	000
300.000
100.000
3.000.	000
500.000
900.000
250.000
750.000
[Stage Direction]
Balance of current fiscal year 1942-43
$ 45,000,000*
105.000.	000*
165.000.	000* 13,000,000f
4.500.000
6.700.000
150.000
260.000
[Stage Direction]
$	300,000
13,200,000 3,000,000
75.000
670.000
3.750.000
225.000
75.000
2.250.000
375.000
670.000
190.000
560.000
[Stage Direction]
*
5,800,000
Total
$ 17,225,000	$ 12,900,000
$246,075,000	$377,850,000
* These estimates for the balance of the current fiscal year include substantial effects of proposed changes m the time and method of payment.
t Two years revenue will be collected in the balance of the current fiscal year, the nrooosed rate increases being retroactive to January 1, 1941.	*
3592
The Budget-Mr. llsley.
[Stage Direction]
Forecast of Total Ordinary Revenue for Fiscal Year 1942-43
Increase in revenue	Total
Revenue from	resulting from	ordinaryexisting taxes	budget proposals	revenueCustoms duties	
$ 135,000.000	$ 135,000,000Excise duties	
123.000,000	$	11,610,666	134,610,000
218,000,000	218.000,000War exchange tax	
95,000,000	95.000,000Other excise taxes	
Income taxes-	
85,000,000	38,240,666	123,240,000Personal 	
National defence tax	
240,000,000) 	
150.000.000(	45,000,000	435,000,000Corporation 	
200,000,000	105,000,000	305.000,000Interest and dividends	
28,000,000	28,000,000Excess profits tax	
275,000,000	165,000,666	440.000,000Succession duties	
15,000.000	15,000,000Miscellaneous taxes	
2.600,000	13,000,666	15,600,000Total tax revenue	
$ 1,566,600,000	$	377,850,000	$ 1,944.450,000Non-tax revenue.	
105,000,000	105,000,000Total ordinary revenue	
$ 1,671.600,000	$	377,850,000	$ 2,049,450,000

[Stage Direction]
If our estimates of the yields of new and increased taxes during the balance of the current fiscal year are reasonably correct, the dominion's total revenues for 1942-43 should be approximately $2,050 million. With expenditures of S3.900 million, this leaves a budgetary deficit of S1.S50 million which will have to be covered by borrowing. On these estimates, we shall have paid somewhat more than 52 per cent of our expenditures out of revenue.
The enactment of the budget proposals will provide for the collection in 1942-43 of additional sums to be refunded after the war and which it is estimated will amount to $95 million.
This will leave for other methods of financing $1,755 million. I shall put a brief tabular statement on Hansard to summarize these calculations in convenient form:
Fiscal Year 1942-43
Estimated total expenditure	$3,900,000,000
Estimated ordinary revenue	 2,050,000,000
Budgetary deficit	 1,850,000,000
Estimated refundable taxes		95,000,000
Amount to be met by decline in
cash and by borrowing	 1,755,000,000
After making full allowance for some reduction in our cash balances which were unusually large at the beginning of this year, for moneys available for investment from the Unemployment Insurance Fund and other special government accounts and for subscriptions from insurance and trust companies and other corporate investors, it is apparent that the balance which should be provided by individual purchases of war savings certificates and bonds is very large, perhaps as much as two-thirds of the total.
[Mr. Ilsley.l	,
No great fraction of this can be provided by individuals with incomes of more than $3,000 or $4,000. Individually they must do their share but the total of their subscriptions will be limited by the smallness of their numbers. It must be provided by people of lower incomes especially those in families whose incomes have increased during the war.
Now, the house will understand what I meant when I said that I was not proposing to substitute compulsory savings for voluntary savings. The refundable tax and other provisions which I am recommending are merely to equalize the base from which voluntary savings start. Subscriptions to victory loans and war savings certificates indicate that the current savings of individuals for the purchase of government securities are certainly not in excess of $12 million a week and may be somewhat lower. Over and above the higher taxes, over and above the minimum savings requirement, these current savings must not only be increased; they must be increased greatly if we are to finance this war the sane and the equitable way, if those of us who are not in armed forces are to demonstrate that, as a democracy, we are capable of meeting the stern tests of war as we expect those who dare physical destruction to meet far sterner tests.
Will this mean a reduction in our standard of living? Certainly. The war will not be won by disputing as to whether labour or agriculture or employer or employee should get a larger share of a swollen national income. It wall be won, not alone by the valour of fighting forces and the skill of generals but by the willingness of the people at home to make necessary sacrifices-willingness to make those sacrifices first and not after all other groups have made them.

The Budget-Mr. llsley.
I am asking that there should be by every individual the most rigorous economy. Every dollar we spend means that someone is working for us. Let us not spend it if that someone might instead be working for victory. I am not asking that anyone's standard of living should be reduced below the level of personal efficiency and decency. I am asking that it should be no higher than that level. Let us compete with our neighbours, in saving, not spending; in making shift with what clothing and house furnishings we have, not in buying more; in hard work and plain and thrifty living.
All this has an immediate and necessary purpose. All the equipment, materials and labour that we can possibly spare must be used in this bitter conflict for victory. It has a further purpose which gives hope for the future. The savings that we make now will be available after the war. We can then replenish our wardrobes and build our houses and take more leisure, knowing that not only will we be increasing the comfort and vitality of our families but providing work and pay for thousands of people who will come out of the armed services and war industries and earn their livelihoods once more in civilian industry. By all means let us have a new world after the war. It will not come from speeches and laws. We must work and save for it and for victory now.
The National War Finance Committee is engaged in the development of an organization in each province which will undertake a continuous campaign for the regular sale of bonds, war savings cerificates and stamps to the public throughout the entire year, supplemented from time to time, by special campaigns. I bespeak for them every dollar of savings that can be made and the active help of everyone in their campaign.
I should like to say a word to the business men who operate large and small businesses throughout this country. A big part of the earnings of business must during the war flow into the treasury. That is not because it is government policy to penalize business enterprise but because so large a part of all our incomes and all our work must go to winning this war. I realize fully that where most of the profits are absorbed by taxes it is difficult to be as vigilant in watching costs as when SI of expense saved is SI added to profits and the mark of a well-run business. Nevertheless it is imperative that business men
should be vigilant also in the national interest. Let no one have it on his conscience that he took man-power for unnecessary work, that he permitted cost increases which could have been avoided. For business too there is a longer view. Industry is going through a tremendous conversion to war production. When victory is achieved, it will have another great job of conversion to do. It must be prepared to serve again the civilian population, perhaps with many new and different products. It is the business interest and the nation's interest that men of business come to that task with costs that have been kept rigorously under control and with funds available for reequipping and restocking their plants and shops. The refundable portion of the excess profits tax will be available for that adjustment but it will be of less than its full value if business ends the war with highly inflated costs.
This, Mr. Speaker, concludes my presentation of the budget. The proposed tax increases are substantial and severe. They are imposed on the assumption that Canadians appreciate the critical gravity of recent events and the necessity of making a supreme effort in the present year. A few weeks ago, the atmosphere was surcharged with optimism which in many of its manifestations was almost lighthearted. The war would be over by January; the tide had turned; Germany was facing internal collapse; Japan had overextended herself; Italy was a joke; and so forth. More and more Canadians were putting forward demands for their own material betterments, and increasing numbers were transferring their interest from war to post-war problems.
The events of the last few days must surely have had a sobering effect. This is no time for airy overconfidence. Events in China, events in the Ukraine, events in the Crimea, events in Libya-do not these convince us that the war may not be won this year, may not be won for many years? It was not recklessly that Germany and Japan brought the United States into the war, as they did. What foolish statements we have madel Not long ago, how often was it said that Hitler was a madman, irrationally running headlong to destruction, that Japan was committing hara-kiri 1 Alas, there seems to have been nothing irrational-certainly nothing intentionally suicidal about the plans of our enemies. These aggressor nations prodded the United States into the war because they
The Budget-Mr. Ilsley.
[Stage Direction]
were convinced that they could, nevertheless, win-win in 1942. Do Canadians realize how critical the situation is at this moment in Russia, in China,, and in the middle east, and how critical it may be elsewhere before long? I believe that now they do and that their individual desires for gain, and ease, and advantage are submerged in the nation's will to win. In this belief, I present this budget to the house and to the Canadian people.

[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 amend the Income War Tax Act and to provide:
1.	That the rates of tax applicable to persons other than corporations and joint stock companies shall be increased to the rates set forth in the following schedule:
A. Rates of tax applicable to persons other than
corporations and joint stock companies:
I.	Normal tax-
(1)	In the case of
(a)	a married person,
(b)	a widow or widower with a son or daughter under eighteen years of age and wholly dependent upon such taxpayer for support, or a son or daughter eighteen years of age or over and dependent on account of mental or physical infirmity, or a son or daughter under twenty-one years of age who is dependent upon such parent for support on proof that such child is a student at secondary school, university, or other educational institution;
(c)	an individual, other than a married person, who maintains a self-contained domestic establishment and who actually supports therein a person wholly dependent upon him and connected with him by blood relationship, marriage or adoption;
(d)	a minister or clergyman, other than a married person, in charge of a diocese, parish or congregation, whose duties require him to maintain at his own and sole expense, a self-contained domestic establishment and- who employs therein on full time a housekeeper or servant;
Provided, in the case of (a), the spouse, and in case of (b), the said dependent, is resident in Canada or in any other part of the territory of the British Commonwealth of Nations, or in a country contiguous to Canada, or is a national or citizen of a country allied with Canada in the present war and is prevented from entry into Canada due to the exigencies of the war, or is legally debarred from entry into Canada;
*Seven per centum of the income, if the income exceeds $1,200 per year;
And in the case of
(e)	a husband and wife having each a separate income,
{Mr. llsley.J
Seven per centum of the income of each, if the income of each exceeds $660 per year;
And in the case of
(f)	a single person, or
(g)	a married person whose spouse is not
resident in Canada or in any other part of the territory of the British Commonwealth of Nations, or in a country contiguous to Canada or in a country allied with Canada in the present war, or whose spouse is not legally debarred from	entry into	Canada,Seven	per centum of	the income,	if	the
income exceeds $660 but does not exceed $1,800 per year;
Eight	per centum of	the income,	if	the
income exceeds $1,800 but does not exceed $3,000 per year; and
Nine per centum of the income, if the income exceeds $3,000 per year.
And in the case of
(h)	Estates having	income taxable	as
provided by subsections 2 and 4 of section 11 of this act;
Nine per centum of the income.
(2)	From the Normal Tax there shall be allowed a deduction of $28 for the year 1942 and for each year thereafter for each of the following persons who is resident in Canada or in any other part of the territory of the British Commonwealth of Nations or in a country contiguous to Canada or in a country allied with Canada in the present war or who is legally debarred from entry into Canada, and wholly dependent upon the taxpayer for support, namely
(i)	a child, grandchild, brother or sister of the taxpayer under eighteen years of age, or if eighteen years of age or over, is wholly dependent on account of mental or physical infirmity, or under twenty-one years of age on proof that such child is a student at a secondary school, university or other educational institution;
(ii)	a parent or grandparent of a taxpayer, wholly dependent on account of mental or physical infirmity;
(iii)	a child under eighteen years of age maintained by the taxpayer in Canada under a cooperative scheme sponsored by the governments of the United Kingdom and of Canada or any of the provinces of Canada, for children brought from the United Kingdom under a government plan, or under twenty-one years of age, and likewise maintained, upon proof that such child is a student at a secondary school, university or other educational institution;
except one such dependent provided for in (b) and (c) of subparagraph (1) hereof;
(3)	If the tax exigible under the Normal Tax should cause the income of a single person or a husband or a wife to be reduced below the amount of $660 or in the case of those persons referred to in (a), (b), (c) and (d) of subparagraph (I) hereof, below $1,200, then to the extent that it would so reduce the income of the taxpayer, such tax shall not be payable.

The Budget-Mr. Ilsley.
II. Graduated Rates of Tax:
In addition to the Normal Tax there shall be imposed in respect of the income above the exemption hereinafter provided, the following: On the first $500 of income or any portion thereof, 30 per centum per annum, or
$150 upon the income of $500; and 33 per centum upon the amount by which the income exceeds $500 and does not exceed $1,000; or $315 upon income of $1,000; and 37 per centum upon the amount by which the income exceeds $1,000 and does not exceed $2,000; or $685 upon income of $2,000; and 41 per centum upon the amount by which the income exceeds $2,000 and does not exceed $3,500; or $1,300 upon income of $3,500; and 45 per centum upon the amount by which the income exceeds $3,500 and does not exceed $5,000; or $1,975 upon income of $5,000; and 50 per centum upon the amount by which the income exceeds $5,000 and does not exceed $8,000; or $3,475 upon income of $8,000; and 55 per centum upon the amount by which the income exceeds $8,000 and does not exceed $13,000; or $6,225 upon income of $13,000; and 60 per centum upon the amount by which the income exceeds $13,000 and does not exceed $20,000; or $10,425 upon income of $20,000; and 65 per centum upon the amount by which the income exceeds $20,000 and does not exceed $30,000; or $16,925 upon income of $30,000; and 70 per centum upon the amount by which the income exceeds $30,000 and does not exceed $50,000; or $30,925 upon income of $50,000: and 75 per centum upon the amount by which the income exceeds $50,000 and does not exceed $70,000; or $45,925 upon income of $70,000; and 80 per centum upon the amount by which the income exceeds $70,000 and does not exceed $100,000; or $69,925 upon income of $100,000; and 85 per centum upon the amount by whicb the income exceeds $100,000.
2.	That the exemptions of $1,500 and $750 shall be reduced for the purposes of the Graduated Rates to $660 for all persons;
3.	That a married person, or a person heretofore entitled to an exemption equivalent to that of a married person, shall be allowed as a deduction from the tax payable under the Graduated Rates, an amount of $150;
4.	That in lieu of the deduction of $400 from income for each dependent child or grandchild there shall be allowed a deduction of $80 from the tax payable under the Graduated Rates;
5.	That a deduction from the tax payable under the Graduated Rates be allowed a taxpayer to the extent of 20 per centum of the amount actually contributed for the support of a dependent parent or grandparent, or a brother or sister under eighteen years of age or eighteen years of age or over and dependent on account of mental or physical infirmity, or under twenty-one years of age, upon proof that such brother or sister is a student at a secondary school, university or other educational institution: provided that the maximum credit herein shall not exceed $80.
6.	That one-half of the total taxes payable by a taxpayer under the Normal Rate of tax and the Graduated Rates of tax shall be refundable to a taxpayer
provided, however, that such refund shall not exceed
8 per centum of the income of a single person, or $800, whichever is the lesser; or
10 per centum of the income of a married person, or $1,000, whichever is the lesser; plus
1 per centum of the taxpayer's income for each dependent, or $100, whichever is the lesser;
7.	(I) That the total taxes payable by any taxpayer under the Normal Rate of tax and the Graduated Rates of tax shall be reduced by the amount paid by the taxpayer in respect of
(a)	payments into any approved superannuation, retirement or pension fund or plan, paid as a term of employment and not repayable during the continuance of such employment;
(ib) premiums on life insurance policies in force prior to the twenty-third day of June, 1942;
(c) principal payments on a mortgage on one residential property, provided such mortgage was registered and in effect prior to the twenty-third day of June, 1942;
Provided, however, that such reductions shall not exceed the amount of the refundable portion of the tax as provided for in resolution 6 above; and the said refundable portion shall be reduced accordingly;
(2) That in the case of a taxpayer over sixty-five years of age with income less than three thousand dollars, the total taxes payable under the Normal Rate of tax and the Graduated Rates of tax shall be reduced by the refundable portion of the tax as provided for in resolution 6 above, and the said refundable portion shall be eliminated accordingly;
8.	That the refundable portion of any tax exigible under any enactment founded on these resolutions shall be repaid to the taxpayer or to his legal representatives, after the cessation of hostilities between Canada and Germany, Italy and Japan, and in the following manner: The refundable portion of the tax in respect of income of 1942 shall be repaid at such times and in such instalments as the Governor in Council may determine but not later than the end of the second fiscal period of the government commencing after the said cessation of hostilities; the refundable portion of the tax in respect of the income of 1943 shall be repaid at such times and in such instalments as the Governor in Council may determine but not later than the end of the third fiscal year of the government commencing after the said cessation of hostilities and so on in respect of the refundable portion of the tax on income of successive years.
The date of the cessation of hostilities shall be deemed to be the date of a proclamation issued under the authority of the Governor in Council declaring that, for the purposes of the said refund, the war no longer exists.
9.	That the refundable portion of any tax paid by the taxpayer in the twelve months preceding the first day of September .in any year shall bear interest at the rate of 2 per cent from that date and shall be payable when the refundable portion is repaid;
The Budget-Mr. Ilsley.
[Stage Direction]
10.	That where, under any existing or future contract or arrangement, a capital or principal sum is payable by instalments or otherwise, without providing for interest, or with interest at a nominal rate only, the Minister in his sole discretion may by regulation or otherwise determine what part of the capital payment represents interest, which shall be deemed to be income for the purposes of this act;
11.	That where any royalty company, association, or other body is organized for the purpose of drilling for and operating oil or gas wells whereby the production belongs not to the company but to the investors in the property, the production shall be deemed to be for and on behalf of the company and the income of the company shall be deemed to include the proceeds secured from the sale of the said oil or gas, less necessary expenses;
12.	That any pension granted to any member of His Majesty's military, naval or air forces or to any member of the military, naval or air forces of His Majesty's allies, for any disability suffered on active war service by the pensioner or any pension granted to any dependent relative of any person who was killed or suffered any disability while on active war service in the said forces, shall be exempt from taxation;
13.	That any amount received as compensation, other than compensation for loss of time, under any Workmen's Compensation legislation of any of the provinces of Canada in respect of any injury or disability incurred or in respect of any death, shall be exempt from taxation;
14.	That any employer may deduct as an expense an amount up to 5 per centum of his pay roll, under limitations to be prescribed, paid as contributions to any employees' superannuation or pension fund or plan, excluding therefrom, however, portions in respect of salaries over $0,000 per annum;
15.	That a taxpayer shall be allowed a deduction from income in respect of medical expenses in excess of 5 per centum of the income of such taxpayer, incurred and paid by such taxpayer in the taxation year, or paid in the taxation year and incurred within one year prior to the date of payment if such payment is made to any qualified medical practitioner, dentist, or nurse, registered under any Dominion or Provincial legislation or regulation, or public or provineially licensed private hospital, in respect of any birth in the family of, illness or operation upon, the taxpayer or his spouse, or any person dependent upon the taxpayer, in respect of whom the taxpayer w'ould heretofore have been entitled to an exemption and if the said dependent is resident in Canada, provided that the allowance in any taxation year shall not exceed the sum of
(a)	$400 in the case of a single person without dependents, or
(b)	$600 in the case of a married person or a person entitled to an equivalent allowance to that of a married person; plus
$100 in respect of each additional person (not exceeding four) dependent upon the taxpayer for support;
[Mr. Ilsley.J
Provided, however, that the maximum deduction hereunder shall not exceed $1,000;
and provided further that the said amounts are substantiated by receipts and that such receipts are lodged with and at the time of filing the taxpayer's income tax return;
16.	That the revenue losses in any business, of the immediately preceding year, may be allowed as a deduction.
17.	That contributions not exceeding $500 to any one registered prospecting syndicate searching for base metals or strategic minerals, but not exceeding $5,000'in the aggregate, and payments not exceeding $5,000 by any corporation in respect of its own prospecting expenses for similar minerals, may be allowed as a deduction from the income of any taxpayer, provided that the tax saving under this act and the Excess Profits Tax Act, 1040, shall not exceed 40 per centum thereof in each case;
18.	That the deduction provided for by section 7 of the said Act under which a taxpayer is entitled to deduct from tax the amount paid under part III of the Special War Revenue Act, be repealed;
19.	That salary and other periodic payments payable to non-residents of Canada who are residents of a country which imposes a tax of a similar nature shall be subject to a tax of 15 per centum at the source;
20.	That the tax payable by all persons other than corporations shall be paid by quarterly instalments during the six months immediately prior to the close of the calendar year and the six months immediately subsequent to the close of the calendar year
(a)	as to the six months, July to December, one-quarter of the estimated tax on or before the 15th day of September and the 15th day of December each year, having regard to the previous year's income and applying the current year's rates, and
(b)	as to the six months, January to June, one-half of the tax (after deducting therefrom the previous two quarterly payments) on or before the 15th day of March and the 15th day of June each year, having regard to the income and applying the rates of the taxation year.
This shall be applicable to the tax on income of the calendar year 1942 and each year thereafter.
Any additional tax found due over that estimated or declared by the taxpayer shall be paid immediately upon assessment, together with interest at 5 per centum after four months from the close of the calendar year.
This instalment method of payment shall not apply to persons whose tax is being deducted at the source in respect of salary or wages, and whose salary or wage constitutes three-quarters or more of his income;
21.	That the tax payable by a corporation shall be paid by monthly instalments during the six months immediately prior to the close of its fiscal period and the six months immediately subsequent to the close of its fiscal period

The Budget-Mr. Ilsley.
(a)	as to the first six months, one-twelfth of the estimated tax, having regard to the previous or anticipated current year's income, applying the current year's rates, and
(b)	as to the second six months, one-sixth of the tax after deducting therefrom the previous six months' payments having regard to the income, and applying the rates of the taxation year.
This shall be applicable to the tax on profits of fiscal periods ending on and after 31st December, 1942.
Any additional tax found due over that estimated or declared by the taxpayer shall be paid immediately upon assessment, together with interest at 5 per centum, after four months from the close of the fiscal period;
22. That the schedule of rates of tax on gifts in section 88 of the said act be repealed and in lieu thereof there be substituted the following schedule, to apply to gifts made after June 23, 1942:
On gifts up to and including $5,000....			Per cent .. 10
On gifts exceeding $ 5,000 but not exceeding $ 10,000.			.. 11
10,000 "	"	" 20,000.	.. 1220,000 "	"	" 30,000.	.. 1330,000 "	a	" 40,000.	.. 1440,000 "	"	" 50,000.	.. 1550,000 "	"	75,000.	.. 1675,000 "	it	" 100,000.	.. 17100,000 "	"	" 150,000.	.. 18150,000 "	a	" 200,000.	.. 19200,000 "	"	" 250,000.	.. 20250,000 "	a	" 300,000.	.. 21300,000 "	a	" 400,000.	.. 22400,000 "	"	" 500,000.	.. 23500,000 "	a	" 600,000.	.. 24600,000 "	"	" 700,000.	.. 25700,000 "	"	" 800,000.	.. 26800,000 "	a	" 1,000,000.	.. 271,000.000'.. . .	.. 2823.	That provisions relating to the collection of National Defence Tax be repealed as of midnight of the 31st August, 1942;24.	That commencing after the 31st day of August, 1942, all dividends and registered interest paid by any debtor to residents of Canada shall be subject to a deduction at the source at the rate of 7 per centum;25.	That commencing after the 31st day of August, 1942, all salaries and wages paid by any employer to residents of, or persons employed in, Canada shall be subject to a deduction at the source of such portions of the taxes authorized herein as may be determined hereafter by the Governor in Council;26.	That any enactments founded on
(a) Resolutions 1 to 15 inclusive, 20 and 21 shall be applicable to the income of the 1942 taxation , period and fiscal periods ending therein and to all subsequent periods;
(b)	Resolution 16 shall be applicable to the
income of 1943 taxation period and fiscal periods	ending	therein	and	all	subsequent
periods;
(c)	Resolution 17 shall be applicable only to the income of the 1942 taxation period and fiscal periods ending therein;
(d)	Resolution 18 shall be applicable to the
income of the 1941 taxation period and fiscal periods	ending	therein	and	all	subsequent
periods;
(e)	Resolution 19 shall be deemed to have come into force on the 24th day of June, 1942, and shall be applicable to all payments made on and after the said date.

[Stage Direction]
Resolved, that it is expedient to introduce a measure to amend the Excess Profits Tax Act, 1940, and to provide-
1.	That the rates of tax as set out in the Second Schedule to the said Act be repealed and the following substituted therefor:
"First part-
Ten per centum of the profits of corporations and joint stock companies and fifteen per centum of the profits of all persons other than corporations, before deduction therefrom of any tax paid thereon under the Income War Tax Act.
"Second part-
One hundred per centum of the excess profits. "Third part-
Twelve per centum of profits of corporations and joint stock companies before deduction therefrom of any tax paid thereon under the Income War Tax Act."
2.	That in computing the amount of excess profits subject to the tax of one hundred per centum, corporations be allowed to deduct such portion of the income tax and the tax payable under the Third Part of the Second Schedule to the Excess Profits Tax Act as the excess profits bear to the total profits.
3.	That the exemption from excess profits tax of corporations with profits not in excess of five thousand dollars be limited to an exemption from the tax under the First Part or the Second Part of the Second Schedule but that such corporations be subject to the tax under the Third Part of the Second Schedule, namely, a tax of twelve per centum of profits.
4.	That there shall be refunded to the taxpayer in accordance with paragraph five of these resolutions an amount equal to twenty per centum of the profits above the point at which the tax calculated under the First Part of the Second Schedule is equal to the tax calculated under the Second Part of the Second Schedule, provided that the said profits have been paid by way of taxes under the Income War Tax Act and the Excess Profits Tax Act, 1940, to the Receiver General of Canada.
5.	That the refundable portion of any tax exigible under any enactment founded on these resolutions shall be repaid to the taxpayer or
[Stage Direction]
The Budget-Mr. Ilsley.
[Stage Direction]
to his legal representatives, after the cessation of hostilities between Canada and Germany. Italy and Japan, and in the following manner: The refundable portion of the tax in respect of the profits of 1942 and fiscal periods ending therein shall be repaid at such times and in such instalments as the Governor in Council may determine but not later than the end of the second fiscal period of the Government commencing after the said cessation of hostilities: the refundable portion of the tax in respect of the profits of 1943 and fiscal periods ending therein shall be repaid at such times and in such instalments as the Governor in Council may determine but not later than the end of the third fiscal year of the Government commencing after the said cessation of hostilities and so on in respect of the refundable portion of the tax on the profits of successive years or fiscal periods.
The date of the cessation of hostilities shall be deemed to be the date of a proclamation issued under the authority of the Governor in Council declaring that, for purposes of the said refund, the war no longer exists.
6.	That the tax payable by a corporation shall be paid by monthly instalments during the six months immediately prior to the close of its fiscal period and the six months immediately subsequent to the close of its fiscal period-
(a)	as to the first six months, one-twelfth of the estimated tax, having regard to the previous or anticipated current year's income, applying the current year's rates, and
(b)	as to the second six months, one-sixth of the tax (after deducting therefrom the previous six months' payments) having regard to the income, and applying the rates of the taxation year;
This shall be applicable to the tax on profits of fiscal periods ending on and after 31st December, 1942.
Any additional tax found due over that estimated or declared by the taxpayer shall be paid immediately upon assessment, together with interest at five per centum, after four months from the close of the fiscal period.
7.	That the definition of "standard profits" be amended to exclude therefrom dividends deemed to have been received under the provisions of section nineteen of the Income War Tax Act.
8.	That if the Minister of National Revenue is satisfied that the taxpayer has not commenced business prior to the second day of January, 1939, he shall direct that the standard profits be ascertained by the Board of Referees.
9.	That the revenue losses in any business of the immediately preceding year may be allowed as a deduction.
10.	That the income of any company derived from the production of base metals or strategic minerals shall be exempt from taxation hereunder if the company first came into production during the period of three years commencing the first day of January, 1943, and such exemption shall extend to the income of the first three fiscal periods of twelve months each of any such company following commencement of such production.
11.	That any enactment founded upon (a) resolutions Nos. 1, 2, 3 and 4 shall apply to one-
[Mr. Ilsley.}
half of the profits of the calendar year 1942 and to the profits of all subsequent periods, provided that in the case of the fiscal period ending after June 30, 1942, and prior to December 31, 1942, the said enactment shall be applicable to that portion of the profits of any such fiscal period which the number of days therein after June 30, 1942, bears to the total number of days of such fiscal period, (b) resolutions Nos. 7 and 8 shall be deemed to have come into force at the commencement of the said Act, and (cl resolution No. 9 shall apply to the profits of 1943 and fiscal periods ending therein.

[Stage Direction]
Resolved, that it is expedient to introduce a measure to amend the Dominion Succession Duty Act and to provide-
1.	That superannuation benefits granted by the Dominion, the Provinces or any superannuation or pension fund or plan shall be subject to succession duty;
2.	That one-half of the estate may be given to charitable organizations in Canada free of succession duty;
3.	That the exemption in respect of gifts made prior to the 29th day of April, 1941, shall be allowed only in respect of gifts which are absolute and without any reservation of benefits to the donor;
4.	That officials of foreign countries accredited to Canada owning real estate in Canada for residential purposes, shall in respect of such residential property be exempt from succession duty, if the country they represent grants similar relief;
5.	That the proceeds of life-insurance policies, including annuity contracts, shall be exempt from duty if the deceased was domiciled outside of Canada at the time the contract was entered into and at the time of his death and further that the beneficiary also was resident outside of Canada at the time of the death of the deceased;
6.	(a) That executors be protected against court action by successors having any interest in expectancy in the property of the deceased if the executor elects to pay the duty in respect thereof at the time of death and not at the time when the expectancy falls into posssesion.
(b) That in order to secure payment of the duty a statutory lien be provided for in respect of any real or immovable property in Canada owned by any person who dies domiciled outside of Canada.
7.	That executors be permitted to pay out. without the consent of the Minister, sums not in excess of-
(1)	$1,500 in the case of moneys payable
(a)	under any contract of insurance;
(b)	by any friendly society; or
(c)	under any superannuation or pension
fund or plan.
(2)	$500 in the case of moneys payable
(a)	out of any bank account; or
(b)	out of any trust or loan company's
deposit account; or
(c)	in satisfaction of wages or salaries.
8.	That the foregoing resolutions shall apply from the commencement of the Dominion Succession Duty Act.

The Budget-Mr. Ilsley.

[Stage Direction]
Resolved, that it is expedient to introduce a measure to amend the schedule to the Excise Act, 1934, and to provide:
1.	That the duty of excise on spirits distilled in Canada be increased from seven dollars to nine dollars per proof gallon, provided that duty paid spirits owned by any distiller at the close of business on the twenty-third day of June, one thousand nine hundred and forty-two shall be subject to the following additional duty of excise on every gallon of the strength of proof two dollars and so in proporton for any greater or less strength than the strength of proof and for any less quantity than a gallon.
2.	That the duty of excise on Canadian brandy be increased from six dollars to seven dollars per proof gallon, provided that duty paid Canadian brandy owned by any distiller at the close of business on the twenty-third of June, one thousand nine hundred and forty-two shall be subject to the following additional duty of excise on every gallon of the strength of proof one dollar and so in proportion for any greater or less strength than the strength of proof and for any less quantity than a gallon.
3.	That duty of excise on beer or malt liquor brewed in whole or in part from any substances other than malt be increased from thirty-five cents to forty-five cents per gallon.
4.	That the duty of excise on malt manufactured or produced in Canada or imported be increased from twelve cents to sixteen cents per pound.
5.	That the duty of excise on malt syrup manufactured or produced in Canada be increased from eighteen cents to twenty-four cents per pound and malt syrup imported into Canada and entered for consumption be increased from thirty cents to forty cents per pound.
6.	That the duty of excise on Canadian raw leaf tobacco when sold for consumption be increased from ten cents to twenty cents per pound actual weight.
7.	That any enactment founded upon the foregoing resolution shall come into force on the tw-enty-fourth day of June, one thousand nine hundred and forty-two.

[Stage Direction]
Resolved, that it is expedient to introduce a measure to amend the Special War Revenue Act and to provide:
1.	That the tax-on telegraph dispatches be increased from five cents to seven cents upon each dispatch transmitted.
2.	That the tax on long distance telephone calls be increased from ten per cent of the charge made to fifteen 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 fifteen cents and not more than forty-five cents is made, and five cents for each additional charge of thirty-five cents or any fraction of thirty-five cents: and provided further that the tax imposed shall in no case be greater than seventy-five cents on any one call.
3.	That there shall be imposed, levied and collected an excise tax of twenty-five cents per month on each telephone extension in any dwelling house, apartment or other domestic establishment.
4.	That the tax on railway, vessel, bus and aircraft tickets or right of transportation be increased from ten per cent of the charge made to fifteen per cent; provided, however, that the said tax shall not apply on the charge for a ticket or right of transportation, if the regular one-way charge is seventy-five cents or less.
5.	That the tax on pullman or parlour-car seats be increased from ten cents to fifteen cents.
6.	That the tax on berths in sleeping cars or on other sleeping accommodation on railway trains be increased from ten per cent of the charge made to fifteen per cent; provided, however, that in no case shall the tax imposed be less than thirty-five cents.
7.	That the excise tax on cigarette paper be increased from five cents for each one hundred leaves or fraction thereof to six cents.
8.	That the excise tax on cigarette paper tubes be increased from ten cents for each one hundred cigarette paper tubes or fraction thereof to twelve cents.
9.	That there shall be imposed, levied and collected an excise tax of one cent for each five cigarettes or fraction of five cigarettes contained in any package of cigarettes manufactured or imported into Canada.
10.	That there shall be imposed, levied and collected an excise tax of one cent per ounce actual weight or fraction thereof on manufactured tobacco of all descriptions, except cigars or cigarettes, manufactured or imported into Canada.
11.	That the excise tax on playing cards be increased from fifteen cents per pack to twenty cents per pack.
12.	That the excise tax on wines of all kinds, except sparkling wines, containing not more than forty per cent of proof spirit be increased from forty cents per gallon to fifty cents per gallon, and that the excise tax on champagne and all other sparkling wines be increased from two dollars per gallon to two dollars and fifty cents per gallon.
13.	That paragraph (a) of subsection four of section eighty-six of said Act is repealed and the following substituted therefor:
"4. (a) There shall be imposed, levied and collected an excise tax of 25 per cent upon the current market value of all dressed and/or dyed furs,-
(i)	imported into Canada, payable by the importer or transferee who takes the goods out of bond for consumption at the time when the goods are imported or taken out of warehouse for consumption; or
(ii)	dressed and/or dyed in Canada, payable by the dresser or dyer at the time of delivery by him."
14.	That there shall be imposed, levied and collected an excise tax of 20 per cent payable by excise stamps on any charge for admission, cover charge, charge for meals, refreshment service or merchandise, or otherwise, which is payable by a person attending any dance hall.
44561-22SJ
The Budget-Mr. Ilsley.
[Stage Direction]
night club, cabaret or similar place of entertainment which provides a combination of any two of the following features: dancing by patrons, sale of alcoholic beverages, entertainment by paid performers.
15.	That in addition to any other duty or
tax which may be payable under the said Act, or any other statute, there shall be imposed, levied and collected from the consumer or user a retail purchase tax payable by excise stamps in respect of the goods mentioned in the Schedule hereunder, purchased or imported by the consumer or user, at the rate set opposite each item in the said Schedule, computed on the retail selling price, if the goods are purchased	in Canada, and	on	a valuewhich includes all other duties and taxes if the goods are imported by a consumer or user, provided that the said tax shall not apply to goods of which the total retail selling price or the total cost	to	the	consumer or user is not in excess of one dollar, in the case of any item mentioned in subparagraphs 1,	2, 4, 7 and 8	of	the	said
Schedule, or in excess of fifty cents in the case of any item mentioned in sub-paragraphs 3, 5 and 6 of the said Schedule:
1.	Trunks; suitcases: bags and luggage of
all kinds; purses; handbags; jewel cases; brief and catalogue cases; dressing and toilet cases; shopping bags,	except paper bags;	golf	and
other sports bags; all the foregoing whether fitted or not, 25 per cent;
2.	Clocks and watches adapted to household or personal use, 25 per cent;
3.	Articles commonly or commercially known as jewellery, whether real or imitation, including diamonds and other precious or semiprecious stones for personal use or for adornment of the person: goldsmiths' and silversmiths' products including all gold, silver, ohromium or other plated ware and pewter ware, 25 per cent;
4.	Articles of all kinds made in whole or in part of ivory, jet, amber, coral, mother of pearl, natural shells, tortoise shell, jade, onyx, lapis lazuli, or other semi-preoious stones, 25 per cent;
5.	Articles of cut glassware, crystal glassware, cut or not, etched glassware, metal decorated glassware or marble, twenty-five per cent;
C. Articles of china, porcelain, earthenware, stoneware or other pottery ware, except articles for use in the preparation or serving of food or drink, twenty-five per cent;
7.	Ash trays; tobacco pipes; cigar and cigarette holders; cigarette rolling devices and other smokers' accessories, not to include lighters, matches or tobacco, twenty-five per cent;
8.	Fountain pens; propelling pencils; desk sets and all other desk accessories, twenty-five per cent.
16.	That immediately after the word "cameras" in section five of Schedule I to the said Act, be added the following words:
"photographic films and plates; projectors for slides, films or pictures; except those designed exclusively for industrial or professional photographers' use, twrenty-five per cent."
IMr. Ilsley.]
17.	That section eight of said Schedule I to the said Act be repealed and the following substituted therefor:
"9. Beverages consisting of unfermented fruit juices (not including grape and other native fruit juices where at least ninety-five per cent of the products sold consist of pure juice of the fruit) and imitations thereof, carbonated beverages or aerated waters and all other compounded or mixed soft drinks, put up in bottles for sale, twenty-five per cent and one cent per bottle."
18.	That the said Schedule I to the said Act is further amended by adding at the end thereof as Sections ten and eleven the following:
"10. Chocolate, candy and confectionery which may be classed as candy or a substitute for candy, thirty per cent."
"11. Chewing gum, thirty per cent."
19.	That the rate of excise tax on cigars mentioned in paragraphs (a) fb) (c) (d) and (e) of section one of Schedule II to this Act be increased by twenty-five per cent.
20.	That section two of the said Schedule II to the said Act be repealed and the following substituted therefor:
"2. Sugar, etc.:-
(a)	Materials enumerated in customs tariff items 134, 135, 135a, 135b, one and one-half cents per pound;
(b)	Materials enumerated in customs tariff items 139 (except glucose and grape sugar) 140 (except molasses), two cents per pound;
(e) Glucose and grape sugar (except when for use exclusively in the manufacture of leather and artificial silk), one cent per pound."
21.	That the excise tax on carbonic acid gas and similar preparations to be used for aerating non-alcoholic beverages be increased from twenty-five cents per pound to fifty cents per pound.
22.	(1) That the tax imposed upon mutual companies authorized under the laws of the Dominion of Canada or of any Province thereof to transact the business of insurance, other than life insurance, on the premium deposit plan, and the tax on every exchange so authorized shall be increased from two per centum to four per centum upon the net premiums received by it in Canada during the calendar year 1941 and each calendar year thereafter.
(2)	That the tax imposed upon mutual companies, other than those mentioned in subparagraph (1) hereof, and upon associations of persons formed upon the plan known as Lloyds', authorized under the laws of the Dominion of Canada or of any Province thereof to transact the business of insurance, other than life insurance, be increased from one per centum to three per centum upon the net premiums received by it in Canada, less net premiums paid for reinsurance to companies or associations to which the tax authorized by this subparagraph or subparagraph (3) hereof applies during the year 1941 and each calendar year thereafter.
(3)	That the tax imposed upon every company, other than those mentioned in subparagraphs (1) and (2) hereof, authorized under the laws of the Dominion of Canada or of any Province thereof to transact the business of insurance, other than life insurance, shall be increased from one per centum to two per
[Stage Direction]
The Budget-Mr. llsley.
3601.
centum upon the net premiums received by it in Canada, less net premiums paid for reinsurance to companies or associations to which the tax authorized by this subparagraph or subparagraph (2) hereof applies during the year 1941 and each calendar year thereafter.
(4)	That there be imposed upon every company authorized under the laws of the Dominion of Canada or of any Province thereof to transact the business of life insurance, a tax of two per centum upon the net premiums received by it in Canada, less net premiums paid for reinsurance to companies or associations to which the tax authorized by this subparagraph or subparagraphs (2) or (3) hereof applies during the year 1941 and each calendar year thereafter.
23.	(1) That any enactment founded on paragraph twenty of these resolutions shall be deemed to have come into force on the sixteenth day of February, one thousand nine hundred and forty-two.
(2) That any enactment founded on paragraph fourteen of these resolutions shall come into force on the first day of July, one thousand nine hundred and forty-two.
(3)	That any enactment founded on paragraphs one to thirteen inclusive, paragraphs-fifteen to nineteen inclusive and paragraph, twenty-one of these resolutions, except as hereinbefore provided, shall be deemed to have come into force on the twenty-fourth day of June, one thousand nine hundred and forty-two and to have applied on all goods imported or taken out of warehouse for consumption on and after that day and to have applied on all goods previously imported for which no entry for consumption was made before that day.

[Stage Direction]
1. Resolved, that Schedule A to the Customs Tariff, being chapter forty-four of the Revised Statutes of Canada, 1927, as amended, is further amended by striking thereout subdivisions (a), (b), (c) and (d) of tariff item 90, tariff items 152b, 152d, 210, 276, 282b, 316a, 347, 410c, 422a, 435, 438d, 438i, 451b, subdivisions (a) and (b) of 534, 574, 584, 610, 610a, 657, 682a, 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. Ilsley.3
Tariff
Item
90a
90b
90c
90d
152b
276
282b
316a
349c
British Preferential Tariff	Intermediate Tariff	General Tariff	Present Rates	B.P. Tariff	Intermediate Tariff	General TariffVegetables, dried, desiccated or dehvdrated, includ-	ing vegetable flour, n.o.p	
Vegetables, pickled or preserved in salt, brine, oil or	IS p.c.	27* p.c.	30 p.c.	15 p.c.	27* p.c.	30 p.c.in any other manner, n.o.p	
Vegetable juices, liquid mustards, soy and vegetable	15 p.c.	32* p.c.	35 p.c.	15 p.c.	32^ p.c.	35 p.c.sauces of all kinds	
Vegetable pastes and hash and all similar products composed of vegetables and meat or fish, or both,	15 p.c.	32* p.c.	35 p.c.	15 p.c.	32* p.c.	35 p.c.Orange juice, grapefruit juice, and blended orange and grapefruit juice, the product of the British West Indies, when imported direct from the country of production	
Peroxide of soda: silicate of soda, dry or in water solution; bichromate of soda; sulphide of sodium; nitrite of soda; arseniate, binarseniate, chlorate, bisulphite and stannate of soda, prussiate of soda	15 p.c. Free	32* p.c.	35 p.c.	15 p.c. Free 15 p.c.	32* p.c.	35 p.c.and sulphite of soda	Free	15 p.c.	20 p c.	Free 15 p.c.	15 p.c. 25 p.c.	20 p.c. 25 p.c.Cotton seed oil for canning fish	
Saggars, hillers, bats, and plate setters, when used in	Free	Free	Free	Free 12* p.c.	Free 17* p.c.	Free 17* p.c.the manufacture of ceramic products	
Incandescent lamp bulbs for use in the manufacture of incandescent lamps; glass tubing for use in the manufacture of incandescent lamps, vials and	Free	Free	Free	Free 12* p.c.	Free 20 p.c.	Free 22* p.c.ampoules; mantle stocking for gas light	Free	7* p.c.	10 p.c.	Free 10 p.c.	7* p.c. 20 p.c.	10 p.c. 22* p.c.Magnesium scrap	
Provided, that nothing shall be deemed to be magnesium scrap except waste or refuse magnesium, fit only to be remelted.	Free	Free	Free	15 p.c.	25 p.c.	25 p.c.
The Budget-Mr. Ilslcy.
410c
422a
428g
438d
(i) Machinery and apparatus and complete parts thereof for use exclusively in producing unrefined oil from shales, not to include motive power, of a class or kind not made in Canada	
Free
(ii) Machinery and apparatus for operating oil-sands by mining operations and for extracting oil from the sands so mined; complete parts of the foregoing...
Free
Concrete road-paving machines, self-propelling, end loading type, with a capacity of 21 cubic feet of wet concrete or more; concrete and asphalt road finishing machines; form graders; sub-graders; combination excavating and transporting scraper units: concrete mixers, transit type; dump wagons or trailers, having a capacity of 10 cubic yards or over, not self-propelled; back-filling machines and equipment, mounted on self-propelling wheels or craw'ling traction, semi- or full-revolving boom and scraper type; steam or air driven pile hammers or extractors; well-points; truck turntables; all the foregoing of a class or kind not made in Canada, and complete parts thereof	
Free
Fuel injection pumps and nozzles for diesel and semidiesel engines	 Free
Locomotives and motor cars for railways, of a class or kind not made in Canada, and complete parts thereof, for use exclusively in mining, metallurgical or sawmill operations; diesel switching locomotives of a class or kind not made in Canada	 Free
Front and rear axles; brakes; clutches; internal combustion engines; steering gears; magnetos; rims for pneumatic tires larger than thirty inches by five inches; transmission assemblies; drive shafts; universal joints; steel road wheels; and parts of the foregoing, when of a class or kind not made in Canada, and imported by manufacturers of the goods enumerated in tariff items 424 and 438a for [DOT] use only in the manufacture of motor trucks, motor buses and electric trackless trolley buses, or for the manufacture of chassis for the same	
Free
Free
Free
10 p.c. Free
12} p.c 17} p.c
Free
Free	Free	FreeFree	Free	27} p.c.10 p.c.	27} p.c. [DOT]12$ p.c.	Free	10 p.c.15 p.c.	27} p.c.Free	Free	FreeFree	25 p.e.20 p.c.	Free	12} p.c.15 p.c.	30 p.c.27$ p.c.	Free	17} p.c.Free	25 p.c.
35 p.c. 35 p.c.
12} p.c. 30 p.c.
Free 30 p.c.
20 p.c. 35 p.c.
27} p.c. 40 p.c.
a
g
[Stage Direction]

The Budget-Mr. llsley.

Tariff
Item
British
Preferential Intermediate Tariff	Tariff
General
Tariff
(1) Provided that if the above articles are imported for use as original equipment for motor trucks, motor buses and electric trackless trolley buses, or for chassis for the same, by a manufacturer of the goods enumerated in tariff items 424 and 438a, and provided also that during the year during which importation is sought, not less than forty per centum of the factory cost of production of such motor vehicles and chassis therefor, not to include duties and taxes, is incurred in the British Empire, the rates of duty under this item shall be	
Free
(2) Provided that the Governor in Council may make such regulations, if any, as are deemed necessary for carrying out the provisions of this item.
7J p.c.	Tt\ p.c.	Free
Free
Present Rates
B.P.	Intermediate
Tariff	Tariff
General
Tariff
U p.c. 25 p.c.
27§ p.c. 40 p.c.
438i
Body bottom cross members and steel shapes for the manufacture thereof; bumpers, front and rear, and parts thereof, including spring steel bumper plates; casket tables or platforms for hearses; destination and route sign assemblies, illuminated or not, and parts thereof; direction signals, illuminated or not; door and step mechanism, hand, vacuum or air operated, and parts thereof; door locks and catches and parts thereof; electric switches, buzzers, bells, push buttons, fuse assemblies and parts thereof; forward drive control conversion assemblies and parts thereof; lamps of all kinds, illuminating and indicating, including sockets, flanges, terminals, glassware, lenses and gaskets therefor, assembled or not, but not to include lamp bulbs; metal stampings, oiled and primed or not, and assemblies thereof; rubber fenders; seat operating mechanisms; ventilators, including motor driven fan type, and grilles, and parts thereof; window operating mechanisms; all of the foregoing when imported to be used only in the manufacture of motor bus bodies, electric trackless trolley bus bodies, motor ambulances and hearses	
Free

Free
20 p.c.
Free
Free
Free 25 p.c.
20 p.c. 40 p.c.
a
[Stage Direction]
2
o
go
The Budget-Mr. Ilsley.
438j
451)
574
610
682a
Semi-finished piston castings of any material	 Pins manufactured from wire of any metal: (i) Specially designed for marking systems		Free Frc [DOT] 17$ p.c.
and, per pound	
(a) Wick, with or without core, processed or not, when imported by manufacturers of wax candles or tapers for use in their own factories in the manufacture of wax candles or tapers		Free
(b) Braided wick, with or without core, processed or not, when imported for use exclusively in oil-burning sanctuary lamps, under such regulations	Free
as the Minister may prescribe		
Woven fabrics, non-elastic, not exceeding three inches in width, imported by manufacturers of suspenders, garters, hose supporters, abdominal supporters and spinal braces for use exclusively in the manufacture of such articles in their own factories		10 p.c.
Resin or rosin; bone pitch, crude only		Free
	7$ p.c.
Mouthpieces in the rough, screws, aluminum pipe fitments and pipe bowls moulded from briarwood dust, and bowls of wood, not further processed than frazed, when imported by manufacturers of tobacco	
pipes for use in the manufacture of such pipes, in	Free
	
Net floats of aluminum, glass, canvas, cork, rubber	
or cellulose acetate, for use exclusively in com	Free
mercial fishing		
25 p.c.
5 p.c.
27$ p.c. 10 cts.
Free
Free
17$ p.c. Free 25 p.c.
Free
Free
35 p.c.
10 p.c.
30 p.c. 10 cts.
Free
Free
20 p.c. Free 27$ p.c.
25 p.c.
Free

Free 17$ p.c. 17$ p.c.
Free 15 p.c.
Free
10 p.c. 22$ p.c.
Free 15 p.c.
15 p.c. 7£ p.c.
Free 15 p.c. 17$ p.c. 20 p.c.
Free 20 p.c.
30 p.c.
27$ p.c.
10 cts. per pound 27$ p.c.
10 cts. per pound
Free 22$ p.c.
3$ cts. per pound
Free
17$ p.c. 27$ p.c.
Free 25 p.c.
25 p.c. 27$ p.c.
Free 25 p.c. 22$ p.c. 27$ p.c.
Free 30 p.c.
40 p.c.
30 p.c.
10 cts. per pound 30 p.c.
10 cts. per pound
Free 25 p.c.
4 cts. per pound
Free
20 p.c. 35 p.c.
Free 25 p.c.
27$ p.c. 27$ p.c.
25 p.c. 25 p.c. 25 p.c. 30 p.c.
Free 35 p.c.
c-i
[Stage Direction]
The Budget-Mr. Ilsley
The Budget-Mr. Ilsley
[Stage Direction]
2. Resolved, that Schedule A to the Customs Tariff, as amended, be further amended by deleting from The Customs Tariff Amendment Act, 1939, as amended by chapter twenty-nine of the statutes of 1940 and chapter thirteen of the statutes of 1941, the following enumerations of goods and rates of additional duties of customs:
Whisky, brandy, rum, gin and all other goods specified in Customs Tariff Items' 156, 156a, and 156b, $3 per gallon of the strength of- proof.
Ale, beer, porter and stout, 9 cents per gallon.
Wines of all kinds except sparkling wines, containing not more than 4 per cent of proof spirit, 321 cents per gallon.
Champagne and all other sparkling wines, $1.25 per gallon.
and by substituting therefor the following enumerations of goods and rates of additional duties of customs:
Whisky, brandy, rum, gin and all other goods specified in Customs Tariff Items 156, 156a, and 156b, $5 per gallon of the strength of proof.
Ale, beer, porter and stout, 30 cents per gallon.
Wines of all kinds except sparkling wines, containing not more than 40 per cent of proof spirit, 42J cents per gallon.
Champagne and all other sparkling wines, $1.75 per gallon.
3. Resolved, that any enactment founded upon the foregoing resolutions shall be deemed to have come into force on the twenty-fourth day of June, one thousand nine hundred and forty-two, and to have applied to all goods mentioned in the foregoing resolutions imported or taken out of warehouse for consumption on and after that date, and to have applied to goods previously imported for which no entry for consumption was made before that date.

[Stage Direction]
A.	REVIEW OP GOVERNMENT ACCOUNTS, 1941-42.
B.	TABLES ON ECONOMIC CONDITIONS, 1941-42.

[Stage Direction]
1. As the final figures for the fiscal year 1941-42 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 1941-42, together with comparable figures for the four preceding fiscal years:
|
[Stage Direction]
The Budget-Appendix
STATEMENT OF REVENUES FOR THE LAST FIVE FISCAL TEARS (000 omitted)
-	1937-38	1938-39	1939-40	1940-41	Estimated 1941-42Tax Revenues- Customs import duties	$ 93,456	$ 78,751	$ 104,301	$ 130,757	$ 142,392Excise duties- Spirits, malt, etc	
Cigars, cigarettes and tobacco	
Licences	19,626 32,837 38	18,530 33,225 34	21,267 40,557 35	34,140 55,417 45	46,777 65,050 39Less refunds	52,501 464	51,789 475	61,859 827	89,602 994	111,866 1,775Excise taxes- Sales	
Manufacturers- Automobiles,rubber tires and tubes Gasoline	
Cigars, cigarette papers and tubes. Beverages	
Matches and lighters	
Sugar	
Toilet preparations and soap	
Electric and gas appliances	
Phonographs, radios and tubes	
Sundry	
Amusements	
Tax on pari mutuel bets	
Special excise (importations)....	
Transportation and communication.. Stamps, licences, interest, etc	
War exchange	52,037	51,314	61,032	88,608	110,091141,864 1,453 1,428 1,769 10,833 1,224 477 18,622 1,727 5,231	125,927 I,	343 1,575 1,819 II,	004 1,249 465 15,591 1,640 4,885	141,121 1,568 2,009 2,135 12,302 1,371 732 1,979 1,657 4,829	184,536 11,206 3,601 2,173 11,894 1,542 1,886 1,289 1,340 1,008 1,848 4,747 61,932	246,553 16,742 24,752 4,281 6,247 2,766 22,009 3,539 8,470 2,361 2,322 7,710 1,082 861 8,131 5,095 100,874Less refunds	184,628 3,809	165,498 3,787	169,703 3,675	289,002 4,835	463,795 10,369Income tax- Individuals	
Corporations	
Dividends, interest, etc	180,819	161,711	166,028	284,167	453,42640,445 69,769 10,152	46,937 85,186 9,903	45,407 77,920 11,122	75,863 131,566 13,042	189,502 185,836 28,269National defence tax	
Excess profits tax	
Succession duties	
Banks, Insurance Companies, etc.- Chartered banks.	
Insurance companies	
Miscellaneous	120,366	142,026	134,449	220,471	403,6071,107 867 509	1,014 891 587	949 926 586	27,672 23,995 898 972 673	106,637 135,168 6,957 787 1,148 702Total Revenue from taxes	449,161	436,294	468,271	778,213	1,360,915Non-tax Revenues- Post Office	
Return on investments	
Bullion and coinage	
Premium, discount and exchange	. 35,546 . 14,465 . 1,715 27 . 9,386	35,288 14,407 2,052 477 9,499	36,728 14,617 3,756 7,939 10,306	40,383 17,592 6,266 6,107 11,194	45,994 25,830 4,765 11,780 14,200Total non-tax revenue	. 61,137	61,723	73,346	81,542	102,569Total ordinary revenues	. 510,298	498,017	541,617	859,755	1,463,484
The Budget-Appendix
[Stage Direction]
STATEMENT OP REVENUES FOR THE LAST FIVE FISCAL YEARS-Concluded (000 omitted)
Special Receipts and Other Credits- Consolidated Fund-[DOT]
Refunds of previous years' special
expenditure	
Refunds of previous years' war
expenditure	
War donations	
Special receipts arising out of the war. Canadian National Railways- Operating surplus for calendar year
1941	
Capital gain on redemption of 4%
debenture stock	
Canadian National (West Indies) Steamships Ltd.-
Operating surplus for 1930 and 1937.. Dominion stock "A" written off.... Montreal Turnpike Trust Accountadjustment	
Surplus value of free lands and reclaimed leases previously held in the Soldier I -and Settlement Assurance Fund transferred to Consolidated Revenue Fund Inventory value of stores on hand in the Department of Transport as at April 1, 1937, credited to Consolidated Revenue Fund pursuant to Department of Transport Stores Act, 1937	
Total Consolidated Fund.
1938-39
1,184
Capital Accounts-
Refunds of previous years' expenditure	
Net insurance proceeds on the P.E.I.
Car Ferry	
Non-active Accounts-
Canadian Government Merchant Marine, Limited-
Balance in Contingency Reserve National Harbours Board-
Reduction in indebtedness	
Write-downs to Consolidated Fund-
Seed Grain and Relief Loans....
Relief Loans to Province of
Manitoba	
Relief Loans to Province of
Saskatchewan	
Soldier and General Land Settlement Loans	
Canadian National Railways Securities Trust Stock-
Line abandonments	
Net capital loss on sale of S.S. Prince David and S.S. Prince
Robert	
Net credit resulting from Canadian National Railways Capital Revision Act, 1937	
Total Special Receipts and Credits. Grand Total Revenue	
1,232
[Stage Direction]
24
798
3,010
1,543
805
1,221
1,410
5,504
1,256	164
1,023
6,395
515,693
127
2,713
8,538
4,154
502,171
17,682
2,600
20,477
562,094
2,334
1,475
12,414
872,169
Estimated
102
7,826
459'
1,649
4,016
14,151
984
58
2,539
17,801
1,481,285
[Stage Direction]
The Budget-Appendix
STATEMENT OF EXPENDITURES BY MAJOR CATEGORIES AND BY DEPARTMENTS FOR THE LAST FIVE FISCAL YEARS (000 omitted)
Ordinary Expenditorb
Agriculture	
Auditor General's Office	
Civil Service Commission	
External Affairs, including Office of Prime
Minister	
Finance-
Interest on Public Debt	
Cost of Loan Flotations and Annual Amortization of Bond Discounts and
Commissions	
Subsidies to Provinces	
Special Grants to Provinces	
War-time Prices and Trade Board- Dominion Fuel Board Administration, coal subsidies and subventions Miscellaneous Grants and Contributions
Civil Pensions and Superannuation...
Government contribution to Superannuation Fund	
Old Age Pensions, including pensions to
blind persons	
Compensation to Provinces under Dominion-Provincial Taxation
Agreements	
Administrative and Sundry Expenditure
Fisheries	
Governor General and Lieutenant Governors	
Insurance	
Justice	
Penitentiaries	
Labour	
Technical Education	
Unemployment Insurance Act, 1940-
Administration	
Government contribution	
Government Annuities-
Payments to maintain reserve	
Legislation-	4
House of Commons	
Library of Parliament	
Senate	
General	
Dominion Franchise Office	
Chief Electoral Officer, including elections	
Mines and Resources-
Adm inistration	
Immigration and Colonization	
Indian Affairs	
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)	_	
' National War Services	
Pensions and National Health-
Administration	
Treatment and after-care of returned soldiers	
9,017
358
1,450
132,118
4,555
13,735
7,475
712
2,005
28,653
3,573
1,850
187
2,790
2,577
49
8,941
1,516
536
76
(') 1,491 1,103 4,897 1,910 933 658
2,521
17,221
4,372
10,018
1,149
11,870
12,109
9,527
379
1,057
127,996
4,914
13,752
7,475
638
2,220
29,044
3,689
2,036
194
2,748
2,675
27
1,800
600
50
0) 184 1,335 5,305 2,249 1,325 1,340
1,921
(3) 409 15,772 6,590 11,216 447
11,899
(3) 118 13,453
11,817
398
1,220
129,315
4,992
13,769
5,475
660
2,271
29,977
3,966
2,320
195
2,725
2,941
31
1,286
432
6S
(*) 186 1,338 5,675 2,116 1,301 1,324
4,532
(3) 178 5,997 1,869 4,852 295
12,064
(3) 132 14,771
Estimated
8,593
397
1,013
139,179
6,304
13,769
5,475
500
2,316
29,912
3,508
1,018
176
2,711
2,717
18
111
2,468
808
2,469
(*) 179 1,273 5,183 1,937 1,114 1,173
4,408
(3)	30
12,229
(3) 133 13,402
[Stage Direction]
8,437
401
1,055
154,270
16,430
14,409
(«)	4,880
533 445
2,347
29,612
21,120
3,513
1,084
180
2,658
2,786
41
2,345
7,287
1,408
424
281
(>) 170
1,287 4,979 1,963 1,175 1,153
(2)
(3) 38
13,430
(3) 137
12,733
The Budget-Appendix

[Stage Direction]
for the last five fiscal years-Continued
(000 omitted)
-	1937-38	1938-39	193940	194041	Estimated 194142Ordinary Expenditure-Continued	S	$	$	$	$Pensions and National Health-Cone.	Pensions. War and Military	42,240	42,181	42,219	41,515	40,582Health Division	957	1,012	1,113	1,111	1,249Post Office	33,762	35,456	36,726	38,700	41,495Privy Council	48	49	59	54	54Public Archives	170	159	150	126	193Public Printing and Stationery	161	191	199	283	195Public Works	12,382	15,484	13,065	11,507	11,936 6,021 813Royal Canadian Mounted Police	0,308	6,145	5,626	5,554	Secretary of State	093	730	836	772	Soldier Settlement	801	758	624	582	564Trade and Commerce	4,070	4,763	4,999	4,315	(<) 6,200 1,909 616C anada Grain Act	1,675	1,847	1,933	1 908	Mail Subsidies and Steamship Subventions	
T ransport-	2,029	1,993	1,907	942	Administration	417	371	358	334	364Air Service	2,935	3,457	3,862	3,478	3,414Marine Service	4,290	4,271	4,215	3,795	4 013('anadian Travel Bureau	250	249	312	470	(5)-3 697Railways and Canals	3,661	4,371	3,763	3,527	Maritime Freight Rates Act	' 3,183	2,583	2,660	3,951 126	3,935Railway Grade Crossing Fund	180	187	255	25Total ordinary expenditure	414,892	413,032	398,323	390,629	443,969Capital Expenditure	Railways	71	26	23	7	5Public Works	4,359	5,398	7,007	3,351	3,352Total Capital Expenditure	4,430	5,424'	7,030	3,358	3,357War Expenditure	War (see sections 17 to 27)	-	-	118,291	752,045	1,351,553Special Expenditure	Unemployment Relief-	Administration-Relief Acts	378	260	287	236	109Grants-in-aid to Provinces	19,493	17,037	Material Aid to Provinces, including municipal improvements projects...	19,534	15,785	1,856 487Dominion share of joint Dominion-Provincial projects	8,841	6,259	7,147	1,794	Dominion projects	13,913	12,981	24,919	9,784	5,948Transportation facilities into mining areas	1,324	1,213	1,121	48	43,949	37,750	53,008	27,647	8,393
Prior to 1937-38 general administration expenses were not segregated from other expenditures of
respective services of the departments which were amalgamated to form the Department of Mines and Resources. \ he figures from 1938-39 represent only Departmental Administration, other administration costs being included as in other departments, under the respective services.
(2)	For current year see Department of Finance.
(3)	Prior -to 1938-39 general administration expenses were not segregated from other expenditure of the respective services of the departments.
(4)	Includes an estimated amount, of S2,565,000 for Census of population of Canada.
(6) For current year included in National War Services.
(6) For previous years included in Departments of Trade and Commerce and Mines and Resources.
[Stage Direction]
The Budget-Appendix
STATEMENT OF EXPENDITURES BY MAJOR CATEGORIES AND BY DEPARTMENTS FOR THE LAST FIVE FISCAL YEARS-Continued (000 omitted)
-	1937-38	1938-39	1939-40	1940-41	Estimated 1941-42S	$	%	$	$Special Expenditure-Continued Western Drought Area Relief- Direct Relief	11,925)	8,869	1,605	Feed and fodder and freight thereon - Expenses of marketing cattle	11,352/ 337	-	-Purchase and distribution of foodstuffs	972	277	-	-	-Prairie Farm Assistance Act, 1939- Administration	-	346	420Advances to Prairie Farm Emergency Fund	7,500	4,376	11,836Wheat acreage reduction payments....	-	-	29,65924,586	9,146	9,105	4,722	41,915Provision 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 and 1941, respectively, not previously provided for	10,500	12,571Total special expenditure	68,535	71,896	89,113	42,869	62,879Government Owned Enterprises Losses charged to Consolidated Fund- Canadian National Railway System, ex-eastern lines	37,882	48,194	34,850	14,451	Eastern lines	4,464	6,120	5,245	2,514	-Prince Edward Island Car Ferry and Terminals	__	(i) 388	427	461	424National Harbours Board	289	138	94	40	33Trans-Canada Air Lines	111	818	412	-	[DOT] -Central Mortgage Bank	-	-	16	Total charged to consolidated fund	42,746	55,658	41,044	17,466	457Loans and advances non-active- Canadian National Steamships	104	6	8	_	National Harbours Board	1,983	3,279	1,027	716	758Total non-active advances	2,087	3,285	1,035	716	758Total government-owned enterprises 	44,833	58,943	42,079	18,182	1,215Other Charges Write-down of assets chargeable to Consolidated Fund- Drought Area Relief Loans, 1934-35- Province of Saskatchewan	1,374	Reduction of soldier and general land settlement loans	750	1,023	" 1,64.3	1,011	271Yearly established losses in seed grail and relief accounts-Department o Mines and Resources	14	18	10	46	58
(>)Included with Eastern lines in previous years.
The Budget-Appendix
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STATEMENT OF EXPENDITURES BY MAJOR CATEGORIES AND BY DEPARTMENTS FOR THE LAST FIVE FISCAL YEARS-Concluded (000 omitted)
-	1937-38	1938-39	1939-40	1940^1	Estimated 1941-42Other Charges-Concluded Canadian National Railways Securities Trust Stock-Reduction due to line abandonments during calendar	$	$	$	$	*years 1938, 1939, 1940 and 1941	
Canadian National Railways Securities Trust Stock-Capital loss (exclusive of loss applicable to expired service life) on sale of S.S. Prince David and	(2) -	2,713	2,600	2,334	2,539Prince Robert	
Cancellation of Canadian Farm Loan Board-	-	1,475	-Capital Stock	10	14	11	12	10Province of Manitoba Treasury Bills.. Province of Saskatchewan Treasury	(*) 805	-	Bills	
To provide a reserve for possible losses on ultimate realization of Active	"	(8) 17,682	-	-Loans and Advances	
Non-Active Accounts-	-	-	-	25,000	25,000General Land Settlement Loans	
Fulfilment of guarantees- Saskatchewan Seed Grain Loans, 1936	139	-	-and 1937	
Canadian National Railways Securities Trust Stock- Increase in Dominion's Equity in the Canadian National Railways due to capital gain on redemption of £22,500,000 G.T.R. 4% Perpetual	2,638	7,136	Debenture Stock	
Increase in Dominion's Equity in the Canadian National Railways due to surplus earnings of Canadian National Railway System for cal-	5,504	99endar year 1941	-	-	-	-	4,016Total other charges	1,718	3,768	25,958	42,518	31,993Grand total expenditures	534,408	553,063	680,794	1,249,601	1,894,966(2)	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.(3)	These amounts are offset by a contra account on the revenue side.
[Mr. Usley

The Budget-Appendix
SUMMARY OF REVENUES AND EXPENDITURES (000 omitted)
-	1937-1938	1938-1939	1939-1940	1940-1941	Estimated 1941-42Ordinary revenues	
Ordinary expenditures	$ 510,298 414,892	$ 498,017 413.032	S 541,617 398,323	% 859,755 390,629	$ 1,463,484 443,969Surplus on ordinary account	95,406	84,985	143,294	469,126	1,019,515War and special expenditures	
Less special receipts	68,535 3,010	71,896 1,256	207,404 164	794,914 8,538	1,414,432 14,151Balance	
Add-Capital expenditures	
" Government owned Enterprises... " Other charges	65,525 4,430 44,833 1,718	70,640 5,424 58,943 3,768	207,240 7.030 42,079 25,958	7S6.376 3,358 18,182 42,518	1,400,281 3,357 1,215 31,993Less other credits	116,506 3,385	138,775 2,89S	282,307 20,313	850,434 3,876	1,436,846 3,650Deduct surplus as above	113,121 95,406	135,877 84,985	261,994 143,294	846,558 469,126	1,433,196 1,019,515Over-all deficit or increase of direct net debt	17,715	50,892	118,700 i	377,432	413,681

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3.	When the books for the fiscal year 1941-42 are finally closed, total revenues will reach, it is estimated, an all-time record of $1,481,285,000. This represents an increase over the preceding fiscal year of no less than $609,-
116,000	or approximately 70 per cent. The chief reasons for this very substantial increase were the new taxes and the increases in old tax rates imposed by the last budget and the higher level of national income and production due to heavy expenditures for war purposes. In addition, there were less important increases in the yield from income taxes due to changes in the time and method of collection. As a result of the last budget, the due date for personal income taxes was moved back from April 30 to March 31 and the prepayment instalment plan became effective in September 1941, thus providing for seven monthly payments during the fiscal year for those who adopted the plan as compared with only three monthly instalments in the preceding fiscal year under the instalment plan which began in January 1941.
4.	The five-year table of revenues shown on page 4 is in the same form as was used last year. This table is divided to show tax revenues under appropriate headings with subheadings for Excise Duties, Excise Taxes and Income Taxes. The non-tax revenue section is broken down under five main headings.
5.	Total revenues from taxation for the fiscal year ended March 31, 1942, are estimated
at $1,360,915,000 compared with $778,213,000 collected during the previous year. This total represents 92 per cent of the total estimated revenues. An examination of the five-year table discloses that direct taxes on incomes realized $645,412,000 compared with $272,138,000 during the previous year. While, in 194041, direct taxes represented 35-0 per cent of the total revenue from taxes, they represented 47-4 per cent of total tax revenues in 1941-42. This comparison illustrates the increasing reliance upon the direct taxation of incomes. Because of the change in the due date of personal income taxes from April 30 to March 31, and the longer period in which the prepayment instalment plan was in operation during
1941-42, an accurate comparison of receipts from personal income taxes during 1941-42 with the amounts received in previous years cannot be made.
6.	As a result of the Budget of April 29, 1941, the Dominion levied succession duties for the first time. The yield of this new tax amounted to $6,957,000. This compared with a rough estimate of $10,000,000 given in last year's Budget.
7.	The total revenue from sales tax, less refunds, is estimated at $236,184,000, an increase of $56,483,000 as compared with the previous year. Part of this increase was the result of removing building materials from the exempt list (effected by the Budget of April 1941) but for the most part it reflects the higher level of activity brought about by increasing expenditures for war purposes.
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8.	The war exchange tax is expected to realize a total revenue of $100,874,000 compared with 861,932,000 received during the previous year.
9.	Other excise taxes as set out in the five-year table are estimated to produce $116,368,000, an increase over the previous year of $73,834,000. Excise taxes derived from new imposts realized $44,937,000 as follows: gasoline $24,752,000; amusements $7,710,000; parimutuel bets $1,082,000; soft drinks $6,247,000; and travel $5,146,000. The remainder of the increase, namely $28,897,000, is accounted for by business expansion and by increased excise taxes on automobiles, cigarette papers and tubes, lighters, playing cards, sugar, toilet preparations, wines and long distance telephone calls, etc.
10.	Revenues from customs import duties for the year just closed are estimated at $142,-
392,000	compared with $130,757,000 received during 1940-41. This increase is due largely to increased imports arising out of the war.
_ 11- Receipts from excise duties mainly on liquor and tobacco, are expected to total $110,091,000, an increase of $21,483,000 over the previous fiscal year. The gross duty on spirits, malt, etc., is estimated at $46,777,000 and that on tobacco at $65,050,000.
12.	Total non-tax revenues are estimated at $102,569,000 compared with $81,542,000 in the previous year. The largest non-tax item is the receipts from the Post Oifice which it is expected will total $45,994,000, an increase of approximately $5,611,000 over the preceding fiscal year. The receipts from the. Post Oifice will, it is expected, exceed the cost of operations by $4,500,000. 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 Oifice for services rendered to other departments for the free use of the mails. Other increases in the non-tax section were recorded under the headings of Premium, Discount and Exchange, and Return on Investments. The increase in Premium, Discount and Exchange was due to repatriation of sterling securities and the increase in Return on Investments was accounted for mainly by interest on increased loans to the Foreign Exchange Control Board and the Canadian National Railways.
13.	The total amount shown for the fiscal
year 1941-42 under the heading, Special Receipts and Credits, is $17,801,000. Of this, total cash receipts account for $11,089,000 as follows:	refunds of previous years' war
expenditures $7,826,000; voluntary donations for war purposes $459,000; insurance moneys received on loss of Prince Edward Island Car Ferry $984,000; and sundry receipts $1,820,000.

The remainder amounting to $6,712,000 represents bookkeeping items which affected the book value of the Canadian National Railways Securities Trust Capital Stock and certain other non-active assets. All of these items making up the total of $6,712,000 are offset by contra amounts appearing on the expenditure side under the heading, Other Charges.
The first of these items is that affecting the book valuation of the Canadian National Railways Securities Trust Capital Stock which was increased by $4,115,000, due to (a) surplus earnings of The Canadian National Railway System for the calendar year 1941, amounting to $4,016,000, and (b) the capital gain arising from redemption of Grand Trunk Railway 14 per cent Debenture Stock at less than par in Canadian funds amounting to $99,000. In addition, there were two other transactions affecting the non-active accounts: Canadian National Railways Securities Trust Capital Stock was reduced by reason of line abandonments during the year 1941 in the amount of $2,539,000, and the sum of $58,000 representing the yearly established losses in the seed grain and relief accounts of the Department of Mines and Resources was written off.
13a. The table below gives a summary of the forecasts made at the time of the last Budget of the probable receipts from various sources of revenue during the fiscal year 194142 and a comparison of these forecasts with the present estimates of actual receipts during the fiscal year. It will be noted that there is shown in the first column the forecast of expected receipts from the tax structure as it existed before the Budget of April 29, 1941, was brought down in the House, while the second column gives the expected receipts from the tax structure as affected by the proposals made in the Budget, and the third column the expected receipts from the tax structure as amended by the legislation finally passed by Parliament.
Under the conditions which have prevailed since the outbreak of war, with production and employment expanding rapidly and with prices rising (until last December), it has been very difficult to make accurate forecasts of the yield from various types of taxation. Budgetary authorities must always be cautious in predicting the probable magnitude and results of expanding economic activity and rising national income. It is always wise to err on the side of conservatism rather than undue optimism. It will be noted from the table that while there were under-estimates or overestimates of some proportions in the case of individual revenue sources, these cancelled each other out to a considerable extent. The total yield from taxation was under-estimated by only $4,815,000.

The Budget-Appendix
Some comments may be made in regard to the probable explanation for the major differences as between the forecasts and the estimated actual results. The increase in customs duties as compared with the forecast was due to a higher level of prices and a greater volume of imports than had been anticipated. The increase in excise duties was due to a higher volume of sales than had been expected while the substantial increases in the various excise taxes were due not only to a greater volume of business but also to higher prices than had been anticipated. The close estimate of the yield of the national defence tax indicates substantial accuracy in forecasting the level of personal incomes and the underestimate of the yield of the graduated tax on personal incomes is chiefly due to the facts (a) that a smaller proportion of taxpayers than was expected took advantage of the prepayment instalment plan, and (b) that many returns mailed on March 31st were not received in sufficient time to be included in receipts for the fiscal year 1941-42.
The difficulty of making accurate allowance in advance for the effects of the pre-payment instalment plan was probably also the main explanation of the under-estimate of the yield from the corporate income tax and the overestimate of the yield from the excess profits
tax although other factors may also have been operative in the case of the latter including probably the fact that depressed businesses were allowed to calculate and pay their tax on the minimum basis pending final determination of standard profits by the Board of Referees. In comparing the forecast with the actual yield from succession duties, it should be remembered that this was an entirely new tax and there was no experience to go upon in preparing the forecast. Perhaps, also, insufficient account was taken of the time necessarily involved in securing full payment of succession duties. In any case, fluctuations in the yield of succession duties are almost impossible to predict in advance. Reference was made in an earlier paragraph to the increase in non-tax revenues. This resulted from a substantial increase in Post Office receipts, a large increase in Premium, Discount and Exchange arising out of the heavy repatriation operations and the increase in return on investments due to advances to the Foreign Exchange Control Board and the Canadian National Railways. It is impossible to predict the amount of special receipts and credits that may accrue in any fiscal year and it has not been the practice to attempt any estimate of this category of revenues.

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Source of Revenue	Forecast of Receipts	Actual Receipts (Prelim- inary)	Increase (+) or decrease (-) in receipts as compared with final forecastFrom tax structure before Budget changes	From tax structure as changed by proposals made in Budget of April 29, 1941	From tax structure as amended in Parliament	Tax Revenues Customs duties	
Excise duties	000 omitted S 137,000 98,000	000 omitted S 137,000 101,200	000. omitted $ 137,000 101,200	000 omitted S 142,392 110,091	000 omitted +5,392 +8,891Excise taxes: Sales tax	
War Exchange tax	
Other excise taxes	
Total excises taxes.... Income taxes: Graduated tax on personal incomes	
National defence tax	
Corporate income tax	
Excess profits tax	
Interest and Dividends	
Total income taxes.. Succession duties	
Miscellaneous taxes	
Total Tax Revenues	
Non-tax Revenues	
Special Receipts and Credits. Grand Total	190.000 81.000 51,000	203,500 81,000 108,800	203,500 81,000 113,900	236,184 100,874 116,368	+32,684 +19,874 +2,468322.000 135.000 55.000 165.000 140.000 15.000	393,400 225.000 110.000 165.000 180.000 42,500	398,400 225.000 110.000 165.000 180.000 27,500	453,426 189,502 106,637 185,836 135,168 28,269	+55,026 -35,498 -3,363 +20,836 -44,832 +769510,000 2,000 1,069,000 81,000	722,500 10,000 2,000 1,366,100 81,000 (no estimate	707,500 10,000 2,000 1,356,100 81,000 made)	645,412 6,957 2,637 1,360,915 102,569 17,801	-62.0S8 -3,043 +637 +4,815 +21,569 + 17,8011,150,000	1,447,100	1,437,100	1,481,285	+44,185
The Budget-Appendix

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14.	The comments which follow will deal with expenditures classified by the usual main categories: (1) Ordinary Expenditures; (2) Capital Expenditures; (3) War Expenditures; (4) Specal Expenditures; (5) Operating Deficits of, and Non-active Advances to Government-owned Enterprises; and (6) Other Charges. All disbursements under these headings with the exception of active loans and investments chargeable to War Appropriation Acts, are included as expenditures in arriving at the over-all deficit or increase in net debt.

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15.	It is estimated that ordinary expenditures for the year will total 8443,969,000, of which such uncontrollable and contractual items as interest and other charges on the public debt, pensions, unemployment insurance, post office, subsidies and payments to provinces under the Dominion-Provincial taxation agreements will aggregate 8330,342,000, approximately 74 per cent of the total. The remaining 26 per cent represents general administrative expenses and other services of government charged to Ordinary Expenditures.
The above estimated total of 8443,969,000 is greater than the actual amount of ordinary expenditures during the previous fiscal year by $53,340,000. It may be noted, however, that this increase is due in considerable part to increased expenditures which are really due to the war itself, including the following as the more important items:
Increased Interest on Public Debt.. .$15,091,000 Increased Cost of Doan Flotations and
Annual Amortization of Bond Discount and Commissions	 10,126,000
Compensation to Provinces under the Dominion-Provincial Taxation
Agreements	 21,120,000
Increase m Administrative Cost, Department of National Revenue.. 1,201,000
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The total of these increases due to the war should be reduced by $5,475,000 representing the aggregate of special grants to the provinces which were dropped in 1941 and replaced by the arrangements under the new Dominion-Provincial Taxation Agreements. This leaves a balance of $42,063,000. If we add to this the increased cost of unemployment insurance, namely $9,563,000, we get a total of $51,626,000. Some of the increases in the so-called ordinary expenditures of other departments might be regarded as due directly or indirectly to the war, such, for instance, as the $2,795,000 increase by the Post Office Department and the $467,000 for administration of the Royal Canadian Mounted Police. Regular subsidies to provinces increased by $640,000. Other minor in-
creases were: Government Annuities $550,000; Public Works S429.000; Trade and Commerce $1,560,000; and sundry increases $1,780,000.
The largest decrease in Ordinary Expenditures was occasioned by the suspension of the special grants to Provinces which amounted to So,475,000. Other decreases are as follows:

 Agriculture $156,000; Old Age Pensions $300,000; House of Commons $1,060,000; Senate $444,000; Chief Electoral Officer $2,188,000; Indian Affairs $204,000; Treatment and aftercare of returned soldiers $669,000; Pensions,. War and Military, $933,000; Transport $233,000; Sundry $320,000. These decreases aggregate $11,982,000.

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16.	Total expenditures charged to capital are estimated at $3,357,000 compared with $3,358,000 in the previous year. The main items in this category are expenditures arising out of dredging the St. Lawrence Ship Channel amounting to $1,952,000, and other construction and improvements, including lighting and radio facilities in connection with civil airways and airports, amounting to $1,250,000.

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17.	Direct war expenditures accounted for roughly three-quarters of the Dominion's total expenditures during the fiscal year ended March 31, 1942. This is, of course, apart from the assistance given to the Government of the United Kingdom by the accumulation of sterling balances or the repatriation of Canadian securities held in the United Kingdom. It is now estimated that Canada's total direct outlays on war account will amount to $1,394,-
033,000	for the past fiscal year. Included in this total is the sum of $42,480,000 charged to Active Assets, of which $18,149,000 represented additions to Loans and Investments and $24,331,000 represented advances to crown corporations organized by the Minister of Munitions and Supply for the purchase of scarce commodities. This total direct war outlay represents an increase of $615,609,000 over the corresponding figure for the preceding fiscal year.
The rapid increase in Canada's war expenditures (including amounts charged to Active Assets) is shown by the following table:
Fiscal Year 1939-40	 $ 127,384,000
Fiscal Year 1940-41	 778^424'000
Fiscal Year 1941-42	 1.394,033,000
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During the corresponding three years of the first World War, expenditures charged direct to war account aggregated approximately $533,000,000. It will be seen, therefore, that expenditures by the Dominion on account of

The Budget-Appendix
the present war have to date been over four times the expenditures made in the same period of the last war. They exceed by over
S603,000,000 Canada's total expenditures for war and demobilization during the whole of the last war. Indeed Canada's direct war outlays during the past fiscal year were less than §300,000,000 short of the total cost to Canada of the last war.
18.	If we deduct the amount charged to Active Assets, we get a total of §1,351,553,000 as the estimated total to be charged to expenditures on war account during the past fiscal year. This represents an increase over the previous year of $599,508,000. The amounts expended by the major Departments or Services and the increases over the preceding year may be summarized as follows:
-	Direct War 1940-41	Expenditures 1941-42	IncreaseDepartment of National Defence-Army	
Department of National Defence-Naval Service	
Department of National Defence-Air Service	
Department of Munitions and Supply	
Department of National War Services	
Miscellaneous Departments:	s 353.235.000 88.163.000 176.279.000 79.954.000 2.370.000 4.490.000 1.692.000 1.897.000 3.370.000 1.214.000 9.381.000	$ 509.879.000 132.443.000 386.418.000 248.639.000 3.112.000 25.724.000 16.727.000 6.559.000 5.619.000 3.666.000 12.767.000	% 126.644.000 44.280.000 210.139.000 168.685.000 742,000 21.234.000 15.035.000 4.662.000 2.249.000 2.452.000 3.386.000
Pensions and National Health				
			
			
	752,045,000	1,351,553,000	599,508,000
			
19.	Expenditures made by the Department of National Defence, Army, are estimated at
8509,879,000,	which compares with $383,235,000 during the preceding year. This total is broken down as follows:
Administration	$	809,000
Army Services	 501,542,000
Royal Military College	 517,000
Radio Services, N.W.T. and Yukon.	167,000
Joint Inspection Board of the
United Kingdom and Canada... .	4,876,000
Internment Operations	 1,315,000
Censorship	 230,000
Dependents' Allowance Board ....	407,000
Dependents' Supplementary Grant
Fund	 16,000
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20.	Expenditures made by the Department of National Defence, Naval Services, aggregated $132,443,000, which compares with $88,-
163,000	expended during the preceding fiscal year. The rapid expansion of the Canadian Navy tnay be indicated by a comparison with Canada's Naval expenditures during the last war; during the corresponding fiscal year of that war, namely, 1916-17, the total expenditures on Canada's Naval Services amounted to $3,806,000.
21. Total expenditures of the Department of National Defence, Air Services, for the fiscal year ended March 31, 1942, are estimated
at $386,418,000, classified as follows:
Home War Establishment	$ 108,708,000
Overseas Establishment	   10,370,000
British Commonwealth Air Training Plan	     267,189,000
Departmental Administration. Air.	113,000
Construction of Temporary Building, Ottawm	 38,000
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For the fiscal year 1940-41 Canada's total expenditure on Air Services amounted to $176,279,000.
22.	Under the Department of Munitions and Supply expenditures chargeable to the War Appropriation for 1941-42 aggregated $248,639,000, of which administration accounted for $4,939,000 and expansion of industry for $243,-
700,000.	Corresponding expenditure during the previous fiscal year was $79,954,000.
23.	Expenditures of the Department of National War Services chargeable to the War Appropriation amounted to $3,112,000 during the fiscal year ending March 31, 1942. This compares with an expenditure of $2,370,000 during the preceding fiscal year. The total of $3,112,000 may be itemized as follows:
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Departmental Administration	$	84,000
National Registration	 274,000
Mobilization	 634,000
Division of Human and Material
Resources, General	 21,000
Salvage	 157,000
Public Information	 709,000
War Charities	 27,000
Radio Broadcasting Censorship		22,000
Women's Voluntary Services	 1,000
National Film Board	 8,000
Payments re Auxiliary War Services. 1,175,000
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24. Included in, the estimated total war expenditures for 1941-42, estimated at $1,351,553,000 are various expenditures by the nonwar departments for services or activities arising directly or indirectly out of the war and charged to the War Appropriation. The total of these expenditures, not including loans and investments referred to above, amounted to $71,062,000 as compared with $22,044,000 during the preceding fiscal year.
The following table gives a detailed itemization of these expenditures classified by Departments and Services:
Agriculture-
Agricultural Supplies Board Administration....
Flour and Feed Administration	
Advertising, 1940-41 Commitments	
Publishing Wartime Pamphlets	
Compensation of Inspectors of 1941 Flax	
Etrich Flax Tow Scutching Machine	
Vanhawert Turbine Flax Scutcher	
Installation of Experimental Refrigeration....
Experimental Shipment of Eggs to Great Britain
Bacon Hog Advertising Programme	
Egg Production Programme	'
Subsidy on Export Eggs	 ' '
Bacon Board Administration	
Bacon Export Subsidy	"
Dairy Products Board Administration	
Cheese Exports to the United Kingdom	
Nova Scotia Apples, 1941 Crop	
Less refund on account 1940 Crop	
1.359.000
1.200.000
British Columbia Apples, 1940 Crop	
British Columbia Apples, 1941 Crop	
Freight Assistance on Western Grains, 1940-41 Accounts".'....
hreight Assistance on Western Grains, 1941-42 Accounts	!
Special Products Board Administration	
Payment to increase Income of Farmers in Spring Wheat Area
of Western Canada	7	
Inspection and Grading of Fibre Flax	
Equipment for Dehydration of Apples	 [	
Dehydration of Vegetables	
Sundry	
Auditor General's Office-
Audit of War Expenditure	
Civil Service Commission-
Additional War Expenses	
External Affairs-
Departmental Administration	
Office of the Prime Minister	 ''
Representation Abroad	
Evacuation of Offices Abroad	
Consular Services, St. Pierre, Miquelon and Greenland!
I ermanent Joint Board on Defence	"
Payments to Canadian Government Employees evacuated from
enemy occupied Territories	
Expenses of Canadian section of Joint Economic Committee.. Sundry	 *
Finance-
Payment of premium on purchase of Dominion of Canada
Registered Stock	
Office of the Comptroller of the Treasury-Dependents, Aliowances
and Outside Offices, etc	
Royal Canadian Mint	
Wartime Prices and Trade Board-
Licence Division	
Administration	" "
Furniture and Equipment	
Subsidies, etc., due to application of order placing ceiling on prices	"
22.000
13.000
25.000 6,000 5.000'
67.000
8,000
19.000
2,000
29.000
8,000
305,000
53.000 2,281,000
11.000
1,784,000
159.000
182.000
311.000
170.000 3,802,000
13,000
10,298.000
6,000
7.000
132.000
6.000
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150,000
238,000
244,000
16,000
76.000
23.000
4.000
2.000
8,000
16.000 5.000
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	388,000
8,100,000
3.864.000 80,000
139,000
1.208.000 94,000
3,242,000

18,727,000

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Fisheries-	.
Canned Lobster Control	$	103,000
Wartime Fisheries Advisory Committee	 1,000
Committee re Japanese Fishing Boats	 5,000
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Justice-
Prize Court	 6,000
Defence of Canada Regulations	 35,000
War Measures Act	 4,000
Arvida Commission of Enquiry	 9,000
Royal Commission re Hong Kong Expedition	 7,000
Labour-
Vocational Training for Discharged Members of Canada's Armed
Forces	  3,000
Wartime Bureau of Technical Personnel	 41,000
Cost of Living Commission	 2,000
Wartime Wages Policy Civil Employment Reinstatement Regulations	   12,000
Labour Supply Investigation Project	 8,000
National War Labour Board	  91,000
Interdepartmental Committee on Labour Coordination	 9,000
National Labour Supply Council	 12,000
Assistance to Necessitous Dependents 1940-41	 10,000
Assistance to Necessitous Dependents 1941-42	 59,000
Training men for R.C.A.F. Ground Crews	 1,489,000
Purchase of Machine Tools	   52,000
Enlistments in His Majesty's Forces re Youth Training	 25,000
Skilled and Semi-Skilled Occupations for War Work 1940-41....	139,000
Skilled and Semi-Skilled Occupations for War Work 1941-42	 4,430,000
Occupation History of Canada's Armed Forces	[DOT].*.[DOT][DOT][DOT]	10,000
Advertising Intent and Purpose of Government Wages Stabilization Policy	 31,000
Ontario Farm Labour Service	 54,000
Specialized Training for Aircraft Manufacturers' Employees		14,000
British Columbia Security Commission	 25,000
Manpower Inventory	  43,000
Mines and Resources-
Metallic Minerals Division-Services to War Departments		58,000
Grant to Yukon Council	 20,000
Prince Rupert-Cedarvale Highway	 10,000
Explosives Division-Administration of Regulations	 12,000
British Columbia-Road-Pinehi Lake	 1,000
National Parks Bureau-Alternative Service Work Camps		237,000
Dominion Forest Service-Alternative Service Work Camps		11,000
Forest Products Laboratories	 16,000
Dominion Forest Service-Internment Operations	 24,000
Engineering and Construction Service-Alternative Service Work
Camps	 98,000
General Expenses-British Isles and Canada	 17,000
Detention of Alien Seamen	 17,000
Canadian Interests in Enemy or Enemy Controlled Territory....	81,000
Canadian Interests Abroad, Apart from Enemy Controlled
Territory	 5,000
Grants to National Advisory Council-Children from Overseas..	79,000
British Evacuee Children...,	 1,000
Return of French Fishermen, SS. Angelus	 6,000
Employment of Japanese Nationals	 71,000
National Harbours Board-
Halifax-Extension to Pier 9	 627,000
-Lighterage Berth at Fish Pier	 66,000
-Moorings for Ships under Repair	 204,000
-Equipment and Operation of Fire Tug Rouille		48,000
Saint John-Construction of Wooden Pile Dock	 589,000
Montreal-Purchase of Locomotive Cranes	 113,000
National Research Council-
Special War Activities	 246,000
New Annex Laboratories	 303,000
Explosive Testing Laboratory	 55,000
Radio Direction Finding Programme	 528,000
National Revenue-
Censorship of Publications
109,000
61,000
6,559,000
764,000
1,647,000
1,132,000
4,000
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Pensions and National Health-
Treatment-Members and Ex Members Defence Forces	$	2,700,000
R.C.M.P	 96,000
Pensions-Defence Forces, etc	 888,000
Air Raid Precautions	 620,000
Investigations-Dependents' Allowance Board	 26,000
Inspection of Industrial Plants	 15,000
Public Health Engineering	 15,000
Quarantine Service	  52,000
Hire of Boat-Halifax	 14,000
Additional Accommodation-Departmental Hospitals	 100,000
Fixtures and Furnishings	 42,000
Committee on Demobilization	 9,000
Processing of Blood	    101,000
Additions-Camp Hill Hospital	-	 52,000
Lancaster Hospital	 133,000
Maintenance-Non-resident Seamen	 10,000
Committee on Reconstruction	  9,000
Extension-Nurses Home, Westminster Hospital	 35,000
Staff Accommodation and Recreation Building, St. Anne	 36,000
Additional Accomodation-Savard Park Hospital	 43,000
Calgary	 31,000
Detention Allowance-Canadian Seamen	 53,000
Addition-University of Alberta (Departmental Hospital)		24,000
Improvements-Deer Lodge	 15,000
Alteration to Steam Mains-St. Anne	 17,000
Infectious Unit-Shaughnessy	 23,000
Post Discharge Re-establishment	 105,000
Reserve Stores	 340,000
Sundry	 15,000
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Post Office-*
Postal Censorship	   328,000
Army Postal Services	 1(66,000
Privy Council
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Office of the Registrar of Orders in Council.. Public Archives-
Compensation to staff evacuated from abroad
5,619,000
494,000
4.000
3.000
Public Works-	_
Additional Accommodation, C.O.T.C. Units	
Ottawa-Daly Bldg., Annex	
Rock Island, Que.-Armoury	
London, Ont.-Westminster Hospital	
Ottawa, Ont.-Base Army Post Office	
Jackson Building-Taxes	
Extension of Jackson Building	
Record Storage Building	
Temporary Building No. 3	
'temporary Building No. 4	
Temporary Building No. 5	
Temporary Building No. 6	
Temporary Building for Department of Pensions
and National Health	
Toronto, Ont.-City Delivery Building	
Temporary Building for Post Office Department.
Vancouver, B.C.

Hospital	
Furniture, etc. for wartime employees	
Repairs, alterations, etc. to buildings	
Rental of new premises	
Dartmouth, N.S.-Wharf improvements. etc	
Missaguash River. N.S.-Interprovincial Bridge	
Shelburne, N.S.-Wharf repairs	
Saint John (Courtenay Bay), N.B.-Dredging	
Lome, Que. Dry Dock-Operation	
Repairs to Pier	
Midland. Ont.-Dredging	
Esquimalt, B.C.-Dry Dock-Operation	
Dry Dock-Dredging	
Protection and Camouflaging	
Provision for 24-hour telegraph service on Pacific Coast....
Port Hardy, B.C.-Wharf extension and shed	
Sidney, B.C.-Wharf improvements and repairs	
Communication facilities between Port Alberni, B.C., and Ucluelet,
B.C., Air Base	
Contingencies	
61,000
31.000
11.000
35.000
64.000
31.000 166.000
20.000
13.000
307.000
471.000
244.000
4.000
10.000 62.000
147.000
784.000
946.000
462.000
202.000 22.000
48.000
130.000
2.000
15.000
10.000
13.000
3.000
5.000
10.000
8.000 6,000
23,000
132.000
4,498,000
[Mr. llsley.I

The Budget-Appendix
Royal Canadian Mounted Police-
Land Services	 $ 3.009,000
Secretary of State-
Internment Operations	 $	77.000
Press Censorship	 81,000
Refugee Camps	    21.000
Sundry	 7,000
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 186,000
Trade and Commerce-
Canadian Shipping Board	 32.000
Export Permit Branch	 46,000
Shipping Priorities Committee	 2,000
[Stage Direction]
 80,000
Transport-
Meteorological Services	 209.000
Radio Interception and Monitoring	 391.000
Civil Aviation	 135,000
Marine Service Steamers	 94,000
Nautical Services	 25.000
Aids to Navigation	 50,000
Compensation to Masters and Crews re loss of personal effects....	25.000
Administration of Pilotage	 12.000
Office of Director of Merchant Seamen	 341,000
Installation of Degaussing Equipment	 171,000
Additional Harbour and Transportation Facilities-Halifax		1,932.000
Salvaging of Captured Vessels	 13,000
Office of the Transport Controller	 83,000
Balance re payment to Yukon Southern Air Transport and Trans-
Canada Air Lines	 10,000
Purchase and Repairs re Motor Tug	Frangois	 29,000
Stores, etc. C.G.S. Montcalm	 100,000
Dredging in St. Charles River, Que	 32,000
Sundry	 14,000
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 3,666,000
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25.	Reference has already been made to the fact that included in the total estimated outlays for war purposes during the fiscal year 1941-42 was the sum of $42,480,000 representing
outlays made under authority of the War Appropriation Act 1941 and carried forward as Active Assets. This amount is made up as follows:
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Advances to Commodity Corporations under Department of Munitions and Supply-
Purchases of Railway Equipment	
Working Capital, Canadian National Railways	
Since the beginning of the war advances companies. The following table shows the net have been made to provide working capital for balances in respect of these advances as at the commodity corporations set up by the Depart- close of the fiscal year 1941-42: ment of Munitions and Supply and for other
Commodity Corporations-
Melbourne Merchandising Company Ltd. (Wool)	 $ 5,531,000
Fairmont Company Ltd. (Rubber and hides)	 11,955.000
Plateau Company Ltd. (Silk)	 958,000
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Other Companies-
Atlas Plant Extension Ltd	 6,207,000
Research Enterprises Ltd	 285.000
Algoma Steel Corp. Ltd	 4,000,000
John Bertram and Co. Ltd	 312,000
Dominion Steel and Coal Corp. Ltd	 1,577.000
English Electric Co. of Canada Ltd	 777.000
Steel Company of Canada Ltd	 2,545,000
A. C. Wickman (Canada) Ltd	 75,000
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	15,778,000

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Of the above total of $34,222,000, the sum of $9,891,000 represents the aggregate of the net balances as at the close of the preceding fiscal year 1940-41, thereby making the net advances for the year $24,331,000.
The advances to the commodity corporations have been brought to the account as assets because the funds represent either cash balances in the hands of the corporations concerned or are invested in commodities, such as rubber, leather, silk and wool, that are readily marketable after the war as commercial commodities. The advances to producing companies will be invested in commodities, goods in process, etc., that may not be readily saleable in the commercial markets after the war, although in some lines at least a considerable sum will no doubt be realized by liquidation. For this reason advances of this latter type have been charged to expenditures for the year in which they were incurred.
Advances by way of loans repayable over a specified period have been made to a number of private corporations to provide additional plant and equipment facilities. Repayments in the amount of $4,582,000 have been received, and the balance outstanding at the close of the fiscal year is shown at $15,778,000.
26.	In addition to the foregoing advances, there have been advances made under authority of Section 3 of the War Appropriation Act, 1941, which are recoverable from the Government of the United Kingdom or from other allied governments. These advances were made to facilitate the provision of services for the said governments. The charges which are brought to account against the respective governments are for services and supplies, such as services arising out of recruitment and training in Canada of the nationals of allied governments, and supplies, repairs or equipment for units of the Royal Navy or naval vessels of allied governments entering Canadian ports.
Recoverable vouchers are raised by National Defence authorities at points of origin and are cleared to Ottawa where they are brought to account against the governments concerned and billed regularly. On the whole these accounts are repaid promptly by the respective governments. Naturally the major participant in this type of operation is the Government of the United Kingdom.
Under Army Services there are charges arising out of the operation of internment camps in Canada for prisoners of war and internees sent from the United Kingdom. As at March 31. 1942, there was a balance owing on this account of $854,000. The Naval Services has a large operation arising out of the servicing of His Majesty's ships at Halifax and Esquimalt dockyards and at other points. A similar service is rendered to Canada's naval (Mr. Ilsley.l
units when they are in United Kingdom waters. Under Air Services the major operation arises out of the Air Training Plan in Canada. This has resulted in substantial charges against the United Kingdom for equipment purchased in lieu of a contribution in kind provided for by the original agreement, and also charges for supplies, services and construction work arising out of the establishment and operation of the R.A.F. Special Schools in Canada. The debit balance in these two accounts as at March 31, 1942, is estimated at $102,419,000, all of which will be adjusted when the new Air Training Agreement becomes operative as at July 1, 1942. In respect of participation in the Air Training Plan by Australia and New Zealand, the former had a small balance owing of $2,-
812,000	as at March 31, 1942, while New Zealand's obligations had been fully met.
It must be understood that corresponding services are rendered to Canada by the United Kingdom in connection with units of Canada's Armed Forces serving in the United Kingdom. In this case the United Kingdom Government bills Canada, but necessarily settlements can only be made some considerable time after the services have been rendered by the United Kingdom authorities. It is impossible as yet to give a close estimate of the amount payable by Canada as at the close of last fiscal year but it is fair to assume that this will substantially offset the amounts due the Dominion.
An estimate of the amounts owing to Canada, as at March 31, 1942, in respect of recoverable advances made under Section 3 of the War Appropriation Act, is as follows:
Army	$	1.595.000
Navy	 11,802.000
Air	[DOT]	 1.017,000
Internment Operations	 854,000
R.A.F. Special Schools	 53.730.000
B.C.A.T.P.-U.K. Equipment		48.689,000
B.C.A.T.P.-Australia's share		2.812,000
Total	$ 120,559,000
27.	Before leaving this summary of war expenditures, it may be well to call attention to the indirect assistance given to the Government of the United Kingdom during the fiscal year under review. In the past such assistance has taken a form which did not result in direct Government expenditure. Since the passing of the War Appropriation (United Kingdom Financing) Act, 1942, this situation has been substantially changed, as will be explained in later paragraphs.
During the fiscal year 1941-42, the deficit of the sterling area in Canadian dollars amounted to approximately $1,100 million and this deficit was financed by Canada. Slightly less than $48 million was financed by private repatriation

The Budget-Appendix
of securities, gifts and other private transactions. Of the remaining $1,050 million which required Government financing, $365 million was financed by the repatriation of Government securities, Canadian National Railway guaranteed and unguaranteed securities and other Government guaranteed securities. The remainder, namely $685 million, represents sterling which was accumulated by the Foreign Exchange Control Board during the year.
The War Appropriation (United Kingdom Financing) Act, 1942, received Royal Assent on March 27th last. Its three main provisions were: (1) the granting of a billion dollar gift to the Government of the United Kingdom to finance the purchase in Canada of foodstuffs, raw materials and munitions of war and to defray other expenditures incurred in Canada for war purposes; (2) the granting of authority to repatriate all Dominion of Canada direct
Dominion of Canada obligations	
Canadian National Railway securities-
Dominion guaranteed	
Unguaranteed	
Other Dominion guaranted securities...
In accordance with the terms of the Act, Canadian National Railway securities to the value of $191,603,000 were turned over to the Railway Company and a temporary loan for this amount was made to the Company to enable it to acquire them. At the close of the fiscal year all the other securities were held by the Dominion with the exception of a small Dominion sterling issue which was cancelled.
The Act provided that the Minister would acquire from the Foreign Exchange Control Board such sterling balances held at the date of the commencement of the Act as were not required for the repatriation operation, the conversion of the $700 million of sterling balances and the current operations of the Board. The cost of acquisition of this surplus sterling was to be charged to the billion dollar gift and as the sterling balances involved represented accumulations to meet the United Kingdom's Canadian dollar deficit during the major part of the month of March, it had been intended that the amount should be charged to the accounts for the fiscal year 1941-42. However, it was not possible to complete the necessary arrangements and estimate the surplus sterling until after April 30th, the last day on which an expenditure incurred in respect of the fiscal year 1941-42 could be charged to that fiscal year. Accordingly the cost of this surplus sterling, namely, $76,429,000, will appear in the Government's expenditures for the current fiscal year.
and guaranteed securities and other Canadian National Railway securities held by British investors; and (3) the conversion of sterling balances accumulated to the credit of the Government of Canada to an amount equivalent to $700 million (at the exchange rate-of $4.45 to the pound sterling) into a Canadian dollar obligation which is not to bear interest until after the termination of the war.
The conversion of sterling balances into a Canadian dollar obligation did not take place until after the close of the last fiscal year. In regard to the repatriation of securities, one delivery of securities was received before the close of the fiscal year. The value of these securities at the vesting prices, less interest included therein, amounted to $222,724,000. The securities so purchased by the Dominion Government were classified as follows:
	 $ 25,338,000
	 $132,841,000
	 63,624,000
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 196,465,000
	 921,000

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28.	Expenditures classified as Special Expenditures for the fiscal year 1941-42 are estimated to total $62,879,000, which compares with $42,869,000 for the preceding fiscal year, an increase of $20,010,000. Payments of awards under the Wheat Acreage Reduction Plan are estimated to total $29,659,000. There was no expenditure on this account during the fiscal year 1940-41. Expenditures 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, are estimated at $11,836,000, an increase of $7,460,000 over the preceding year. The cost of administering this Act is estimated at $420,000, an increase of $74,000.
29.	The remaining item under Special Expenditures which shows an increase is the provision for reserve to meet deficits resulting: from the operations of the Canadian Wheat Board. There has been added to this reserve account $12,571,000, an increase of $2,071,009 over the provision made for this purpose in the accounts of the preceding fiscal year.
As reflected in the Public Accounts for the year ended March 31, 1940, an advance of $52,000,000 was made to the Canadian Wheat Board to meet possible losses of the Board in respect of the 1938 wheat crop. During the fiscal year ended March 31, 1941, an additional amount of $10,499,677 was set up in the Domin-
The Budget-Appendix
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ion's books as a reserve to meet the deficit of the Board not previously provided for, on the basis of calculation made as at July 31,
1940.	In the fiscal year now under review, an additional amount of $12,570,828 was added to the reserve account to provide for deficits of the Board not previously provided for, on the basis of calculations made as at July 31, 1941, to the close of the last crop year. These amounts, which aggregate $75,070,505, represent deficits resulting from the operations of the Canadian Wheat Board on the basis of calculations made as at July 31, 1941.
From the reserve account there was advanced to the Board during the fiscal year ended March 31, 1942, the sum of $4,623,382, which amount enabled the Board to discharge its liability in respect of advances made by chartered banks to the Board and guaranteed by the Government of Canada in connection *with the marketing of wheat crops up to and *including the 1938 crop. As a result of these advances the amount now held in the reserve account is $18,447,123.
30.	The total of the increases of the various items of special expenditure, noted above is $39,264,000. Offsetting these increases there was a reduction of relief expenditures of $19,254,000, leaving a net increase in Special Expenditures of $20,010,000, as compared with the previous year.

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The next major classification of expenditures comprises the losses of and the non-active advances to Government-owned enterprises, which are operated as separate corporations.
Canadian National Railways
31.	The operating revenues of the Canadian National Railways for the calendar year 1941 totalled $304,376,000, an increase of $56,849,000 or 23 per cent over the previous year. With the single exception of the year 1928, this represented the largest revenue in the company's history, and was more than double that of 1933.
Operating expenses of the railway amounted to $237,768,000, an increase of $35,249,000, or 17-4 per cent over the preceding year.
Net revenue available for interest on the railway's debt amounted to $54,361,000 compared with $33,474,000 in 1940. After payment -of interest charges of $44,698,000 on debt held by the public and interest charges of $5,647,000 due to the Government in respect of temporary loans for capital and refunding purposes there was a net cash surplus of $4016,000 compared with a cash deficit of $16,965,000 in the pre-

vious year. This cash surplus, the first since 1928, was paid over to the Government in redemption of temporary loans.
The operating deficit of the Prince Edward Island Ferry and Terminals during 1941 was $424,000 compared with $461,000 in 1940.
Canadian National Steamships
32.	The operations of the Canadian National (West Indies) Steamships Limited in the calendar year 1941 resulted in a cash surplus of $1,206,000 after payment of interest on bonds held by the public but before depreciation and interest on advances from the Government. The comparable figure for 1940 was $666,000. The operating surplus was paid to the Government as interest on advances (current and arrears).
National Harbours Board
33.	The operations of the facilities and harbours under the administration of the National Harbours Board recorded a slight gain over 1940. Operating income for the calendar year, after payment of interest to the public but before depreciation and interest on Government advances, totalled $5,174,000 compared with $4,942,000 in 1940.
Financial assistance provided by the Government to the National Harbours Board and charged to Dominion expenditure totalled $791,000. This amount is made up as follows: $33,000 for the operating deficit of the Churchill Harbour; $342,000 for non-active advances in respect of the deficit of the Jacques Cartier Bridge at Montreal; $400,000 for the retirement of debentures of the Quebec Harbour Commission; $2,000 for the redemption of debentures of the Saint John Harbour Commission; and the remaining $14,000 for miscellaneous capital expenditures at various ports.
The elevators at Port Colborne and Prescott operated at a profit during 1941 and the Government received $213,000 from these sources which was credited to Ordinary Revenue.
Summary
34.	The total amount charged to Government expenditures resulting from the operating deficits of, and non-active advances to, all government-owned enterprises totalled $1,215,000 as compared with $18,182,000 in the previous year. This decrease of $16,967,000 was due entirely to the better operating results of the Canadian National Railways, as there was a slight increase in expenditure on other government-owned enterprises. Loans and Advances to government-owned enterprises which are treated in the Public Accounts as Active Assets are referred to in a later section.

The Budget-Appendix

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35.	The total of Other Charges, the final main category of expenditures, is estimated at $31,993,000.
The principal item included in this total is $25,000,000, to increase the reserve to meet possible losses on ultimate realization of assets treated as "active" in the Dominion's balance sheet. This is the same amount as was provided for in the Public Accounts for the year ended March 31, 1941.
In addition, there was the usual annual write-off of Soldier and General Land Settlement Loans estimated at $271,000, and cancellation of Canadian Farm Loan Board Capital Stock, amounting to $10,000. The provision for a further reserve of $25,000,000 and the write-offs from Active Assets result in a proportionate increase in the net debt of the Dominion.
36.	The Canadian National Railways Securities Trust Stock, representing the proprietor's equity of the Dominion in the Canadian National Railways, has been increased by $4,016,000 due to the surplus earnings of the Canadian National Railway System for the calendar year 1941, and also by $99,000 due to the capital gain on redemption of Grand Trunk Railway 4 per cent Perpetual Debenture Stock at a price below par in Canadian funds. Both these items are offset by similar amounts included as special credits to Consolidated Fund already referred to under Revenues.
37.	Write-offs from Non-active Assets include $2,539,000 from the Canadian National Railways Securities Trust Stock, representing line abandonments during the calendar year 1941, and $58,000, the yearly established loss on Seed Grain and Relief Accounts of the Department of Mines and Resources. Both these items are offset by similar amounts of other credits already referred to under Revenues.

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38.	The grand total of expenditures for the fiscal year 1941-42, under the various categories enumerated, namely, Ordinary Expenditures, Capital Expenditures, War Expenditures, Special Expenditures, Losses of and non-active advances to government-owned enterprises, and Other Charges, is $1,894,966,000.
39.	The following table shows the percentage distribution of revenues and expenditures for a number of important items of revenue and expenditure. Receipts from various taxes and other revenue sources are shown as percentages both of total revenues and of total expenditures. Similarly, several of the main items of expenditure or groups of such items are shown as percentages both of total expenditures and of total revenues. This table should only be used for the purpose of drawing broad conclusions as to the relative burdens imposed on the treasury by the several important services or obligations of Government.
PERCENTAGE DISTRIBUTION OF REVENUES AND EXPENDITURES, 1941-42 (000 omitted)
Revenues	Amount (estimated)	Percentage of total Revenues	Percentage to total Expenditures$	%	%Ordinary Revenue-	Income Tax	403,607	27-25	21-30National Defence Tax	106,637	7-20	5-63Excess profits tax	135,168	912	7-13Succession duties	6,957	0-47	0-37Oustoms Import Duties	142.392	9-61	7-52Excise Duties	110,091	7-43	5-81236,184	15-94	12-46War Exchange Tax	
Manufacturers, transportation and communication, stamp	100,874	6-81	5-32116.368	7-86	6-14Other tax revenues	2,637	018	0-14Total revenue from taxes	1,360,915	91-87	71-82Non-tax revenues	102,569	6-92	5-41Total ordinary revenue	1,463,484	98-79	77-23Special receipts and other credits	17,801	1 -21	0-94Grand Total Revenues	1,481,285	100-00	78-17
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(000 omitted)
' Expenditures	Amount (estimated)	Percentage of total Expenditures	Percentage to total RevenuesOrdinary Expenditure- Interest on Public debt	$ 154.270	% 8-14	% 10-4116,430	0-87	in
170,700	901	11-52
			
Subsidies to provinces	14.409	0-76	0-97Compensation to provinces under taxation agreements	21,120	Ml	1 -43Old Age Pensions	29,612 445	1-56	2 00Civil pensions and superannuation	0 02	0-03Pensions and after-care of soldiers- Pensions, war and military	40,582	214	2-74Treatment and after-care of returned soldiers	12.733	0-67	0-86
Total		53,315	2-81	3-60
			
Agriculture		8,437 1,684 2,232 10 727	0-45	0-57
		0 09	0-11 0-15
Legislation			012	
Mines and Resources	0-57	0-73Pest Office	41,495	2-19	2-80Public Works	11,936 15,448 02,409	0-63	0-81Transport	0-82	1-04 4-21All other	3-29	
443,969	23-43	29-97
			
Capital Expenditure- Railways		5		
Public Works		3,352	0 18	0-23
			
	3,357	018	0-23
			
War Expenditure		1.351,553	71-32	91-24
			
Special Expenditures- Relief expenditures	8,393 41,915 12,571	0-44	0-57Prairie Farm Assistance including wheat acreage reduction	2-21 0-67	2-83 0-85
Total Special Expenditure		62,879	3-32	4-25
			
Government Owned Enterprises- Losses charced to Consolidated Fund- Prince Edward Island Car Ferry & Terminals and National Harbours Board 	457	002	0-03Loans and Advances non-active- National Harbours Board	758	0-04	0-05
1,215	0-06	0-08
			
Other Charges- Write down of assets	27,878	1 47	1-884,115	0-22	0-28
31,993	1-69	2-16
			
	1,894,966	100-00	127-93
			
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40.	As total revenues for the fiscal year 194142 have been estimated at 11,481,285,000 and total expenditures at SI,894,966,000, the estimated over-all deficit (or increase in net debt) for the year is 8413,681,000. In the preceding fiscal year a comparable deficit was 1377,432,000.

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41.	In addition to the expenditures for the year, as already outlined, the Dominion has made disbursements for the acquisition of investments which are treated 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. The net increase in active loans and investments during the fiscal year 1941-42 is estimated at $616,147,000 as compared with $362,370,000 in 1940-41. This increase is fully itemized in the table under section 56.

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42.	As was shown in the Public Accounts for the fiscal year ended March 31, 1941, loans made to the Western Provinces under authority of the annual Relief Acts and outstanding at the close of that year totalled. $157,492,294.23.
No loans have since been made and during the year under review repayments were received from the Provinces of Saskatchewan and Alberta in the amounts of $171,272.74 and $46,000 respectively. These repayments left the net amount outstanding as of March 31, 1942, at $157,275,021.49, divided by Provinces as follows:
Manitoba	$ 25.217.214 18
Saskatchewan	
71.341.419	95Alberta	
25.972,000	00British Columbia	
34,744,387	30Total	$157,275,021	4943.	The following table shows the net loans made to each Province during each fiscal year:

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-	Manitoba	Saskat- chewan	Alberta	British Columbia	Totals	$	S	$	$1931-32	2.788,812	10,934,341	4,097.740	4,813,124	22.634,0171932-33	5,171,904	7,578,556	1.902,041	912.636	15,565,1371933-34 	2,273.233	5.469.240	4.050.743	1,321.761	13,115,0271934-35 	2.874,631	10,141,014	1,926.476	7.966,714	22.908,8351935-36 	2.396,226	14.245,478	13,104,000	12,558,445	42.304,1491936-37	4,626.000	6.058,879	805,198	3,972.400	15.462.4771937-38 	2,959,188	11.604,787	193,000	1,541.636	16,298,6111938-39	1,405,499	13.708,847	-	-129,506	14,984,8401939-40	1,882,493	9,190,681	-53,698	1,546.552	12.566,0281940-41	-355.924	1,637,007	-7,500	240,625	1,514,2081941-42	-	-171,272	-46.000	-	-217,27226,022,112	90,397,558	25,972,000	34,744,387	177,136,057Less Write-off as provided by votes 392 and 393 of further supplementary estimates,	18,487,0551936-37	804,897	17,682,158	-	-	Less Write-off Saskatchewan Treasury Bills re 1934-35 Drought Area relief assumed by Dominion. (Principal $1.250,000: Accrued interest	1,373,980previous years $123,979.81)..	-	1.373,980	-	-	25,217,215	71,341,420	25,972,000	34,744,387	157,275,022
The Budget-Appendix
[Stage Direction]
Canadian National Railways
44. During the fiscal year ended March 31, the Canadian National Railways in the amount 1942, the Government made net advances to of $251,721,580, classified as follows:
Advances-
Under Canadian National Railways Financing and Guarantee Act, 1941-for
capital expenditures and retirement of miscellaneous obligations	
Under The War Appropriation (United Kingdom Financing) Act, 1942-"
Purchase of securities	
Under The War Appropriation Act, 1941-Temporary ' Loan' for Working
Capital	"
Under Canadian National Railways Financing and Guarantee' Act,'"i940- Purchase of Grand Trunk Railway Company of Canada 4 per cent
Pernetual Consolidated 1) benture Stock	
Under the Canadian National Railways Refunding Act, 1938-Retirement of maturing issues
[Stage Direction]
Total Advances	
Repayments-
Temporary Loan on account of interim deficit	
Application of 1941 Surplus-
Advances-Financing and Guarantee Act, 1938	
Advances-Financing and Guarantee Act, 1939	
Advances-Senneterre-Rouyn Branch Line Construction Advances-Trans-Canada Air Lines
[Stage Direction]
Total Repayments
[Stage Direction]
Net Advances
[Stage Direction]
Under the authority of The War Appropriation Act 1941 and The War Measures Act the Dominion purchased $1,027,426 of railway equipment which is being leased to the Cana-diant National Railways under the terms of a hire-purchase agreement. The Railway Company repaid instalments aggregating SI,509,-141 under the terms of hire-purchase agreements relating to equipment purchased by the Government in the fiscal years 1935-36 and 1936-37; 1939-40 and 1940-41.
Canadian Pacific Railway Company
45.	Loans to the Canadian Pacific Railway Company made in previous years for relief purposes were completely liquidated by repayments aggregating $981,000. In addition, the Railway paid the fifth 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, 1936-37 and 1937-38 at a cost of $5,730,000 and leased to the Railway Company. The Railway also paid the first instalment of $663,000 under the terms of a hire-purchase agreement relating to equipment purchased by the Government in the fiscal years 1939-40 and 1940-41 at a cost of $9,951,000 and leased to the Railway Company.

[Stage Direction]
46.	In the fiscal year ended March 31, 1942, the Government purchased an additional $25,-

000 of the capital stock of the Canadian Farm Loan Board. Capital Stock in the amount of $10,000 was cancelled and written off. The Board repurchased out of surplus funds from the Government $1,000,000 of its 3± per cent Bonds. At the close of the fiscal year the Government's investment in the Canadian Farm Loan Board was $36,537,000.
47.	The Canadian Broadcasting Corporation repaid $283,000 on account of loans made by the Government during the fiscal years 1937-38 and 1939-40.
48.	The Canadian Government Merchant Marine, Limited, repaid loans aggregating $750,000 made in the fiscal year 1940-41 in order to provide the Company with working capital.
49.	There was advanced to the Foreign Exchange Control Board in the fiscal year 1941-42 an amount of $400,000,000 in order to provide the Board with capital to carry on its foreign exchange transactions.
50.	Loans totalling $230,000 were made to the National Harbours Board during the year for capital construction purposes at the ports of Montreal and Vancouver. In the same period, loans made in previous years were reduced by $1,210,000, leaving a net credit on this account of $980,000.
51.	Investments in Sinking Funds amounted to $486,000 during the fiscal year under review. This amount together with the amount held at

The Budget-Appendix
March 31, 1941, viz., $5,233,000, was written off to Redemption of Debt, as the 4 per cent Loan of 1953-58, the 3i per cent Loan of 1950-55 and the 31 per cent Loan of 1958-63 were vested by the Government of the United Kingdom in August 1941. In turn these three sterling issues were purchased by the Government of Canada and cancelled.
52.	In the fiscal year under review the Provinces of Manitoba, British Columbia and Nova Scotia reduced by $740,000 loans made to them by the Dominion Government for house construction in the period following the first Great War.
53.	Loans for Soldier and General Land Settlement were reduced by payments of $1,521,000, and, in addition $271,000 was written off and charged to Consolidated Fund.
54.	In the period April 1, 1941, to March 31, 1942, 4,309 loans were approved under the National Housing Act for an amount of $13,541,415, bringing the total approvals to March 31, 1942, to $76,784,145. During the fiscal year, the Dominion's share of loans actually paid out, less repayments by borrowers, totalled $2,644,165. 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, 1942, was $16,254,095. 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.
55.	Under the Municipal Improvements Assistance Act, 1938, no further loans were approved during the fiscal year ended March 31, 1942. From the inception of the Act to March 31, 1942, total loans approved totalled $7,801,000. During the said fiscal year, the amount actually paid out by the Government, less repayments, was $331,000. 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 situated is required to guarantee the payments for interest on and amortization of each loan.
56.	The following statement shows in summary form the net changes in active investments during the last fiscal year together with comparable figures for the four preceding years:
LOANS AND INVESTMENTS, ACTIVE (000 omitted)
-	1937-38	1938-39	1939-40	1940-41*	Estimated* 1941-42	t	$	$	$	$Sinking Funds	3,843	4,336	Cr.	2,798	Cr.	61.963	Cr.	5,233Canadian National Railways	Cr.	27,429	3,841	21,479	105,573	251,722Canadian Pacific Railway	Cr.	211	Cr.	211	Cr.	211	Cr.	211	Cr.	981Canadian Farm Loan Board	3,848	2,834	2,288	838	Cr.	974Dominion and National Housing Acts-	Loans	1,678	2,657	4,393	3,805	2,644Municipal Improvements Assistance Act,	1938-Loans	-	815	3,111	1,718	331National Harbours Board	1,890	692	947	Cr.	333	Cr.	980Province of Sask. Power Commission...	-	58	Cr.	4Provinces-under relief legislation	16,299	14,985	12,566	1,514	Cr.	217Provinces-Housing Loans, 1919	Cr.	1,422	Cr.	105	Cr.	699	Cr.	1,634	Cr.	740Railway Equipment purchased	89	Cr.	1,399	8.135	14,781	Cr.	1,586Soldier and general land settlement	505	Cr.	749	Cr.	1,116	Cr.	1.139	1,521Roumanian Government	359	Bank of Canada Capital Stock	-	820	Central Mortgage Bank-Capital Stock	-	-	250	_Canadian Broadcasting Corporation	500	Cr.	50	700	Cr.	364	Cr.	283Canadian National .'West Indies) Steam-	ships	450	-	-	Canadian Government Merchant Marine.	-	-	-	750	Cr.	750Foreign Exchange Control Board	-	-	-	325,000	400,000Net Advances	399	28,466	49,045	388,393	641,428	
The Budget-Appendix
[Stage Direction]
loans and investments active-Concluded
(000 omitted)
-	1937-38	1938-39	1939-40	1940-41*	Estimated* 1941-42Less write-offs- Soldier and general land settlement	%	$	$	$	%loans	
[DOT] [DOT] Canadian Farm Loan Board-Capital	-750	-895	-1,643	-1,011	-271Stock	
Loans to Province of Saskatchewan-	-10	-14	-11	-12	- 10Drought Area Relief, 1934-35	
Reserve for possible losses on ultimate	-	-1,374	"	realization of active loans and advances	-	-	-	-25,000	-25,000Net change in active investments	Cr. 361	27,557	46,017	362,370	616,147
*Does not include advances by the Department of Munitions and Supply to commodity and other corporations described in section 25 (pages 22-23).

[Stage Direction]
57.	During the fiscal year ended March 31, 1942 the Government issued obligations in the amount of $2,457,464,570 (including the increase in Treasury Bills outstanding but not the total amount of recurring issues of Treasury Bills made to refund outstanding Treasury Bills). With the exception of one $10,000,000 issue sold in New York, all issues
were sold in the Canadian market. During the same period Dominion obligations in the amount of $964,335,201 were paid off out of the proceeds of the new issues. The remainder of the proceeds, namely, $1,493,129,369, less cost of flotation, provided cash for direct and indirect outlays on war account.
58.	The following table gives details of the amounts and terms of the new issues, including the prices at which they were sold:

[Stage Direction]
Price		Yield at		
Issue Date	Maturity Date	Interest Rate	Where Payable	To Public	To Govern- ment	Public Price	Price to Government	Amount Issued1941 May 1	May 1, 1942	% 1	Canada	i	$ 100-00	%	% 100	$ 250,000,000May 1	May 1, 1943	2i	New York	-	100-00	-	2 25	10.000.000June 15	Dec. 15, 1946	2	Canada	99-00	97-98	2-19	2-40	193,286.000June 15	June 15, 1951	3	Canada	100-00	98-95	3-09	3-21	643.534,250July 1	July 1, 1942	4	Canada	-	100.00	-	4-00	33,293,471Oct. 16	Oct. 16, 1944	14	(School Lands) Canada	-	99-27	-	1-75	200,000,0001942	Mar. 1	Sept. 1, 1944	14	Canada	100-00	(x)	1-50	w	(a) 57,169,000Mar. 1	Mar. 1, 1948	24	Canada	100-00	(x)	2-25	(X)	(a)268.924.000Mar. 1	Mar. 1, 1954	3	Canada	100-00	(*)	3-07	(x)	(a)671,410,300Various	June 15, 1945	Non-In terest	Canada	100-00	100-00	Nil	Nil	4,553,219Bearing Certificates. War Savings Certificates. War Savings Stamps Treasury Bills.	3-00t	3-00t	84,333,840Various	
Increas	e in short-term	Canada	-	-	Nil	Nil	960.490 2,417.464.570 40.000.000
2,457.464,570
(a) Preliminary figures.
(x) Final costs for Second Victory Loan not yet available.
(t) Yield to investor if held to maturity, seven and one-half years after issue. 

The Budget-Appendix
It will be noted that both the first and second Victory Loans were sold during the fiscal year under review. Each was an outstanding success. In the case of the first Victory Loan, total subscriptions amounted to $836,820,250 and the total number of subscribers was 968,259. The second Victory
Loan offered in February last resulted in total subscriptions of $997,503,300 and the total number of subscribers was no less than 1,681,525.
59.	The following table gives the details of Dominion of Canada bond redemptions during the fiscal year under review.

[Stage Direction]
Maturity Date	Interest Rate	Where Payable	Amount
	%		s
May 1, 1941		li	New York-	20,000.000
	1		250.000,000
	4		33.293.471
	2		200.000.000
	5		141,663,000
Mav 15, 1942 (1)	ii	93.818,000June 1, 1942 (1).	2	59.761.00021	4,201,913May 1, 1955 (3) 	31	42,761.3904	68.550,263July 1, 1963 (3)... 	31	44,257.0873 (4)	4,551,948Non-Interest Bearing Certificates	Nil	Canada	1,477,129964,335,201(1)	Amount converted into Second Victory Loan.(2)	This issue was vested by the Treasury of the United Kingdom in January 1942. The amount (at par of exchange) purchased in the fiscal year 1941-42 was cancelled.(3)	These issues were vested by the Treasury of the United Kingdom in August 1941. The amounts purchased, including Sinking Funds were cancelled.(4)	Yield to investor if held to maturity, seven and one-half years after issue date.60.	The fortnightly issue of three months Treasury Bills was continued during the past fiscal year. The last issue made during the year was sold at a discount of 0-552 per cent. The amount of these Treasury Bills outstanding at the close of the fiscal year was $270,000,000, and increase of $40,000,000 over the amount outstanding at the beginning of the year.
As at March 31, 1942, the average rate of interest on the Dominion's outstanding direct funded debt (including Treasury Bills) was
2-90 per cent. This compares with an average rate of 3-06 per cent on the debt outstanding at the close of the preceding fiscal year and is probably the lowest average rate in the Dominion's history.
60a. It may be of interest to give a summary of Loan Flotations and Bond Redemptions made by the Government of Canada since the outbreak of war to March 31, 1942. The record of such financing operations is found in the two following statements:
445BI-2301
The Budget-Appendix

[Stage Direction]
Maturity Date
Interest Where Rate	Payable
Amount
%
Oct. 15, 1939	
Oct. 15, 1939	
Nov. 15, 1939	
March 1, 1940	
April 17, 1940	
June 1, 1940	
Sept. 1, 1940	
Oct. 1, 1940	
March 15, 1941	
May 1, 1941	
May 1, 1941	
Oct. 16, 1941	
Nov. 15, 1941	
May 15, 1942	
June 1, 1942	
Oct. 1, 1947	
May 1, 1955	
Sept. 1, 1958	
July 1, 1963	
War Savings Certificates	
Non Interest Hearing Certificates
2i
3 3* * H 4a
4 1
1
5 H 2 21 31 4 31
(')3
Nil
Canada	
Canada	
Canada	
Canada	
London	
Canada	
C anada....
London	
C anada....
New York___
C anada....
Canada	
C anada....
C anada....
Canada	
London	
London	
London	
London	
C anada....
Canada	
17,168,000
6,242,500
4,654,000
115.013.637
0)137,058,841
80,000,000
75.000.	000 0)93,926,667
45.000.	000
20.000.	000
250.000.	000
200.000.	000 141 663,000
(s)9.3,818,000 (3)59,761,000 (*)4,201,913 (6)42.761,390 (')68,550,263 0)44,257.087 4.746,413 1,655,632
Total
1,505,478,343
Recapitulation-
Payable in Canada	 1,094,722,182
New York	 20.090,000
London	 390,756,161
1,505,478,343
0) Due July, 1, 1950, called for redemption on April 17, 1940.
0) Due October 1, 1960. called for redemption on October 1, 1940.
(3) Amount converted into Second Victory Loan.
(*) This issue was vested by the Treasury of the United Kingdom in January, 1942. The amount (at par of exchange) purchased to March 31, 1942, has been cancelled.
fs) These issues were vested by the Treasury of the United Kingdom in August, 1941. The amounts purchased (at par of exchange) to March 31, 1942, have been cancelled.
(3) Yield to investor if held to maturity, seven and one-half years after issue date.
tMr. Ilsley.]

[Stage Direction]
Title of Issue
Two-Year Notes	
First War Loan (***)	
Five-Year Bonds	
One-Year Notes	
Five-Year Bonds	
Second War Loan (***1	
Two and One-Half Year Notes	
New York Bank Credit	
One-Year Notes	
1941 Victory Loan	
1941 Victory Loan	
Total-1941 Victory Loan (***)...
Three-Year Notes	
Second Victory Loan	
Second Victory Loan	
Second Victory Loan	
Total-Second Victory Loan (***)
War Savings Certificates	
Non-Interest Bearing Certificates	
Total	
Increase in short-term Treasury Bills.
Grand Total	
Issue Date	Maturity Date	Interest Rate	Sold to	Total IssuedPublic	Chartered Banks	Bank of Canada	%	$	%	$	$Oct.	16,	1939 ..	Oct.	16,	1941...	2	-	200,000,000	-	200.000.000Feb.	1,	1940 .	Feb.	1,	1948-52	31	250,000,000	-	-	250.000.000March	1,	1940 ..	March	1,	1945...	2	-	-	40.000.000	40.000.000May	1,	1940...	May	1,	1941...	1	-	-	250 000 000	250 000.000June	1,	1940 ..	March	1,	1945...	2	-	40 960 000	24 040 000	65 000 000Oct.	1,	1940...	Oct.	1,	1952...	3	324,945,700	-	-	324,945.700Jan.	2,	1941...	July	2,	1943...	li	-	250.000.000	-	250.000.000May	1,	1941...	May	1,	1943...	21	-	(**)10 000.000	-	10.000,000May	1,	1941..	May	1,	1942...	1	-	-	250,000,000	250.000 00015,	1941...	Dec.	15,	1946..	2	} 836.820.250	/	193,286.000June	15,	1941..	June	15,	1951...	3	\	643,534.250836.820,250	-	-	836,820,250Oct.	16,	1941..	Oct.	16,	1944...	a	99,700,000	100,300,000	200.000.000M arch	1,	1942...	Sept.	1.	1944..	n	1	(	57.169.000M arch	1,	1942..	M arch	1,	1948...	2i	997,503.300	-	-	268.924,000M arch	1,	1942..	March	1,	1954..	3	I	1	671,410,300997,503,300	-	-	997,503,30013	133,473.762	133 473.762Various...	June	15,	1945...	Nil	10,765.678	-	-	10.765,6782,553,508,690	600,660,000	664,340.000	3,818,508.690(*)	(*)	(*)	115,000,0003.933,508.690
t Yield to investor if held to maturity seven and one-half years after issue date.
(*) It is not possible to allocate the increase in Treasury Bills to purchases by the public, chartered banks and Bank of Canada.
(**) Includes participation by a United States bank.	'	.	.	,
(***) The chartered banks and the Bank of Canada converted maturing bpnde into bonds of these issues, in the case of the 1941 Victory Loan conversions amounted to $42,225.000 and in the Second Victory Loan to $117,486,000.
The Budget-Appendix
The Budget-Appendix

[Stage Direction]
61.	At the close of the fiscal year under review the gross unmatured funded debt (including Treasury Bills) of the Dominion outstanding amounted to $5,866,071,000. Other liabilities consisting chiefly of Annuities, Superannuation and insurance funds, Post Office Savings Bank deposits, and various trust and contingent funds were outstanding on the same date in an aggregate amount of $742,949,000. The gross liabilities of the Dominion, therefore, totalled $6,609,020,000 as at March 31, 1942. On the other side of its balance sheet, however, the Dominion had active assets of $2,546,648,000 consisting of cash on hand and various active loans and investments (less
reserves provided against ultimate loss on their realization). If, therefore, we deduct the amount of the net active assets from the amount of the gross liabilities, we arrive at a figure of $4,062,372,000 representing the estimated net debt of the Dominion. This net debt shows an increase over the corresponding figure for the close of the preceding fiscal year of $413,681,000, which of course is the amount of the over-all deficit for the fiscal year ending March 31 last.
62.	The following is a preliminary statement or balance sheet showing the liabilities and assets of the Dominion as estimated at March 31, 1942:
LIABILITIES-MARCH 31, 1942 (estimated)
Bank Circulation Redemption Fund	$
TPost Office Money Orders, Postal Notes, etc., outstanding	
Post Office Savings Bank deposits	
Insurance and Superannuation Funds-
Government Annuities	$ 172,970,000
Insurance Fund-Civil Service	 15,118,000
Insurance Fund-Returned Soldiers	 20,574,000
Retirement Fund	 12,718,000
Superannuation Funds	 65,533,000
Unemployment Insurance Fund (cash)	 5,213,000
4.478.000
6.900.000 21,678,000
292,126,000
Trust Funds-
Indian Funds	
Common School Funds	
Contractors' Securities Deposits Other Trust Funds	
14.642.000
2.678.000
6.851.000
10.463.000
War Supplies Limited	
Contingent and Special Funds	
Canadian Wheat Board-Reserve for losses on wheat marketing guarantees	
Province Debt Accounts	
Funded Debt and Treasury Bills unmatured	 5,866,071,000
34.634.000
36.714.000 257,567,000
18.447.000
11.920.000
Floating Debt-
Funded Debt matured and outstanding	 6,000,000
Interest due and outstanding	 8,485,000
Outstanding cheques	   44,000,000
[Stage Direction]
 5,924,556,000
[Stage Direction]
The Budget-Appendix
[Stage Direction]
(estimated)
Cash, working capital advances and other current assets	
Recoverable Advances-
United Kingdom and other Allied Governments, Army, Navy and Air
Special Deposits	
Bank of Canada Capital Stock	
Central Mortgage Bank Capital Stock	
Canadian Broadcasting Corporation-Loan	
Canadian National (West Indies) Steamships. Ltd.-Loan	
Dominion and National Housing Acts-Loans	
Municipal Improvements Assistance Act, 1938-Loans	
S	791,093,000
120,559,000
3.022.000
5.920.000
250.000
503.000 .	450,000
,	16,254,000
.	5,976,000
Loans to Provinces-	,	,
Housing Loans, O. C. of December 3, 1918 and amendments
Unemployment Relief Loans	
Province of Saskatchewan-Power Commission	
Province of Alberta-subsidy overpayment	
Loans to National Harbours Board-
Montreal	*	
Vancouver	
New Westminster Harbour Commission-Loan	
Canadian Farm Loan Board-Advances and Capital Stock.
Foreign Exchange Control Board-Loans and Advances...
$	130,000
157,275.000 54,000 469,000
60.326.000
25.091.000
157,928,000
85.417.000 275,000
36.537.000 725,000,000
Railway Accounts-
Canadian National Railways-
Advances-Refunding Act, 1938	
Advances-Financing and Guarantee Act, 1939	
Advances-Financing and Guarantee Act, 1940	
Advances-Financing and Guarantee Act, 1940-
Grand Trunk Railway Debenture Stock	
Advances-Financing and Guarantee Act, 1941	
Advances-The War Appropriation (United Kingdom Financing) Act, 1942-purchase of securities	
51.825.000
11.332.000 7,573,000
105.936.000
11.943.000
191.602.000
Advances-The War Appropriation Act 1941-
Temporary Loan	
Purchase of equipment leased to-
Canadian National Railways-
1936 Agreement	
War Appropriation Act, 1940	
War Appropriation Act, 1941	
Canadian Pacific Railway-
1936 Agreement	
War Appropriation Act, 1940	
Loans to Foreign Governments-
Greece	
Roumania	
Soldier and General Land Settlement Loans	
Seed Grain and Relief Advances	[DOT] [DOT] [DOT]
Munitions and Supply-Advances to Commodity and other Companies.
Canadian Government Railways Working Capital	
Bond Holding Account	
Province Debt Accounts	
Unamortized Discount and Commission on Loans	
Less-Reserve for possible losses on ultimate realization of active loans and advances	
17,122,000
[Stage Direction]
 397,333,000
4.655.000
13.888.000
1.027.000
[Stage Direction]
 19,570,000
3.526.000
9.288.000
[Stage Direction]
 12,814,000
6.525.000
24.329.000
[Stage Direction]
 30,854,000
	 33,888,000
	 2,413,000
	 34,222,000
	 16,772,000
	 41,860,000
	 2,296,000
. .	55,442,000
[Stage Direction]
Net Debt, March 31, 1942 (estimated)	
Net Debt represented by- .	,
A. Expenditure and non-active assets (estimated) March 31, 1942. Capital Expenditures-
Public Works-
Canals	
Railways	
Public buildings, harbour and river improvements....
Military Property and stores	
Territorial Accounts
[Stage Direction]
425.960.000	[DOT]
307.828.000 12,572,000
9,896,000
[Stage Direction]
The Budget-Appendix
[Stage Direction]
ASSETS-MAKCH 31, 1942-Concluded.
(estimated)
Loans, Non-aetive-
Canadian National Railways Securities Trust Stock	 § 267 283 000
Canadian National Railway Stock	 18 000 000
Canadian Pacific Railway	(old)	"!!""!!!!!	62.791	000Canadian National Steamships	!!"!!"!!!	13	872	000National Harbours Board-	...Quebec	
27,778,000Chicoutimi	,,	
3,838,000Churchill	
10,000Halifax	
12,452,000Saint John	
16,550,000Three Rivers	
3,741,000Montreal (Jacques Cartier Bridge)	
4^815! 000Seed Grain and Relief Advances	
^ 346^000Soldier and General Land Settlement	
16.526^000Saskaichewan Seed Grain Loans Guarantee Act, 1936	
2,637 000The Set d Grain Loans Guarantee Act, 1937	7'136 000Miscellaneous Advances	3 537 000
B. Consolidated Fund-
Balance Consolidated Fund brought forward from March 31, 1941	 2,195,400,000
Excess of expenditure over revenue, less amounts charged under A '	'
above, fiscal year ended March 31, 1942-(estimated)	 409,101,000
[Stage Direction]
 2,604,501,000
*4.062,372,000
63.	The following table shows the various 31, 1942, and the annual interest charges obligations included in the unmatured funded thereon: debt of the Dominion outstanding as at March

[Stage Direction]
Date of Maturity	Rate Per Cent	Where Payable	Amount of Loan	Annual Interest Charges1942,	May	1	1	Canada Canada Canada Canada Canada New York Canada C anada	$ 2,500,000 00 25,230 00 4,780 CO 1,331.738 83 1.212.270	00 225.000	00 500 000 00 3.750.000	00 7,350,005 00 675.000	00 1.812.500	00 857,535 00 2.250.000	00 3,000,000 00 500 000 00 2.100.000	00 1.900.000	00 3.533.500	00 2.025.000	00 3,865,720 CO 17,158 81 1.625.000	00 6,050,790 00 1.625.000	00 1,088,750 00 4.841.270	00 1.625.000	00May	15	n 2	June	1	July Oct.	1	4	33,293,470 85 40.409.000 00	15	3	1943,	May	1	21 21 U 5	June	1	July	2	Oct.	1944,	Jan.	15	2* 2	New York Canada Canada Canada C anada Canada Canada New York C anada C anada Canada London Canada C anada Canada Canada Canada C anada C anada C anada Canada Canada New York O anada Canada Canada	June	1	Sept.	1	n 41 11 21 2	Oct.	15	Oct.	16	Nov.	15	1945,	Mar.	1	Aug.	15	2* 4	76,000,000 00	Oct.	15	1946,	Feb.	1	4§ 2	Dec.	15	1947,	Oct.	1	21 31 2} 31 31 31 31 31 3	1948,	Feb.	1	Mar.	1	*268.924,000 00	1949,	Feb.	1	June	1	Oct.	15	1950,	Feb,	1	1951,	Feb.	1	June	15	19.306,027 50 1.950 000 00Nov.	15	3} 31 5	1952,	Feb.	1	May	1	1, wZ.i. uuu UUOct.	1	3	Oct.	15	4	1954,	Mar.	1	3	20.142,309 00
[Mr. Ilsley.J

The Budget-Appendix

[Stage Direction]
thereon-Concluded
Date of Maturity	Rate Per Cent	Where Payable	Amount of Loan	Annual Interest Charges1955,	May 1	
June 1	
June 1	
1956,	Nov. 1	
1957,	Nov. 1	
1958,	June 1	
Sept. 1	
Nov. 1	
1959,	Nov. 1	
1960,	Oct. 1	
1961,	Jan. 15	
1963, July 1	
1966,	June 1	
Sept. 15	
1967,	Jan. 15	
1968,	Nov. 15	
Treasury Bills due April 1, 1942 Treasury Bills due April 17. 1942 Treasury Bills due April 29. 1942 Treasury Bills due May 15. 1942 Treasury Bills due May 29. 1942 Treasury Bills due June 12, 1942 War Savings Certificates	31 3 3 41 4) 3 4 41 41 4 31 31 31 3 3 3 [DOT]548 [DOT]548 [DOT]547 [DOT]545 [DOT]547 [DOT]552 t3	London C anada C anada Canada C anada Canada London C anada C anada New York New York London C anada C anada New York New York C anada C anada Canada Canada C anada Canada C anada Canada Canada	$ 5.905,276 73 40.000.	000 00 55.000	000 00 43,125.700 00 37,523.200 00 88.200.000	00 4.449.736 66 276,687,600 00 289.693,300 00 100.000.000 00 48.000.	000 00 4.409.579 62 54.703.000	00 55.000.	000 00 55.000.	000 00 40.000.	000 00 45.000.	000 00 45.000.	000 00 45.000	000 00 45.000.	000 00 45.000.	000 00 45.000.	000 00	*	191 921 49 1,200 000 00 1.650	000 00 1,940.656 50 1,688.544 00 2.646.000	00 177.989 47 12,450.942 00 13.036.198 50 [DOT]	4.000 0C0 00 1.560.000	00 143.311 34 1,777.847 50 1.650	000 00 1.650	000 00 1.200.000	00 240.600	00 246.600	00 246.150	00 245.250 00 246.150	00 248.400 00*5,723,251,986.27 129.677.966 48 4,030.578 00 9,110,045 92	*166.378,153 94 t3 870,745 74
*5,866.070.576 67	*170.248.899 68
Pavable in Canada	*5,391,619.711 25	91-92%Payable in New York	459,000.000 00	7-82%Payable in London	15.450.865 42	0 26%*5,866,070.576 67	100-00%
* Preliminary figures.
t 3 per cent on purchase value if held to maturity (7§ years from date of issue).

[Stage Direction]
64.	Bonds and debenture stocks bearing the guarantee of the Dominion and outstanding in the hands of the public as at March 31, 1942, totalled $818,841,717, a decrease of $165,174,661 during the fiscal year under review. This decrease is accounted for mainly by the purchase of Canadian National Railway Company securities from the Government of the United Kingdom, as provided for under the War Appropriation (United Kingdom Financing) Act 1942.
65.	There were also outstanding at the close of the fiscal year other contingent liabilities assumed under Relief, Seed Grain and other legislation. During the fiscal year the Government agreed to guarantee the repayment of bank advances to the Canadian Red Cross Society to a maximum amount of $3,000,000. It was anticipated that this Society would require funds for carrying on its war services pending the time when receipts would be available to it from a general public campaign.
However, no advances were required under this guarantee.
66.	Advances by Canadian chartered banks to the Government of Newfoundland, amounting to $625,000 and carrying the guarantee of the Government of Canada have been referred to in previous budget speeches. These advances were paid off by the Government of Newfoundland during the fiscal year under review.
67.	Guaranteed bank advances to the Canadian Wheat Board outstanding as at March 31, 1942, amounted to $116,686,562. This amount constitutes the Board's gross liability to the banks and related mainly to the purchase of wheat of the 1939, 1940 and 1941 crops. The guarantee of the Dominion to the Winnipeg Grain and Produce Clearing Association Limited referred to in previous budget speeches is still outstanding. However, no liability accrues from day to day in connection with this guarantee as margin deposits are made to the Clearing Association.
The Budget-Appendix
[Stage Direction]
68.	Before operations under the Home Improvement Loans Guarantee Act were discontinued (October 31, 1940), 125,720 loans had been made by banks and other approved loaning institutions to home owners under the terms of this Act and the total amount of such loans was $49,959,055. The Dominion's contingent liability arising out of these loans is limited to 15 per cent of the aggregate of such loans made by approved lending institutions, but as the balance of these loans outstanding on March 31, 1942, had been reduced to $6,162,009, the contingent liability of the Government is limited to this amount. Up to March 31, 1942, 801 loss claims for an aggregate amount of $259,100 had been paid. In terms of total losses to total volume of loans, this loss ratio is only slightly more than one-half of one per cent. Repayments to March 31, 1942, amounted to $43,797,048 or 88 per cent of the total volume of loans made.
69.	Under the Dominion Housing Act, 1935, and the National Housing Act, 1938, the Government 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 more than the amount advanced by the Dominion. In the case of small loans (for amounts not in excess of $4,000, in the case of a single family 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 the 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 or 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 of 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 18,251 had been approved at March 31, 1942, under the Dominion Housing Act, 1935, and the National Housing Act, 1938, in the amount of $76,784,145. Losses recorded and paid to March 31, 1942, amounted to $1,010.28, covering the Dominion's proportion of the loss on three loans. This amount represents total losses to date under both the Dominion Housing Act, 1935, and Part 1 of the National Housing Act, 1938. These losses are offset in part by a profit of $288.41 realized by the sale of eight properties. The net loss to date is therefore only $721.87.
70.	The following is a statement of bonds and debenture stocks and other indebtedness guaranteed by the Dominion, outstanding on March 31, 1942.
IMr. Ilsley.]

The Budget-Appendix

[Stage Direction]
Date of Maturity	Issue	Interest Rate	Amount Outstand ing
		%	t cts.
Feb. 15, 1943....	Canadian National	2	55,000,000 00Feb. 1, 1944....	Canadian National	21	15,60u,000 00May 1, 1944....	Canadian National	3	35,000,000 00Jan^ 15, 1946....	Canadian National	21	15,000,000 00July 1, 1946....	Canadian Northern	6$	23,759,000 00April 1, 1948....	New Westminster Harbour Commissioners	41	(00,000 00Canadian National	3	50,500,000 00Sept. 1, 1951....	Canadian National	41	50,000,000 00Feb. 1, 1952....	Canadian National	3	20,000,000 00Aug. 1, 1952	Saint John Harbour Commissioners	5	667,953 04Feb. 15, 1953....	Canadian National	3	25,000,000 00Canadian Northern	3	Z,U11,330 05Feb. 1, 1954....	Canadian National	5	50,UUO,000 00Mar. 1, 1955....	Canadian National (West Indies) Steamships	5	9,400,000 00June 15, 1955....	Canadian National	43	48,587,000 00Feb. 1, 1956....	Canadian National	4$	70,000,000 00July 1, 1957....	Canadian National	65,000,000 00July 20, 1958....	Canadian Northern	3J	6,621,474 47Jan. 15, 1959....	Canadian National	3	35,000,000 00May 4, I960....	Canadian Northern Alberta	3$	911,332 00May 19, 1961....	Canadian Northern Ontario	3}	8,144,663 54Jan. 1, 1962....	Grand Trunk Pacific	3	34,992,000 00Jan. 1, 1962....	Grand Trunk Pacific	4	8,440,848 00July 1, 1969....	Canadian National	5	57,138,000 00Oct. 1, 1969...	Canadian National	5	57,858,200 00Nov. 1, 1969...	Harbour Commissioners of Montreal	5	19,000,000 00Feb. 1, 1970....	Canadian National	5	17,376,000 002	3,383,676 53Various dates	1942-54	City of Saint John Debentures assumed by Saint	John Harbour Commissioners	Various	775,229 314	15,573,333 335	5,549,825 005	3,153,989 344	8,295,549 67do 	Northern Railway of Canada Debenture Stock.	4	502,313 00$ 818,841,717 28

[Stage Direction]
Principal Amount Outstanding Mar. 31, 1942
Bank Advances, re Province of Manitoba Savings Office	*
Province of Manitoba Treasury Bill	
Province of British Columbia Treasury Bill	
Bank Advances, re Canadian Wheat Board	
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	
Loans made by approved lending institutions under Dominion Housing Act, 1935
and National Housing Act, 1938	
Loans made by approved lending institutions under The Home Improvement
Loans Guarantee Act, 1935	
Deposits maintained by the chartered banks in the Bank of Canada	
Bank Advances, re Government War Contracts-Department of Munitions and
Supply	
Guarantee under Dominion-Provincial Taxation Agreements of Provincial receipts from gasoline taxes at amounts received in fiscal years ending nearest December 31, 1940	
6,131,616
4,805,723
626,534
116,686,562
Not determined
Indeterminate
6,162,009
241,931,985
1,700,357
Indeterminate
The Budget-Appendix

[Stage Direction]
Calendar Years				
	1926	1928	1932	1937	1939	1940	1941
Group I-Comprehensive Indexes (1935-39 -100)							
Physical volume of business	83	98	66	102	102	121	135Volume of manufacturing	92	104	68	113	109	135	151Mining	63	62	57	100	113	125	1291 orest ry	84	87	57	117	102	123	126Carload ings	131	148	88	106	102	114	129Electric power output	46	61	61	106	109	115	128Employment (a)	100	111	88	114	114	124	152National income..,	109	124	70	105	118	131	157Retail sales	(e)	(e)	92	105	105	118	136Group II.-Price Levels and Financial Factors (1926=100)	Wholesale prices	100	96	67	85	76	83	90Farm product prices	100	101	48	87	64	67	71Cost of living (b)	122	121	99	101	102	106	112Common stock prices (b)	91	145	51	116	92	77	68Bank deposits	100	11$	100	120	132	139	152Active currency circulation	100	105	81	103	111	147	198Group III.-Gross Value or Production In Major Industries (f millions)	Agriculture	1.715	1.806	767	1,039	1,205	1,265	(c) 1,375Forestry	656	586	349	494	466	627	(c) 740Fisheries	73	71	34	51	53	60	(c) 61Mining (including Smelting)	277	313	265	663	663	748	(c) 777Construction	386	488	133	352	373	474	(c) 607Manufacturing	3,101	3,582	1,981	3,626	3,475	4,529	(o) 5,018Group IV.-Foreign Trade and International Transactions ($ millions)	Exports (gold excluded)	1,277	1.364	498	1,012	936	1,193	1,640Net non-monetary gold exports (d)	30	40	70	145	184	203	204Total exports, including non-monetary gold	1.307	1.404	568	1,157	1,120	1.396	1.S44Imports (gold excluded)	1,008	1,222	453	809	751	1,082	1.449Total trade	2.315	2.626	1.021	1,966	1,871	2,478	3,293Export balance	+299	+182	+115	+348	+369	+314	+395Net tourist receipts	(e)	(e)	(e)	(e)	(e)	60	87Net interest and dividends going abroad ..	201	221	262	246	254	272	c) 256(a)	1926-100.(b)	1935-39 = 100.(c)	Preliminary eetimate.(d)	Adjusted lor chances 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) (1935-39=100) Physical volume of business	1940 1941	114 131	109 128	106 126	120 131	118 134	120 137	121 138	129 142	130 149	129 139	130 132	128 141
Volume of manufacturing		1940 1941	130 142	120 136	116 140	128 143	130 143	129 144	134 154	144 164	149 182	146 165	147 149	142 159
			lOA										
1940	116	109	113	146	121	137	127 146	142	124	117	128	1241941	123	125	123	122	141	126	.1940	121	107	i09	113	121	136	137 131	134 130	132	125	123	1171941	i26	121	126	118	114	117	
Carload ings		.1940 1941	113 126	109 123	96 125	111 129	117 139	115 134	127 140	120 128	107 119	109 121	115 124	125 139
													
.1940	112	114	107	112	123	124	129 131	119 126	114	109	109	1111941	117	116 W8	116	126	129	123	.1940	121	119	118	119	119	121 153	122 155	124	127	130	133	136 1651941	139	141	141	150	151	
Retail sales (c)		.1940 1941	90 102	90 101	106 119	110 136	120 143	121 134	103 122	113 134	114 137	132 152	136 147	174 202
													
Group II.-Price Levels and Financial Factors- (1926 = 100)	.1940	83	83	83	83	82	82 90	82 91	83	83	83	84	841941	85	85	86	87	89	95	.1940	70	70	71	72	68	64 71	65 72	63	64	65	67	67 75K ' 1941 1942	67 1 77	68 78	69 79	70 80	70	
s-i
[Stage Direction]


<P
The Budget-Appendix

CANADIAN ECONOMIC CONDITIONS-MONTHLY FIGURES-Concluded
5* Vtf 	-	Jan.	Fel>.	Mar.	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec._ , Group II-Concluded Cost of living (d)	1941 1942	104 103 115	104 108 116	105 108 116	105 109 116	105 109 116	105 111	106 112	106 114	106 115	107 116	10« 116	108 116Common stock prices (d)	1941 1942	91 71 67	90 67 65	90 67 62	88 66 61	73 64	66 64	66 68	69 68	76 71	74 69	75 69	70 67Bank deposits (e)	1941 1942	142 146 156	143 150 160	139 149 166	140 151 166	139 154	137 155	136 154	135 154	138 153	140 151	140 153	139 154Active currency circulation (e)	1941 1942	119 169 225	120 175 234	126 182 241	125 186 244	127 187	143 194	154 198	159 206	168 211	173 217	173 222	178 230Group III.-Other Significant Factors	Exports (f) ($ millions)	1941 1942	91 89 152	72 100 168	84 103 177	85 118 170	111 163 235	112 147	102 171	111 150	103 143	107 140	119 164	99 152Imports (0 ($ millions)	1941 1942	7i 9« 142	71 90 120	77 108 115	86 106 142	101 128	91 115	90 128	97 138	86 137	109 141	102 134	102 126Net non-monetary gold exports (g) ($ millions)	.. 1940 194! 1942	22 19 15	12 15 17	16 20 16	18 14 14	17 16	15 18	16 17	18 13	17 21	19 17	17 15	17 17Construction contracts awarded (1 millions).	..1940 1941 1942	9 27 13	12 25 11	12 14 18	26 24 , 23	28 41 24	39 86	29 32	41 36	52 39	26 29	55 23	17 19War contracts awarded (h) ($ millions)	..1940 1941 1942	35 53 99	42 64 55	31 73 85	21 153	30 111	46 61	87 96	74 85	70 57	148 85	68 51	144 99War expenditure (S millions)	1941 1942	13 88 145	24 83 133	(i) 33 (i) 104 (i) 220	10 46 142	24 90 205	40 65	39 108	59 99 	67 91	82 111	72 120	84 124(a)	Indexes seasonally adjusted unless otherwise indicated.(b)	As at first of month. 1926=100.(c)	Unadjusted(d)	1935 39=100
(e) Based on daily average figures: index unadjusted.
(f; All gold excluded; includes exports of foreign produce.
(hi Ifi'" n 00of marked eold. These figure were computed by the Bank of Canada on the basis of official trade returns, (h) Contracts awarded by Department of Munitions and Supply on Canadian Account; Feb., 1942, preliminary; March, 1942, estimated.
[Stage Direction]
g
[Stage Direction]

The Budget-Appendix

Honours and Decorations
Richard Burpee Hanson: Mr. Speaker, I should like to offer my congratulations to the hon. gentleman upon the manner and the methods he has adopted in the presentation of this budget. I especially call the attention of hon. members of this house to his concluding paragraph which I hope will sink into the minds and hearts of every last one of us, and every last one of our citizens. I agree with every sentiment he has expressed in that paragraph, and I only wish that 100 per cent of our people will also agree.
On motion of Mr. Hanson (York-Sunbury)
the debate was adjourned.



HONOURS AND DECORATIONS


Hon. N. A. McLARTY (Secretary of State) moved:: Whereas the report of a special committee of the House of Commons on titles, honours and decorations was presented to the house on May 14, 1919, and carried, on division, on May 22, 1919; and
Whereas the opinion has been expressed that the application of the principles embodied m the report in the circumstances which have emerged during the present war had led to discrimination between the members of the Canadian armed forces, and others of his majesty's armed forces, between different ranks in the Canadian armed forces; and between Canadians actively participating in the present war, and others of his majesty's subjects; and
Whereas the further opinion has been expressed that it is impracticable to make provision for recognition of conduct and action involving gallantry, courage, meritorious service and devotion to duty without contravening the principles embodied in the report;
Therefore be it resolved:
That a select committee of the house be appointed to inquire into and to report upon the expediency:
(a)	of maintaining the principles that form the basis of the recommendations contained in the said report and continuing in effect the said recommendations, or
(b)	of cancelling, altering, modifying or adding to the said recommendations, in so far as they relate to honours and decorations which do not involve titles, and, if so, in what respect and to what extent.
That the committee shall consist of the following members: Messrs. Bertrand (Laurier-Montreal), Bruce, Fraser (Peterborough West), Gershaw, Graham, Hill, Kinley, Macmillan, Marshall. McCuaig, Stirling, Turgeon, Weir, Wood. Wright, and shall have power to send for persons and records, to examine witnesses under oath, and to report their opinions and observations from time to time to the house.
He said: In rising to move the resolution standing in my name I feel that it is rather
an anti-climax to the magnificent address we have heard from the Minister of Finance (Mr. Usley). We used to hear of the great addresses made by other ministers of finance such as Sir George Foster, Mr. Fielding and other capable ministers, and sometimes we have taken the position that things are not as they used to be, that we do not hear the magnificent eloquence which was heard in speeches made many years ago. That reminds me of an apropos remark which Punch made about the Times. When someone wrote and said that the Times was not as it used to be, Punch replied, "Yes, but it never was."
I think we have heard to-night as fine a budget address as this house has ever heard, and I am speaking not only of the present house but of the old house as well. Again I should like to congratulate my colleague upon a magnificent and splendid address. I should like also to congratulate Canada upon having a Minister of Finance who can prepare and deliver such a budget as we have heard to-night.
In moving the resolution standing in my name for the appointment of a select committee of this house to review the question of honours and decorations, it is not necessary at this stage to deal with it at any great length. It is, however, I believe desirable that I should deal briefly, in the first place, with the present situation and endeavour to point out to the house why it is desirable to have the proposed committee appointed.
As members of the house will see, no question of conferring titles is involved. The members of the house will recall that in the year 1919 a special committee considered the question of titles, honours and decorations and presented its report on May 14, 1919. This report was discussed by the house and was carried on division on May 22, 1919. It will not be necessary for me to read the full report, but I might give a summary of its contents.
The report provided for the submission of an address to His Majesty the King dealing with the exercise by the king of certain legal powers which formed a part of the royal prerogative. It involved an expression by the House of Commons of its views to the effect that:
(1)	No titles of honour or titular distinctions should be conferred upon British subjects domiciled or ordinarily resident in Canada save such appellations as might be of a professional or vocational character or which appertain to an office.
(2)	Hereditary titles of honour or titular distinctions or dignitaries or titles as peers of the realm should, by legislation or otherwise, be extinguished upon the death of the holder if domiciled or ordinarily resident in Canada, and no further hereditary titles should be conferred upon Canadians.
Honours and Decorations

(3)	The titles "right honourable" and "honourable" should be continued.
(4)	The practice of awarding military and naval decorations such as the Victoria Cross, the Military Medal, the Military Cross, the Conspicuous Service Cross, and similar decorations to persons in military or naval services of Canada for exceptional valour and devotion to duty should be continued.
(5)	No person domiciled or ordinarily resident in Canada should accept or use titles of honour or titular distinction conferred by foreign rulers or governors.
The policy recommended in the report has been followed by the governments which have been in power since 1919, with one exception. In 1934 and 1935 certain recommendations of Canadians for titles and honours were made and a number of titles and honours were granted.
It will be observed that in the proposed terms of reference in this motion, one of the suggestions is that the committee should consider cancelling, altering, modifying or adding to the recommendations in the report of the committee in 1919 in so far as they relate to honours and decorations which do not involve titles.
It will also be observed that in the report of the committee of 1919 the statement is made that the committee do not recommend the discontinuance of the practice of awarding military or naval decorations to members of the military or naval services of Canada for exceptional valour and devotion to duty. At that time the Royal Canadian Air Force had not been established, and this accounts for the fact that no reference is made to members of the air force. Carrying out the policy approved by the house in adopting the report in 1919. the prohibition on the recommendation and acceptance by Canadians of titles of honour or titular distinctions has been interpreted to mean that Canadians may not receive any medal or award in an order of chivalry, on the ground that such an award, for example, as a companionship in the Order of the Bath or the Order of Saint Michael and Saint George, or the Order of the British Empire, involves membership in an order of chivalry in which the highest grades involve knighthood.
The medals and decorations mentioned in the report of the committee of 1919-the Victoria Cross, the Military Medal, the Military Cross, and the like-are medals and decorations which are awarded, in the main, for conspicuous gallantry in action. While the Victoria Cross may be awarded to men of all ranks in the army, the navy and the air force, some of the others, such as the Military Cross and the Military Medal, are awarded only to officers or men below certain ranks. For 
example, the Military Cross is restricted by royal warrant to officers below the rank of major and to warrant officers, classes 1 and 2. The Military Medal can be granted only for gallantry in action and can be awarded only to warrant officers, classes 1 and 2, non-commissioned officers and men.
An examination of the provisions of the report and of the debates in the House of Commons, indicates that there is some doubt as to whether the House of Commons, in 1919, intended to impose a ban upon military decorations other than those which involved titles or titular distinctions. In the text of the resolution, the prohibition is confined to "any title of honour or titular distinction"; while in the debates there was much confusion as to whether the prohibition was intended to extend to military decorations, such as the lower classes in the orders of chivalry, which do not involve either titles of honour or titular distinctions.
When the question of awards arose during the present war, the position taken was that ordinary medals and decorations might freely be awarded to members of the Canadian armed forces and to Canadians serving in others of his majesty's armed forces as members thereof or as attached personnel. The awards thus made available included the ordinary medals and decorations, such as the Distinguished Service Order, the Distinguished Conduct Medal, and the Medal of the Order of the British Empire, as well as mentions in dispatches and commendations. All awards involving titles, and awards in the lower grades of those orders of chivalry which, in their higher grades, involved titles, were regarded as coming within the prohibition involved in the report. It was, therefore, open to Canadians to receive the Victoria Cross, the Distinguished Service Order, the Distinguished Flying Cross and similar decorations. On the other hand, such awards as Knight Commander of the Bath, Companion of the Bath (military), Knight Commander of St. Michael and St. George and Companion of St. Michael and St. George, Knight Commander of the Order of the British Empire, Commander of the Order of the British Empire, Officer of the Order of the British Empire, and Member of the Order of the British Empire (military) were not available to Canadians.
In the present war, civilan decorations have been instituted by His Majesty the King. The report does not preserve any rights in respect of civilian decorations. There was a good deal of doubt as to whether, upon the institution of the George Cross and the George Medal, it would be open to the Canadian

Honours and Decorations
government to provide for recommendations without contravening the provisions of the report. The position taken was that a ban upon the award of the George Cross or the George Medal would not be in accord with the general spirit underlying the report and, accordingly, steps were taken to make these civilian awards available for Canadians.
It is desirable that the position with regard to the classes of the orders of chivalry which do not involve titles should be clarified and that doubt should be removed with regard to the availability of the George Cross and the George Medal.
A further question has arisen by reason of the nature of the present war. In total war the dangers of the burdens fall heavily upon the civilians as well as upon the soldiers. There are Canadians serving in positions of great personal danger who are showing qualities of courage and devotion to duty that are clearly comparable with those which result in awards to the armed forces. Such civilians are all excluded from recognition except in cases which qualify for the George Cross and the George Medal. It is thought that the House of Commons would desire to review the whole question of recognition of civilian service in the light of the conditions which have arisen during the present war.
Another problem results from the nature of naval warfare. It has been increasingly evident that seamen of the merchant navy are showing qualities of courage and devotion to duty which require recognition. It is desirable, therefore, that the house should consider whether members of the merchant navy should not be placed in a position of equality with members of the armed forces. It will, of course, be understood that the British mercantile marine is given recognition in the matter of awards fairly comparable with that which is accorded to the Royal Navy and it is probable that members of the house would desire that Canadian seamen should receive similar treatment.
Under the present position, immediate awards take the form of medals and decorations and have been available to Canadians on the same basis as to members of the armed forces of other parts of the British commonwealth. Individual actions of gallantry in the' face of the enemy have led to awards to Canadians without discrimination. On the other hand, under the system which has been in force in the past and which is applied to the members of the armed forces of the British commonwealth with the exception of Canada, a substantial number of awards for courage and devotion to duty are made periodically, normally at the New Year and on the occasion
of the king's birthday. These lists include operational awards earned by continued courageous action and devotion to duty during operations, and also awards for exceptional devotion to duty in the course of services rendered outside active theatres of war. These periodic awards normally consist of the Knight Grand Cross of the Order of the Bath, Knight Commander of the Bath, Companion of the Bath. Knight Grand Cross of the Order of the British Empire, Knight Commander of the Order of the British Empire, Commander of the Order of the British Empire, Officer of the Order of the British Empire, Member of the Order of the British Empire, and the British Empire Medal, all in the military divisions of the orders. Of these only one, namely, the British Empire Medal, has been regarded as being available to Canadians. The Knight Grand Cross of the Order of the Bath, Knight Commander of the Bath, Knight Grand Cross of the Order of the British Empire, and Knight Commander of the Order of the British Empire are higher classes of orders of chivalry; the recipients of these awards have the right to the title "Sir" during their lives and their wives are entitled to be called "Lady". They are thus clearly within the wording "titles of honour or titular distinctions" as set forth in the report. The other awards, Companion of the Bath, Commander of the Order of the British Empire, Officer of the Order of the British Empire and Member of the Order of the British Empire, are lower classes of the same orders of chivalry which do not carry titles. The recipients of the awards are entitled to wear ribbons on their uniforms and formal insignia on ceremonial occasions. These awards are, however, regarded as being so associated with titles of honour or titular distinctions as to be excluded by the provisions of the report.
In the practical working out of the British system of recognition of courageous action and devotion to duty, the present position results in discrimination between Canadians and members of the armed forces of other parts of the British commonwealth; and also in discrimination between officers and warrant officer's, on the one hand, and non-commissioned officers and men on the other hand.
The best illustration of the first type of discrimination would be found in the case of commissioned officers, warrant officers, non-commissioned officers and aircraftmen who are charged with the direction and maintenance, under conditions of grave danger and hardship, of aircraft engaged in operation. Their courage and devotion to duty lead to extended recognition in the awards to ground personnel of the Royal Air Force, and of
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other air forces operating with the Royal Air Force, including awards in the Order of the British Empire, and medals of that order. In the cases in which equivalent courage and devotion to duty is shown by commissioned officers, warrant officers, non-commissioned officers, and aircraftmen of the Royal Canadian Air Force, no awards involving membership in the Order of the British Empire can be made by reason of the principles set forth in the report. Other concrete illustrations might be taken from the experience of other branches of the Canadian armed forces.
The other element of discrimination is between members of the Canadian forces. Here, again, the best illustration would be found in the ground crews of a Royal Canadian Air Force squadron. Assuming that, through a difficult period, continued courage and devotion to duty had been shown by a pilot officer, a warrant officer, second class, and a leading aircraftman; under the present position, a British Empire Medal could be awarded to the leading aircraftman,, but the warrant officer, second class, and the pilot officer would have to forgo recognition.
It is thought that the House of Commons might want to examine these aspects of the question, with a view to devising some means whereby discrimination, if any exists, could be avoided. Within the terms of the reference to the committee, it would be possible to submit recommendations to the house which would lead to the removal of any element of discrimination from members of the Canadian armed forces, except in the case, of course, of officers holding the rank of Rear-Admiral, Major-General, Air Vice-Marshal, or higher ranks. Under the existing system of awards it is not possible to arrange for recognition of the services of these higher ranking officers without providing for the revival of titles in Canada-a course which I am sure this house will agree would be unlikely to commend itself under present conditions.
In the making of recommendations with regard to these matters it will of course be understood that, under our constitution, the crown is the fountain of honour, and that any recommendations which may be made should take the form of recommendations with a view to their submission, through the appropriate channels, to His Majesty the King, for approval.
We are all conscious of heroic deeds which are being performed and of distinguished services which are being given by self-sacrificing and patriotic Canadian men and women in the armed forces. I think it will also be agreed that Canadians who are serving in many parts of the world and on many battle

fronts beside their comrades from the United Kingdom, from Australia, New Zealand, South Africa and the Indian empire should, subject to the limitations of the resolution, be eligible for official recognition which may be regarded as equivalent to that given their comrades.
This is one of the reasons why the government has reached the conclusion that the whole question at this time should be studied by a select committee of the house. I trust that after the committee has examined the question from all points of view, the report which it may submit will be such as to commend itself to the judgment of parliament.


Mr. JEAN FRANCOIS POULIOT (Temis-couata):: I wish to join the Secretary of State (Mr. McLarty) in paying a tribute to the Minister of Finance (Mr. Ilsley). Sometimes I disagree with his policies, but I always admire his native eloquence.
Regarding this resolution, I remember that between 1930 and 1935 the present Prime Minister (Mr. Mackenzie King) took a definite stand against the awarding of titles in this country, precisely at the time when Mr. Bennett decided to go back to the old tradition of bestowing titles on Canadian citizens. We are frequently told that we are at war and that we should not forget that we are at war; and I do not. In my humble view decorations should be given only to those who risk their lives for their fellow citizens, either in the army, or in research when they expose their own lives in scientific studies, or in civilian life to those who risk their lives to save those of others, such as the man who jumps into the water to rescue a child from drowning. These people are entitled to decorations. Their decorations have a real meaning; they signify that a man has accomplished a conspicuous action for mankind at the risk of his own life. I assume that up to this point everybody will agree.
Now, sir, what is nobility? Noblemen were first roturiers, and the difference between a noble lord and a roturier is the fact that the lord has been made such from a roturier, who may be described as a man of the mob. It is interesting to discover how it happens that a man who comes from the mob turns into a nobleman as by enchantment. It is much the same as if he were touched by Merlin's magic wand. It is really funny. Four years ago, after a visit to England, I took the trouble to examine the House of Lords "Who's Who", and I noticed that one-half of the noble lords had belonged to the nobility only since the beginning of the twentieth century; that is, at the end of the nineteenth century they were roturiers.

Honours and Decorations
Of course the highest degree of civilization is to enjoy the same kind of life as Horace did in Rome two thousand years ago, when, in the beautiful climate of Italy, garbed in a peplum, he could sit and philosophize while drinking Falernian wine. It was a great life. I know that the lives of most noblemen consist in enjoying the best that civilization can afford-in living in a castle, in hunting, in reading-because there are intellectual pleasures available to those whose livelihood is earned for them-in eating and drinking the best, in racing, fox-hunting and so on. This is very fine.
But the greatest nobility is the nobility of the heart, and that is why soldiers-and when I say soldiers I mean sailors and airmen as well-deserve a special recognition. Their hearts are so big that, though they may not always make the supreme sacrifice, they expose themselves to the risk of sacrifice in such a way that they are entitled to be distinguished in some manner, so that their fellow citizens, seeing them, will be in a position to observe, "That man is a hero; he must have accomplished conspicuous deeds that deserved particular recognition."
In the army there are three classes of men, and now I refer to the militia in particular. There are the privates; there are the noncommissioned officers, and there are the officers. Well, it takes a long time for a private to become a non-commissioned officer, and a much longer time for a non-commissioned officer to become an officer. For my part, the best reward that could be given, not as a matter of decoration-a medal with a ribbon-to any private, is to make him a noncommissioned officer, and the best reward for a non-commissioned officer is to make him an officer-and no officer is prouder than the man from the lower ranks who gets his promotion on the battlefield. Everyone will be in favour of this, but it takes a long time to get it. There is a reason for these promotions. It is that when a man is worth a promotion in the army he is in most instances qualified to have a larger number of men under his direction, and it would improve the army if we insisted upon the observance of the promotion system before going any further in connection with the distribution of titles.
I do not think more titles should be given; in fact, I think some titles should be dropped. For instance, take all those civilians who are now in uniform, especially in the Department of National Defence for Air. There are civilians who are in uniform now, doing civilian jobs, and who are entitled to allowances for their wives and so on. Do you not think,
Mr. Speaker, that they should return to civilian life so long as they are doing civilian work? It is not because they are working in a defence department that they should be allowed such a privilege as to wear a uniform when they are not military men. The government should discontinue buying uniforms and paying allowances for these men.
I believe, sir, that you were in the house when we received certain correspondence from Toronto from a gentleman who wrote regarding the restoration of titles. He must have been acting for-


Mr. DEPUTY SPEAKER:: Order. The question of titles is not covered by the resolution. The resolution refers to honours and decorations which do not involve titles. Therefore I do not think the question of granting honours which do involve titles comes within the scope of the resolution.


Jean-François Pouliot: The first paragraph reads:
Whereas the opinion has been expressed that the application of the principles embodied in the report in the circumstances which have emerged during the present war had led to discrimination between the members of the Canadian armed forces, and others of His Majesty's armed forces, between different ranks in the Canadian armed forces; and between Canadians actively participating in the present war, and others of His Majesty's subjects. . . .
I will not insist upon the question of titles, but I wish to say a word about decorations, using the language of the motion, to those Canadians who are "others of His Majesty's subjects," These must be people who have had nothing to do with the war. I should have liked my good friend the Secretary of State (Mr. McLarty) to say something more by way of definition of "Canadians actively participating in the present war" and, in the second place, "others of His Majesty's subjects." In the first place, reference is made to the armed forces of the country, and then there are two other categories of people mentioned. Who are those Canadians actively participating in the present war? Are they the dollar-a-year men? I admit that some of them are good men, but I wonder if all of them should be awarded decorations or anything of that sort when most of them are paid high travelling expenses and living allowances. They are already receiving compensation. Then there are "others of His Majesty's subjects." Who are they? Of course, the committee would have ample opportunity to inquire into the matter, but I remind the government that we are the ones who have to vote upon the motion for the formation of the committee, and, therefore, if anybody is to get the information the first ones to have that privilege should be the
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members of the house who have the responsibility of passing a motion like this, which is not clear at all. It does not satisfy my mind, and I know the farmers in my county will laugh about it. Let me make myself clear in this regard. They will not laugh about anything that is done in order to recognize the exceptional merit of anyone in the armed forces, but they will laugh when they think of those fellows who look after their own business while "actively participating in the present war." It is a distinction between the army and those business men who are "actively participating in the present war." It is most impressive. Besides that, there are "others." Who are they? It smells bad.
Whereas the further opinion has been expressed that it is impracticable to make provision for recognition of conduct and action involving gallantry, courage, meritorious service and devotion to duty without contravening the principles embodied in the report. . . .
If it applied only to the army, I would agree. But if it applies in the first place to "Canadians actively participating in the present war" but not in the army, and in the second place to "others of His Majesty's subjects",
I do not agree with it. There is something more that strikes me. It is that reference to a report of a special committee of the house on titles, honours and decorations that was presented to the house on May 14, 1919, and carried, on division, on May 22, 1919. Nobody has read that report. It was passed when you, sir, were sitting in the house, but I never had that report. I do not know what it is. But I can tell you, sir, that that motion is superfluous, because when R. B. Bennett was Prime Minister he paid no attention to that report; he gave titles by the bushel and the shovelful. Therefore why refer to that report when it was ignored by R. B. Bennett? I find it childish, especially at this time when Russia, the United States and all other countries will pay no attention to those titles. Here we go back in the vaults of this chamber and find an old report of 1919 which has been ignored by R. B. Bennett when he created barons out of whisky makers and so on. It is childishness in war time-I can return the compliment to the government. I was once told by the Minister of National Defence (Mr. Ralston) that we should be serious. Is this a serious matter? It is toys to amuse the wealthy.


Thomas Vien: I do not think the hon. gentleman is in order. It is not in order under the rules of the house to style as childish a resolution presented by a minister of the crown-or by any other hon. member as far as that goes.
[Mr. Pouliot.l
Furthermore, I do not believe that the hon. gentleman is speaking to the very subject matter of the resolution, which is the expediency of referring to a committee of the house the question of studying some -method to give recognition of conduct and action involving gallantry, courage, meritorious service and devotion to duty. I would like the hon. gentleman to withdraw that expression.


Jean-François Pouliot: Then, sir, I will substitute the words "not serious".


Thomas Vien: Even that is hardly in order.


Jean-François Pouliot: Then I will substitute for what I have said that I cannot understand it. I will tell your honour what I have in mind when I used the expression "childish". Your honour will remember that Napoleon said, "c'est avec des hochets que 1'on mene les hommes". "Hochets" means toys. That is why I thought of "childishness"; if you find it out of order, of course I desire to abide by your ruling, and I am not hard to please.
But, sir, the basis of that argument is a report, a report which I have never read, which I ignore except for the summary given in the resolution. The first paragraph of the motion summarizes the report that will be studied again by a committee which will include many distinguished members of this house, and especially my very dear friend and esteemed colleague the hon. member for Queens (Mr. Macmillan). In the first paragraph there is mention of titles, honours and decorations. I hear one of the ministers say "no". Well, you may table the famous report. It is easy to have copies made by the king's printer. I am anxious to read the report, but I am too busy to make long searches. If it is given to me here, I will read it.
So we have the preamble, "whereas" and "whereas" and "whereas", and then:
Therefore be it resolved:
That a select committee of the house be appointed to inquire into and to report upon the expediency-
The expediency, observe.
- (a) of maintaining the principles that form the basis of the recommendations contained in the said report and continuing in effect the said recommendations, or-


Mr. MACDONALD (Brantford City):: That throws it wide open.


Jean-François Pouliot: As it may be decided by the committee. But are we to entrust the committee with that job now? We are still in the dark, we do not know.
(b) of cancelling, altering, modifying or adding to the said recommendations, in so far as

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they relate to honours and decorations which do not involve titles, and, if so, in what respect and to what extent.
The whole thing will be studied from A to Z, I presume, and in my humble opinion that will be a waste of time. When I think of the intelligence of my colleagues, of their experience and their value as members of this house, to think that they will have to spend their time on this-and mark you, I do not say "waste", I say "spend" their time on this-when Tobruk has just fallen; when we heard solemn words of warning from the Minister of Finance just a moment ago, when everybody, if not fearful, is greatly concerned and worried about the future, I find that there is no time for this.
To summarize what I have to say it is this. In the first place there should be no snobbery in the army; there should be no caste in the army, no caste to keep privileges or promotions for themselves. The army should be made more accessible to the common man, and the common man should be given greater opportunity for promotion on the battlefield. The same thing applies to the sailor and the airman. If that is done, our men will be so satisfied with having at last what they were promised when they enlisted that they will not insist upon anything more than they are entitled to receive now in regard to decorations. Is there anything to prevent our men from receiving the Distinguished Flying Cross, the Distinguished Flying Medal, the Distinguished Service Order, the Distinguished Conduct Medal, and so on? But there is one thing I regret, and I will tell you what it is. I regret very much what was done in the case of one man, who at the risk of his life took away a bomb that had fallen either very near or in St. Paul's cathedral in London. He did something which was deserving of the Victoria Cross, but instead of any such recognition he has been put in gaol for five years. First get that man out of gaol; then we might talk about decorations. That is my humble view about the matter.


James Layton Ralston: Mr. Speaker, if I may be permitted just a word, I think my hon. friend is under a complete misapprehension with regard to this motion. I share his view as to the undesirability of bringing forward a matter of this kind at such a serious period in war, if it were at all possible to deal with it otherwise and see that justice might be done. But I want to say to you, sir, that a very great injustice is being done to the non-commissioned officers and men, and to the officers,
of the armed services on account of the resolution known as the Nickle resolution, which apparently has been regarded as more or less binding.
May I say to the hon. member who just sat down that the Distinguished Flying Cross is awarded for gallantry in the face of the enemy, and the particular matter that is in mind as far as the armed services are concerned is awards for meritorious service not in the face of the enemy, service such as that to which he referred a few moments ago as being performed by a man who was a member of a bomb-removal squad. Those are matters which cannot be dealt with by way of recommendations at the present time, except in very limited fashion. The air force have an Air Force Cross which can be awarded for meritorious service not in the face of the enemy. The only thing the army has is what is known as the Meritorious Service Medal. That can be awarded for acts of bravery or endurance not in the face of the enemy, but it can be awarded only to other ranks, not to officers. The air force also has the Air Force Medal, which of course is not applicable to the army or the navy. If my hon. friend had noticed the birthday honours, he would have seen recognition accorded a large number of members of the British, Australian and other forces for meritorious services performed. These were not dollar-a-year men, to whom the hon. gentleman referred, but men who performed meritorious service, acts of endurance and devotion to duty, whose only reward can be some recognition of this kind by their country. The fact that this is a serious period in the history of the war constitutes, it seems to me, all the more reason why we should consider this question. It is all we can do for our boys, particularly those who, through no fault of their own, have not seen action as yet. I therefore submit to the house that this resolution should be passed and that the committee should be asked to examine into that situation.
My hon. friend has seen fit to indulge in some remarks with regard to promotions in the army. I want to say to him that promotions in the army are made from the ranks, except in some special technical services, and on merit. He speaks of young men being promoted on the field of battle. Every month young men are coming back from England to take officers' courses here, junior staff courses, for instance. They have been promoted in the field; they have shown their qualifications, and they have come back here to take these special courses. The same thing is being done with regard to the men in the ranks in this country. I think my hon. friend must know,
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or at least he should know, the rule that a man must serve for four months in the ranks before he may be promoted to become an officer. The hon. gentleman suggests that recognition should be given men by promoting them. There may be men who perform meritorious acts for whom no vacancy may exist as far as promotion is concerned. Would my hon. friend suggest that we should wait for a vacancy in the establishment and then solemnly make a man a corporal because he did something which should be entitled to recognition by way of a decoration? I say that is not the sort of recognition that is contemplated for acts of the sort I have mentioned. Men receive their promotions when they are entitled to them, having regard to their service and what they can do in the way of leadership and when there are vacancies. That has nothing whatever to do with these matters of exceptional gallantry or exceptional devotion to duty, for which it is hoped the decorations suggested here may be provided.
If I may presume to offer a suggestion, personally I have always felt that there was a good deal to be said for the establishment of a Canadian order, an order of our own. Here perhaps I may be stepping beyond the functions of a member of the house, particularly since the matter is to go to a committee, but it seems to me that this is a matter which might well be given consideration by that committee: a Canadian order of merit, for instance, or some other decoration, which might be awarded by Canada itself as a recognition of devotion to duty and meritorious service by its sons in the armed forces, or elsewhere for that matter.


Mr. CHURCH:: If I may ask the minister a question, would he quote from the text of the resolution of 1919 any principle which prohibits the decoration of soldiers in this way ' at the present time, as applied to this war?
I have the text of the resolution before me and I cannot find it. As a matter of fact, it is not there.


James Layton Ralston: I have not the text before me; but, if I remember correctly, orders of chivalry are mentioned, which would mean that membership in the Order of the British Empire could not be awarded even to those who might earn the right to such an award by reason of some act of meritorious service. That is one instance. I have not the resolution before me now; but I am advised by the legal officers of the department, and also, I think, by the legal officers of the Department of External Affairs, that the resolution does prevent the award of decorations of this kind for meritorious services which are not actually

acts of gallantry in the face of the enemy. I cannot give my hon. friend the text, since I have not the resolution before me. Needless to say, as far as I am concerned, this matter would not have been brought before this house if it were considered that it could have been dealt with otherwise, but I have felt that a grave injustice was being done to the men in the armed forces, and this seemed the only way in which it might be remedied.


Hon. GROTE STIRLING (Yale):: That is an interpretation which makes it desirable that there should be a committee to examine the matter, and I want to commend the Secretary of State (Mr. McLarty) for having introduced this resolution. We shall certainly work with the committee and do our best to have these discriminations removed. The minister has referred to an interpretation at present used with which I certainly do not agree; this is an interpretation put by someone on the first part of the Nickle resolution. I raised this matter in March last year when I asked a statement of policy from the government as to the awarding of these decorations. Rather to my surprise that produced a statement by the Prime Minister (Mr. Mackenzie King) that the government would still stand on the Nickle resolution of 1919 and the interpretation previously given to the first part.


Thomas Langton Church: Is the hon. gentleman speaking for those on this side of the house or for himself?


Mr. COLD WELL:: Eleven o'clock.


Norman Alexander McLarty: Does the hon. member wish to speak on this? Could we not get it through to-night? I do not think we should take up too much time with it.
On motion of Mr. Church the debate was adjourned.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Wednesday, June 24, 1942