1945-12-13

[Stage Direction]
Seventh and final report of special committee on Veterans Affairs.-Mr. Tucker.

Right Hon. W. L. MACKENZIE KING (Prime Minister):: Mr. Speaker, I wish to
table parliamentary return reference No. 33, moved by the hon. member for St. John-Albert:
For a copy of all correspondence, letters, cables and other documents exchanged between His Majesty's government in the United Kingdom and His Majesty's government in Canada from September 1, 1938, to September 15, 1939, relating to the attitude of Canada in the event of an outbreak of hostilities between His Majesty and any other power.
When the motion was adopted the order was extended to cover a period subsequent to September 15 sufficient to complete the correspondence in reference to the particular matters referred to.
I would say that the reason for the delay in bringing down this return is that the consent of the government of the United Kingdom and the consent of the government of Australia and New Zealand had to be obtained before we felt at liberty to table the correspondence. That consent has now been obtained, and the return which I have just made includes all the correspondence.
Previous to September 1, 1939, the government of Canada was kept informed of international developments in the usual manner. As the crisis approached in the summer of 1939 there were consultations between the United Kingdom and Canadian authorities through the United Kingdom high commissioner at Ottawa and the Canadian high commissioner in the United Kingdom.
I think hon. members will find this return most interesting and of historic interest, inasmuch as it relates to the attitude of Canada at the outbreak of hostilities between His Majesty and the German Reich. There are only eight telegrams in all; they are not very lengthy, and I believe it would meet the convenience of hon. members if they were printed in the Votes and Proceedings of the House of Commons. I ask that instructions be given accordingly.

________________Foreign Insurance Companies



SERVICE PERSONNEL


[Stage Direction]
On the order for motions:
Hon. DOUGLAS ABBOTT (Minister of National Defence):: Yesterday in my absence the leader of the opposition asked, in view of the fact that press representatives were not allowed on the Queen Elizabeth at her recent visit at New York, whether steps would be taken to allow such representatives to board ships arriving in future in New York with returning Canadian service personnel. Perhaps I can best answer that by explaining what steps were taken to have them allowed on board this time. I was advised two or three days before the ship was due that the regulations at New York did not permit of press representatives being allowed on board. They had been, of course, when the ship called at Halifax. I asked the quartermaster-general to endeavour to get that ruling changed. He was not successful. We then took it up through our minister at Washington. He discussed it with the war department and with the department of state. The United States war department and state department said that they would waive their objections: they had no objection to the rule being changed so far as Canadian press men were concerned, although it might involve some difficulty with United States newspaper men wTho were not allowed on their transports. However, the owners of the ship, the Ounard-Whi'te Star -line, were not prepared to allow the regulation to be changed, and therefore it was not possible for Canadian newsmen to go on board.



CANADIAN AND BRITISH INSURANCE COMPANIES ACT, 1932

[Stage Direction]
Mr. R. W. MAYHEW (Parliamentary Assistant to the Minister of Finance) moved the first reading of bill No. 241 (from the senate) to amend the Canadian and1 British Insurance Companies Act, 1932.
Motion agreed to and bill read the first time.
Mr. MAYHEW moved the second reading of the bill.
Mr. BRACKEN:: Mr. Speaker, before the
bill receives its second reading perhaps the Minister of Veterans Affairs will say something with respect to procedure on the second reading of senate bills. It was indicated a day or two ago that the procedure that had been followed was not to have discussion on second reading of these bills. It seems to me
we should have an explanation at some stage of these bills before giving them second reading.
Hon. IAN A. MACKENZIE: (Minister of Veterans Affairs):	I believe the practice of
the house in days gone by has been that these senate bills should go first of all to the committee for discussion and then come back to the house. Personally I think there should be an explanation of any senate bill before it passes this house.
Motion agreed to and bill read the second time.



FOREIGN INSURANCE COMPANIES ACT, 1932

[Stage Direction]
Mr. R. W. MAYHEW (Parliamentary Assistant to the Minister of Finance) moved the first reading of bill No. 242, to amend the Foreign Insurance Companies Act, 1932.
Motion agreed to and bill read the first time.
Mr. MAYHEW moved the second reading of the bill.
John Bracken: A day or two ago, Mr. Speaker, you made a ruling that it was not the ordinary procedure to have any explanation on the second reading of these bills. If that is the rule of the house, we will all accede to it, but the Minister of Veterans Affairs agrees with me that there should be some explanation before giving the second reading to the bill. We know nothing about it.


Mr. SPEAKER:: I do not think I said
that there could be no debate on the second reading of a bill coming from the senate. I said that it was not usual to have a debate on the second reading, though the motion is debatable.


John Bracken: Then I have a suggestion to make with regard to such bills coming to us in the future. I do not ask for any long explanation, but I think the house should be informed as to the general character of any such measure that is laid before us.


Mr. MACKENZIE:: I am in complete
agreement with my hon. friend.


Mr. MAYHEW:: I regret that I am unable to give any more extended explanation than is to be found in the bill itself. The minister is not in the house and I was not able to discuss it with him. A general explanation appears in the bill as follows:
This amendment will make available to foreign companies for the purpose of vesting assets in trust as security for Canadian policy-
Questions

holders a class of security in which Canadian companies are permitted to invest under paragraph (b) of subsection one of section 60, of The Canadian and British Insurance Companies Act, 1932, as amended. The subparagraph inserted recognizes a statutory charge upon assets and a record of continuous payment of interest on the obligations secured thereby as equivalent to the forms of security set forth in the preceding subparagraphs of the paragraph.
Motion agreed' to and bill read the second time.



QUESTIONS

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

Mr. BLACK (Cumberland):: I.	How many empty or used beer bottles have been collected in Nova Scotia by the wartime prices and trade hoard, or under its authority, yearly to November 1, 1945, and sold: (a) in Nova Scotia; (b) elsewhere?
2.	By what individuals or firms were sales and deliveries made, and what was the quantity and cost to each buyer?


Robert Wellington Mayhew: Yearly figures regarding
the number of empty or used beer bottles collected in Nova Scotia under authority of the wartime prices and trade board are not readily available. The following information covers the period beginning December 11, 1942 (effective date of wartime prices and trade board order A-505 restricting the sale and distribution of used beer bottles in the provinces of Nova Scotia and New Brunswick) and ending May 10, 1945 (the date on which the order was rescinded):
1.	(a) Sold in Nova Scotia-352,303 dozen pints, 1,356,038 dozen quarts; *(b) Sold elsewhere-255,272 dozen pints, 1,088,447 dozen quarts.
Doz. Pts.
2.	Name of Buyer	Purchased
Olands	 166,402
Keiths	 185,901
Labatts	 97,698
N. B. Brew	 75,752
National Brew	 27,389
Red Ball	 25,913
Canadian Brew	 22,439
Molsons	 6,081
^Permits issued under order A-505 to Provincial Bottle Exchange, Halifax, N.S.
Price	Purchased Doz. Qts.	Price$46,592	677,058	$304,67652,052	678,980	305,54127,354	339,886	152,94821,210	287,986	129,5937,668	175,993	79,1967,255	135,901	61,1556,282	120,182	54,0811,702	28,499	12,824Bottle Company,	Sydney, Nova	Scotia, and to


BONUS OR SUBSIDY ON WOOD FUEL
Mr. BLACK (Yukon):: 1.	When was payment by the government of bonus or subsidy on wood fuel in Canada commenced?
2.	During what period was it paid?
3.	What department of government made such payments?
4.	At what rate was it paid?
5.	What was the total amount so paid to wood dealers in Yukon?
6.	Up until what date will amounts so earned be paid?
7.	What proceedings is an applicant required to take to obtain such payments as yet not made?


Mr. MAYHEW:: 1.	Subsidies authorized by P.C. 3465, April 29, 1943, and subsequent orders in council have been payable, subject to varying conditions on wood fuel delivered to a dealer or held for his account on and after March 5, 1943. (By P.C. 7802 dated Oct. 6, 1944 subsequent payments of subsidy were restricted to wood fuel delivered to or held for a dealer's accounts after Sept. 30, 1945.)
2.	Subsidies have been payable, subject to varying conditions, since the passage of P.C. 3465, April 29, 1943, and continue to be payable.

3.	Commodity Prices Stabilization Corporation Ltd. on the directions of the timber controller (originally the coal controller, followed by the wood fuel controller during the successive periods in which wood fuel was under their respective jurisdictions.)
4.	Subject to certain limitations, subsidy was payable at the rate of SI.00 per standard cord of 128 cubic feet on wood fuel contracted for and cut on or before Dec. 31, 1944, and delivered to a dealer or held for his account on and after March 5, 1943. (By P.C. 7802 dated Oct. 6, 1944 subsequent payments of subsidy were restricted to wood fuel delivered to or held for a dealer's accounts after Sept. 30, 1945.)
Subject to certain limitations, subsidy was payable on wood fuel as described above covering such portion of the wood fuel dealers' transportation costs as the timber controller might specify.
Subject to certain limitations, subsidy is payable to wood fuel dealers on the certification of the timber controller on such transactions and in such localities where, in the judgment of the timber controller, a subsidy or bonus is necessary, having regard to the costs of production and transportation, to get the

Questions
necessary quantity of wood fuel produced and transported. The rate at which such subsidy is payable is specified by the timber controller in each individual case.
5.	To Sept. 30, 1945, subsidy amounting to $2,158.45 has been paid to wood fuel dealers in the Yukon.
6.	No final date for the discontinuance of subsidies on wood fuel has yet been established.
7.	To obtain a subsidy a dealer must apply to the regional wood fuel officer, Vancouver (British Columbia and Yukon) for an eligibility, giving full particulars of his anticipated costs of purchase and of handling the particular lot of wood in question. If, in the opinion of the regional wood fuel officer, such wood is really required and a subsidy is necessary, the eligibility will be granted. Then when the dealer has bought and moved that wood to his yard or delivered it to his customers, he must apply for the agreed subsidy stating the exact costs incurred and attaching to his application evidence in the shape of receipts that such expenditures were actually made. The necessary forms are supplied by the regional wood fuel officer.
Subsidies, varying according to the needs in each particular instance, are payable to licensed wood fuel dealers:
(a)	in the discretion of the timber controller ;
(b)	where there are definite shortages of wood fuel in consuming centres;
(c)	where, without such subsidies, dealers are unable to obtain wood, bring it to such consuming centres and sell it to consumers there within the price orders.


CHALK RIVER ATOMIC ENERGY PROJECT
Mr. BRUCE:: 1.	What has been the total expenditure in connection with the atomic energy project at Chalk River, up to the 31st of Octdber last?
2.	Has any amount been appropriated for the next fiscal year?
3.	If so, how much?


Mr. HOWE:: Stand.


Mr. BRUCE:: May I ask if it is possible
to have a reply, if not to-day at least to-morrow? This question has been standing on the order paper for fifteen days.


Clarence Decatur Howe: I will make inquiries, and if
it is possible to give an answer to-morrow I will give it.


J. G. FOGO, K.C.
Mr. BLACK (Cumberland):: 1.	What positions has J. G. Fogo, K.C., held with the Department of Munitions and Supply and the Department of Reconstruction?
2.	At what dates was he appointed to such positions and when did he retire?
3.	What was the total:	(a) remuneration;
(b) expenses; (c) other allowances paid him in each such position?
4.	Has he been appointed a director or to any position in a wartime shipping or other crown company, and if so what positions?
5.	Is this a full time job, if not what proportion of his time will be required?
6.	What remuneration and expenses are payable?
7.	Who are the solicitors for the crown companies in Halifax and what fees have been paid for legal services and expenses?
8.	What is the name of the legal firm with which Mr. Fogo is associated in Halifax?


Mr. HOWE:: 1.	The positions held by J. G. Fogo, K.C., are as follows:-(a) With the Department of Munitions and Supply,-associate co-ordinator of controls, (b) With the Department of Reconstruction-None.
2.	(a) He was appointed! October 31, 1942
by order in council P.C. 4/11491.	(b) He
resigned) on May 31, 1944.
3.	(a) None. (b)	$183.98. Travelling
expenses during the term of his employment with the department, (c) Living allowance, when absent from Halifax on departmental business, paid1 to Mr. Fogo; 1942, $1,225; 1943, $4,825.
Reimbursed the firm of Messrs. Burehell Smith Parker and Fogo to cover living allowance; 1943, $3,575; 1944, $3,425.
4.	Yes, a director of Wartime Shipbuilding Limited.
5.	No; required to attend meetings.
6.	No remuneration. Travelling expenses only.
7.	There are no solicitors for crown companies in Halifax.
8.	Burehell, Smith, Parker and Fogo.


TRAVELLERS BUILDING, WINNIPEG
Mr. ZAPLITNY:: 1.	Has the government acquired or leased the Travellers building, Winnipeg?
2.	If so, from whom?
3.	What was the total cost to the government for alterations in connection with this building?
4.	What rent, if any, is the unemployment insurance commission paying (or has paid) for this building?
5.	When is this building to be occupied, and by whom?


Mr. FOURNIER (Hull):: 1.	The Travellers building was leased for the accommodation of the unemployment insurance commission.
2.	Republic Investments Limited, Winnipeg.
3.	$36,580.76.
4.	S26,984.00 per annum.
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5.	The two upper floors were temporarily
occupied by the Department of National Health and Welfare since March 26, 1945, but this department is now being moved out and the unemployment insurance commission is in the course of moving into the whole building.


FOREIGN EXCHANGE CONTROL-CANADIANS GRANTED UNITED STATES RESIDENTIAL STATUS
Mr. MACDONNELL (Muskoka-Ontario):: 1.	How many residents of Canada have been granted a change of residential status from Canada to the United States by the Foreign Exchange Control board ini the months of September, October and November, 1945?
2.	What is the aggregate amount of money which has been so authorized to be taken out of Canada by such persons?
3.	How many applications and for what
aggregate amounts have been granted in the following categories:	(a) $25,000 and under;
(b) over $25,000 and under $50,000; (c) over $50,000 and under $100,000; (d) over $100,000?


Robert Wellington Mayhew: The following information relates to changes of residential status from
	Cash and
	bank
1945	balances
September 			 81,183,369
October 			 1,390,964
November 			 1,037,435
83,611,768
3.		Cash and bank
	No.	balances
Under $25,000 	.. 3,930	$3,5S2,308$25,000 - $50,000 ....	.. [DOT] 1	460$50,000 - $100,000 ...	. . 	-Over 8100,000 	.. 2	29,000
Canada to all other non-sterling area countries, the large majority of which were, however, to the United States. The figures for November do nc include a relatively small number of cases dealt with by the board's Vancouver office, details of which are not yet available.
1.	September, 1945-1,186; October, 1945- 1,492; November, 1945-1,255; total-3,933.
Note: No permit from the foreign exchange control board is required by a resident leaving: Canada with not more the S50 and the above figures do not include residents who may have left Canada for permanent residence in the United States or elsewhere but took with them not more than S50 each.
2.	The values and type of assets declared by the persons referred to in paragraph 1 above and authorized to be withdrawn from Canada is given below. Information is not available as to the funds and other property actually withdrawn from Canada by such persons:
Securities S 954,720 712.641 762,826	Real estate, personal effects and other assets SI,061,377 1,101,746 1,210,090	Total S3,199,466 3.205.351 3.010.351S2,430,1S7	$3,373,213	S9,415,168Securities $2,212,187' 8,000	Real estate, personal effects and other assets 83,322,123 23,090	Total $9,116,618 31,550210,000	28,000	267,000


RURAL MAIL CARRIERS-WAR BONUSES
Mr. BREITHAUPT:: 1.	What steps have been taken by the Post Office Department to continue payment of wartime bonuses to rural mail carriers?
2.	Is any action being taken by the department to embody such bonus in the regular contract of these carriers?


Mr. BERTRAND (Laurier):: 1. Wartime bonuses to rural mail carriers have been paid under the authority of the War Measures Act, where the courier establishes the fact that operating costs have increased due to conditions which could not have been foreseen when he entered into his contract.

With the termination of the War Measures Act, these wartime bonuses must cease, but provision will be made to invite public tenders in each case where the courier is not satisfied to continue at his original contract price.
2. No. Any action to this end would be contrary to the terms of the Post Office Act.


FEED WHEAT
Mr. McCUAIG:: 1.	How many bushels of feed wheat were shipped from western Canada to eastern Canada in each of the years, 1941 to 1945?
2.	What was the price paid per bushel by the eastern farmer in each of the above years?

Senate and House of Commons


Mr. GARDINER:: 1.	Bushels
1941	(Oct. 20 to Dec. 31)	
2,659,0201942	(Jan.	1	to	Dec. 31)	
15,062,5911943	(Jan.	1	to	Dec. 31)	
23,709,3661944	(Jan.	1	to	Dec. 31)	
22,524,6021945	(Jan.	1	to	Nov. 30)	
18,908,138
2. Because of different conditions of sale, grades of wheat-whether whole, ground, bagged, et cetera, the price paid per bushel
by all eastern farmers is not assessable.
The cash price for wheat of official feed grade in store Fort William-Port Arthur showed the following range:
High
per bushel
1942
1944
.65i
.801
1.04
1.04
1.04
1942
1944
Low
per bushel 57i 64 74i
1.04
1.04
From September 11, 1942, wheat used exclusively as feed for live stock in eastern Canada
was subject to a rebate of 8 cents a bushel. This rebate was increased on November 11, 1943, to 25 cents a bushel.


EGLINTON HUNT CLUB PROPERTY, TORONTO
Mr. FLEMING:: 1.	What use is being made of No. 1 I.T.S. property, formerly known as Eglinton Hunt club,
Toronto ?
2.	What use or disposal of the property is intended for the future?
3.	Is the property for sale?
4.	If so: (a) in block or in parcels; (b) at what price and on what terms; (c) through what agency, if any, has it been listed for sale?


Mr. GIBSON (Hamilton West):: 1.	No. 1 Composite training school and the Institute of aviation medicine are located at this site. Spare accommodation is used to handle any overflow of R.C.A.F. personnel in Toronto area. Air cadet squadrons have the use of the facilities at this unit in the evenings.
2.	Present plans call for the retention of this site for the continuance of the Institute of aviation medicine and also to serve as a urban headquarters for Toronto auxiliary squadrons.
3.	No.
4.	N.A.


CAPE ISLAND, SHELBURNE COUNTY, N.S., BRIDGE
Mr. GILLIS:: 1.	What surveys were made in past years, and what reports are on record in connection with a bridge from Cape Island, Shelburne county, Nova Scotia, to the mainland?
2.	How much did the government spend on the construction of this bridge, and in what years was the expenditure made?
3.	Was work actually begun on piers or abutments?
4.	If so, are these still standing?
5.	When and why was the work discontinued?
6.	What action is the government taking towards building this bridge as a post-war project, or on any other basis?


Mr. FOURNIER (Hull):: 1.	This matter has been investigated and given consideration, and it has been definitely established that the project is in connection with highway communication within the province and is therefore a matter for the attention of the provincial government.
2,	3, 4, 5 and 6. Answered by No. 1.


SENATE AND HOUSE OF COMMONS
[Stage Direction]
Right Hon. W. L. MACKENZIE KING (Prime Minister) moved that the house go into committee to consider the following resolution.
That it is expedient to present a measure to amend the Senate and House of Commons Act to provide for payment of an allowance to every member of the Senate and House of Commons for expenses incidental to his duties as a member at the rate of two thousand dollars per annum for the period during which he is a member, payable at the end of each calendar year and subject to a deduction equal to one-half of the amount of deductions, if any, from the member's allowances in respect of sittings of the house of which he is a member during such year, and to provide that in the case of ministers of the crown, of the Leader of the Opposition in the House of Commons, and of members of the Senate the amount of such allowance shall be deemed to be taxable income; and to provide further that such measure shall be deemed to have come into effect on the sixth day of September, one thousand nine hundred and forty-five.
He said: As my colleague the Minister of Veterans Affairs (Mr. Mackenzie), in leading the house last night, announced at the close of the session, in bringing forward this particular motion I desire to substitute it for one which is already on the order paper as order No. 7. Hon. members will notice that order No. 7 relates only to members of the House of Commons. The resolution now .presented is in more complete form and has reference to members of the Senate as well as members of the House of Commons.
[Stage Direction]
Senate and House of Commons
May I say a word with respect to the circumstance that the resolution should have appeared on the order paper in the first instance with reference only to members of the House of Commons.
When the resolution was placed on the order paper in the form in which it was it represented the only decision which had been arrived at by the government up to that time with respect to allowances to members of parliament for expenses incidental to their duties as members of parliament.
It was obviously desirable that there should be discussion with members of the senate before deciding on what should appear in resolution form with respect to members of that house. I did not have any opportunity to have a discussion with members of the upper house before leaving for England, and subsequently visiting the United States. When my colleagues in the government saw that I would be returning sooner than was expected at the time I left, it was decided by them to leave over discussion w'ith representatives of the senate until after my return. When I returned I found a great many matters demanding urgent attention, and it was not possible for me to arrange to see representative members of the senate immediately. I took the first chance I had to discuss with some of the senators the position of members in the other house in respect to the expenses incidental to the discharge of their duties, and I have since gone more fully into the matter with representative members of that house. The measure which I now bring before the house is one which in its more complete form will, I think, commend itself to members of both houses of parliament-at any rate, I sincerely hope that that may be so.
At this late stage of the session, Mr. Speaker, I may have to ask the house for its unanimous consent to allow me to proceed a little more rapidly with consideration of the motion now before us than might otherwise be the case. When the orders of the day are reached I shall ask that the house allow the motion No. 7, which is now in its possession, to be withdrawn and the order to be discharged. I make that intention known immediately so that we may be in a position to discuss the resolution that now appears under government notices of motion.
With respect to this notice of motion I would say that His Excellency the Governor General, having been informed of the subject matter of this resolution, is pleased to recommend it to the consideration of the house.
With the permission of the house, I would now ask that the necessary steps be taken

to proceed at once in committee with the resolution in order that I may have an opportunity of introducing the bill immediately. I should think that all the discussion that may be necessary can be had on the second reading of the bill. If the house will give its unanimous consent to this procedure, I shall see that the bill is introduced this morning with the understanding that discussion upon it will not take place before tomorrow.
John Bracken: Mr. Speaker, with respect to
the remarks of the Prime Minister in regard to the discharge of item No. 7 on the order paper, may I say that this party will be very glad to approve of its being done. With respect to the further procedure regarding this new resolution, may I ask the Prime Minister if he desires to proceed further to-day than reaching second reading?


William Lyon Mackenzie King: I have just
indicated that we would go on with second reading of the bill to-morrow. All I desire to do now is to introduce the bill and have it given first reading.


John Bracken: Then, Mr. Speaker, I
understand the Prime Minister desires that we should get past the several stages of this resolution this morning and up to second reading of the bill.


William Lyon Mackenzie King: Yes.


John Bracken: In the event that the
house approves that procedure, and since the members have not seen a copy of this bill, I respectfully suggest that we might proceed up to second reading without being expected to take part in any debate.


Mr. M. J. COLDWELL (Rosetown-Biggar):: Mr. Speaker, may I say that I approve the procedure outlined by the Prime Minister and by the Leader of the Opposition. So far as we are concerned there will be no objection to facilitating the progress of the bill, provided that there is some discussion on the second reading.


Mr. ANGUS MacINNIS (Vancouver East):: I do not agree with that. I take the position that anything I have to say on the resolution itself I am going to say, but I shall not hold it up.
Mr. SOLON E. LOW (Peace River): Speaking for this group I will say that we are prepared to facilitate the discharge of No. 7 from the order paper and to allow this resolution to be substituted therefor. We have no desire to hold up the proceedings at this stage.

Senate and House of Commons


Mr. H. W. HERRIDGE (Kootenay West):: I take the same position as the hon. member for Vancouver East. Anything I have to say I shall say on the resolution.
Motion agreed to and the house went into committee, Mr. Macdonald (Brantford City) in the chair.


Angus MacInnis: I rise just for a moment to say that I am opposed to this measure. I cannot conceive of anything more unwise for this parliament to do at a time when the affairs of the country are in such a state as they are, and when this house has failed to take any action which would relieve the present distress of the great mass of the people of the country, than to pass this resolution. The distress is increasing daily, and we have done nothing in the house to alleviate it. We have failed to deal with old age pensions and with increasing unemployment. Veterans in my own city of Vancouver are unemployed by the thousands. I consider therefore that this action by this House of Commons is a colossal impudence.


Major James William Coldwell: In view of what has just been said I too feel that I must say something, although I did not intend to do so. I fully -appreciate the remarks made by my colleague, the hon. member for Vancouver East. All of us in this group at least, and I think throughout the house, feel exactly the same way about the condition of the people generally in the country, and if I thought that the defeat of this resolution would bring relief to these people I would support the opposition to it. But obviously their condition will no-t be helped by members of parliament -remaining in the position in which they have found themselves over a period of years. Some members of parliament I know are moving into further debt and having their work made ineffective by the care that has been put upon -them in that respect. In the -early days of our parliamentary history the House of Commons was looked upon as a place where gentlemen met; as the best club in London, and perhaps-I do not know about Canada-as the best club in Ottawa. Fortunately for democracy that day has gone, and there are members in this House of Commons now who -of necessity must give all their time to the business of the country, meet unusual expenses, and who are expected to get by on an amount which in the past has been altogether inadequate. That, I think, is particularly true of some of us in this group.


Mr. POULIOT:: In the old times members of parliament were elected by rotten boroughs.


Major James William Coldwell: Yes. In view of what my hon. friend has just said I should like to point out that I am not only speaking for this group in this house. One year ago -there w'as a national convention of my party to which was forwarded a resolution from quite a small local, where there are no members of parliament, no members of our national executive, and no elected representatives of that constituency sitting in this group. I should like to place that resolution before the house. It read:
Whereas it is desirable and necessary that our elected representatives be sufficiently remunerated by the receipt of -an income adequate to the calls made upon them;
Therefore be it resolved that this convention declare itself in favour of a higher indemnity than allowed by the present government after the payment of income taxes.
That was not prompted by any member of parliament; it came from a district which is quite out of touch with our members. So when I speak here this morning I feel that I am speaking not only for a majority of my colleagues but for the rank and file of the movement as expressed in a resolution passed at the national convention held last December in the city of Montreal.


Herbert Wilfred Herridge: I just want to say that I am opposed to this resolution, because the allowance is not taxable, and because of its being extended to members of the other place. I will deal with these matters at greater length when we come to second reading.


Jean-François Pouliot: I respect the view's of my colleague. Some may differ with us; they are not many, but it is their view and they have a right to it. But they are wrong, because the indemnity received by members goes back to their constituents; it goes to hotels and transportation companies for trips for which we pay from our own pockets, though they are for the benefit of our constituents. A member who does not touch the pork barrel cannot possibly live on an indemnity which by taxation has been reduced to $2,800. It is not now a question of ethics. The real question is obvious: shall it be possible for poor men to remain inpolitics, or shall politics become on-ly the realm of the rich? The -hon. member for Rosetown-Biggar, the leader of the C.C.F. party, spoke very well, but perhaps he did not catch my remark when I said that in olden times members of parliament were elected by rotten boroughs. That was before the reform bill. At that time they were elected by a handful of people, and the common people had not the right to say who should be their member. That member apparently was

Senate and House oj Commons
the tool of a marquis or a duke or the owner of a large property, and the common man was ignored until the reform bill came along. But surprisingly enough in that land of contrasts, those were the top days of parliament. Precisely when members of parliament were elected by rotten boroughs, parliament reached its peak in England.
Well, this does not reflect Canadian conditions of to-day. I say to you, Mr. Chairman, that some hon. members have been incurring debts while in politics. It is a fine gesture to say we will not touch it or that it should not be exempt from income tax. I remember the first lady who was elected to this house. In a very indignant mood, the first time she received $4,000 she went to her bank and obtained a certified cheque for $2,000 to the order of the Receiver General of Canada and said, "We are paid too much; S2,000 is enough. I will return $2,000 to the exchequer." She did that only once. At the time it was a fine gesture, giving money back to the exchequer. Why should we do that when we have to borrow more money from the bank? Let us be sensible, sir. The constituents of every member of this committee of the whole know very well what a member has to pay for: all sorts of celebrations; bazaars; wreaths; wedding gifts, and so on. They expect it; they think each member of parliament is a press making money.


Angus MacInnis: Baloney!


Jean-François Pouliot: I wonder why my hon. friend calls it baloney. Perhaps he does not give anything to his electors, but that is his own business.


Angus MacInnis: I give them service, not presents.


Jean-François Pouliot: I respect my hon. friend's views, but let him also respect mine; otherwise I will say something to him. I am not speaking for the gallery; I am stating my case. I remember that once when I was sitting in the other corner there and we were discussing certain matters affecting ourselves, I spoke of members who were poor. Some gentlemen who are now in the senate, and who are very dear friends of mine, did not object to that; it was true. But another hon. gentleman who was my deskmate did object. He thought we should not say anything like that, that we should keep up appearances and never admit we were poor. Why pose as wealthy when we are not? And if we are not, it is precisely because we have done our duty. We have not touched the pork barrel; we have gone into debt just to serve our constituents.

The indemnity is not a salary; it is just a compensation for what we lose by sitting here for such long periods of time. I will not labour the question, Mr. Chairman, though there is much more I could say. Let us be sensible; let us be honest with the people. I am sure no hon. member will receive letters of protest, except from perhaps one or two of his constituents who are not familiar with the conditions that exist to-day.


Mr. COCKERAM:: I am in complete agreement with this increase, but at the same time I should like the Prime Minister or the Minister of Finance to agree that industry should be allowed to increase the wages of their salaried employees, which they have not been permitted to do for some time.


William Lyon Mackenzie King: I had not intended to speak on the resolution but since others have made some comments perhaps I should say a word as to the obligation I have felt in the matter of introducing this resolution. I speak now more particularly to hon. members who have come into the house since the last session, the last parliament in fact. Hon. members who were present at that time will remember that before the end of the session I stated that I thought the allowance paid to members of parliament was wholly inadequate, having regard to their increased obligations, the changed situation in the world, and the corresponding enlargement of their duties since the allowance had been previously fixed.
It was twenty-five years ago that parliament sanctioned its last increase in allowances to members of parliament. In the last session of the last parliament I said I should like to see an increase made at once, before the close of the session. I gave as a reason something which I since have had reason to believe was sound indeed. I pointed out that it was necessary to have in parliament, in these days, men of wide experience, men of known character and ability, men who were prepared to give a considerable portion of their time to the study of questions, as well as to speaking upon them. I pointed out further that, with the obligations of the members being what they are, it was becoming increasingly difficult to get the desirable type of persons to stand as candidates for the different parties. When I say this I am not referring to any one party, but to all parties.
I said at that time that I did not know what the fortunes of the political parties might be in the general election. I was not at all sure at that session that I would be standing where I am at the present time. I was not sure at that time that to-day I would even be where

Senate and House of Commons
my hon. friend the leader of the opposition (Mr. Bracken) now sits. But I said that, in parliament or out of parliament, I would publicly advocate an increase in the allowances to be paid to members of parliament, and that this would be done for the sake of parliament itself and for the independence of individual members of parliament. I am now fulfilling that undertaking. May I add that the undertaking was made before the general election, and that during the campaign I repeated what I had said. I did so because I have a very high opinion of the institution of parliament. It is the most important of all the institutions in our country; no other is comparable with it. Those who come to parliament as members have not oply the obligations of legislators, but also of trustees of the financial and other resources of the country.
When the allowance was last increased the total appropriations of parliament were $568,939,431. In the last three sessions the appropriations were not in millions but in billions and were as follows: In 1942-43, $4,343,738,428; 1943-44, $5,540,668,592, and in 1944-45, $5,179483,114. In addition to that, at the time the allowance to members was last decided upon, in 1919-20, discussions in parliament related almost completely to matters of domestic concern. They dealt only to a limited extent with international affairs. That condition is not comparable at all with what we have to-day. In these days the whole of the discussions in parliament are on a very much vaster scale than anything known hitherto. And they are not going to become less. I venture to say that every question of real importance to-day has an international bearing and cannot be considered apart from its international bearing. I go further and say that our discussions already have demonstrated that we are dealing in large part with world problems. Every member in the house has been considering or discussing questions relating not to Canada alone, but to the world situation; and we are not going to go back, so far as discussions of the kind are concerned. New problems will become increasingly difficult and complex, and wall require more in the way of careful study and application of conscience on the part of all who are entrusted by the country with the discharge of public affairs.


Jean-François Pouliot: And time.


William Lyon Mackenzie King: Yes; my hon. friend has referred to time. I had occasion to look into the amount of time hon. members sat when the indemnity was last increased. I find that in 1920 the house sat 86 days, as compared with the session 1940-42, when it sat 105 days; that of 1942-43, when it sat 124 47696-215
days; 1943-44, 120 days, and 1944-45, 135 days. It will be noted that these are much longer periods of time than were customary when the last change was made.
Sometimes one hears comparisons made between the amounts received by members of parliament and salaries received by men in industry, wages paid, and the like. We heard a suggestion, very well intentioned, of one such comparison this morning. If I were to go back to my college days in search of an appropriate expression to meet any comparison I believe I would say that a member of parliament is in a position sui generis, that is to say, is in a position of his own; is in a class by himself. From the point of view of responsibility and opportunity combined, there is, or should be, no position held by any person in the country that can be compared with that of a member of parliament, whether he or she be in the House of Commons or in the Senate. I say that we belittle this greatest of all institutions for the preservation of liberty if in any way we seek to detract from the importance of parliament or if we do not afford to members of parliament that which will help to preserve their independence, or cause the best men in the country to enter its halls.
There are only a few members of the house who have not some business of their own, some professional or business obligations. These interests, to a considerable extent, to say nothing of family obligations, they must sacrifice while attending to the business of parliament. In these callings and professions they meet with difficulties which have to be met as if they were not serving as well the interests of the country as a whole.
I repeat, I believe the institution of parliament is the great palladium of liberty; it is the one institution above all others which can preserve freedom, it is more needed to-day than it has ever been in the world's history. A member of parliament, whether a member of the House of Commons or of the Senate, carries a burden upon his soul the like of which has never been placed upon the souls of men at any time heretofore, because it involves, as must now be clear to all hon. members, the question whether in the future we are to have life or death for mankind.
Mr. Speaker, I leave the matter there.
Resolution reported, read the second time and concurred in. Mr. Mackenzie King thereupon moved for leave to introduce bill No. 243, to amend the Senate and House of Commons Act.
Motion agreed to and bill read the first time.

Reconstruction and Supply


WITHDRAWAL OP ORDER NO. 7 ON THIS DAY'S ORDER PAPER
[Stage Direction]
On the order being called:
In committee of the whole-the following resolution:
Resolved, that it is expedient to present a measure to amend the Senate and House of Commons Act, to provide for payment of an allowance to each member of the House of Commons for expenses incidental to the discharge of his duties as a member of the House of Commons at the rate of two thousand dollars per year for the period when he is a member, and to provide further that such measure shall be deemed to have come into effect pn the sixth day of September, one thousand nine hundred and forty-five.-The Prime Minister.
William Lyon Mackenzie King: Mr. Speaker, this is the order to which I referred a minute or two ago. I move:
That order No. 7 on the order paper be withdrawn and the order be discharged.
Motion agreed to and order discharged. RECONSTRUCTION AND SUPPLY



DEPARTMENT TO ASSUME FUNCTIONS OF RECONSTRUCTION AND MUNITIONS AND SUPPLY- CONCURRENCE IN SENATE AMENDMENTS

[Stage Direction]
Hon. C. D. HOWE (Minister of Munitions and Supply) moved the second reading of and concurrence in amendments made by the senate to bill No. 173, respecting the Department of Reconstruction and Supply.
He said: Mr. Speaker, several amendments have been made to the bill. They fall into three classes. The first amendment is purely a revision of wording and makes no material change. The second class of amendments- there are several of them-make it clear that there is an appeal to the exchequer court from any decision of the minister. A recent judgment of the court had made that somewhat doubtful, and so the bill has been rewritten to make it clear that all decisions of the minister with reference to matters in the renegotiation section are subject to an appeal to the exchequer court.
There are two further amendments the purpose of which is to put a termination date to the period during which contracts are subject to renegotiation. A contract to be subject to renegotiation must have been entered into before the second day of September, 1945, and any bulk termination of contracts cannot be for any year later than the fiscal year that includes September 2, 1945.
That is the purpose of the amendments to the bill. Its provisions have not been weakened
fMr. Mackenzie King.]
in any way, and I have no hesitation in moving concurrence in the amendments made by the other house.
Motion agreed to; amendments read the second time and concurred in.
The house having reverted to orders of the
day:

[Stage Direction]
On the orders of the day:
Mr. D. A. CROLL (Spadina):: Mr. Speaker, may I direct a question to the Minister of National Defence? It was reported in the press yesterday that after December 15, the Lady Nelson would be used for transporting to this country the wives and other dependents of soldiers. Has the minister a statement to make on that matter?


Douglas Charles Abbott: Yes. My hon. friend told me that he was going to ask this question, and I am glad that he has done so because the session will be over in a day or two and it might be well for me to state just what the position now is.
The basic policy governing the repatriation of soldiers and war brides from the United Kingdom remains unchanged. Very briefly this policy, as hon. members are already aware, is that no major movement of dependents will be undertaken until all troops who are available for repatriation, and have priority rights, have been returned to Canada. However, recent developments have now placed us in a more favourable position than was previously anticipated.
By the end of this month we shall have repatriated since V-E day slightly more than
180,000	soldiers in addition to Royal Canadian Navy and Royal Canadian Air Force personnel, leaving approximately 100,000 soldiers to return from overseas. This latter figure includes the occupation force of 25,000 and repatriation and other controlling staffs in the United Kingdom. This position is sufficiently favourable to justify our planning to allot in the latter part of January, and thereafter, an increased amount of shipping to repatriation of dependents without prejudice to the early repatriation of servicemen still abroad. The ships we propose employing for the return of dependents are our two hospital ships, the Lady Nelson and the Letitia. The Lady Nelson arrives in Canada on December 15 on its last trip with battle casualties. There will be, of course, a small

Income War Tax
number of casualties to service personnel resulting from accidents and- sickness, and these will continue to be returned to Canada by hospital ship; the remaining space will be made available to dependents. It is estimated that the Lady Nelson is capable of carrying between 200 and 300 dependents and can make about three round trips every two months.
The Letitia is at present in Vancouver where she is undergoing normal maintenance. She will return to England, via the Panama canal, and be dry-docked for necessary repairs and it is anticipated will be available for transatlantic runs about the end of January. We plan on employing this hospital ship in the same manner as the Lady Nelson. The Letitia can accommodate approximately 400 dependents, and can also do about three round trips in two months.
At the moment a strong possibility exists that in addition to these two ships at an early day we will be able to divert the Lady Rodney to carrying dependents. This ship was recently taken off the Newfoundland run and is now employed on troop carrying. The Lady Rodney has a capacity for approximately 250 to 300 dependents.
I wish to point out here that the carrying of dependents presents different problems from those incurred in the carrying of troops, and only certain ships are suitable for repatriating war brides with any economy of carrying capacity. Ships which carry dependents must have additional stewardesses and other ship staffs. They must be stocked with crockery and have suitable dining facilities; and in addition have different sanitary arrangements from those provided on our troopships.
The government is, and always has been, fully aware of the desirability of returning to Canada the dependents of Canadian soldiers at the earliest possible moment consistent with the rights of service personnel having repatriation priority. It therefore affords me no little pleasure to be able to inform the house of this shipping which is being made available at an earlier day than had hitherto been considered possible.


Mr. LOCKHART:: May I ask a supplementary question? There is no particular delay, I hope, in repatriating compassionate
cases?


Douglas Charles Abbott: None whatever. They are
being handled exactly as in the past. We have been continually bringing over a certain number in this class.


Norman James Macdonald Lockhart: I asked the question
because I understood that there was some hold-up of compassionate cases.


Douglas Charles Abbott: None whatever.
47696-215J


TRADE AND EMPLOYMENT
[Stage Direction]
On the orders of the day:
John Bracken: I had wished to direct a question to the Prime Minister, and I am sorry that he has gone, but perhaps the Minister of Veterans Affairs will bring the question to his attention?
It arises out of the statement made by the Prime Minister yesterday morning in tabling certain documents, one relating to the loan made by the United States to the United Kingdom, and I think also a white paper issued by the United States government containing among other things, a proposal for an international trade conference likely to be called in the coming summer. Has the government of Canada received an invitation from the United States government to attend such, a conference; and whether or not it has received such an invitation, should such an invitation be received will the government give favourable consideration to making its delegation to the proposed conference a non-partisan delegation rather than one representing only the government itself?
Hon. IAN A. MACKENZIE (Minister of Veterans Affairs):	I shall be very glad to
direct the Prime Minister's attention to the question of my hon. friend, and possibly it may be answered later in the day.



INCOME WAR TAX ACT

[Stage Direction]
Hon. J. L. ILSLEY (Minister of Finance) moved the second reading of bill No. 234, to *amend the Income War Tax Act.
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Macdonald (Brantford City) in the chair.
On section 1-Contractual annuities.
Mr. ILSLEY:: I should like to make a statement to the house regarding this proposed amendment relating to the taxation of annuities. The committee may recall that when we were discussing the resolution on which the amendment is based I stated that the question of defining the capital element to be excluded from annuity payments for tax purposes was a very complicated one. The amendment I am now proposing to the bill which is before the committee is simpler and, at the same time, more generous to the taxpayer than the existing provision in the bill.
The amendment which I 'am now submitting provides that the capital element to be
Income War Tax

excluded from annuity payments Shall be based on either the commuted value of the annuity at the time it begins or the amount which the annuitant could, under the contract, have chosen to receive in lieu of the annuity if this amount is stated in the contract.
I should like to point out that the main problem that has had to be faced in connection with annuities is the possibility in certain cases of tax avoidance if the commuted value or optional lump sum payment is used, as is proposed in this amendment, as the basis for excluding the capital element in annuities. The possibility of abuse is in connection with deferred annuities where a large lump sum payment is made for an annuity to begin many years in the future, and the annuity may be an annuity certain for a very few years. Under such an arrangement a person would, in effect, secure tax exemption on the interest earnings of this large amount of capital which would have accumulated over the period of deferment. Possibly I have in my own mind exaggerated the importance of this danger, but I did not feel justified in presenting to the house legislation which would be subject to criticism along the lines I have just suggested. I think, however, that the proviso at the end of the amendment I have just moved will be a sufficient safeguard against the tax avoidance possibilities in the device I have just mentioned. The proviso states that notwithstanding this provision (meaning the provision relating to the exclusion of the capital element from annuity payments) the minister may, in any case in which he considers it proper to do so, exercise the powers conferred on him by subsection 2 of this section.
Subsection 2 just referred to states as follows:
"Where, under any existing or future contract or arrangement for the payment of money, the minister is of the opinion
(a)	that payments of principal money and interest are blended, or
(b)	payment is made pursuant to a plan which involves an allowance of interest,
Whether or not there is any provision for payment of interest at a nominal rate or at all, the minister shall have the power to determine what part of any such payment is interest, and the part so determined to be interest shall be deemed to be income for the purposes of this act."
This section, gives the minister power to deal effectively with any tax evasion which might be prompted through the somewhat generous provision with respect to the taxation of the interest element in annuities.
I had better read the amendment and send copies to those who are interested in the bill. The amendment is:
That the following be substituted for paragraph (b) in lines 9 to 30, page 1:
(b) annuities received under a contract (other than payments described in paragraph
(c)	of this subsection) except a portion of each amount received thereunder that bears the same relation to the whole amount as the amount that the annuitant could, under the the contract, have chosen to receive in lieu of the annuity or, if no such choice is provided by the contract, the present value (computed in such manner as the minister may by regulation prescribe) of the annuity at the time of commencement thereof, bears to the aggregate computed in the case of an annuity for life on the assumption that the annuitant will live during the period of his normal expectation of life (calculated in accordance with mortality tables approved by the minister) of the *annuity for which the contract provides:
Provided that this provision shall not be construed to prejudice the operation of subsection 2 of this section.


Ian Alistair Mackenzie: I move accordingly, Mr. Chairman.


James Lorimer Ilsley: Is a further explanation
desired for this?


Mr. JACKMAN:: No-a further understanding.


Mr. MACDONNELL (Muskoka-Ontario):: Am I correct in understanding that this is really designed to meet a difficulty which some people thought existed in the original subparagraph (ii) of paragraph (b) of subsection 1, particularly relating to the words "the amounts paid exclusively for the annuity", and that the words here, "the amount the annuitant could, under the contract, have chosen to receive in lieu" are now put in as applying both to annuities received in case of death and annuities received not in the case of death? In other words, those words are now considered to apply to both cases?


James Lorimer Ilsley: That is correct; and the
amendment goes further than that, because the people that the hon. gentleman is referring to are interested in their own annuities that they are selling, and their suggestions of a change would have meant that annuities sold by insurance companies, which always have the option of a lump sum payment, would have received one kind of tax treatment and annuities sold by the government would have received a less favourable one because there is no such option. I did not think that that was right, and so now we have gone the whole way and we have said that, whether there is a choice or not, you take the commuted value of the annuity as the capital element; and if you do that and just stop there you
[Mr. Ilsley.J

Income War Tax
have opened the door pretty wide to a danger which I outlined in the remarks I made a while ago.


James MacKerras Macdonnell: Would the minister say a word as to the proviso in the last three lines? I am not sure that I fully appreciate that.


James Lorimer Ilsley: I read the proviso. The
proviso enables the minister to deem certain payments interest, even though they are not called interest, and treat them as taxable income.


James MacKerras Macdonnell: Where is the minister reading from?


James Lorimer Ilsley: Subsection 2 of section 3 of the Income War Tax Act, inserted a few years ago, provides:
"Where under any existing or future contract or arrangement for the payment of money, the minister is of the opinion
(a)	that payments of principal money and interest are blended, or
(b)	payment is made pursuant to a plan which involves an allowance of interest; whether or not there is any provision for payment of interest at a nominal rate or at all, the minister shall have the power to determine what part of any such payment is interest and the part so determined to be interest shall be deemed to be income for the purposes of this act."
Is that sufficient?


James MacKerras Macdonnell: Yes.


Harry Rutherford Jackman: How will the section be administered? How is the individual to be able to file the tax return in the usual period allowed for that purpose?


James Lorimer Ilsley: Is the hon. gentleman speaking about the annuitant beginning to receive the annuity?


Harry Rutherford Jackman: Yes.


James Lorimer Ilsley: He will doubtless be advised by the company or the government that is paying the annuity of the rules that will apply, because he will have to be advised of the part of the annuity which is capital.


Harry Rutherford Jackman: The grantors will send
out notices?


James Lorimer Ilsley: I am sure they will. That would be the normal mode of operation.


[Stage Direction]
Amendment agreed to.
James MacKerras Macdonnell: I wish to raise a question in regard to subparagraph (g) at the top of page 2, which reads:
All annuities and other annual payments received under the provisions of a will or trust ...
What I wish to draw particular attention to is line ten:
... except a payment or portion thereof which can be established by the recipient not to have been paid out of the income of the estate or trust.
I am questioning the words "can be established", because I think they may go a very long way, and I have an alternative to suggest. Perhaps it is familiar to the minister, but I want to make this comment, which I think is a valid one. This is in aid not of the big man, but of the small man, because the small annuitant can never go to the expense of trying to have the question determined, since the amount involved is not large enough. I will read the alternative so that the minister can decide whether it is satisfactory. It seems to me to be proper, and I press strongly the significance of those words "which can be established by the recipient". They put all the onus on the recipient, and that involves a great deal of difficulty. The alternative I have to suggest is this:
except that portion of the annuity payment or other annual payments received under _ the provisions of any will or trust which is derived from the income of the estate or trust irrespective of the date on which the will or trust became effective, whether the same is received in periods longer than or shorter than one year.
In other words, the only change is to remove the onus from the recipient. That onus can be a very heavy one.


James Lorimer Ilsley: The onus was put on the recipient to cover a case something like this. Suppose there is an estate, the income from which is $10,000. The testator does not know exactly what the income of his estate is going to be, but probably he assumes that the income will be more than that. He leaves eleven annuities of $1,000 each. Now each annuitant will claim that his $1,000 came, not out of the $10,000 but out of capital. They will all claim that their annuities came out of capital. There is $1,000 there that has to be accounted for.


Harry Rutherford Jackman: Somewhere.


James Lorimer Ilsley: Yes. There are eleven annuities, and, as I say, each will claim that his annuity comes out of capital. That has to be settled among themselves or by the executor or someone else. It cannot be left to the minister, because it will mean that the minister would have power to decide the question. If you gave the minister discretion he would apportion it, and say that a small portion came out of capital with reference to each annuity. It has to be left to the people themselves, the trustee or the executor of the estate to say where that extra $1,000 came
Income War Tax

from, whether from capital or income. It must be settled by them. The minister cannot run around trying to prove that it came out of income rather than out of capital. It was to cover a case such as that that the burden was put on the recipient, and it is not a heavy burden.


James MacKerras Macdonnell: In the first place, I think the minister will agree that the case he mentions is not a usual one. In fact it is fairly remote. In the second place, after all, the wording I suggest simply means that the people themselves will have to establish what the truth is. They cannot simply make a statement without evidence. "That portion of the annuity payment or other annual payments received under the provisions of any will or trust which is derived from the income of the estate or trust" is a matter of fact. I am satisfied that the minister, as a lawyer, or a reformed lawyer, will agree with me that when you put that onus on the recipient it can create a very substantial additional burden. It is not a. case of hair-splitting. I submit that what it does do is to put a substantial additional burden on those who already have a heavy burden to carry. They would just come along and say that it is from the income without giving any reason to substantiate it. They are taxed with this heavy onus which can be established by the recipient.


James Lorimer Ilsley: Unless we have a clause like this the executor does not need to say anything, does he? He has an estate out of which he has to pay 311,000 a year. He just pays $11,000 a year. The income there might be
31.000	a year, but if he says nothing and does not need to say anything, who in the world can say which annuitant drew the money out of capital? This makes him say, and he must say. In the absence of this he does not need to say anything at all; he just pays out the
311.000	a year and he leaves it to the minister. The minister starts to tax somebody because it came out of income, and each one he starts to tax says, "No, mine came out of capital." The minister says, "Why do you say it came out of capital?" The man says, "I do not need to say anything about it; you have to show it came out of income." You cannot show it came out of income because there was not enough income. That is the position we are trying to avoid. It is not a great burden for any of those people. All they need to do is to show that they got the annuities out of income. Where the annuities are greater than the income I suppose they will arrange it so

that the person with the largest income got the annuities out of capital, because they save more taxes that way.


Mr. McMASTER:: This is a case that will arise often. Either it should be made definite here or it should be left to the minister, because the executor has no power to deal with it. The only occasion I know of on which power like that is given to an executor is where a trust company have power under a will to allocate certain amounts paid for repairs between the life tenant and the reversioners, but they have no power to do anything except pay out money in the case of an annuity. This question will arise in the first instance in every case when the executor files the form which is prepared a month before the other forms are filed. He will say that so much income came from the estate, and on the back he has to show where it is allocated. He has to say that so much went to John Jones and so much to William Smith, and so forth. After he does that he lists the total amount of the income, and if he shows less than the total amount of the income the department immediately gets after them and makes somebody else pay the difference. He will have to do it in some way or other, or simply make a statement as to how it is paid. I submit that the executor must be helped by appropriate legislation. In the case of a deficiency it will be allocated against the different people who are interested in it, because you cannot get them all together to agree to it. Some of them may be in California, some in Vancouver, some in Toronto. They will not agree to it. The executors have no power. I believe this either can be covered by legislation or can be left to the minister.


James Lorimer Ilsley: I think they will agree to it. If they do not agree, they will have to pay taxes on the whole thing.


William Alexander McMaster: That seems an easy way out of it.


James Lorimer Ilsley: It is not an easy way out of it to give the minister power to allocate.


William Alexander McMaster: We are willing to do that.


James Lorimer Ilsley: I do not think the hon. member's colleagues are willing.


William Alexander McMaster: I think so.


James Lorimer Ilsley: It is giving another discretion to the minister.


William Alexander McMaster: The people who are handling estates have enough trouble without throwing this additional burden on the executors. It could be covered by an appropriate clause or by leaving it to the minister.

Income War Tax


James Lorimer Ilsley: We believe this is the best way to get at it. It avoids giving the minister another discretion, and it really puts some responsibility on the beneficiaries in these rare cases. There will not be very many of them. They will come to some agreement, because if it is not established the whole thing is, taxable.


William Alexander McMaster: I really think the minister should meet these objections. Thousands of such cases are coming up every day. Surely we can assist the executors and everybody else. In the long run it would be assisting the minister. Why not put. in a clause covering that? We have never found the taxing officers anything but fair; at least I have not. By appropriate legislation we should assist the executor when he makes out the original form. We could do it here in five minutes.


James Lorimer Ilsley: No; it is an invidious sort of power to invest in the minister, to ask him to choose certain persons or to say that the annuity' comes out of income and they are fully taxable. We should not be asked to say to one individual that his comes out of income and to another that his does not. The burden to establish that should be on the people who are seeking tax relief. At the present time these annuities are fully taxable. They are being relieved of taxation to the extent that they come out of capital. Year after year we have had representations, if not in this House of Commons, outside of it, that it is wrong to tax annuities if they come out of capital. We have said: In those numerous cases how can we tell whether they come out of capital or not? That was just the trouble. In these cases we can let them find out and establish that it came out of capital, and then it is not taxed. I think it is perfectly fair.


Harry Rutherford Jackman: I hesitate to raise this question again, but this is my first opportunity to do it. I refer to certain government annuities which, under this section, will be subjected to tax to which I believe they should not be subjected. Annuities were sold by the Department of Labour and its representatives to Canadian citizens. The number who purchased them, according ito the Ives commission report, totalled something over 100,000. ' Of that number those who are interested in the particular aspect of the case to -which I wish to draw attention probably number some 40,000 of our citizens, who with their families undoubtedly number over
100,000	Canadian people.
These government annuities were sold prior to June 25, 1940. In some cases they may have been paid for in full up to the maximum amount of SI ,200. In other cases the agents for the Department of Labour said: You may take out whatever amount is convenient for you now. The amounts stipulated ran from $100 to S600, as the case may be. They were told that they had the right at any time to enlarge the contract up to SI.200, and that the annuity would be tax free. When I said the other evening that the representatives of the Department of Labour made such statements the minister challenged my words. I find that there can be no contradiction of my remarks because these agents of the Department of Labour did go about the country and sold 100,000 or more annuities on that assumption. In proof of that statement I shall point to a booklet which was put out prior to June 25, 1940, called "An Old Age of Comfort and Happiness." On page 12 of this booklet, printed by the king's printer, I find the following:
The advantages of Canadian government annuities. A Canadian government annuity is the safest investment you can make. The security of the whole dominion is behind your purchase. It is free from dominion government taxation. . It is payable for life.
And so forth. This is the printed evidence on which these annuities were sold. What evidence is there that one has the right to enlarge the annuity? If one looks at the contract, for instance, he finds that there are certain conditions printed on it. It says:
If desired this contract (may be matured .at an earlier date than specified therein on any anniversary of the date of issue, the amount of annuity being adjusted accordingly, provided that the minimum annuity of $10 a year has been purchased.
I may say that that bears relation not so much to enlarging the annuity to $1,200 as to maturing it at an earlier date than originally suggested in the contract. However, there can be no doubt that the applicant for the annuity was given the right to enlarge that annuity under the same terms and conditions as those to which he originally subscribed. I will read again from an application form on which I see the wording in ink "June 16, 1936," and the address of the agent of the Canadian government annuities branch. It says:
... and with the understanding that such an annuity will in any event be granted to me as the" total amount paid in by me improved at four per cent compounded yearly will purchase at the rates in effect at the date of this application, the same not to exceed $1,200.
I mention that as tying the government down to the rates, and again I refer to the government publication, printed by the king's
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printer, in which these annuities are stated to be free from dominion government taxation. In 1940, however, the matter undoubtedly came to the attention of the income tax department. I think it may have come to its attention before that, because I believe one agent in Winnipeg sold some of these contracts on representations which were not desirable and had a great many people subscribe to them with nominal payments, though the practice probably was not as general as the minister may have believed. So in 1940, when the income tax rates became very high and it might have been possible for certain people who held these contracts for small amounts to enlarge them and thereby obtain a substantial advantage, much greater than they had ever contemplated prior to the war because no one foresaw that within a few short years the income tax rates of this country would be about equal to those in Great Britain, section 5(k) was passed by this house. At the time I drew the attention of the minister to this matter, and I thought I had made a blunt statement, though I did not speak with any fervour at all, when I said the minister had broken the word of the Dominion of Canada. At that time I understood him to agree, as Hansard for that day records; I quoted the sentence the other evening. The minister now claims he did not understand it, and even challenges my suggestion that the agents of the Department of Labour had made these representations in regard to annuities being tax free, which undoubtedly was the case. Section 5(k) went on to say:
... provided that such exemption shall not extend to that portion of the income which exceeds the amount of the annuity actually specified in the contract -before the 25th day of June, 1940 ...
That is to say, if you had subscribed for a $600 annuity, you could not enlarge it to $1,200. Then quoting again from the act:
... where such excess -amount -arises by reason of any option or contractual right to enlarge the annuity income by -the paymen-t of additional sums or premiums, unless such additional sums or premiums have actually been paid before the said date;
In order to break the warranty or the contract of the government with the citizens of the country it was necessary that this house actually say, in the budget brought down at that time by the minister, that notwithstanding any option or contractual right we would do so and so. Well, surely if you have a contract to purchase 160 -acres for a farm, and have an option to purchase the adjoining 160 acres, the option is as much a part of the contract as is the original purchase; there is [Mr. Jackman.1
no question about that. However, I did not want to make very much of the point at the time. In the first place the country needed the revenue, and in the second place I had no doubt at that time where the equity lay. I thought it lay primarily with the government, because people had taken out annuities for small amounts, -and with the great increase in income tax rates there was a tremendous unexpected advantage to the annuity holder. Nevertheless I say as solemnly as I can that it is my belief that the Minister of Finance, or whoever was responsible for it, did break the -word of the dominion government in that regard to a great many of our people.
That is the first matter I wish to speak about, having to do with the enlargement of these annuities taken out prior to 1940, which right was taken away -and the contract and word of the government broken in 1940. Now, however, I come to a matter which to me has much greater contractual significance, and where the equity lies not with the government but surely with the annuity holder. There were many, I estimate around forty thousand, annuity holders who took out these contracts, let us say, for the maximum of $1,200 prior to 1940, to mature perhaps twenty or thirty years later. Now, or some time in the near future, they wish to mature those contracts by paying in a sufficient amount of capital to enable them to draw their $1,200, which according to the terms -of the contract were to be at the same rates, and according to the representations made and well understood by everyone, to some extent so well understood that they are protected as to the amount paid in by the government in its legislation; that is, they were sold on the understanding that the income was to be free from dominion government taxation.
Well, after that legislation came down in 1940 some people had doubts as to whether they would be entirely free of tax in connection with these annuities taken out prior to 1940, even though they had stipulated for $1,200. Letters were written to the annuities branch of the Department of Labour asking whether or not these contracts had been prejudicially affected. The replies came back that the contracts which stipulated for $1,200, taken out prior to 1940, were in no way prejudicially affected. Letters to that effect will be found in the files of the annuities branch; and, if I am correctly informed, at that time an opinion was given by the Department of National Revenue that such annuities which stipulated for the maximum of $1,200 would not be taxed if they were made immediate. Section 5 (k) speaks of "enlargement" and

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the question apparently was whether or not making an annuity immediate, the maturing of it, was an enlargement. From what I can understand, the first opinion given was that it was not an enlargement, and that any person holding a $1,200 annuity could pay it up in full. Then apparently there was a change of heart, probably because income tax rates were becoming steeper and apparently necessity knows no law, even when the dominion government is concerned in the case. Bo we find that the annuities branch issued a ruling in regard to income tax concerning these annuities, under date of July 10, 1944, in which they said:
However, exemption from income tax, shall not extend to that portion of the income which exceeds the amount of annuity-
I emphasize the word "amount" because it is the point at issue.
-actually specified in the contract-
There is only one amount specified in the
contract, and that is $1,200.
-before the 25th of June, 1940, where such excess amount of annuity arises by reason of any option or contractual right to enlarge the annuity income by the payment of additional sums or premiums unless such additional sums or premiums have actually been paid before the said date.
That ruling referred to the amount actually specified in the contract. That surely can mean only one thing; that is, as set out on the face of the contract. This announcement by the superintendent of annuities on July 10, 1944, was followed by one from the same branch of government on September 1, 1944, which was changed in wording and which did not make the same reference to the amount stipulated on the face of the contract.
Correspondence has also been had as to the contract, and such statements as these were made:
The contract may be converted into an immediate annuity to begin at an earlier anniversary date of the contract. Deposits may be made irregularly, and if a sufficient amount is deposited the date of maturity of the contract would be automatically brought forward.
In respect to the whole matter the holder of the annuity gained only one impression, and that was that contracts prior to 1940 were tax tree as to the stipulated amount, and that they could be matured at an earlier date if so desired.	[DOT]
I do not wish to say much more on the matter. The minister did not seem to be too familiar with all the details in connection with annuities when he spoke the other evening. A document which he recommended is, I find, a most interesting one-and I hope he has read it himself. I would refer to the first 47696-216
page of part I of the royal commission on the taxation of annuities and family corporations, 1945. It states:
The complaints and criticism of a considerable number who had purchased government annuity contracts prior to 25th June, 1940, when the present section 5 (k) of the act came into force, and who had contractual rights *therein to increase their annuities as their savings permitted, were strong and severe. They contend that they had no knowledge of the proposed change in time to protect themselves, but a much greater number complained that they purchased their annuities from the crown on the assurance of the department and its salesmen, and upon the statements in literature distributed by the government that the annuities they were invited to purchase would be exempt from all federal taxation.


Mr. NICHOLSON:: For all time?


Harry Rutherford Jackman: Until the annuities expired. They were sold on a distinct basis, and people who bought these bought them instead of other investments. That is why I say the dominion government has broken its bond, that it has broken the word of the Dominion of Canada in this regard. I do not believe there can be any contention to the contrary.
Since I made certain statements the last occasion the matter was before the committee, friends of mine and those with whom I have been associated, who have the utmost confidence in the word and integrity of the Minister of Finance-and perhaps also in my word -cannot believe that both the minister and I can be right in this matter. The responsible minister states on the one hand that the dominion government has not broken its word, while I contend that it has. And yet we find in the report of this royal commission the very proposition I am now putting before the committee.
Let me read the final sentence in the report of the royal commission, which I believe is as strong as any words I could use. That final sentence is this: "They feel that they have been betrayed by their government."


James Lorimer Ilsley: But the commission does not say so.


Harry Rutherford Jackman: I am reading from the summary of the evidence, and I should like to correct any wrong impression I might have created. This is the summary of evidence compiled by the commissioners, the evidence upon which the commission has reported. These are the complaints and criticisms of the holders of the annuities.


Alexander Malcolm Nicholson: Did the commission say that?


Harry Rutherford Jackman: They have not said anything about it, because it was not within the
REVISED edition
Income War Tax

sphere of their reference. They say that they took evidence. There are a great many citizens in Canada, for whom I speak at the present time, who feel that their government has betrayed them.


James Lorimer Ilsley: Mr. Chairman, I deny, as I did before, that the government has broken its word in this matter. I deny that there has been any betrayal. I can understand that there were certain purchasers of options- because that is really what they were-to increase annuities if they wished. The government was bound, but they were not bound to increase. I can understand that. These purchasers of options, when they found that this would be a very desirable form of investment into which they could put their money, felt that they would take up these options and put their moneys into annuities which would be totally free of taxation. Then they found that there had been a change in the law, so that they could not do that. But surely we carry out our contract with them when we permit them to enlarge their annuities. That was our contract.


Harry Rutherford Jackman: It is not the same annuity at all.


James Lorimer Ilsley: Our contract with them was to sell them an enlarged annuity. The contract had nothing in it about taxation. But surely if a person who is not bound at all, but who merely has an option to put his money into an enlarged annuity, chooses later to enlarge his annuity, he must take that enlarged annuity subject to the taxation prevailing at the time he enlarges it.


Harry Rutherford Jackman: Whether they were fully paid annuities, or annuities with contractual rights, makes no difference. Surely it makes no difference whether a contract is a contract for a sale of goods, or a contract expressing an option or a right in the future. Both are valid in law. There is no question as to whether one has value and the other has not value. The option has just as much value as any contract in business. Will the minister say that these contracts, or options-call them what you like-were not sold by representatives of the government with the clear understanding that they, and their enlargements, if you wish, would be free from dominion government taxation? Does the minister deny that this is a booklet issued by the dominion government? I point out that it bears the king's printer's imprimatur. They were sold under warranty; there is no question about that.


Alexander Malcolm Nicholson: The hon. member for Rosedale has laboured this point for some time. He did so when the resolutions were before us, and has done it again to-day.


Harry Rutherford Jackman: And I will labour it again.


Alexander Malcolm Nicholson: If the hon. member were minister and if he were introducing the legislation he is now advocating, would that be his plan? Even though there were salesmen who gave certain undertakings with those who entered into this contract, certainly the government did not assure those persons who made purchases that there never would be any change in the income tax laws. I think the hon. member for Rosedale was right when, during the war, he did not press his point.


The CHAIRMAN:: Shall the section.carry?


Harry Rutherford Jackman: No. The minister has not said whether what I have said is or is not true. He said the other night that he would not let me off easily, after I had made my charge. I never expected to be let off easily, and I intend to stick to this matter until justice is done-even if I have to labour it from now until kingdom come. I will call it one o'clock.


Ian Alistair Mackenzie: The hon. member does not call it one o'clock; the chairman does that.
At one o'clock the committee took recess.
The committee resumed at three o'clock.


Harry Rutherford Jackman: Just before the committee took recess we were discussing the taxation of dominion government annuities. I believe the principle at stake to be a very important one, first- because there are so many of our citizens who hold these annuity contracts, something over 100,000, I believe, and second, because the Dominion of Canada has had a record for integrity which is unblemished. As we have seen, the dominion government at this session has gone to considerable lengths to reinstate the credit of one of our provinces which, owing to dire circumstances, had to make an adjustment on its bonds.
The minister still does not admit that there was a breaking of the government's word. Should it be shown that there was a breaking of the government's word, as I have endeavoured to indicate on several occasions by presenting the facts of the case; if the government 5 free to break its word in regard to contracts of its own making, it is quite free to break contracts in connection with government bonds and arbitrarily lower the rate of interest or otherwise do what it will. If that should come about, or the impression should gain ground that the dominion government is not
[Mr. Jackman.1

Income War Tax
to be relied upon, the credit of our country would suffer, and the cost to the country of its financing in the future would be very great.
To bring this matter to a head I would ask the Minister of Finance three simple questions which I think go to the heart of the matter. If he answers them as I think the facts indicate they should be answered, I will rest the case there for the present. Will the minister, having regard to the evidence which I have brought before the committee, admit that in the result these government annuities were bought through misrepresentation by the agents of the dominion government in regard to the future of government taxation?


James Lorimer Ilsley: The answer is no.


Harry Rutherford Jackman: The minister will not admit that, notwithstanding the fact that the government booklet has it in printed evidence, that the annuities branch of the Department of Labour admits that its members went about advertising these annuities as free of tax, and that the contractual element in regard to the option is also as valid in law and as binding on the dominion government as is the nfain part of the contract itself. The minister apparently does not admit that there was any misrepresentation in the sale of these annuities. I have already placed before the committee the report of the evidence tendered to the royal commission known as the Ives commission.
May I ask the minister a second question? Was there sufficient evidence of the existence of an optional or contractual right on the part of the holders of these annuities or annuity contracts purchased prior to 1940 to make him feel that it was necessary to pass section 5 (1) (k) of the Income War Tax Act of 1940, whereby the rights of annuity holders were done away with, even though the act itself says:
. . . provided that such exemption shall not extend to that portion of the income which exceeds the amount of the annuity actually specified in the contract before the twenty-fifth day of June, 1940, where such excess amount arises by reason of any option or contractual right to enlarge the annuity income by the payment of additional sums or premiums, unless such additional sums or premiums, have actually been paid before the said date.
It is strange that parliament, exercising its sovereign power to do what it will, found it necessary to say that even though there might have been an optional or contractual right, that right no longer existed so far as this act was concerned.


James Lorimer Ilsley: It did not say that.


Harry Rutherford Jackman: Why was that put in,
may I ask?
47696-216J


James Lorimer Ilsley: That simply said that if the right to take up the option was exercised after the passing of that act, the option would have to be taken up in the light of the new dominion conditions. It did not deny the right to take it up.


Harry Rutherford Jackman: No notice was given to
the holders of the option or contractual right to take up their option. The minister was just saying that there was an option or contractual right under certain conditions; he said the element of taxation did not apply to it. Yet I have shown him the government's literature in connection with this matter, which clearly shows that the government agents in their own printed matter held out the representation that it is free of tax. The minister still refuses to admit it. I submit the evidence, Mr. Chairman.
The third point is this: Where there are two rulings given by the Department of National Revenue in regard, not to the enlargement of the contract from a smaller amount to the maximum of $1,200 but to the amount of the contract for whatever sum is stated

perhaps six, perhaps twelve hundred dollars. After section 5(1)(k) was passed in 1940 stating that these contracts could be matured at an earlier date than that specified on the face of the contract through the annuitant using his right under the option clause which is embodied in the contract, was there a ruling to the effect that the maturing could not be subject to tax? Then was there later a ruling given that any maturing of the contract beyond the amount stated on the face of the contract would be taxable? If so, have there been two rulings? And what is the position of those who matured their contracts subsequent to June 25, 1940, up to the present time? Some people operated under the first ruling, and now a second ruling of the Department of National Revenue, I understand, has been given. Will the minister clarify that situation?


Mr. McCANN:: The answer to the hon.
gentleman's question is no. The rulings in the main have been consistent. There may have been some slight adjustment or variation, and it is possible that some official may have written a letter which was not in consonance with the ruling of the department.


Harry Rutherford Jackman: What the Minister of
National Revenue has stated is not quite good enough. I asked a simple question; was there a ruling by the department that the maturing of a contract even subsequent to June 24, 1940 was not taxable, and then at some subsequent time another ruling that
Income War Tax

a maturing of such a contract was taxable? There are two questions to which the minister may answer yes or no.


James Joseph McCann: I do not think that I can enlarge on the answer which I have given the hon. gentleman. It would be utterly impossible to examine into letters which have been written by any or every employee of the department. But the answer still holds, that in the main the ruling has not been changed, but it may have been subject to some minor adjustment.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
On section 2-Reciprocal shipping and aircraft income tax exemptions.
Mr. FLEMING:: With regard to the amendments appearing at the top of page 3, and being a part of section 2, I take it that these have reference to definitions which have not yet been adopted by the house but will be submitted in1 connection with the bill to amend the National Housing Act. Is that correct? I have in mind paragraphs 3 and 4.


James Lorimer Ilsley: That is right. The National Housing Act amendments have not yet been passed. There was an order in council using these terms and making clear exactly what they mean, and the same definitions will be carried into the National Housing Act of 1944.


[Stage Direction]
Section agreed to.
On section 3-Deductions for superannuation or pension fund.
James MacKerras Macdonnell: I wish to ask the minister a question with regard to the hardship-I think it is a great hardship-wrought by these amendments, if I understand them correctly, with regard to a considerable number of pension funds which have been set up pursuant to the rights reserved in section 5, subsection 1, paragraph (h) of the act. As I understand it, the effect of this is that in a good many pension funds which have been in effect, and where payments have been made, the rights to receive a pension tax-free are now being drastically cut down. I should like the minister to tell me if I am stating the fact correctly, and whether he does not agree that in a large number of funds which have been in operation for a considerable period of time, this drastic cutting down of rights is causing serious injury to the funds. If so, is it in his opinion necessary that this be done?
Jackman.]


James Lorimer Ilsley: With regard to persons
who have been contributing to funds under the existing provisions of the law, their position, at the time when they receive their pensions, is changed by this legislation, in respect of taxation. In some cases it is improved and in some cases it is made worse. I think that the treatment, subject to something which I am about to say with reference to the whole question of apportionment on . a cash basis, is perfectly fair. But it would be idle for me to deny that it is changed.
Take the case of a pension fund which elected to receive its investment income free of tax. That is the class of cases under the subsection which the hon. gentleman mentions. The consequences flowing from that in the past have been these. The contributor, the employee, is not entitled to deduct his contributions to the fund from his income for taxation purposes, but when the time comes for him to receive his pension he gets his pension free of income tax. That is being changed. In the future it will not be possible to set up funds like that at all. The income of the fund will be free of tax, but the pensioner, the contributor, in every case will be entitled to deduct his contributions from his income for tax purposes and he will be taxed in full on his pension. That will be the case with regard to pension funds which are set up in the future. With regard to the past there is apportionment, and the question is, on what basis the apportionment should be made. Now, the basis laid down in the act is this. We take the proportion of the total contributions to the fund which were paid in during the period when the contributions were not deductible by the employee, and the proportion which those payments in bear to the total payments in is the proportion which will be applied to the pension for tax purposes. So when the pension comes out, that proportion is applied and part of the pension is free from tax and part is taxable.
Various alternative plans have been suggested. One was to make the apportionment on a time basis rather than on a cash basis. That has much against it. Another plan was to give some weight to interest payments, which would involve actuarial calculations, and that would be the fairest basis. I have prepared a statement to deliver to the committee on these problems, and perhaps I should read it.
The purpose of paragraph (h) under subsection 1 of the section, on page 4 of the bill, is to define "a portion", or more strictly "a proportion" of a pension which shall be tax-free in the hands of the recipient employee

Income War Tax
or his dependents, because the employee, in making contributions to the pension scheme, has not been permitted to'deduct some or all of his contributions from his income for tax purposes. Such deduction of contributions from income could not be made in the case of pension funds where the trustee or corporation in charge of such funds has elected in the past to have the income from the investment of the funds exempt from taxation. In other words, under paragraph (h) of the act as it has been up to date, there have been some pension funds where the contributor was taxed on the contribution when it went in, and in return was allowed to receive a portion of his pension free from tax.
We are now changing the law in accordance with the recommendations of the royal commission to make all contributions to the pension plan deductible from income for tax purposes and to provide in general that pension payments shall be subject to tax. In order to be equitable, however, it is necessary to make an allowance for pensions which the employees have earned through contributions which could not be deducted from income, and to allow them a corresponding proportion of the pension free from taxation. This paragraph in the bill is intended to do that. The proportion of the pension which is to be free of tax is defined as equal to the proportion which the aggregate of the amounts of the contributions paid by the employee, which he was not entitled to deduct from his income, forms of the total contributions paid by the employee.
This basing of the proportion on the amounts paid under the one system and the other is the same principle which has been in the law for some time in paragraph (h) of subsection 1 of section 5 of the act. It has been necessary for some time to have a principle of this kind to cover cases where the status of contributions is changed by reason of the pension plan coming under the section after some period on the other basis.
My attention has been called to the fact that the principle on which this apportionment has been made and will be made under the law as we propose to amend it, while relatively favourable to older employees, who will be retiring shortly, is relatively unfavourable to younger employees who will have some period under the new system before retiring. The reason for this is that the formula we have been using, and which we propose for the time being to continue to use, includes accumulation of interest on contributions made to the fund and therefore weights all contributions equally in determining the tax-free portion of the pensions; whereas, strictly speaking, the earlier contributions are of more
importance in earning the pension rights for the employee, because they accumulate an interest over a considerable period.
It has been suggested that we should offer an alternative formula which would take this factor into account. Such a formula, however, involves the introduction of certain actuarial principles and in its administration would require some actuarial investigations in connection with funds and payments out of them.
I have not been prepared to introduce this alternative system at this stage, but I am prepared to consider an alternative of this kind in the future. I understand that the present proposal would not work unfairly in the immediate future and therefore there will be an opportunity for further consideration of the appropriate1 formula and preparation for its administration.
I am told I said that the actuarial-calculation method would be the fairest. I do not think I should admit that. It is alleged by some that it would be fairer than the application of the straight apportionment on a cash contribution basis. Certainly it would be preferred by many to the present arrangement. I do not know whether the point the hon. gentleman has in mind is the one I have covered.
There are pensions in connection with which employers have made by far the largest part of the contribution to the fund and where employees have been contributing perhaps for only a year or two. If the trustees of the fund made the election provided for in the law as it is at present, those employees would be entitled to receive their entire pension tax free, provided their contributions were all made after that election.
Mr. MACDON'NELL (Muekokia-Ontario): And they pay the taxes.
Mr. IiLSLEY: They pay the taxes themselves. If we are talking on the basis of fairness, however, that arrangement is not fair to the crown, because the employer may have made a very large contribution to cover fifteen or twenty years in the past. If the employer is a taxpaper he is allowed to deduct that contribution from his income for his tax purposes and it goes into the fund without any cost to the employee, because the employee did not pay it. That is not a case of the employee making contributions over that period and nevertheless paying income tax on them. After a certain date, all he needs to do under the law as it stands at present is to make one contribution. So long as he makes one contribution he is entitled to draw his pension. If he makes one contri-
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bution after the date of election he is entitled to draw a pension for the rest of his life and not pay income tax on it, although he never suffered any deduction except one during his lifetime in respect of his payments in. But he gets that income free of tax on the way out.
My hon. friend will say, Well, that is what the Jaw gives him at the present time, and you must not take away from him anything that the law gives him. But if we cannot alter the expectations of pensioners in respect of those plans, we cannot do any of this. Take the case of a certain bank. I shall not mention any particular one, but the employees of the bank that I have in mind have been paying income tax on the entire amount of their incomes without the deduction. They had the expectation that they would receive their pension tax free. From now on we are going to tax at least part of their pension. That is an alteration of their expectations; it is an alteration of what might be called their rights; it is an alteration of what would be their rights if we did not change the law, but I do not think that we can ever put this on an optional basis.


Mr. HOMUTH:: They did not think that the law would be changed.


James Lorimer Ilsley: We cannot put this on an optional basis for every employee in Canada. It is a change in the tax system which on the whole is fairer than the old arrangement, and is recommended by the Ives commission as a good thing to do. Take the case that I put a while ago. It is entirely indefensible from the standpoint of the treasury and the taxpayers as a whole.


James MacKerras Macdonnell: That was exceptional. ,


James Lorimer Ilsley: What has been brought to my attention is the case where there have been about fifteen years of contribution covered by the employer and two years contribution by the employee, resulting in a hundred per cent exemption of tax of the employee in expectation. That expectation is being frustrated by this change, but the employee is being treated perfectly fairly. For the years that he did make a contribution he will get credit during the pension period, but for the years during which he did not make a contribution he will be taxed on his pension.


Karl Kenneth Homuth: His contribution was in labour.


James Lorimer Ilsley: No. If it had been represented in money he would have paid taxation

on it. The whole reason why he is tax free on his pension is that he pays taxes on his contribution.
Mr. MACDONNELL (Muskoka-Ontario) If we are considering now what would be fair, as the minister has fairly stated many people will be deprived of what might be called their expectations, or, but he added, "what might be called their rights." That is a fair way to put it.


James Lorimer Ilsley: I said, what would, but for this change in the law, have been their rights.


James MacKerras Macdonnell: I think the minister said, "what might be called their rights." I wrote down what the minister said.


James Lorimer Ilsley: The hon. gentleman did not take down the rest of it. I said, "what would be their rights if the law had not been changed.


James MacKerras Macdonnell: Actually this means a grievous change in the expectations of a substantial number of people. Instead of getting tax free the pension which represents, as the minister has so fairly pointed out, not only their own payments,but the payments of the employer, they are going to get only the exemption in respect of their own payments.


James Lorimer Ilsley: And the employer's contribution during those years in which they make payment. It must be borne in mind that they get the benefit of that as well.


James MacKerras Macdonnell: Let us face the facts. So far as these people are concerned there was a firm commitment that is now being taken away. I am not arguing that there must never be a change; I am not arguing that governments must never change their tax system because it is going to hurt people's expectations. But surely you must have regard to the existing situation. I admit that there is a certain regard being had for the proportion which is allowed here, but let us take a case similar to that which the minister mentioned. A pension has been set up for older employees. The firm makes substantial contributions to take care of the past, and the employees begin to put in their own contribution. They pay income taxes on their own contributions and look forward to the time when their pensions fall due, believing that they will be tax free. This makes a drastic change in their set-up and alters the whole picture. In order to accept this new situation, must we work this grievous change

Income War Tax
on these people? Can we not accept the situation which has existed and make a sort of easement out?
I am not referring to individual cases; what I have in mind is making such provision that those pension funds which have existed can run on and be eased out in some manner other than the one suggested here. The easement the minister is suggesting is practically no easement at all. There is a hardship. I suppose the minister will argue that when there is a change in the tax system there is always a hardship. I earnestly suggest that here there is a terrific hardship on a large number of people who are coming to the time of retirement, and their whole expectation, their whole future, will be turned upside down. Nothing less than that is happening to them, because a man who is just coming to his retirement age and who has been figuring on getting an income which is probably none too large to begin with, will find himself in a difficult position. He will have to do some close figuring anyway. His pension may be SI,800, 82,000 or $2,500. If that is taxed: at the present rate it upsets his whole expectatipn in the future. The minister has agreed that the expectation is a legitimate one. These men have been working toward it for years. Can the minister say that such, a drastic and grievous upset in the expectation cannot be avoided?


James Lorimer Ilsley: Certainly there is nothing unfair about the method of taxation that is being imposed, except to the extent that perhaps something other than a cash basis should be considered, what is called an actuarial basis; but that does not meet the point of the hon. member.


James MacKerras Macdonnell: Surely the minister will agree that when this was set up it was no doubt argued1, perhaps even by him, that that arrangement was a fair one, and people have acted on it for many years.


James Lorimer Ilsley: I cannot do any more in this bill than I have done. There has been endless discussion about this from everybody who gets worse treatment. The ones who get better treatment as a result of this are not heard from. It is a fair way of treating them, subject to the qualifications I mentioned, that perhaps weighting should be given to the interest. Between now and1 the next budget I should be willing to give consideration to this. I cannot make any change in this bill.


James MacKerras Macdonnell: Is the minister saying that he intends to give consideration to putting in the qualifications,
which will be comparatively small, or is he saying that he will give consideration to the broader point which I have raised? [DOT]


James Lorimer Ilsley: Divide it on the basis of employer contributions as well as employee contributions.


James MacKerras Macdonnell: I mean consideration of the fairness of bringing to an end the arrangement whereby the pensions were to be enjoyed tax free. That is what I am suggesting; in other words,
5 (1) (h).


James Lorimer Ilsley: Yes, I should be willing to give consideration to that between now and the next budget. I do not know what we can do. I would not offer much hope that we can make any change except in the one respect I have mentioned, but I am willing to give it consideration. I do not see what we can do except go the whole length of giving every employer an option.


James MacKerras Macdonnell: I appreciate the difficulty. I also appreciate the minister saying that he will give it consideration.


Harry Rutherford Jackman: Certain companies really do not have a tax bracket; they are merely trustees, as it were, and therefore there is no substantial exemption if they are allowed to make contributions. The minister may know certain classes of companies of that sort, financial companies and so on. If both the employer and the employee make contributions to the fund, and both pay tax on their respective contributions, when the money is drawn out by the beneficiary is it taxable or non-taxable?


James Lorimer Ilsley: The employer never pays tax on his contribution, as far as I know.


Harry Rutherford Jackman: The employee would be the ultimate beneficiary, but the whole fund is built up by contributions from both the employer and the employee on which tax has been paid. Ultimately the employee benefits. Under these resolutions would that be taxable or non-taxable? The fund is created from tax-paid moneys on the part of both contributors.


Douglas Charles Abbott: Moneys which have not been claimed as a deduction for tax purposes.


Harry Rutherford Jackman: Yes.


James Lorimer Ilsley: It always is claimed as a deduction by the employer. It is a cost of doing business.


Harry Rutherford Jackman: It is in connection with an approved plan, but I am thinking of one case in particular. Possibly it is not worth
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while claiming the exemption because it is such a small part of the total cost of operation. The fund is built up entirely of tax-paid contributions. When the beneficiary gets the benefit under the retirement plan is the amount taxable or non-taxable?


James Lorimer Ilsley: Is the hon. gentleman talking about plans that are not approved?


Harry Rutherford Jackman: Yes.


James Lorimer Ilsley: If it is an approved plan the employee pays on the whole thing; he pays on the whole income without the deduction, or he should. On the other hand the employer could claim it as a deduction, could he not? I should think the employer would make that deduction as a cost of doing business.


Harry Rutherford Jackman: Suppose he does not care whether or not he gets it. I am only interested in the beneficiary.


James Lorimer Ilsley: Then the question is what happens to the pension when it is paid. It is fully taxable, is it not?


Harry Rutherford Jackman: Suppose he has gone through the formality of obtaining approval from the minister, but without any request for tax deduction on the part of the employer, and certainly none on the part of the employee. Would there be any freedom from taxation on the amount ultimately going to the beneficiary?


James Lorimer Ilsley: If he obtained the approval?


Harry Rutherford Jackman: Yes. I do not know what good the approval would do except to qualify it under some section.


James Lorimer Ilsley: The approval has this effect, that the employee may deduct the contributions from his income for tax purposes.


Harry Rutherford Jackman: But when he gets the money it is taxable?


James Lorimer Ilsley: It is taxable in any case, any money he receives, apart from these apportionment cases. You are talking about a fund that starts now, and pensions are all taxable from now on.


William Alexander McMaster: I should like to call the attention of the minister to something which may result in hardship to employees many years from now. A man may have paid in to a pension fund for ten years; he may not get his pension for another thirty years. Unless there is something in the rules and regulations which will enable him to get a statement up to date, he will not know how much was paid in before this new act came into force. It is the employee who will have to deal with the department, and unless he [Mr. Jackman.}
knows what he has paid in up to now he will never be able to make a statement. In the past it has not been important to keep track of what he has paid, but some regulation should be passed now providing that employers will have to give statements as to the contributions to date of the different employees.


James Lorimer Ilsley: Surely he could get a statement from the trustees of the fund. The fund has to know how much he has paid in order to know how much to pay him in the way of pension. I do not think there would be any trouble about getting that information.


Mr. PROBE:: Assume that an employee has contributed to a regular employees' pension fund for a period of years and then leaves the employment under which he was eligible to contribute that superannuation money; but the terms of the agreement between employer and employee were such that he could continue to pay into that fund. Up to the present his payments have been tax free. Would they continue to be tax free up to the amount of $900?


James Lorimer Ilsley: Yes; unless there is something peculiar about the case that I do not understand, that normally would be so. The whole scheme of this new legislation is that the contributions are tax free.


John Oliver Probe: But he is no longer in that employment.


James Lorimer Ilsley: I would not like to be too final about that if he does not continue to be an employee. I shall have to give' the hon. gentleman an answer later.


John Oliver Probe: He is still eligible to obtain superannuation under that plan.


James Lorimer Ilsley: That would be a matter of agreement between the employer and the fund.


Donald Methuen Fleming: Under section 14 of the bill the increase in the deduction to $900 becomes effective only with the 1946 income and has no relation to the 1945 income. I am thinking of some large pension schemes under which the employee has the right to make greater payments than stipulated, for the purpose of increasing the pension he may receive on retirement. That is a valuable right for older employees who may be not far from the retirement age, especially in connection with pension funds which have been in existence for only a short time. I am thinking of one very good example, the civic pension fund of the city of Toronto. About 2,500 employees are affected by this particular proposal. The principle being sound of increasing the deduc-

Income War Tax
tion to $900 per annum, would not the minister consider making this provision effective with say the last quarter of 1945, instead of delaying its effectiveness until the 1946 income?


James Lorimer Ilsley: It would mean an apportionment of the year, that an employee could pay in up to S300 a year for the first nine months and $900 for the last three months. I think we are doing pretty well by bringing that in as of January 1, 1946. We are making a big extension of the right of deduction from income here. There are large numbers of these pensioners all over Canada, and it would be a most difficult administrative task to make all these apportionments. I do not think I should like to make a change during the year.


Donald Methuen Fleming: Could not some formula be worked out for the apportionment without making the calculation too complicated? This affects many employees who are rapidly approaching the age of retirement.


James Lorimer Ilsley: I do not think we had better change that.


Donald Methuen Fleming: Then I should like to
direct a question to the minister in regard to the unusual medical expenses section, in connection with which I should like to bring two matters to his attention. The first has to do with the deduction from salary or wages referred to at line 40 on page 4, where it says:
-including the salary or wages paid to one fulltime attendant upon the taxpayer, his spouse or any such dependent, who was throughout the whole of the taxation period necessarily confined-
In other words, in respect of a person confined by reason of illness to a wheel chair or bed, the right to deduct wages or salary paid to a full-time attendant applies only where the person is ill throughout the entire taxation period. I take it that that means the calendar year. As for the person who is totally blind, at any time in the taxation period there is permission in the section to deduct the salary or wages paid to one full-time attendant upon the taxpayer. If the principle is sound that the person incapacitated by total blindness at any time during the taxation year shall be entitled to deduct salary or wages of a fulltime attendant, why should not the principle be applied also to the person who for reasons other than blindness is incapacitated? I suggest, Mr. Chairman, the principle is sound that expense incurred in respect of the wages or salary of a full-time attendant made necessary by any form of physical or mental incapacitation ought to be included within the scope of the medical expenses to be calculated under this section.


James Lorimer Ilsley: At a later time I shall give consideration to the hon. member's suggestion, but I should not like to make an amendment to this bill. Many blind people have incomes, and need attendants with them pretty steadily. On the other hand, if we allowed persons to add to their medical expenses the costs, salaries or wages paid to full-time attendants for, let us say, a month, during an illness, I believe the section would be impossible of administration. Checking would be very difficult. There would be a great opportunity to have an attendant who might be considered unnecessary. On the other hand, if the person is bedridden, or is confined to a wheel chair for a full year, there is not the same opportunity. This was intended to cover cripples, or other persons who might be permanently incapacitated.


Donald Methuen Fleming: If it is a sound principle to allow a deduction in respect of the wages or salary of a full-time attendant who attends a person incapacitated throughout the year, I suggest the principle should apply equally to incapacitation for part of the year. As to the matter of proof, let me point out there are many other expenses permissible under the section, and its predecessor, which are just as capable of being misused as this one might be, or as a section such as I have suggested might be. I believe methods could be found to establish proof, which would satisfy the administrative requirements of the department. I respectfully urge upon the minister that he give consideration to that matter.


James Lorimer Ilsley: Does the hon. member take it that it would apply to the same attendants for the whole year?


Donald Methuen Fleming: No; it is a matter of incapacitation throughout the whole year. At present the patient must be incapacitated throughout the entire year before the salary or wages of a full-time attendant can be deducted'. If that principle be sound, then it ought to apply to incapacitation for part of the year, because the whole purpose of the section would seem to be that of cushioning the burden of unusual medical expenses.


James Lorimer Ilsley: Correct.


Donald Methuen Fleming: It is certainly unusual in respect of persons completely incapacitated for part of the year. That is more unusual than it would be in connection with a preson permanently incapacitated-let us say a paralytic. The principle is recognized as being sound and I suggest it ought not to be confined to the one group. It is recognized in respect of persons incapacitated throughout the whole
Income War Tax

year and in respect of those who are blind, whether for part of a year or for a whole year. Should it not apply to those who are completely incapacitated1 in ways other than by blindness for part of the year?


James Lorimer Ilsley: Nursing expenses are allowed.


Mr.   KEJEMING@: Yes; but we know that often full-time attendants are required' by families who cannot afford to pay for nurses. Under present rates of pay for nurses it is often necessary to retain the services of a full-time attendant who will work for a rate lower than that paid a nurse.
Let us consider the extreme case of a person who, by reason of an accident, is incapacitated for eleven months of the year, and for that time requires the full-time services of an attendant. Under this section the payment of wages to that full-time attendant would be disallowed. But if the person is incapacitated for twelve months he is allowed the full amount for those twelve months. Putting it in the mildest form, certainly that is an anomalous situation. The principle having been recognized:, it ought to be made applicable to incapacitation for shorter periods, subject to proper proof to the need for a full-time attendant. I believe my suggestion is eminently fair, and I would ask the minister to consider it.


James Lorimer Ilsley: I shall take note of what the hon. member has said. This section was drawn carefully some years ago. The provision was introduced by myself, and in the beginning we limited the allowances to payments made to registered nurses. We then decided that perhaps that was too narrow an interpretation, and that it should be extended to practical nurses. The question at once arose as to who might be a practical nurse. There are many degrees of nursing. For instance, one might find a domestic servant who could do something in addition to what would be considered pure domestic service, and might to some extent look after a patient. There was so little opportunity to check that that we finally decided the test would be that of having a full-time attendant throughout the entire taxation period, and that that wrould be a fairly good indication the person in attendance was needed for some thing equivalent to nursing services.
I believe the provision with respect to blind persons speaks for itself. There can be no doubt that a blind person needs the services of an attendant, and it does not make any difference whether such attendance is for a short or for a long period of time. I cannot remember exactly the considerations

which were in our minds at the time, but I do know that the matter was carefully considered. I should not like to make any amendment at this time.
What happens is that hon. members will make suggestions when these matters are being considered, and then when we are preparing the next budget we have them in mind. We will remember what has been so strongly urged by the hon. member for Eglinton, and, after talking it over, we will decide whether or not a change should be made. However I would not care to do so at this time unless the matter were extremely urgent-and I- do not think it is. I shall give it consideration before the next budget is brought down.


Donald Methuen Fleming: I should like to thank the minister. I would draw to his attention another point which arises from the last two lines at the bottom of page 4 of the bill. This permits the inclusion of an amount expended on an artificial limb, a spinal brace, a brace for a limb or an aid to hearing for the taxpayer, his spouse or any such dependent. I draw attention specially to the words "artificial limb, a spinal brace, a brace for a limb, or an aid to hearing", and I would refer briefly to aids to seeing. Under rulings given by the Department of National Revenue, persons purchasing spectacles are allowed to deduct that portion of the amount which they pay to the optometrist which represents his professional services, but nothing is allowed on the glasses which may be prescribed as necessary as a result of his examination. I fail to see why there should be any distinction made in principle between aids to seeing and aids to hearing. If you permit the deduction of the expenditure made by a taxpayer on a hearing aid, why in principle do you deny him the right to deduct what he has paid on an aid to vision?


James Lorimer Ilsley: For two reasons-much more unusual and much more expensive.


Donald Methuen Fleming: Those may be matters that affect administration. But you have this anomalous situation. A man goes to an optometrist for an examination, who prescribes the kind of lens required to correct some defect in vision. The prescription is filled by an optician. The department permits the deduction of that portion of the taxpayer's expenditure which represents the optometrist's fee for his examination, but no deduction is allowed on the cost of the lenses, which would certainly correspond to the purchase of medicine in the case of a person requiring medicine, or an artificial limb or splint.
I do not happen to wear glasses myself, but I see that the minister does, and he has had

Income War Tax
more personal experience. I know however from experience that the prices paid for some lenses are very high indeed, and their purchase bears heavily on families who may have inherited some eye weakness necessitating spectacles for perhaps three or four or five children in the family. No deduction is allowed, and my humble submission is that it is not fair to make this distinction which discriminates against those who require to purchase these aids to vision. Will the minister give consideration to that point? I would not raise it if I did not consider it important and a hardship to many people.


James Lorimer Ilsley: So many people wear glasses that it is hardly an unusual medical expense at all. Glasses are one of those things that nearly all of us have to buy. The question has been raised many times in this house, and the deduction has never been allowed. I could mention many more articles for which just as good a case could be made out as for glasses. You could egg yourself on step by step until you included nearly everything except food and clothing, and perhaps then it would be urged that some kind of food should be included.


Harry Rutherford Jackman: May I make a suggestion and perhaps convey some little information to the minister in connection with this relief for unusual medical expenses? I believe that the four per cent is based on the total income before tax. When the section was first passed I remember bringing to the attention of the minister that this might result in hardship because some people with large earning power and not very much capital already have a very difficult situation to meet, particularly if while continuing to earn their large salary, with the embarrassment of income tax, they had severe sickness in the family. I suggest that the four per cent be applied on the net rather than on the gross income. When I brought this question up before, the minister replied that people with substantial incomes had usually something set aside. But I would point out that the heavy income tax and the necessity of maintaining one's way of life has exhausted the little capital which many people had. Would the minister give consideration to a change in departmental administration whereby the four per cent would be applied to the net rather than to the gross income?


James Lorimer Ilsley: It could not be changed by
departmental regulation.


Harry Rutherford Jackman: It depends on how you interpret four per cent of the income.


James Lorimer Ilsley: Income is income, and I think four per cent is pretty good. It was five per cent, and we have brought it down to four; I think that is low enough.


[Stage Direction]
Section agreed to.
Sections 5 and 6 agreed to.
On section 7-Amount refundable.
James Lorimer Ilsley: I have an amendment to
move, Mr. Chairman, that the word "less" in line 7 on page 8 of the bill be deleted and the word "before" be substituted therefor. The necessity for this is obvious. It is hardly more than the correction of an obvious error.


Ian Alistair Mackenzie: I move accordingly,
Mr. Chairman.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
On section 8.
James MacKerras Macdonnell: There are two points I should like to raise .in the interest of clarification-I hope it is clarification. I suggest that the word "taxable" be inserted before the word "income" in line 32 of page 8 of the bill. If I understand it aright, the income referred to . would be taxable income, but as it reads now, it refers to the income of the company calculated in accordance with this act. That may have no other meaning than taxable income, but if I am right the insertion of the word "taxable" would make it clear. The next paragraph reads;
(ii) the income of the company in each of the said periods that was not liable to taxation under this act.
It has been suggested to me that that might in certain cases include capital gains, and I cannot believe that that was intended. Therefore I suggest that after the word "Act" in line 40 the following words be added: "other than income arising out of the sale or other disposition of a capital asset." That would make it clear. My suggestion is that although that is not taxable income, in certain circumstances it might be deemed income and therefore the addition of these words could only be in the interest of clarification.


James Lorimer Ilsley: I shall have to take time to look at this amendment. I could not settle it one way or the other in a minute. Does the hon. gentleman want to let the section stand, and go on?


James MacKerras Macdonnell: That is quite satisfactory to me.


James Lorimer Ilsley: If this is going on again after eight o'clock we can look at it in the meantime. But we had better just let the part headed "94" stand.
Income War Tax


Harry Rutherford Jackman: What is the position with regard to earned surplus before 1917?


James Lorimer Ilsley: As we propose it, the earned surplus before 1917 comes out free of tax on a winding up.


Harry Rutherford Jackman: Under the present law, does it?


James Lorimer Ilsley: Under the interpretation of the present law. That is the way it has always been interpreted. Capital surplus of course comes out free on a winding up. Earned income, the surplus accumulated prior to 1917, if it comes out in the form of dividends, is taxable and remains taxable; and the surplus between 1917 and 1939 can come out, under the provisions of the Ives report, at these limited rates of taxation.


Harry Rutherford Jackman: What type of surplus will come out free on winding up? All surpluses?


James Lorimer Ilsley: AH capital surplus comes out free on winding up, no matter when it was accumulated.


Harry Rutherford Jackman: Earned surplus?


James Lorimer Ilsley: Earned surplus prior to 1917 comes out free on winding up. All surplus up to date, both capital and income, has been taxable if taken out in the form of dividends. That is, the administration have not gone behind the dividend, to see where it came from; they have just taxed the dividend. Now it is proposed to change that in respect of the period from 1917 to 1939, and that is all it is proposed to do at this stage.


Harry Rutherford Jackman: It is fair that the surplus prior to 1917, when there were no taxes on income, should come out free on winding up; when the principal proprietor dies we do not want to wind up t'he company and create unemployment. The whole purpose of this new provision is to make it possible for the chief proprietor to pay his succession duties, or the estate to pay them for him. It may be that the company was largely built up prior to 1917; it may be that new developments in the industry which other competitors did not have had resulted in not very large accumulations since that time. Would it make any difference to the minister if permission at least were given to include the pre-1917 surplus under the provision of the section we are now discussing? If there is any equity attaching to the equitable distribution of post-1917 surpluses, surely it applies a fortiori to pre-1917 surpluses. Could the option not be given to the corporation to distribute pre-1917 on the same basis as post-1917?

Mr. ILSLEY': That is the argument which the hon. gentleman advanced the other night when the resolution was up: and it is hard to 'answer, there is no doubt about that. But we are meeting a situation, and I do not want to open the door too wide or go too far. This whole problem arose from the fact that, not from the pre-1917 surplus at all, everybody I think was quite willing to wind up and start with a new company or something of the kind if he could get his surplus out tax free. They can always get their pre-1917 out tax free. What they were worrying about was their surpluses after 1917. The surpluses after 1939 are going to present another problem, which is not dealt with in this bill at all. But we are just dealing with one period here, from 1917 to 1939. For the great majority of companies, at any rate, this I think solves their problems.


Harry Rutherford Jackman: I am trying to collect a little revenue for the minister in this case. If they wind a company up free, the minister goes on record to this effect; he gives them the option, if they agree to do it, to include the pre-1917 surplus. Under the provisions of this act they are going to pay some tax, some extra money to the crown. Has the minister any objection if the opposition tries to swell his revenues and give that option to people? How can any harm come from it?


James MacKerras Macdonnell: The minister thinks that maybe the hon. member is trying to sell him a pup.


James Lorimer Ilsley: I suggested that in the discussions. I was told that nobody would do it. He wouldl not pay taxes on that pre-1917 surplus; he would find that he did not have to. All he has to do is to wind up and get out. I was told that.


Harry Rutherford Jackman: The question has been asked in a number of cases.


James MacKerras Macdonnell: It may be just a question of interpretation, but I should like to ask about something on page 9, reading from the old section 95:
A dividend received from a private company is not taxable under this act if-
So and so. The question arises, if a shareholder should be in an estate or trust, whether it can be argued-I think it would be a close legal point-that the dividend would still be free from tax in the hands of the beneficiary. It seems to me that the tail should go with the hide, but if there is any doubt about it perhaps it could be made clear. It may be that a statement to that effect, if it were made now, would be sufficient.


James Lorimer Ilsley: The fear is that on the second transfer it might attract the tax?

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James MacKerras Macdonnell: I was not ingenious enough to think of this myself, but it has been suggested, perhaps because of the great respect in which the ingenuity of the department is held.


James Lorimer Ilsley: Well, the departmental officials are here and they say they do not intend to raise that point.


James MacKerras Macdonnell: All right.


Mr. GREEN:: Section 8 of the bill has been allowed to stand until this evening?


William Ross Macdonald: I think it was agreed that just the section numbered 94, subsection 1, under section 8, would stand, but that the remainder of the clause will carry.


Howard Charles Green: I had two questions to ask the minister. They deal with the new section 96 of the Income War Tax Act. Provision is made in subsection 3 of that section for the manner in which the tax is to be paid: (a) provides that the tax shall be paid on or before December 31, 1946 although the right of election to take advantage of the amendment does not expire until the end of 1947, and (b) provides a second way of paying, namely, by four equal annual instalments, commencing December 31, 1947, together with interest at the rate of four per cent per annum on each instalment from the 31st day of December, 1946 to the date of payment. What is the objection to allowing a company that has not paid by December 31, 1946, to come under the alternative plan and prepay? Suppose in 1948 they are in a position to pay everything? Why should they not be allov'ed to prepay with interest up to the date of prepayment? The way the provision reads, they are absolutely bound to pay in four equal annual instalments, with interest, and I do not see that there is any harm done by giving them the right to prepay with interest up to the date of prepayment.


James Lorimer Ilsley: It may be that is the meaning of the section as drawn, that they cannot prepay. But I am informed by the officials that the standard practice in situations of this kind is to accept prepayment with interest up to the date when they are paid, and that is what they will do in this case.


Howard Charles Green: I think that this could be read by an officer of the department, having to meet the situation, in such a way that he could at least demand payment of interest up to the end of the fourth year. I suggest it would be wise to make it clear that there is a right of prepayment. It states that a private company that has elected to pay the tax under this section either "shall"' pay the tax
up to December 31, 1946 or "shall" pay in four equal annual instalments. If words were inserted there giving them the right to prepay it would do away with any uncertainty.


James Lorimer Ilsley: I have no objection; we can draft something.


Howard Charles Green: There is another point in connection with this section. There is a question whether or not the net amount of surplus available after the tax is paid can be retained by the company as a tax-free fund. The position may be such that the company cannot finance payment out by way of dividend at that particular time and would have to hold the net amount of surplus. Would it be permissible to hold that net amount as a tax-free fund?


James Lorimer Ilsley: They can hold that part of the surplus as long as they wish. It is tax-free. They do not have to pay taxes on it again.


James MacKerras Macdonnell: On the top of page 10 reference is made to regulations. A private company may elect in such manner as may be prescribed by regulations. Can these regulations be got out as soon as possible? It would be a great convenience for those who have to make a decision if they could have the regulations at the earliest possible day.


James Lorimer Ilsley: My colleague, the Minister of National Revenue, has duly noted that request.


Harry Rutherford Jackman: It would save trouble in *he future if the committee took a moment or two longer to consider a practical example that has been sent to me. The matter may be simple enough under the regulations, but for the sake of clarity I should like to have the minister's opinion. I quote:
It should be set forth in the amendment that disbursements made in 1940 and subsequent years shall not be deducted from the surplus balance as at December 1, 1939, unless distributions from 1940 onwards were not earned.
That is satisfactorily answered in the section, I believe, that if deductions from earned surplus were made since December 31, 1939, for various corporate reasons those deductions will not serve to reduce for purposes of this section the total amount of earned surplus at balance December 31, 1939, unless they were earned.


James Lorimer Ilsley: Is that clear from the section.


Harry Rutherford Jackman: I have not bad a chance to give it much consideration. It is a long and complicated section and the experts should be able to advise us
Income War Tax


James Lorimer Ilsley: If the surplus or part of it is gone, it is not there to base an election on.


Harry Rutherford Jackman: There has been an arbitrary deduction in the corporate accounting from earned surplus but not through the income accounting. Corporate books are not necessarily kept from the income tax people's point of view of earnings or lack of earnings. You do what you like with your own books, but when it comes to income tax there are certain rules which are laid down and which you have to follow in paying your taxes. But you might have had a certain amount of earned surplus on December 31, 1939 and taken a capital of $10,090 and written it off, because you do not want a capital deficit showing on your balance sheet. It is done all the time. If you operate under this section, are you going to be prejudiced because of your own arbitrary action, or is your earned surplus what it was really, the earned surplus of 1939? Perhaps the minister will answer that question.


James Lorimer Ilsley: Let. me read over 96 (1):
A private company may elect in such manner as may be prescribed by regulations, on or before the 31st day of December, nineteen hundred and forty-seven, to be assessed and pay a tax, computed in the manner set out in subsection two of this section, on an amount equal to its undistributed income on hand at the end of its nineteen hundred and thirty-nine fiscal period or its undistributed income on hand at the end of the fiscal period that terminates nearest the time when it so elects, whichever is the lesser.
If the undistributed income has been reduced after the end of the fiscal period of 1939 then it is the lesser sum and only that which is subject to the election. Is that not correct? I do not quite understand it.


Harry Rutherford Jackman: I understand the way
the minister read it. The point is that the amount of undistributed income may be something entirely different from earned surplus. I put the proposition that there was an arbitrary deduction from the earned surplus allowed for capital deficit in order that the books would look right to the shareholders. The people who want to get their money out under this section should not be prejudicially affected by that arbitrary action on their part. Perhaps consideration might be given to the question and an answer brought down at eight o'clock.
I should like to present another case that was put to me. The earned surplus of this company in January, 1917, was $5,000. I understand that that remains exactly where it stood and cannot be brought in under the operation of this section. The earned profits
[Mr. Jackman.1
between 1917 and 1939 were $38,000. Capital losses were realized to the amount of $8,000, and for the purposes of the company itself the earned surpluses show a net of $30,000. Then capital profits of $5,000 were realized. Whether or not they were actually added to earned surplus I do not know; they ought to have been. That gives an amount of $40,000, which could be distributed although not necessarily distributed under this section. The questions asked are these: To operate under the bill would the company be permitted to distribute first $40,000, which is the total of the pre-1917 earned surplus and the surplus arising in between and the result of the capital gains and losses; second, $38,000 being the earned profits between 1917 and 1939, or only $30,000 which represents the actual earnings less capital losses and not the capital gains? We might have an answer to these questions at eight o'clock.


James Lorimer Ilsley: This is the same example that was given when the resolution was before us.


Harry Rutherford Jackman: That is right.


James Lorimer Ilsley: The company in question
had an earned surplus of $38,000 built up in the period 1917 to 1939. In the same period the company had a capital loss of $8,000. In a subsequent period, presumably after 1939. the company realized a capital profit of $5,000.


Harry Rutherford Jackman: The time is not stated.
Does it make any difference?


James Lorimer Ilsley: I took it from what the
hon. gentleman said just now that the capital-


Harry Rutherford Jackman: Perhaps we might have
it both ways, if it is not too much trouble.


James Lorimer Ilsley: The capital profit was before 1939? I do not see how it could be because there was a capital loss of $8,000 between 1917 and 1939.


Harry Rutherford Jackman: We will assume it was after.


James Lorimer Ilsley: The pre-1917 surplus was
$5,000. The question is, what amount would the company pay taxes on? According to the present proposals the company would pay taxes on $30,000; that is, the $38,000 earned in the period 1917 to 1939, less any capital losses in the same period, which in this case were $8,000. leaving $30,000 surplus. The capital profit realized after the period 1917 to 1939 will not be applied in a reduction of the capital losses made in that period.


Harry Rutherford Jackman: If the capital profit had been realized prior to 1939 the amount dis-

Income War Tax
tributable would be $35,000. Then you would be able to add it back to offset the $8,000 capital loss.


James Lorimer Ilsley: That is right, $38,000 less
$3,000. leaving $35,000.


Harry Rutherford Jackman: The first letter I read
raised the whole question of capital losses being deducted from earned surpluses. That is also involved in this question, although it is not quite the same.


James Lorimer Ilsley: Did the hon. gentleman get
a full answer?


Harry Rutherford Jackman: Yes. The answer is that $30,000 are distributable and $5,000 is not allowed to be counted, because it is presumed it is after the deadline date.


James Lorimer Ilsley: Yes. The other $5,000 is
prior to 1917. That does not come into it either.


William Alexander McMaster: What is the implication
of this phrase:
-at the end of its nineteen hundred and thirty-nine fiscal period or its undistributed income on hand at the end of the fiscal period that terminates nearest the time when it so elects.
Does that mean that this company can elect which time it will come under this section, either 1939 or 1945?


James Lorimer Ilsley: No. This only applies to the earned surplus during the period 1917 to 1939, and this section makes the termination period the termination of the fiscal period of the company in 1939.


William Alexander McMaster: If the minister had not told me I should not have read it in that way. It does not say so. It says nearest to the year 1939.


James MacKerras Macdonnell: Line 7 explains it.


James Lorimer Ilsley: Yes. That is a case where they have lost some of their surplus after 1939 and they have a lesser sum to distribute.


William Alexander McMaster: What about the profits they have added since then?


James Lorimer Ilsley: Profits are not added. That would be surplus accumulated after 1939.


William Alexander McMaster: From the way I read it, it would look as though they could elect either the January, 1939, period or the last period.


James Lorimer Ilsley: It is whichever amount is the lesser.


William Ross Macdonald: Do I understand that it is the wish of the committee that section 95 of part XVIII carries, and that sections 94 and 96 stand?


James MacKerras Macdonnell: May I ask one question to clear up the point raised by the hon. member for High Park? This is an addition to the resolution which was before the committee some time ago? Now that the point has been raised, I am wondering whether it is in accordance with the spirit of the resolution.


James Lorimer Ilsley: A resolution is always
couched in general language, and there are many refinements


James MacKerras Macdonnell: But it was up to 1939?


James Lorimer Ilsley: Yes, it was; the earned
surplus accumulated by the company from the beginning of its 1917 fiscal period to the end of its 1939 fiscal period.


James MacKerras Macdonnell: Then this is a substantial change; if there have been any losses since, then you practically say they have to be taken into account. Is that the effect of it?


James Lorimer Ilsley: Yes.


William Alexander McMaster: But suppose there were immense profits since then. Apparently a company can take the lesser one, which would be to the end of the year 1939. Are they not supposed to pay taxes on what they have made since then?


James Lorimer Ilsley: If they lost money after 1939 they have to take it off their surplus.


William Alexander McMaster: But suppose they had
a profit?


James Lorimer Ilsley: They do not add it on,
because we are not dealing with the disposition of surpluses accumulated after 1939.


William Alexander McMaster: It does not say so here.


James Lorimer Ilsley: But we are not dealing
with it; that is the whole idea.


William Alexander McMaster: It is this act that will have to be interpreted, not just what is said in this committee. I do not see where it says that it only deals with profits up to that time. If it does say so, I should like the minister to let me know.


James MacKerras Macdonnell: I do not want to labour the point, but it does seem to me that this is introducing something quite foreign to the Ives report. Am I right in that?


James Lorimer Ilsley: No, I do not think so.


James MacKerras Macdonnell: And it seems to me it is going beyond the resolution. I should like to be clear on that.
Income War Tax

Resolution 8 says, "accumulated by the company from the beginning of its 1917 to the end of its 1939 fiscal period."


James Lorimer Ilsley: Where are they to get this money to distribute?


Harry Rutherford Jackman: Don't you worry.


James Lorimer Ilsley: I have not enough knowledge of business to understand where they will get it. This is to facilitate the distribution of earned surplus during that period.


Harry Rutherford Jackman: The surpluses have lost their identity. They are in bricks and mortar and working capital. There is no identity of surpluses in a company.


James Lorimer Ilsley: You cannot put your finger on any part of the assets that you can say represents surplus, but you know the amount of the surplus at the end of the 1939 fiscal period. If they have a smaller surplus at the time they elect, that is all there is to distribute as a result of that 1917-39 period.


Harry Rutherford Jackman: Surpluses are pretty
arbitrary things. They have to do largely with taxation, not with the actualities of business.


James MacKerras Macdonnell: I want to be sure I understand this. We are now in the year 1945. When this measure comes into operation some time subsequent to this a company will elect. As I understood the resolution, we were allowing them to elect to take certain action in respect of the earned surplus accumulated by the company from the beginning of its 1917 fiscal period to the end of its 1939 fiscal period. Now, apparently the result is that if it has had any losses since 1939, then the distributable surplus, which under resolution 8 was a certain sum at the end of 1939, is now a lesser sum.


James Lorimer Ilsley: That is right.


James MacKerras Macdonnell: It is still not clear to me why it was thought necessary, because this is a substantial change in the recommendation of the Ives commission, is it not? It is not clear to me why this is put in.


James Lorimer Ilsley: Part of it is gone; that is all.


William Alexander McMaster: I am a new member of the house, and I have no doubt everyone who has spoken on this, except myself, has some knowledge of companies and what is intended. I have not that knowledge, but I have enough imagination to believe that during the years some companies have kept undistributed sur-

pluses on which they have not paid income tax. Now they find that the income taxes are to be very considerable for years to come, and they are trying to get an easy way out to distribute these surpluses. The minister must have knowledge of some of these companies, and I should like his statement that this is a fair amount that is being charged these companies under this section.


James Lorimer Ilsley: I am just taking the recommendation of the Ives commission. It is impossible to say whether it is a fair amount; it is just a matter of judgment.


Harry Rutherford Jackman: The minister will admit that some cases cried out for relief, as he said himself one session.


James Lorimer Ilsley: Yes.


Harry Rutherford Jackman: I put the case to him once and he said I had put it somewhat modestly, because these companies cried to heaven for relief.


James Lorimer Ilsley: Something had to be done. I am satisfied that the treasury will gain substantially by passing this legislation, because otherwise these companies will not pay the taxes; they will do something else, sell their shares to the public or something and we shall not get any revenue at all if the tax is too heavy. The combination of succession duty and high income tax was such that it made it impossible in some cases for people to pay the taxes.


James MacKerras Macdonnell: I do not want to persist further in this, but for the sake of clarity would the minister allow this section to stand over until eight o'clock, and perhaps let us have another word on it then?


James Lorimer Ilsley: Yes. I was to answer that question concerning section 96 (1) then.


James MacKerras Macdonnell: That is right.


James Lorimer Ilsley: Then I think the situation is that section 95 is carried and sections 94 and 96 stand.
Section stands.
On section 9-Family allowances.


William Alexander McMaster: Perhaps this might be allowed to stand also, because I should like to speak to some of the minister's officials in regard to it. I have taken some figures at random and made some computations, and it strikes me that the amounts you are taking back under this arbitrary formula do not anywhere approach what should be taken back if it is worked out finely. That is, in some of

Income War Tax
the lower brackets you are taking back perhaps too little, but in some of the higher brackets you are not taking back too much. It all arises from the fact that a man may have three children between the ages of eight and sixteen, for whom he would be receiving $8 a month each, while another man with three children under the age of five would receive only $6 a month each. I have worked out figures concerning both extremes, and in no case do they nearly approximate the amount that should be recovered from the taxpayer. In almost every case the difference is against the taxpayer.


James Lorimer Ilsley: Against the treasury, do you mean?


William Alexander McMaster: Take the man with an income of $2,790; the amount you will recover from him will be $330 instead of $318.80, if my figures are correct. That is a man with young children. A man with older children will pay $411 when he should pay only $382, if my figures are correct. The man with an income of $2,810 will pay $349.70 when he should pay only $323.60. The man with the older family will pay $441.50; and should pay only $389.20. Of course, as all understand, by fixing an arbitrary amount such as $2,800 to make the breaking point, the man who makes $2,810 will actually lose the $20 he would have earned over and above $2,790 and also something extra. He is contributing more to the treasury.
There is this discrepancy which I have mentioned, and in some cases it amounts to $30 or S40. If I am wrong in this I should like to be corrected.


James Lorimer Ilsley: I do not think that is so. There might be a few cases where there is over-recovery. In most cases, however, under these tables-in fact, in practically all cases- there is under-recovery.


William Alexander McMaster: My figures might be wrong. Let us consider the amount of $2,500. The same applies there. A recovery of $254.60 is made, where the tax should be only $228. Then, in respect of the older family there is a recovery of $324 where the tax should be only $282.


James Lorimer Ilsley: I should like to let the hon. member have an opportunity to discuss it. However, this is an endless job. Nothing has taken more time, in proportion to the space occupied by the result, than has this. We spent weeks in an effort to have these tables as fair as possible. To get the tax value for each child is a most difficult task, because it varies with the number of dependents over eighteen, as well as with those under eighteen.
It is different just over $1,200 from what it is higher up in the scale. This is a highly complicated and baffling task.
Then, of course, the family allowance value of children varies, depending upon the age and to a certain extent upon the size of the family. All those variations have to be taken into consideration, and the table evolved must be as fair as possible. However, both these tables lean heavily to the side of the taxpayer and against the treasury.


William Alexander McMaster: I did not think so, but I am ready to be convinced by one of the officers in the department.


Mr. LESAGE:: This whole question in connection with the relationship between the deduction for children and family allowances is most complicated. As a matter of fact, the whole income tax system at the present time is too complicated, and it is hoped that after the dominion-provincial conference has reached an agreement the system will be simplified.
In connection with the matter of deductions for children, may I draw the attention of the committee to the fact that under the present system of deductions from the tax rather than from income the taxpayer with a family is placed in an unfair position. For every married man with children and every married man without children the net non-taxable or non-compressible income is $1,200. This, of course, is true, except for the normal tax.
I submit with respect that the rate of taxation should be imposed only over and above the minimum necessary to each one, according to his family responsibilities or, if we put it in this way, according to the number of dependents for whom he has a right to claim deduction. It is a false principle to set the same non-compressible and non-taxable income of $1,200 for all married men, and then to impose equal rates for what is earned over and above that $1,200, with only an arbitrary deduction of $108 for each dependent.
What is strictly necessary to rear a child should not be taxable. If it is taxable the father of a family must then accept a lower standard of living. After a little calculation, we arrive at the conclusion that the more children a man has, the higher his rate of income tax with respect to the strict necessities of life. For fathers with children in colleges or universities the situation is unbearable. I, for one, would not be here to-day if the present system of deductions had existed before the war. I would not be here, nor would I be a lawyer, because I could not have gone to university. My father received only an average salary, on which he educated five
Income War Tax

sons, and it was only after great sacrifice that on his income he was able to give the five of us college and university degrees. But to-day that would be completely impossible.
Has any thought been given to the possibility of going back to the system of deductions from income instead of deductions from the tax?


James Lorimer Ilsley: Yes, a great deal of thought has been given to it, and may I say that I agree that that system is more desirable than the present one-with certain modifications. Before bringing down the budget this year, we worked out a new tax structure, and considered carefully the question whether that new structure should be introduced at this session. However, for the reasons I stated when the budget was presented, we thought we should introduce an interim budget having straight percentage deductions.
I think that when a new tax system is introduced that principle, fundamentally, will be adopted, although there will be modifications to take into account the necessary interrelationship between allowances to children and family allowances. However, I know at the present time'-and of course I cannot make it public just now-the lines along which I intend to proceed. There will be much difference of opinion as to whether that is the proper one. However, we have had continual trouble with this system of tax credits for children because, time after time, hon. members have argued that the tax credit per child was not sufficient for its support. The answer is that it was never intended to be sufficient to support a child.
The principle enunciated just now by the hon. member for Montmagny-L'Islet is much nearer the proper principle; that is, that the deduction from income which is fixed should be sufficient to support the child. And it has been argued, I believe correctly, that the tax credit we allow is, at the rate of our taxes, greater for most children than a $400 deduction from income. For a good many children that is so. It is hard to get the public to understand why, if you are allowing a tax credit to a parent in respect of a child, you should not allow a tax credit high enough for him to support a child on that tax credit. Of course, when a person looks into it, that is ridiculous. It would mean that if you had a two per cent income tax instead of a forty per cent income tax, the tax credit would perhaps be only ten dollars and yet the parent would be much better off. The principle that was originally incorporated in our Income War Tax Act was an exemption of $400 for each child. Whether the tax rates were high or low that $400 exemption was always there, and people argued about that $400 just as they argue about the
TMr. Lesage.]
$108. The fact was that that $400 was taken from income and the $108 is a deduction from the tax. But I am glad to have the hon. member's observations, and they will be given full consideration when we make changes in our income tax system. At the moment at least, I am disposed to agree with the general principle that deduction from income should be taken as the basis of the allowances for children.


Joseph Arthur Lesage: In the lower income brackets the deduction of $108 from the tax amounts to more than the $400 deduction from income. I have not the exact figures, but I know that around $2,500 and higher incomes the $108 amounts to less than the $400 exemption per child, and I was drawing the attention of the committee to salary incomes of over $2,500, to those fathers of families who are sending their sons to college and university.


James Lorimer Ilsley: When I say that I accept the principle I wish to emphasize that it will be with qualifications, because I would not feel like going back to a system under which people with high incomes got an unqualified deduction from their income of so much per child for income tax purposes.


Mr. ZAPLITNY:: I should like to reiterate the stand which this group has always taken in connection with income tax exemption levels before the income tax is applied. We believe that the present exemptions are too low. We believe that for married persons the exemption should be at least $2,000 and, for single persons, $1,000. I do not think we need to consider very long to realize the necessity for that. Only this afternoon we had the Prime Minister telling us how necessary it is that members of this house should have their income raised. The rest of the people of the country are in no more fortunate position than we are, and the post-war years will. I think, show our greatest danger to be deflation; that is, sufficient purchasing power may not be in the hands of the people who need it most. One of the surest ways of increasing purchasing power would be to reduce the amount taken away from them in taxation; in other words, to leave more spending power in the hands of the people. Therefore I would urge upon the minister the desirability of raising the exemption levels to at least $2,000 for married people and $1,000 for single.


James Lorimer Ilsley: The hon. gentleman's representations will be given consideration. The revenue loss would be simply enormous, as my hon. friend perhaps will appreciate, if we were to do that.


[Stage Direction]
Section agreed to.
Section 10 agreed to.

National Housing
On section 11-Deductions in respect of 1946 and subsequent years.
Mr. BROOKS:: With regard to the refundable portion, does this mean that the situation with reference to mortgages and agreements for sale under 7 A of sections 93 and 94 is now cancelled?


James Lorimer Ilsley: It is still in the act, but no refundable taxes are collected. Therefore this kind of off-set against taxes is dead.


Alfred Johnson Brooks: So that it simply means nothing? It is in the act but has no effect?


James Lorimer Ilsley: That is right.


[Stage Direction]
Section agreed to.
On section 12-Deduction in respect of 1945.
William Alexander McMaster: 
James Lorimer Ilsley: I cannot agree to that
suggestion at all.


[Stage Direction]
Section agreed to.
On section 13-Certain transactions in province of Alberta bonds.
Harry Rutherford Jackman: This is the first time that we have had incorporated in our taxation system a tax on capital gains. There may have been tax losses in this period on these securities. Does the minister say that the rule works both ways?


James Lorimer Ilsley: I know there were none, so that there is no need to make provision for it.


[Stage Direction]
Section agreed to.
On section 14-Application.
James Lorimer Ilsley: There is an amendment, Mr. Chairman, that the word "section" in line 16 be deleted and the following substituted therefor, "sections seven and".


Douglas Charles Abbott: I move accordingly, Mr. Chairman.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
Progress reported.


[Stage Direction]
Hon. J. L. ILSLEY (Minister of Finance) moved the second reading of bill No. 239, to amend the National Housing Act, 1944.
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Macdonald (Brantford City) in the chair.
On section 1-"Cooperative housing project".
Alexander Malcolm Nicholson: Would the minister
make some explanation of this section?


James Lorimer Ilsley: This is a new definition. Subsection 3 of section 4 of the main act enables loans to be made for the construction of a cooperative housing project on the same terms as loans are made to home owners. Subsection 3 provides that each shareholder of a corporation or beneficiary under a trust deed shall have possession of a housing unit. The subsection does not, however, specify the percentage of the units which must be owned by shareholders or beneficiaries under a trust deed. The new definition covers this omission and provides that at least seventy-five per cent of the units are to be leased to shareholders or beneficiaries, as the case may be.


Herbert Alexander Bruce: I wish to take advantage of this amendment to put in a plea with the minister to assist the university of Toronto to get what is known as the Eglinton Hunt club quarters for housing for student veterans of this war who will enter for the next session, 1946. We are very short of housing in the city of Toronto. If these buildings could be obtained it would relieve living accommodation for other citizens. Therefore I ask the minister if he will use his best efforts to have the air force who are now occupying this building, in part only, give it up for the purposes of the university.


Mr. MacNICOL:: That will be for students?


Herbert Alexander Bruce: Yes.


Ian Alistair Mackenzie: Is the hon. member personally satisfied that the Eglinton club quarters would be all right for the purpose?


Herbert Alexander Bruce: Yes. It has been investigated by the superintendent of buildings of the university who has reported that it would suit admirably for housing a large number of returned veteran students.


Ian Alistair Mackenzie: How many?


Herbert Alexander Bruce: I think it would take about 400, perhaps 450 who otherwise would have no place to live. A thorough canvas has been made of possible living quarters without success. We have had to take Ajax, as the minister probably knows, and this will be filled to capacity next year. I urge upon the government to vacate this building and make it available for veteran students.


John Ritchie MacNicol: Would the students have individual rooms, or would there be large community rooms, dormitories, to accommodate them?
National Housing


Herbert Alexander Bruce: I think there are both, but it does not matter much. The crying need is accommodation for our students, and this building is near the university where they attend lectures.


James Lorimer Ilsley: I will look into that situation. I do not know the terms under which the government has the premises, whether they have a lease-


Ian Alistair Mackenzie: Yes.


James Lorimer Ilsley: -or how long a lease it is.


Herbert Alexander Bruce: My recollection is that it was purchased by the government. The government has control.


James Lorimer Ilsley: If the government has purchased it, when the department using it find it no longer necessary for their purposes they declare it surplus, and then War Assets Corporation disposes of it. I was going to say that that was the situation at Ajax, but I am not right about that, because I do not think one of the service departments had that development at Ajax. I think that was an arrangement made by the Department of Munitions and Supply or the Department of Reconstruction with the university of Toronto.


Herbert Alexander Bruce: I hope a similar arrangement may be made with respect to the use of this building as was made by the Minister of Munitions and Supply with the university for the use of the Ajax building near Pickering. There should be no difficulty in that regard. I do not think it would come under the classification to which the minister refers.


Ian Alistair Mackenzie: At the present time a committee of the various presidents of Canadian universities is studying the very problem which the hon. member has just mentioned, and I am sure that they will make recommendations along these lines to the government.


Donald Methuen Fleming: I think the committee ought to be aware of the fact that certain answers on this subject were tabled to-day in reply to questions I had asked with regard to the intended disposal of these buildings. I happen to know the situation well, because I live a matter of only half a dozen blocks from this No. 1 I.T.S. property. It is the old Eglinton Hunt club. It was purchased by the government in the early days of the war, and the buildings were gradually extended, particularly the dormitory accommodation; but in the answers tabled to-day the Minister of National Defence for Air made it quite clear that it was the government's inten-
tion to retain the buildings and not dispose of any part of them, because they had several uses for them. I have not the answers before me now, but there was not any hope held out there for their disposal.
A number of organizations in North Toronto and elsewhere have been greatly interested in this building because among other things it is highly suitable for a community centre, and there is great need in our city for community centres. I do not believe, even if the government found it surplus, it should be hastily, disposed of. There are a number of people who would be interested in bidding on it for worthy community purposes. In any event, the answers made to-day by the Minister of National Defence for Air did not leave any hope that the buildings or the property would not be required for government use.


Mr. FERGUSON:: There are any number of buildings at Camp Borden which are not being used by the air force and are now vacant. They formerly accommodated personnel of the air force, but the troops have moved from there. I would suggest that the government might use those buildings and vacate quite easily the building in Toronto. They would be welcomed back to Camp Borden.


Mrs. STRUM:: Before this section is carried there are a few remarks I should like to make about the whole subject of housing. In this country we have not taken advantage of the whole situation in regard to the construction of homes. Other countries have done much better than we have in the field of housing. I refer particularly to New Zealand, where in 1939 I saw houses built by the government. To me it was a most shameful thing that we would allow our lumber to stand in piles in the mills of British Columbia; while the termites were eating our lumber there, we had people unemployed; we had slums; we had stagnation and social decay. Yet in New Zealand they were able to build new homes by the thousand with our timber, and they did so because they really attacked the problem of housing in the manner in which it deserves to be attacked. I sat in the office of the minister of housing, who at that time was Mr. Armstrong, and he told me he was the happiest man in the cabinet because he had more money than he could spend. They had set up a separate department, and the appropriation was so generous that they were able to absorb all the labour available for the building of homes in New Zealand.
At the time I visited there early in 1939 they had just brought over 200 workmen from Australia, because they had exhausted all the

National Housing
available labour supply for building homes in New Zealand. They had brought these 200 carpenters in to assist in the housing project.
I had forgotten a few of the details because it is five or six years since I was there; but consulting with the high commissioner to-day,
I found that their money was provided at one and a half per cent. They were given an appropriation from their central bank and their housing corporation undertook the construction of houses. These were not considered to be temporary structures but good for sixty years. Only the best materials were Used.
The corporation buys a piece of land and undertakes housing development, and on the basis of town planning these houses are laid out in blocks. There are no two alike in a block. They avoid monotony in design and material, and the houses are planned in relation to the whole development. They consider that they can afford to charge low rentals, because over a period of sixty years these houses will have paid for themselves and replaced the money invested in them.
The houses were a joy to behold from the outside, and on the inside they were very well planned. I found, in discussing the project with the minister, that they had invited all the architects of New Zealand to submit plans and had chosen a number of designs in units of one, two or three bedrooms. At that time they did not undertake anything larger than three-bedroom units, but since then they have undertaken the construction of apartment blocks for single business people and for .married couples without children as well as for old age and blind pensioners. They are putting up these apartments for the convenience of people who need limited housing. But they are also, in their larger houses, continuing to build the larger units with the idea of giving a priority to families with children.
There are two fields here where there is a great need. It is criminal that we should penalize the mother with children. It is a dreadful thing that the mother, who is making the biggest contribution of all to her country, should find it so difficult to get a roof under which to shelter her children. Yet one has only to try to find living accommodation to discover to what an extent children are feared and abhorred and what a penalty we put upon the mother with children.
Last year in the city of Regina I started to look for living accommodation. My family had a high school girl, a child already in grade ten. I found that even children in high school are considered a menace if you are looking
for a place in which to live. I do not know what would have happened if I had had a child in a perambulator.
In this country we should definitely give priority to all the mothers who have young children. We should definitely build homes and subsidize rentals for widows with children and for old age pensioners. These are two features which will remain part of our economy. We have started to pay pensions and will continue to do so. We have started to pay mother's allowances to take care of widowed mothers who have children to bring up. These are two- groups who, because of their lack of income, cannot pay the rentals that will give them decent homes. These are two fields in which we should definitely subsidize rentals, so that those people who are in such an unfavourable bargaining position may have decent homes.
When I was in New Zealand people said to me, "I suppose everyone in Canada has a lovely home?" I wondered why they assumed that we all had lovely homes, and they said, "Well, this is your timber; we are building our homes with your timber." We in this country, who have so much timber, who have metals and all the things that go into the making of plumbing and fixtures, furniture, draperies and1 floor coverings, we, who can build and equip and furnish homes from our own resources, have no excuse for having so many of our people living under the wretched conditions in- which we find them.
I wish we would show the same concern for the living accommodation of others that we show when it comes to our own incomes. I wish I could hear a howl of welcome going up in this house to any suggestion, about improving the living conditions of our people comparable with the one we heard this morning over the bill for increasing our own indemnity. I wish we would be as enthusiastic about our mothers and children, about our old age pensioners and about people whose condition is so desperate, as we are in regard- to people who have some money to put into annuities. If we did that we would never be content until we had a separate department of housing and a generous appropriation that would- enable- us to embark upon the construction of homes, using the materials of which we have such a generous supply and the workmen who need- employment.


Mr. REID:: Will the hon. member be good enough to tell the committee what these houses in New Zealand- rent at and what wages are paid to the workmen who build them?
3i44
National Housing


Gladys Grace Mae Strum: Yes. May I quote briefly from an address given last night by Mr. Syd Tasker of New Zealand:
New Zealand has "thousands" of houses which are owned by the state and rented at an average of $20 a month, Syd Tasker of the New Zealand War .Supply Mission told members of the Gyro Club, Wednesday night.


Thomas Reid: But will the hon. member tell us what the size of the house is? When I quote from a newspaper I am challenged. I should like to know the size of the house and the wages.


Gladys Grace Mae Strum: I have a report on housing by the department of housing construction, which I would recommend to the hon. member for New Westminster.


Thomas Reid: I will recommend some to my hon. friend too.


Gladys Grace Mae Strum: This gives a survey of the whole problem. There is something else I was very much interested in, and that was the plan that the New Zealand government has for training returned men in the building trades. In a little booklet called "Korero", on page 23 there appears an. outline of a programme for reconstruction and training under which servicemen are paid and trained in the building trades. While they learn their trade, they are paid wages and are building homes for themselves. This booklet gives a survey of the whole undertaking.


Thomas Reid: 
Thomas Reid: I do not want to enter into this debate, but as one who takes more pride in this country than in any other, I wish to remind the hon. member that the wages paid work out to $50 a month, and when you pay $20 a month rent that is a pretty high rental to pay on such low wages.


Mr. BENTLEY:: I should like to remind the hon. minister for New Westminster-


Some hon. MEMBERS:: Oh, oh.


Thomas Reid: It does not make any difference what I am called.


Thomas John Bentley: That is right. I should like to remind the hon. member for New Westminster that we have passed a measure in this house and have under consideration now certain definite arrangements to pay $50 a month to some people in this country during the process of rehabilitation. These are heroes; some of them will likely wear medals. Therefore I think the hon. member was ill-advised to bring up the question of wages.


Ian Alistair Mackenzie: May I ask the hon. member one question? Is there one country in the world which pays as much for rehabilitation benefits as we do?


Mr. ROSS (Souris):: The hon. member did not want the country to know that.


Thomas John Bentley: I should like to advise the committee that I was replying to a question of the hon. member-


Ian Alistair Mackenzie: I ask you another one.


Thomas John Bentley: Not yet. The hon. member for New Westminster was dealing with wages, and I am pointing out that wages is an important form of income for a lot of people.


Ian Alistair Mackenzie: May I repeat my question? Does the hon. member know of any country in the world that pays as much for out-of-work benefits or rehabilitation benefits as Canada?


Thomas John Bentley: I shall answer that question after a while. I have the floor at the present time. The matter of wages does not enter into that. The hon. member for New Westminster asked the hon. member for Qu'Appelle whether the wages over there were over $50 a month. I wish to point out that a large section of our population will be asked to live on and pay rent with that amount of money. That has nothing to do with whether it is comparable or not with what is paid1 to veterans in other countries and here.


Gladys Grace Mae Strum: 
Ian Alistair Mackenzie: In New Zealand
currency.


Gladys Grace Mae Strum: Yes.


Thomas John Bentley: That buys bread and butter in New Zealand.


Gladys Grace Mae Strum: In comparing the economy of New Zealand there are two or three things that many of us have not yet grasped. New Zealand is about the size of Saskatchewan. It is a country of a million and a half people. They lack minerals; they have not a drop of oil; they must import all of their oil products;

National Housing
they import their metals; they have very little soal and very little timber. They live on the export market. When you compare the economy of Canada with that of New Zealand you are comparing two things that are not comparable because we have so much more than they have. We should be able to do so much more than they are doing because their economy is necessarily limited by their resources.


Ian Alistair Mackenzie: I wish to say just one word. As one who is proud to be a Canadian, may I say I am sick and tired of hearing hon. members quoting New Zealand and saying that it has so much more virtue than Canada. As a matter of fact, we are far ahead of New Zealand in many respects. I am reminded of George Canning's famous phrase:
A sturdy patriot of the world, alone friend of every country but his own.


Gladys Grace Mae Strum: I do not want to be misunderstood or to give the impression that I think Canada is not a good country.


Ian Alistair Mackenzie: The very best in the world.


Gladys Grace Mae Strum: But I do say this, that in the commonwealth of nations New Zealand has pioneered as a legislative laboratory. New Zealand was the first country in the world to pay old age pensions. New Zealand was the first country to give women the vote-that may or may not have been a good thing. If there is anything that any part of the commonwealth has done that we can profit from we should be big enough to admit that and use its experience to our own advantage. We have so much more here than New Zealand can ever have that I think we would be well advised to use it as they have done.


Thomas Reid: My name has been mentioned in the discussion and I think I have the right to reply in order to keep the record straight. My chief reason in rising to ask a question about wages in New Zealand was that if a man pays $20 a month rent for a home and receives only $80 a month in. wages, one wonders how he can carry on. My sole reason in asking about wages was to draw a comparison between what they are charged for rent and what they earn.


William Ross Macdonald: May I remind the committee that we are considering a bill to amend the National Housing Act. I have given considerable latitude in discussion, but I think the committee should now confine itself to a discussion of this bill.


Donald Methuen Fleming: Section 1 of the bill introduces a definition of cooperative housing projects. What I am interested in is, what
substantive provisions in the act are contemplated with reference to cooperative housing projects? A new definition is introduced here, and I do not find in the other sections of the bill any detailed provision for what is to happen with regard to cooperative housing projects.


James Lorimer Ilsley: Cooperative housing projects qualify, at the present time, for home ownership loans under the National Housing Act. This is just to define what a cooperative housing project is.


Donald Methuen Fleming: There is no word about it in the other section of this bill, no detailed provision.


James Lorimer Ilsley: No; this is an amendment to the housing act.


Donald Methuen Fleming: That is what I am speaking of.


James Lorimer Ilsley: The National Housing Act refers to it. Section 4, subsection 3, of the National Housing Act reads:
Notwithstanding anything contained in the two last preceding subsections, a joint loan may be made by His Majesty and an approved lending institution with which His Majesty has entered into a contract under this section to a trustee or corporation constituted or incorporated for the purpose of constructing and managing a cooperative housing project if-
Certain conditions are complied with. There is no definition of a cooperative housing project. This gives a definition of it.


Donald Methuen Fleming: There is no other provision in the new bill with reference to a cooperative housing project.


James Lorimer Ilsley: No.


Donald Methuen Fleming: The amendment is simply to define the existing terms of the old act?


James Lorimer Ilsley: Yes.


Alexander Malcolm Nicholson: This does not make sense to me. The bill says:
Section 2 of the National Housing Act, 1944, chapter'46 of the statutes of 1944-45, is amended by adding thereto after paragraph 5 the following paragraph.
I cannot see where this fits into the present act.


James Lorimer Ilsley: Section 2 is the interpretation section of the National Housing Act. Subsection 5 defines contractor and section 5 (a) will define cooperative housing project. It is put in alphabetical order; that is all.


Alexander Malcolm Nicholson: Can the minister give us any information as to what will happen when this section comes into force? Are we likely to get some action in the field of housing?
National Housing


James Lorimer Ilsley: Cooperative housing projects may borrow under the housing act. They are expected to do so. I am told that one loan has been made, to one project.


Alexander Malcolm Nicholson: Would the minister say where it is?


James Lorimer Ilsley: In Ottawa.


Alexander Malcolm Nicholson: Would the minister indicate whether a cooperative farm, for example, wishing to embark on a cooperative housing programme, would be eligible for a loan under the act now that this section has been added?


James Lorimer Ilsley: Is this a cooperative farm with a number of houses on it?


Alexander Malcolm Nicholson: We will say there are to be ten houses on the cooperative farm which they wish built as a unit, where they might have central heating and lighting.


James Lorimer Ilsley: Yes, that would be eligible.


Alexander Malcolm Nicholson: What would be the procedure; -how would they go about securing the loan?


James Lorimer Ilsley: They apply to a lending institution, and the national housing administration contributes its share when the plans are passed and the loan is made, the same as with other loans under the act. Instead of lending to an individual, you lend to this group.


Alexander Malcolm Nicholson: Without this section it would not have been possible, would it?


James Lorimer Ilsley: Yes, it would have been possible, but this section defines cooperative housing projects. It was already possible under the act to lend to cooperative housing projects, but there was no definition of them.


Alexander Malcolm Nicholson: Did I understand the minister to say that one such loan had been made in the city of Ottawa?


James Lorimer Ilsley: That is right.


Mr. GILLIS:: Does this measure supersede or interfere with already established provincial acts in the field of housing?


James Lorimer Ilsley: It does not interfere with them.


[Stage Direction]
Section agreed to.
On section 2-"Cost of construction."
Donald Methuen Fleming: This section is designed apparently to pu-t into statutory form- one of the amendments provided by P.C. 392. We see introduced the words "and carrying charges", but there is no definition in the amending bill or the present act in regard to

carrying charges. It seems to me that in a situation of this kind it is highly desirable that there should be a clear definition of the items which enter into carrying charges.


James Lorimer Ilsley: It is generally understood to be the interest on money tied up during the period of construction. I am told that the question of preparing a definition was considered, but it was thought to be unnecessary since the -term is so well understood.


Donald Methuen Fleming: With great respect I think there could be room for considerable disagreement as to what should be included under carrying charges. We all think of interest on borrowed money, but one also thinks of insurance, taxes and so on. Then there is depreciation; and what about amortization and so on? With respect I would suggest that this is one term which should be defined. A number of terms are defined in this act; we are introducing one new definition already, and I would urge that this term be also defined.


James Lorimer Ilsley: These are the carrying
charges during the period of construction, the charges necessary to complete the housing project. What could they be apart from interest on the money?


Donald Methuen Fleming: What about taxes? What about insurance?


James Lorimer Ilsley: It would include that, I think.


Alexander Malcolm Nicholson: In this section reference is made to farm housing. Could the minister give us some information as to just what the present procedure is in making housing available to farm dwellers under the act? I had an inquiry of this kind last summer; a family had their house destroyed by fire. I took up the matter with the department, who advised the family to secure the loan from the local bank, but the local bank did not have any information and was not interested in negotiating a loan. That was in Saskatchewan. What is the machinery through which farmers will work in securing loans for the construction of housing?


James Lorimer Ilsley: Under the National Housing Act?


Alexander Malcolm Nicholson: Yes.


James Lorimer Ilsley: Just the same as anyone else building a house; the application is made to a lending institution. There have not been many loans to farmers under the National Housing Act. However, the act is available to them if they wish to make such application.

National Housing


Alexander Malcolm Nicholson: In Saskatchewan, for example, we have no lending institutions which have been handling national housing loans; at least that is the case in my constituency. What provision have we for farmers in the constituency of Mackenzie, we will say, to negotiate loans?' Apparently there are no people nearby to inspect the site or to supervise the construction. Will it be possible for people in those areas to obtain loans for the construction of houses?


James Lorimer Ilsley: Up to November 30 ninety-two loans had been made in Saskatchewan.


Alexander Malcolm Nicholson: To farmers?


James Lorimer Ilsley: I do not know how many have been made to farmers. The lending has not been large in Saskatchewan, but it is increasing.


Alexander Malcolm Nicholson: Could the minister say whether any loans have been made to farmers?


James Lorimer Ilsley: I have not that information.


James Arthur Ross: Even apart from
farmers the situation last fall was that people in villages of a thousand1 or fifteen hundred people could not come under this legislation. The lending institutions refused to operate outside the large centres. I know people who were keen to act as agents for some of these companies, people who wanted to build- homes themselves and who could have obtained materials for the construction of ten or a dozen houses in towns of eight hundred to a thousand people. They interviewed a number of insurance companies and other lending institutions, who all claimed they would not operate outside large centres. Has anything been done in recent weeks to make money available under this scheme in towns or villages, outside the larger centres, quite apart from farm operations?


James Lorimer Ilsley: In the past they have
operated to some extent outside the large centres, and there are special inducements under the National Housing Act to encourage them to do so. The assumption of risk by the government is greater in such areas. But the situation is susceptible of much improvement; I will put it in that way. This corporation we are setting up, the central housing and mortgage corporation, has as one of its main functions extending the benefits of the National Housing Act to all areas right across the country. If it is not working; if it is too concentrated in these benefits, I will expect this corporation to make recommendations to me for such steps as may be necessary to remedy the situation. When the bill was before the 47696-217
house previously I think I said that in order to make it work-I was going to say for our own satisfaction but certainly for our own peace of mind-we shall see to it that the benefits of the National Housing Act are not too greatly concentrated in cities.


James Arthur Ross: That is just the point I wished' to make, because they simply have not been operating outside the larger centres. That has been the case on- the prairies, at any rate, and I was wondering if you were moving to do something about it. I am not blaming anyone because the machinery is not available, but the finance people themselves have refused to operate under it in towns and villages, at least on the prairies, and I am wondering if something could be done to make it available to them.


James Lorimer Ilsley: We will do everything we can.	'


Alexander Malcolm Nicholson: Can the minister tell us how many loans, if any, have been made under the act to farmers in any part of Canada?


James Lorimer Ilsley: I will try to get that information; I do not have it here. [DOT]


[Stage Direction]
Section agreed to. .
Sections 3 and 4 agreed to.
On section 5-"Low-rental housing project."
Donald Methuen Fleming: I notice that the words which have been introduced to give the minister power to admit others than families with low incomes to this form of housing do not make any reference to economic rental or lower rental. In other words, in view of the underlined1 words in the last four lines of this section, apparently it is not open to the minister to rent to veterans' families at anything less than the economic rental. If the minister will refer to the earlier words he will see that the provision calls for leasing to families of low income at the economic rental therefor, or at a lower rental; and- then the section goes on to say "or to such other persons", and so on.


James Lorimer Ilsley: What was the first provision the hon. member read?


Donald Methuen Fleming: I am dealing with the
underlined words as they appear in the last four lines of section 5, and I am pointing out that at the place they are introduced they follow these words:
*at the economic rental therefor, or -at -a lower rental.
9 If the minister introduced the new words before those it would have been possible to

National Housing

rent to families of veterans at less than economic rentals. Is it the purpose of the minister under this section not to permit rentals to veterans at less than economic rates? I believe that is the only interpretation the section bears, in its present form.


James Lorimer Ilsley: This is a definition of low
rentals. It is a definition of "low-rental housing project". That is, it is a housing project undertaken to provide decent, safe and sanitary housing accommodation, and so on.


Norman James Macdonald Lockhart: By a municipality.


Donald Methuen Fleming: It might be a limited
dividend housing corporation.


James Lorimer Ilsley: Yes, the section states:
"Low cental housing project" means a housing project undertaken to provide decent, safe and sanitary housing accommodation complying with standards not exceeding those approved by the minister, to be leased to families of low income at the economic rental therefor or at a lower rental or to such other persons as the minister under agreement with the owner may designate, having regard to the existence of a condition of shortage, overcrowding or congestion of housing.
It is to enable him to rent premises to persons not in the low income group, if he considers it necessary to do so. It is designed to enable the leasing to veterans, even though they are not of low income.


Donald Methuen Fleming: I understand that; but I take it that the purpose of the section is to make it clear that in the case of rentals to veterans' families, they do not qualify as families of low income, as the section now stands.


James Lorimer Ilsley: They do not have to be
families of low income in order to qualify for these premises.


Donald Methuen Fleming: All will agree that we want to see every benefit of the act extended to veterans' families. The note makes reference to veterans' families. It may be that the minister intends to pass orders in council or to make regulations which will place that interpretation on the new section. I would point out that if it is intended to make this accommodation available now to veterans' families who are not within the low income group, the statute should make that provision, instead of its being left to become a matter of regulation on the part of the minister. If that is the clear intention, then it should be so expressed.


James Lorimer Ilsley: I think that would be too
restrictive. It can be provided for in agree-

ments with limited dividend corporations, or other owners. This simply gives the minister some latitude.


John Oliver Probe: It appears to me that the minister, through his holding company, is going to condone a lowering of housing standards, as it is now permitted by progressive municipal bodies. Under such conditions he would permit lower standards of construction?


James Lorimer Ilsley: No, that is not so. The object is to see that luxury housing does not qualify for benefits under this section. That is, we say that very heavy loans of dominion government money are to be made, and that the housing cannot be too expensive.


John Oliver Probe: I agree with that explanation.
The second point is this: Does the minister foresee a considerable use by the low-rental group of citizens of the housing programme to be facilitated by this measure, or is he making provision that the low-rental group may perhaps be superseded by a moderate income group who could pay the economic rentals of these buildings? Has the minister any statistics respecting rentals under this project?


James Lorimer Ilsley: No, I have not. But I may as well say that, under present costs, economic rentals are not low rentals. We hope they will be at a later date, and it is possible that they may be. But at the present time costs are so great that all we can honestly say is that the rents will be kept down as low as costs will justify. I cannot give a figure; but they will not be what are ordinarily known as low rentals.


Angus MacInnis: If houses are rented at something lower than an economic rental, then obviously something will have to be made up. Who will make it up?


James Lorimer Ilsley: "Economic rental" is a technical term, defined in this way:
"Economic rental of a family housing unit" means a rental at the rate of 12 per centum per annum of the cost of construction of the family housing unit.
With the financial assistance we can give, probably 12 per cent will not be necessary. It will not be economic rental within the meaning of the definition; nevertheless it will be a return on the money.
Section stands.
Progress reported.
At six o'clock the house took recess.

Income War Tax
After Recess
.The house resumed at eight o'clock.



INCOME WAR TAX ACT

[Stage Direction]
The house resumed consideration in committee of bill No. 234, to amend the Income War Tax Act-Mr. Ilsley-Mr. Macdonhld (Brantford City) in the chair.
On section 8-'"Accumulated undistributed income."	_
James Lorimer Ilsley: I suggest that section
94(1)(c)(i) be amended so that it will read: "the income of the company that was liable to taxation under this act." I suggest also that there be no addition to the next subparagraph (ii). The amendment proposed by the hon. member for Muskoka-Ontario was chat the words "other than income arising out of the sale or other disposition of a capital asset" be added at the end of the paragraph. That is not income and never has been regarded as income, and if would be unwise to toy with the idea of its being income at all by suggesting an amendment to the act.


James MacKerras Macdonnell: The only comment I would make is that my suggestion was that, while it is not income liable to taxation it might be deemed to be such, but if the minister is satisfied after consideration that there is no danger of that contingency arising, I am satisfied to let it go as it is.


James Lorimer Ilsley: The kinds of income not liable to taxation are listed in the act. Profit on a capital asset is not income at all and we should not admit the possibility of its ever being considered as income. I will ask my colleague to move the amendment to paragraph (i).
Mr. ST. LAURENT:	I move, Mr. Chairman:
That the words "calculated in accordance with this act" in lines 31 and 32 on page 8 of the bill be deleted and the following substituted therefor: "that was liable to taxation under this act."


Harry Rutherford Jackman: Does that refer to paragraphs (i) and (ii) ?	.


James Lorimer Ilsley: No; just paragraph (i) is amended. The other remains as it is.


[Stage Direction]
Amendment agreed to._
James Lorimer Ilsley: Perhaps we can consider clause 94 carried, Mr. Chairman.


Mr. McLURE:: 
William Ross Macdonald: I would remind the hon. gentleman-


Winfield Chester Scott McLure: These are just generalities. Mr. Chairman.


William Ross Macdonald: The Excess Profits Tax Act was passed some time ago and it is improper to refer to it now. May I remind the hon. member that we are dealing with section 8, new section 94, which- deals with private companies.


Winfield Chester Scott McLure: Yes. Well, that is what I want to deal with.

Income War Tax


William Ross Macdonald: The hon. member will be in order when, he is dealing with income tax on. private companies; otherwise he will not be in order.
Mr. McLtfRE: Thank you, Mr. Chairman. I assure you that I shall be in order. Running through these two acts as I perused them, I found these words outstanding, "discretion of the minister", for instance, under the deductions from income not allowed' as depreciation-


Joseph Arthur Lesage: On a point of order, I submit that the hon. member is completely out of order.


William Ross Macdonald: If the hon. member is dealing with anything other than income tax on private companies he is out of order.' I think it is the wish of the committee at this stage that we should be in ordfer with respect to the various items. There is a rule which I have quoted from time to time, that discussion in committee must be relevant to the clause under consideration. One hon- member says, "Why at this stage?" That rule has been observed through all the sittings of this committee. It has been the custom in the sittings of the committee to have a general discussion under clause 1. We had that discussion on this bill. Of course I am in the hands of the committee, but I understood it was their wish that general discussion should take place under the first clause and that after that all discussion must be relevant to the clause under consideration. I must therefore ask the hon. member to keep his remarks within the meaning of section 8.


Mr.   M@: Well, Mr. 'Chairman, you stated that you were in the hands of the committee. All I can say is that I am under your hands; if you thumb me down, I am down. I have some suggestions to offer here, and even if I may not be strictly in order I believe the suggestions are worth considering. In the amendments to the acts last night I noticed on every occasion the words "discretion of the minister" were omitted, and placed therein-


James Lorimer Ilsley: Mr. Chairman, I think my hon. friend realizes that he is not in order. I do not like to take advantage of rules of order, but at this stage he should not be making a speech on the general principle of the Income War Tax Act. It is entirely at variance with what we should be doing. We should be examining these sections one by one to see if they can be improved and what further amendments are desired. We are dealing with a highly technical section relating to the taxation of private companies' income

which is undistributed, and I feel that hon. members should confine themselves specifically to that section.


Winfield Chester Scott McLure: I will try to do so.


William Ross Macdonald: I must insist, as it is the wish of the committee, that reference must not be made to the acts which were passed last night. They have been completely passed; they have gone through all the procedure required in this chamber to put them into effect. Therefore they should not be referred to now.


Winfield Chester Scott McLure: Well, Mr. Chairman, I was referring to them only to show the amendments they had made in leaving out the words "discretion of the minister" and inserting therein "in the opinion of the minister." I could not see any difference. However, I will not deal with that any further. I wish to offer this suggestion with regard to appeals in the case of income tax on private-


James Lorimer Ilsley: Mr. Chairman, I am trying to be patient, but I do not like to see an hon. member repeatedly called to order, and, when he is called to order, say, "Mr. Chairman, I will now de^.1 with private companies" and then proceed with his manuscript to make a general speech when he knows he is out of order.


William Ross Macdonald: I am forced to rule that the hon. member is out of order. Does section 8 carry?


James MacKerras Macdonnell: I wish to ask a further question with regard to this undistributed income. I am sorry to do so, but frankly I am perplexed about this calculation, and I should be glad if the minister would say what is the basis of these tests which are here, and which do not immediately make themselves clear to me. I should like to know whether this is in accordance with the practice which has been followed in the past, whether there is the validity of long practice behind it; and alsOj I believe, it is based or supposed to be based on certain recommendations made in the Ives report. I was trying to find them but I could not do so. May I have the reference to the Ives report?


James Lorimer Ilsley: "Undistributed income" has not been defined in the past, although it is used in the Income War Tax Act. I am not aware that the Ives commission made any recommendation as to definition, but there was evidence before the commission as to what is "undistributed income... on hand". Those are the words. It was considered that the phrase was a little too loose and was susceptible of various interpretations, so that a

Income War Tax
definition was drawn up which is in accordance with the practice of the department in the past.


James MacKerras Macdonnell: Then might we have a short explanation of the additions and the subtractions? There are two additions and six subtractions, and I think it would be better if we could understand the basis.


James Lorimer Ilsley: The additions are, all the income of the company which was liable to taxation or was not liable to taxation. You start with that. That is inclusive; it covers all the income of the company.


Harry Rutherford Jackman: Shall I ask one question now?


James Lorimer Ilsley: All right.


Harry Rutherford Jackman: Just in connection with subparagraph (ii), "the income of the company in each of the said periods that was not liable to taxation under this act:" I assume that "the income of the company" will have a technical definition in the interpretation clause of the act.


James Lorimer Ilsley: Yes, it is defined in the act.


Harry Rutherford Jackman: Just for clarification: it will not include capital profits or capital losses?


James Lorimer Ilsley: No.


Harry Rutherford Jackman: It would include dividends from other Canadian corporations?


James Lorimer Ilsley: It would, yes, but those are non-taxable.
Mr. MACDONNELL (Muskoka-Ontario) Would the minister run through the six subtractions too?


James Lorimer Ilsley: Well, the subtractions are:
(iii)	laiU operating losses sustained by the company during the said periods,
(iv)	the amount by which all capital losses sustained in the said periods by the company exceeds all capital profits of the company in the said periods.


Harry Rutherford Jackman: May we pause there? The minister said just five minutes ago that the last thing he wanted to do was to import the idea of capital gains or capital losses into our income tax system; yet here is a net deduction from the amount of earned surplus to be available for distribution under the new section which will be lessened by the excess of capital losses over capital gains.


James Lorimer Ilsley: This shows the necessity of definition. Capital losses may be used to . reduce a surplus, even an income surplus.


Harry Rutherford Jackman: But no capital gains to increase it?


James Lorimer Ilsley: This is the amount by which all capital losses exceed capital profits. The profits do not augment it, but the losses diminish it. You strike a balance between capital losses and capital profits. If the profits are greater they are not added. If the losses are greater they are subtracted.


Harry Rutherford Jackman: But surely the point is, in order to do substantial justice to the owners of the company, the larger the earned surplus is-in fairness to the crown-the better for them, the more justice is done; and now, under this subparagraph (iv) earned surplus i? reduced by the amount of the capital losses. There may have been a capital loss which would wipe away all your earned surplus, and that would mean that there would be much less available for distribution under this relatively favourable section than otherwise. I think I am clear in my thinking on that. It would be unfavourable to the shareholders of the company if that were to be the case. You obviously cannot add capital gains to swell your surplus, and I do not see why you should deduct capital losses to diminish your surplus, from the point of view of taxation. On a balance sheet you might do it for appearances' sake, but that is the arbitrary act of a board of directors and has nothing to do with the taxation. I do not know why you import a capital profit or loss element into this at all. Why not leave it where it was? It may bring up the question we discussed before the dinner recess: if there were capital losses and they were taken off the earned surplus there is not that earned surplus to distribute; but I submit it is just a legal technicality. If you have cash available, or can come to the treasury and borrow it, you can pay off the full earned surplus. It is just a technical accounting figure.


James Lorimer Ilsley: I do not understand that argument. I think a surplus is a surplus; I do not think it is a fiction at all; and if a company had an earned surplus of a million dollars over a certain period and a capital loss of five hundred thousand dollars, it has only five hundred thousand dollars left there. Because these income tax rates may appear attractive, we could not let them distribute a million dollars and then get the money by borrowing on future earnings and distributing them on these rates.


Harry Rutherford Jackman: Not to the extent of impairing capital, but there are three or four ways of dealing with it; for instance, it could be made an earned surplus account, or a
Income War Tax

capital surplus account. There need be no
impairment of capital at all. If the assets are valued in the market place, even though there may be technically an earned deficit on the balance sheet you may still be able to distribute earned surplus or even part of capital without running into a technical distribution of capital. I do not understand why the minister brings in the capital element at all as a subtraction from earned surplus, because we certainly could not put it in as an addition.


James Lorimer Ilsley: It has always been the
practice.


Harry Rutherford Jackman: Well, some of us do not know why. It is, I think, a fair question. .


James Lorimer Ilsley: Shall I run over the rest of them? The next is:
(v)	the dividends paid by the company during the said periods except dividends that were paid exclusively out of a suimlus or .accumulated profits on hand prior to the first day of January, nineteen hundred and seventeen and that were not taxable as income of the shareholder.
Is there anything wrong' with that one?
Mr. JACdCMAN: No.


James Lorimer Ilsley: The next is:
(vi)	all income tax, business profits tax and excess profits tax paid by the company in respect of the said periods.
That is clear is it not? The next is:
(vii)	expenses incurred or disbursements made by the company during the said periods but not allowed as a deduction from income under this act.


Harry Rutherford Jackman: I	do	not understand
that one.


James Lorimer Ilsley: There are some expenses
which are not allowed as deductions. For instance, if a company were to pay an allied company excessive amounts for , some goods or services it might be disallowed; or, charitable contributions in excess of the amount permitted, if that ever happened, and I think it has happened, and so forth. But there are expenses which were actually incurred which are not allowed as deductions. The next is:
(viii)	that part of the income of the company for the said fiscal periods that has been taxed in the hands of its shareholders under section twenty-one of this act and has not been paid out by way of dividends during the said periods.
Those are personal corporations.


Harry Rutherford Jackman: I do not understand why; that is all.


James Lorimer Ilsley: It is deemed to be distributed. It has already borne the tax. If it is not in

the hands of the shareholder, and you cannot get it in the hands of the shareholder, they have paid the tax on it, and it is deemed to be distributed.


Howard Charles Green: Has the minister given any consideration to the suggestion that subsection 3 of section 96 of the act should be-


James Lorimer Ilsley: We are still on section 94.
Can we pass 94?


James MacKerras Macdonnell: I think we are perfectly clear on all except subparagraph (iv), and I do not think we are as clear as we should like to be on that. Will the minister say that that is part of the recognized practice which has been used?


James Lorimer Ilsley: The answer is, yes.


William Ross Macdonald: We now revert under
section 8 to new section 96.


James Lorimer Ilsley: There are two points about section 96. The first is the point raised by the hon. member for Muskoka-Ontario. This section-I am referring now to subsection 1-in my judgment is correct as drafted. The point was raised that the resolution was broader than the section, and perhaps it is. But resolutions are loose things; they are general and lacking in refinement and so on, and the statute is much more precise. But on page 73 of the report of the royal commission on the taxation of annuities and family corporations-the Ives commission-is found this passage:
We .recommend that any private company having .accumulated undistributed income on hand in ay, to the extent that such income was earned prior to the end of its 1939 fiscal year, apply for permission to settle the income tax liability that would arise on the distribution of such income to its shareholders.
The rest of it is irrelevant. The meaning of that we took to be-and we think that whatever it meant, this is what we should do- that we take the undistributed income on hand at the date of election, if it was earned prior to the end of the 1939 fiscal year. It is the undistributed income earned between 1917 and 1939 which is on hand at the date of the elections, and this clause is clearly based on that.


James MacKerras Macdonnell: But that is the thing that I questioned. The report covers the income earned between 1917 and 1939. Let us assume that between 1939 and the date of election there has been a loss of income. Let us further assume that before the time for distribution actually comes there might be a turn of affairs and the company would make earnings to recoup itself. Why is there any fairness in saying that the

Income War Tax
amount which is on hand in 1939 and which would have been distributed but for the loss intervening since 1939; if that loss is recouped, why should you cut off the company from chance of having an opportunity to distribute the amount which was on hand in 1939? It does seem to me it is pressing those two words in the report "on hand", rather hard. Looking at the fairness of the situation and what I understand to be the intent and scope of .the terms of reference of that report, it seems to me that the act steps in and undertakes to alter, by reason of something which happens after 1939, a situation which existed in 1939, and which I understood was the situation with which the Ives report was called upon to deal.
I am not assuming that parliament cannot deal differently from the Ives report if it wishes to do so, but the minister is quoting the Ives report, and 1 think he is pressing much too hard on those words "on hand".


James Lorimer Ilsley: I do not know that we can get very much farther by arguing the matter. I do not think it was anybody's intention to take the earnings that the company elects to distribute and allow those earnings to be paid out under this schedule of rates. That is what is being argued for here. Why stop at the date of paying out? Why not go away into the future? It was not the intention to take income that would be earned in 1946, 1947 and 1948 and allow it to be paid out under this favourable schedule of rates.


James MacKerras Macdonnell: Nor was it the intention to take what was earned in 1939 and to worsen the situation which existed in 1939,


James Lorimer Ilsley: We cannot run away into the future. We take the situation at the time they elect. They can elect on their 1939 surplus and they can distribute it.


Harry Rutherford Jackman: I cannot help feeling that the drafters of this section were frightfully legalistic and not very practical. Undistributed income on hand does not mean that there is so much money or so many liquid resources in the company representing that amount. It may be that the company has assets in the form of cash, in which case its capital and all the surplus balance is an amount of cash. It may be that a company has no cash, that it has only bricks and mortar, and all the capital and all the surplus and capital surplus, or anything else must offset only bricks or mortar. But that does not say that the company cannot get working capital or cannot
have earned surplus which is distributable. The words "on hand" used in the Ives report is a loose expression if one gets down to legal terminology. What is your earned surplus on hand at the end of the year? It is simply the amount showing in your balance sheet. Take the earned surplus of a company and the liabilities; there is no identity on the asset side representing the exact amount in the earned surplus on the liability side. It is just on the one side, on the asset side, and as long as the two sides of the sheet balance under the double entry system, it is all right.
I see no significance in the words "on hand. What is likely to happen if a company finds that it had an earned surplus in 1939 which was greater than its earned surplus at the time it elects to operate under this section of the new act? Either the company have been doing so poorly that they have had losses, or they have been doing rather poorly but have paid out more in dividends. If they have paid out more in dividends I think the minister will be satisfied that the government will get ^ its share; that is, if they paid out more in dividends than they earned' and thereby reduced the earned surplus. There should be no hesitation on his part to allow the company to take its 1939 earned surplus as the basis for distribution. I do not see that there can be any very favourable position for a company that has reduced its earned surplus, that has had either a loss or has paid out more money than it has earned. The government gets a higher rate of taxation on it, and it could not be prejudicially affected by that action under this section whereby the 1939 earned surplus is reduced.


James Lorimer Ilsley: I should just like to hear what my hon. friend would say if the Department of National Revenue exercised its powers under the Income War Tax Act to compel the payment of surplus out in dividends and then refused to permit a deduction of capital loss. I know my hon. friend would say that there was no surplus then, to the extent of the capital loss.


Howard Charles Green: What about the other
suggestion?


James Lorimer Ilsley: The hon. member for Vancouver South, whom I always wish to accommodate, made a suggestion.


James MacKerras Macdonnell: Why can you not extend that to us?
Income War Tax


James Lorimer Ilsley: This section 96 (3) (b) is all right as it stands, but there is no reason why these words should not be added, and I will move accordingly:
That the following he added at the end of subparagraph (b) of subsection 3 of section 96 at line 51 on page 10 of the bill:
"Provided that any instalment or part thereof may be paid before the date on which it becomes payable, interest thereon ceasing as from the date of payment."


[Stage Direction]
Amendment agreed to.
James MacKerras Macdonnell: I wish to make one more last appeal to the flinty heart of the minister, pointing out to him that in the recommendations of the Ives report the following is found:
That capitalization or distribution of surpluses earned prior to the end of the 1939 fiscal year be permitted . . .
There is a definite recommendation in the report.


James Lorimer Ilsley: That is merely a summary of the recommendations.
Section as amended agreed to.
Bill reported, read the third time and passed.



NATIONAL HOUSING ACT


[Stage Direction]
The house resumed consideration in committee of bill No. 239, to amend the National Housing Act, 1944-Mr. Usley-Mr. Macdonald (Brantford City) in the chair.
On section 5-"low-rental housing project."
Alexander Malcolm Nicholson: Would the minister define what he has in mind when reference is made to families of low incomes? What groups would be included?


James Lorimer Ilsley: It is not defined.


Alexander Malcolm Nicholson: Although it may not be defined, I think it would be well to have some statement from the minister as to what income ranges might be included. Who could hope to get under the wire?


James Lorimer Ilsley: It is defined in a kind of way, but that does not mean much.


Donald Methuen Fleming: Paragraph (11) of section 2 of the act defines it.


James Lorimer Ilsley: Yes, 'but that does not lead to much. It is defined in this way:
"family of low income" means a family which receives a total family income less than five times the economic rental of a family housing unit required to provide sufficient accommodation for the said family.
fMr. Macdonnell.]


Alexander Malcolm Nicholson: In the report on reconstruction, dealing with housing and community planning, at pages 110 and 111 we have some interesting paragraphs regarding tenant families in the lower third of the income bracket. It points out that in the twelve metropolitan areas the average family earnings would be $703 a year. On that basis, accepting the definition the minister has given, people living in those areas should pay rent of about $12 a month. In some of these cities the average is a great deal less than $703. In Saint John, New Brunswick, for example, the average annual family earning is $595. In Windsor it is a good deal higher, $943. I understand that about 177,000 families in Canada fall within this range, with an average of $703, and as I have pointed out on previous occasions it is very difficult for people in that income group to find places to live. Those who are being discharged from the services are finding it almost impossible to secure living quarters right across the country, and I think at this session the minister should give some indication as to what the administration has in mind to make housing available for people getting less than $1,000. I do not think the legislation now on the statute books will make it possible for life insurance companies or any builders to provide suitable units that can be rented at $12 a month. I believe some authority, either municipal, provincial or federal, must be prepared to bridge the gap between what these families can afford to pay and what might be regarded as an economic rent; and in my opinion the federal government should take that responsibility. We are all very proud of the performance of the minister during the last several years, when a difficult job had to be undertaken. ' We were told that if it is physically possible somehow or another it will be made financially posible.


James Lorimer Ilsley: But it is not physically possible.


Alexander Malcolm Nicholson: I think it is physically possible to build houses such as they have built in Boston, or Philadelphia, or New York, or Chicago, so that people who are getting less than $1,000 a year can have running water, electric lights and steam heat. It is true they cannot be built next week or next month-


James Lorimer Ilsley: That is what I mean.


Alexander Malcolm Nicholson: -but I think we must have legislation that will get the work started immediately. We still have not any legislation that will provide any units of any consequence for people getting less than $1,000 a year.

National Homing
Again in this report we have a section on Philadelphia. At page 202 we are told that in the low-rental projects in that city a family getting S525 a year rents a one-bedroom apartment at $11.25 a month. A family getting from $526 to $700 will pay $14 for the same accommodation. A family getting from $700 to $900 will pay $17.50, and a family receiving from $900 to $1,200 will pay $22. Hon. members might assume there would be some friction when people living in the same apartment block find that one family is paying twice as much as another, but a good socialist principle has been accepted, that they should give according to their ability, and those who are getting twice the income of the others do not complain because they have to pay twice the rent for exactly the same quarters. If you have a larger family and require four bedrooms, and are getting less than $525 a year, you pay $12.75 for a modern apartment. If in the United States in the ten years before the war they were able to appropriate funds to build houses for their people in these low income brackets, it does seem to me that in the closing hours of 1945 we in Canada at least should be prepared to pass legislation that will provide a bridge between what people in the lower income brackets can pay and what must be paid, so that housing may be made available to this very large group in the dominion.


James Lorimer Ilsley: To begin with, the figures of incomes for Canadians are for the year 1941, are they not?


Alexander Malcolm Nicholson: That is true.


James Lorimer Ilsley: The average would be much higher at the present time.	-


Alexander Malcolm Nicholson: I am sure it is, but if we could count on maintaining the 1941 income for the next ten years I think the majority of the Canadian people would consider that we had passed through the period of transition quite successfully. Some of the provisions of this bill would indicate that the minister's own department does not anticipate that we are going to maintain the 1941 income level for the next five years.


James Lorimer Ilsley: 194.1?


Alexander Malcolm Nicholson: One of the later clauses assumes, I take it, that we are going into a depression, that we are not going to maintain an income level as high as that of 1941.


James Lorimer Ilsley: I did not think there was any assumption in the National Housing Act or anywhere else that we were going into a depression.


Alexander Malcolm Nicholson: Later on you provide that the federal government will take up fifteen per cent of the losses. I have not the section before me at the moment, but as I understand it we have not had any losses in the administration of the National Housing Act to date. If for the future we are going to plan on losses of fifteen per cent it will mean that one person out of every six or seven can expect to have his home foreclosed, * or to be unable to meet the payments; otherwise I cannot see any s^nse in making provision for the federal government to assume losses of that proportion. But we will discuss that later on.	,


James Lorimer Ilsley: Because we make such provision does not mean that we expect losses of that kind. We get lower rates of interest, betterTerms, and so on, if we give a guarantee. The hon. gentleman is urging subsidized housing at the present time, is he not?


Alexander Malcolm Nicholson: Yes; otherwise I do not see any chance of returned soldiers who are coming back and looking for jobs finding anywhere to live, under the legislation we have, or in the houses the life insurance companies are going to build.
I did not have the Financial Post with me yesterday, but in the issue of November 3 a front page article states, "$40 to $55 rents for insurance housing seen." Unless there is some subsidized housing, a large group of Canadians will not be able to take advantage of the new houses which have been built.


[Stage Direction]
Section agreed to.
Sections 6 and 7 agreed to.
. On section 8-Institutional holding company.
John Oliver Probe: Before we pass section 8 I should like to draw once again to the attention of the minister his statement of August 5, 1944, as reported in Hansard, to the effect that the government does not believe that a building programme invoking the assistance of municipal or provincial bodies is necessary, and that this legislation is framed accordingly.
When discussing section 5 before recess the minister indicated that in all probability housing accommodation would be made available to other than those in low income groups. I foresee a situation in which all the housing we will provide under this measure will be made available to people of moderate rather than of low incomes.
The minister has definitely stated that housing corporations sponsored by provincial governments or municipalities are not to be considered in any way under this measure. My home city of Regina has been forced

National Housing

during the fall and winter to build about a hundred temporary shelters to look after part of the requirements of our citizens. These are certainly no more than shelters, because most of the amenities of living do not exist there. At a cost of something over 1100,000 only a roof is supplied, and in two years that money will be wasted. That, it is considered, is the approximate life of the buildings being erected. Certainly these cannot be called homes.
Under present financial arrangements it is possible that the minister will secure a maximum of about 100,000 homes. This number of homes at $4,000 would amount to $400 million, which is to be made available through the use of five per cent of the assets of the insurance companies, plus guarantees by the dominion government. That would provide 100,000 homes or, according to the Curtis report, about one-seventh of our present shortage. In any event, our municipalities or private owners must supplement what the minister is prepared to do, by the terms of the various housing acts. He has said that free enterprise will be permitted to handle this emergency, and yet in answer to the hon. member for Mackenzie he said that it was physically impossible to build these houses.


James Lorimer Ilsley: I should have added "in the near future".


John Oliver Probe: I had a communication just this week from the carpenters and joiners union of my city, in which they point out that they have seven carpenters unemployed. That may not seem like a large number, but those seven carpenters are unemployed because there are no materials to work with.


James Lorimer Ilsley: That is what I mean.


John Oliver Probe: I point out to the minister that he has not taken positive steps to secure materials. In the first place, we are turning over large sums of government money to the mortgage and investment companies, and, by this measure, we are guaranteeing profits on their commitments to the extent of two and one-half per cent of their invested capital. Then we are not taking adequate steps to make sure that the materials produced in Canada remain here.


Mr. MITCHELL:: The hon. member has been talking about keeping materials in Canada. Would he use the same analogy, so far as wheat is concerned? He would have a great time eating all our wheat.


John Oliver Probe: In Canada we have ample wheat for the needs of our people and we are very happy to dispose of our surplus at prices below the world market. The minister

has not heard those who represent agricultural communities complaining about the fact that we are selling under the world market. We feel in duty bound to assist world needs to that extent. But when one hears our lumber merchants talking about the price of hemlock-


The ACTING CHAIRMAN (Mr. Golding):: We are dealing with housing.


John Oliver Probe: I was trying to answer the Minister of Labour.


Humphrey Mitchell: The hon. member was just trying. ,


John Oliver Probe: He was drawing a red1 herring across my argument.
The point is that we are exporting lumber. People in Europe are not eating it, and it is not being exported only to the devastated countries of Europe, as I have pointed out before, from figures provided to me by the Minister of Trade and Commerce. Why does not the minister keep those supplies at home, so that carpenters can go to work? Why does he not give some impetus to apprenticeship, or to a training plan to have more carpenters on the job? We were told a few days ago that money was not the difficulty, and that it would not be a limitation in the building programme. Pour in the money; heaven knows we have been doing it for five years in connection with the war. We did not stint, because we had to get the materials.
We have those materials in Canada. We may need a little more coordination and, for a time, we may have to place an embargo on exports of building materials. We may have to train more builders. Those builders in the prairie provinces who are unemployed during winter months, because materials are not available, under proper planning could be working on housing.
We have the money; we can get the materials.; we can train the men. There are all sorts of men still in the services who would be glad to assist in this programme. Why in heaven's name can we not go to work on it? This is a national emergency, and still we are fiddling around, guaranteeing mortgage companies two and one-half per cent on their investments in connection with the building of houses. Then the minister tells us it is likely these will not be low-rental houses anyway, and that they will be taken by those in the middle-income group. The low-income people cannot afford to rent houses costing $4,000.


James Lorimer Ilsley: I do not know to how much of what the hon. member has said I should reply. He has made an earnest and sincere appeal to increase the supply of materials.

National Housing
The chief shortage is not that of lumber. The bottle-neck is in connection with soil pipe and brick.


John Ritchie MacNicol: Andi plumbing fixtures.


James Lorimer Ilsley: Plumbing fixtures of some kinds, yes. Those are the chief shortages. The hon. member has asked why in heaven's name we do not keep our lumber in Canada, and suggests that we should not send it to the United States.


John Oliver Probe: Keep enough of it-all of it is likely not needed.


James Lorimer Ilsley: That is a pretty delicate
matter. We have to keep up a certain flow of lumber to the United States if we are to rely on the flow of articles from the United States which we must have to live. Therefore we cannot tamper unrestrainedly with the flow of lumber to the United States. Lumber is not the bottle-neck anyway. It is these other things.


John Oliver Probe: Could not our trade commissioners arrange for builders supplies, such as plumbing and electrical equipment, which are in plentiful supply in the United States to be sent to this country?


Humphrey Mitchell: They are just as badly off there as we are.


John Oliver Probe: I would ask the minister
to reconsider his definition of "approved lending. institutions" to make it possible for corporations like my own city to go into this business. They have spent money in the past on temporary shelter and it has just gone down the drain. I should like to see the definition of lending institution amended so that any housing corporation established by a provincial or municipal government or by an otherwise approved lending institution will be given a chance to meet this housing emergency.


James Lorimer Ilsley: Suppose I were disposed
to do exactly what my hon. friend wants; I think the form that my approval would take W'ould be to approve municipally or provincially owned limited dividend corporations. I think that would be the practical approach within the framework of the act.


John Oliver Probe: Does the act now permit
of their doing just that very thing?


James Lorimer Ilsley: Yes, it permits it.


John Oliver Probe: And would the minister give it his blessing and make it easier for them to get loans? In my own city, for instance?


James Lorimer Ilsley: There has been no suggestion that the municipality of Regina would form a 47696-2I8i
limited dividend corporation and take advantage of the loans on the very favourable terms provided by the act. Some municipalities might. I am not sure. There has been a suggestion or two which would come under that description and one is under consideration at the present time. But for the reasons which the hon. gentleman has stated we are fighting shy of these arrangements under which a junior government puts up a very small sum of money and the federal government puts up 90 per cent of the money because, as I stated at the time, business relations between the federal government and junior governments are sometimes a little difficult, and one can never tell when the difficulty is going to'crop up because there is a general feeling that the federal government is fair game; that if you can get what you want out of the federal government, you do. That is one reason.
Another reason is that a great many municipalities are not preperly set to give independent and proper management to this business. The time may come, and before very long, when that type of corporation will be approved. Each would be examined on its own merits to see if it qualified. There is nothing in the act which excludes such projects if they are in the form of limited dividend housing corporations. Some municipalities would not wish to undertake that. Housing is an important business with all sorts of difficulties and embarrassments that are not to be lightly undertaken. Some of the municipalities had an unfortunate experience following the war of 1914-18 which they do not wish to repeat.	.


John Oliver Probe: The experience of continental countries is that public housing is the' only solution for the housing situation. I am speaking of capitalist countries too, not only socialist countries. Capitalist Britain had to go into a scheme of housing under public housing authorities, and they put up over one million houses from 1919 to 1939. That scheme was a success. They put up houses which rented for eight shillings a week. That was the average rental for a four to five-roomed house. In answer to the hon. member for New Westminster, who queried the hon. member for Qu'Appelle this afternoon about rentals, let me say that in New Zealand the rentals for accommodation in a four-roomed house averaged $3.60 a week and for a six-roomed house $5 a week. We have to do the thing along these lines sooner or later, and why not now? There is one other restriction which the Minister of Finance might remove if he will give this his blessing. That is, that the municipal housing corporations
National Housing

are to-day paying too high a rate of interest. I think he will have to lop that rate of interest to encourage them to go into low-rental housing.


Alexander Malcolm Nicholson: In support of what the hon. member for Regina City has said, I might remind the minister that following the housing experiment after the last war we went into a serious depression, but we had the minister's assurance a few minutes ago that we shall not have a depression of that sort.


James Lorimer Ilsley: That is right.


Alexander Malcolm Nicholson: We now have the National Housing Act, and having had more experience than we had after the last war I think municipal housing might turn out differently now from what it did then. I would ask the minister, if the government of Saskatchewan desired to negotiate a contract with the federal government, could they expect to get the money on similar terms to those enjoyed by the life insurance companies? I asked the minister for the number of units which have been approved in Saskatchewan. Can he give that information now?


James Lorimer Ilsley: For farmers?


Alexander Malcolm Nicholson: For both groups.


James Lorimer Ilsley: There have been ninety-two loans under the new housing act in Saskatchewan.


Alexander Malcolm Nicholson: Would it be possible for the government of Saskatchewan to get money for housing under similar terms to those given to the life insurance companies? While there are sometimes differences 'between Ottawa and the provinces, I understand that the minister had his own way in the seed grain dispute, and I do not think there will be any insurmountable difficulties in connection with housing.


James Lorimer Ilsley: There is no provision for guaranteeing the two and a half per cent return except in the case of life insurance companies, and that is done to protect the policy holders and to enable the companies to invest trust funds. Loans could be granted to a limited dividend corporation, and the question whether a limited dividend corporation the shares of which were owned by a provincial government would be approved is one to which I would give consideration. We certainly never contemplated anything like that when we set up the act, but it is a matter that could be given consideration.


Alexander Malcolm Nicholson: Our Saskatchewan
citizens have been paying life insurance for a great many years, and these premiums have

gone outside the province in the past to Toronto, Montreal and Waterloo. Unfortunately we now find that these companies which we have been supporting generously are not prepared to negotiate loans to encourage housing development in Saskatchewan. That being the case, I think the federal government might consider making federal funds available to a corporation that would be completely publicly owned in Saskatchewan, and in view of the fact that our housing needs are possibly greater in Saskatchewan than in any other province, a particularly good case might be made by taking all the factors into consideration. We have had very few war industries there; many of our service people are going back, and I regard housing as one of the undertakings that might provide a great impetus to business all along the line. That was the experience of Great Britain during the depression years. When the United States ' and Canada seemed to be severely paralysed industrially, in Great Britain, because they undertook building projects such as the hon. member'for Regina City has mentioned, they were able to bring prosperity to the hardware merchants, the plumbers, the tinsmiths and the carpenters. In Saskatchewan we would have a special case to get funds on conditions similar to those on which the insurance companies are getting them in other parts of the province.	'


[Stage Direction]
Section agreed to.
On section 10-Joint loan losses.
Alexander Malcolm Nicholson: I referred to this section before, and I would ask the minister to explain why he has suggested fifteen per cent in view of the excellent performance of National Housing ever since it was set up. I understand, from one of the minister's recent reports, that we have lost less than $100. I think this should be lower.


Donald Methuen Fleming: The act has not been used.


Alexander Malcolm Nicholson: Yes; it has been used.


John Ritchie MacNicol: If. it had been used we would not be in the condition we are in to-day.


Alexander Malcolm Nicholson: I may say to the Progressive Conservatives that it did not get under way while they were in office. We did have a National Housing Act, and on page 327 of this report we have some statistics on the number of housing units built.


Donald Methuen Fleming: This is a different act today.


Alexander Malcolm Nicholson: That was a national housing act. However, the point is that less

National Housing
than $100 has been lost on the operations of the National Housing Act, 1938. That being so, I should think that five per cent as a guarantee from His Majesty would be a satisfactory arrangement, if we are not going to have another depression.


James Lorimer Ilsley: If we are not going to have another depression?


Alexander Malcolm Nicholson: I do not see that any guarantee should be given that one out of every six or seven is not to be foreclosed, or that there are not to be losses, and I say that in view of the past performances of national housing. In view of those performances I do not see why fifteen per cent is suggested.


James Lorimer Ilsley: This section 10 is a clarification. Under the act the crown puts up to twenty-five per cent of the housing loan and the lending institution seventy-five per cent. In the first instance, therefore, twenty-five per cent of any loss in respect of a housing loan is assumed by the crown. In addition, this clause authorizes the government to pay losses suffered by a lending institution on its share of the loan up to fifteen per cent of the total investments by the institution. Actually the guarantees vary in accordance with the size of loans and the location of the houses, varying inversely with the size of loan and directly with the remoteness of the locality. In other words, special encouragement is given the'building of small homes located in outlying areas in which lending institutions would not ordinarily invest. The hon. gentleman says that fifteen per cent is unnecessarily high having regard to the experiences of the past. But the National Housing Act began to operate about 1935 or 1936; there has been a rising real estate market from that time to this, and it is the most favourable period in the world to take. There naturally would not be any losses when values are getting a little higher all the time. It is not necessary to draw the conclusion that we shall have a depression from the apprehension that perhaps real estate values will not continue to rise trom now on. They may even decline somewhat.


An hon. MEMBER:: They should not rise.


James Lorimer Ilsley: No, I should not think so; ' but if they declined somewhat, then we are not going to have the same favourable experiences; that is, the lending institutions will not have the same favourable experiences as they have had in the past.


Alexander Malcolm Nicholson: The minister has mentioned one factor that interests me, namely, the activities in the remote areas. If he can give an assurance that the act will be made
operative in those areas I withdraw my objection, but previously he did not give any satisfactory answer to indicate that on the frontiers our citizens will be able to take advantage of the privilege. I realize that the cost of administration is a good deal higher as one gets into the northern countries. A great deal has been said about the possibilities in northern Ontario, Quebec and Manitoba. National Housing was not very much interested in going into those northern areas; and if the minister would give the committee some assurance that from now on the operations will be carried on in those remote areas, I can understand that the loss factor might be altered considerably in comparison with operations in the large centres in the older parts of Canada. Can the minister give us that assurance, that operations will be carried on effectively in the remote places?


James Lorimer Ilsley: The only assurance I can give is the assurance I gave this afternoon, that we are determined to get a wide distribution of the loans, and I shall certainly rely on this central housing and mortgage corporation to recommend measures and, if necessary, to have legislation that will bring about that result. As I said this afternoon, we recognize the responsibility of seeing that the loans are not concentrated in the big cities.


An hon. MEMBER:: They have been.


James Lorimer Ilsley: It is said they have been. If we are to make the National Housing Act a real success-it has been a success in the past in the sense that there were a very large number of houses built under it, and it has been a financial success so far as the government is concerned-but if we are to make it a social success and from that point of view a national success, then we have to see that there is a wide distribution of benefits. [DOT]


Alexander Malcolm Nicholson: Can the minister be more specific than that?


James Lorimer Ilsley: I cannot be more specific.


Alexander Malcolm Nicholson: I represent 57,000
people in parliament, and in the past we have not been in a position to take advantage of the housing administration. The life insurance companies have no large offices in that area, certainly not within several hundred miles, and what assurance can we have that houses can be built in an area like Mackenzie, under the legislation we now have on the statute books?


James Lorimer Ilsley: Only what I have given; that is all.


[Stage Direction]
Section agreed to.
Sections 11 to 15 inclusive "greed to.
National Housing
[Stage Direction]
On section 16-Life insurance companies may form institutional holding company or housing corporation.
Donald Methuen Fleming: In this new subsection 1A at the top of page 6, between clauses (a) and (b) the word "or" appears. I wonder why it is made alternative. Why should it not be an institutional holding company and an institutional housing corporation? Why is it confined to one or the other?	[DOT]


James Lorimer Ilsley: I certainly took it to mean both. They may cause to be formed an institutional holding company or an institutional housing corporation. That does not mean that they exhaust their choice, that they have to make a choice between the two. Certainly I did not understand that.


Donald Methuen Fleming: May I say with respect, I should have thought that clause as it stands means that the company can form either an institutional^ housing company or an institutional housing corporation, but not both. If it is intended to be both, why not let us use the word "and"?


James Lorimer Ilsley: If there is anything in the contention, the defect goes further than the extent which the hon. gentleman has pointed out, because it is intended that they may form more than one of either. The intention was that they might form more than one institutional holding company and more than one institutional housing corporation. Perhaps, therefore, we can amend the section so as to make it clear. I suggest that we let the section stand for the time being and go on to something else. If we use "and", then they have to form one of each.


Donald Methuen Fleming: Make it "and/or".


James Lorimer Ilsley: The justice department will not permit that.	[DOT]


Donald Methuen Fleming: Get a new department.


James Lorimer Ilsley: I shall have to let that stand a little while.
Section stands.
On section 17-Conditions of investments.


Donald Methuen Fleming: Under section 17 there are phrases used which, taken with part V of the act which relates to community planning; call for some comment. It will be observed that lines 26 to 28 provide that "the project shall in the discretion of the minister be constructed with or in harmony with an official community plan satisfactory to him"; and in a later part of the act we have provision for research into community planning, and1 the general stipulation that in matters relating to [Mr. Ilsley.}
community planning, so far as housing is concerned, under, the provisions of the act everything must be satisfactory to the minister. In addition, the planning bureau-I believe it is so called-within the housing administration, at the present time has embarked on a pretty broad scale of consultation with the municipalities across the country. The point I wish to make in this connection is that in efforts to assist in this respect-that is, to assist communities with their planning so far as housing is concerned, and I mean houses that are 'being built under the provisions of the act-there has been too much interference on the part of the planning bureau, within the housing administration, in the affairs of the local municipalities. I have myself seen evidence of it. These municipalities are not all badly governed. The minister indicated in his remarks a few minutes ago that some municipalities were not to be entrusted with the formation of limiting housing dividend corporations because they would not give efficient management. I urge that many municipalities are efficiently operated and are thoroughly capable of running their own affairs in matters in relation to the planning of their communities, and' so far as my observation goes, there has been on the part of the housing administration, in the course of its administration of the act, too much interference with the planning in the local municipalities and the local communities.


James Lorimer Ilsley: It is all to the good.


Donald Methuen Fleming: Instead of help there has very often been downright interference. I do not think the minister wishes that the dominion authority, under the powers given by this act, should begin to manhandle or interfere with the efforts of the local municipalities and communities in the planning of their own communities. There is a great deal of good work being done in the matter of planning in Canada at the present time. I speak with knowledge of what is going on in Ontario. Great impetus has been given to local community planning, but too often the contribution of the housing administration- that is, this federal housing administration- has been one of arbitrary interference and dictation rather than assistance. I call that to the attention of the minister, because I am sure that is not the sort of thing he would wish to see practised under his jurisdiction.


James Lorimer Ilsley: The main change is to make the requirement of official community plans permissive rather than mandatoiy. This will enable projects to be built prior to the adoption of community plans. It is an important

National Housing
change, but it is considered necessary at the present time. Many municipalities have no community plans and it would take considerable time to prepare them. Because of the emergency of the housing problem, the main emphasis must now be on building houses and nothing must be allowed to stand in the way. It is hoped that within a reasonable time-a year or two-the emergency will have passed and the minister will be able to insist on satisfactory plans being prepared before he gives a guarantee under the section. The hon. member thinks that perhaps we should not insist on that; that the dominion should not interfere in the matter of community planning. But one of his colleagues the other night, when the other bill was up, made a sustained plea for dominion assistance, and upon adequate community planning as a national policy as something that the dominion must insist upon. Otherwise we would have haphazard, unplanned towns and cities and we, could not take the position, therefore, that it is none of our business because we are a federal government. The fact is that it is our business. The hon. gentleman says that there has been arbitrary interference by the national housing administration with municipalities. I do not know whether there has been; I am not familiar with the details. But it was all well meant. Administrative insistence on higher rather than on lower standards of planning has been all to the good. It would be news to me to find that the housing administration was relaxing in any way its watchfulness over planning. It must have been in the other direction; otherwise there would not have been complaints about its being arbitrary.
Mr. FLEMING; With respect, the minister has rather misapprehended the point I was making. I should be the last person in the world to say that the administration of this act should be such as to discourage proper community planning. I have been working too long on community planning to take that position. I heartily share the point of view taken by the hon. member to whom the minister refers. It was the hon. member for York West.


James Lorimer Ilsley: That is right.


Donald Methuen Fleming: I entirely agree with him, but my point is that instead of assisting community planning, as I think it should be assisted under this act, there has been, on too many occasions, interference. I can point to cases where intervention of the representatives of the housing administration has not been confined at all to planning with respect to housing. It has been a case of going right
in and trying to revamp the community plan in well organized and well operated municipalities where there was no necessity for doing so. These government officials are going in and throwing their weight around. I am sure the minister does not wish that sort of thing to be going on in connection with the housing administration.


[Stage Direction]
Section agreed to.
Sections 18 to 23 inclusive agreed to.
On section 24-Minister may enter into contract.
Mr. PROBE; In answer to a query of mine a few moments ago the minister indicated that certain specialized types of housing material are in very short supply. There are perhaps two ways in which the minister might solve this shortage. I understand that plumbing and electrical supplies in this country are under what almost amounts to cartel fcontrol.
John Ritchie MacNicol: You are wrong there.
Mr. PROBE; The report of the royal commission. on price spreads stated in their report, that requests for investigations into the fields of electrical and plumbing supplies were made to the commission in 1936, but considerations of time prevented the commission from acceding to those requests. It may be that the minister may be able to pep up these manufacturers, and I wish he would give us an assurance at this stage that he will do that. During war time when munitions were needed the government set up certain crown companies to build the sinews of war which private manufacturers could not supply. Here is an identical situation facing our own people and the boys coming back from the front. Why not set up a crown company or two and use the buildings which the Minister of Reconstruction will be only too glad to get rid of and produce these plumbing and electrical supplies?


James Lorimer Ilsley: I agree that everything
should be done that can be done. We are much concerned about the situation and have given it a great deal of attention. Perhaps some special measures will have to be taken.


Mr. FRASER:: The minister said that brick is in short supply. During the last year I understand that many brickyards have tried to get priorities for tires for yard wagons and for mechanical shovels. If the minister's office would help in the securing of this equipment, they will do the manufacturing.


[Stage Direction]
Section agreed to.
Sections 25 to 27 inclusive agreed to.
On section 28-If no security.
National Housing
Donald Methuen Fleming: This is an amendment to a section in part IV of the act. Has that part of the act been proclaimed? It has been on the statute books for the last year and a half.	,	[DOT]


James Lorimer Ilsley: It has not been proclaimed. It was thought advisable to amend section 32 of the act, which amendment is being proposed a little later in the bill, before we proclaimed that part. There may be a proviso that such proclamation may limit the type of loan to be made under any part or the areas in which such loans may be made.


Donald Methuen Fleming: Could the minister tell us when part IV of the act is to be proclaimed1? This is the part which deals with home extension loans.


James Lorimer Ilsley: There has been a good reason for not proclaiming it up to this moment. There was a possibility that materials might be used in home improvements which might better go into new buildings. But the time is coming when home extensions are probably advisable in some places. The main act has been proclaimed, except part IV which is the part dealing with home improvement loans and home extension loans. At this time, when there is an. emergency shelter problem and a shortage of building materials and skilled labour in the construction industry, it is not considered desirable to guarantee loans for home improvement purposes. It is desirable, however, to permit loans to be made for home extension purposes, that is, for purposes which will provide more housing accommodation. A later section will permit part IV to be proclaimed and be effective as regards home extension loans.


Donald Methuen Fleming: I take it that we can
expect that part IV will be proclaimed as to home extension loans at an early day?


James Lorimer Ilsley: Yes.


Mr. CASE:: I cannot just understand why this exception is being made in connection with a one-family dwelling, or does this section provide an advantage to owners of one-family dwellings as compared, with owners of multiple dwellings?


James Lorimer Ilsley: This is not a new amendment; the section to which my hon. friend has referred has been there right along. I shall try to find out just why the section was drafted in those terms. I find I cannot get the information, but there is a good reason. We are not changing anything.


Wilfrid Garfield Case: There is no intention to give the owner of a multiple family dwelling a 
disadvantage in favour of the owner of a single house? It says, "one-family dwelling," and further on in the bill provision is made to encourage the development of multiple housing units.


[Stage Direction]
Section agreed to.
On section 29-Payments out of C.R.F.
Donald Methuen Fleming: Sections 25, 26 and 29 of the bill are the real meat of the bill; the other sections have to do principally with routine amendments. We have substantial increases in appropriation recommended in these'sections; and in view of the fact that the appropriations made available under the original act of 1944 have not been tapped to any great extent I wonder if the minister would give the committee a statement on the plans his department has in view which contemplate putting to work these substantial increases. Under section 25 the aggregate principal amount of investments which may be guaranteed by the minister is raised to $125,000,000. Under section 26 the. minister may make loans and pay losses up to $150,000,000. These two provisions are in lieu of the previous provision of $50,000,000 for these combined purposes. Then in section 29 there is provision for an expenditure of $5,000,000 to carry on the functions under part V of the act in connection with housing research and community planning. Would the minister favour the committee with a statement as to what plans his department has in view for putting these substantial amounts of money really to work for the purpose of having houses built.


James Lorimer Ilsley: The hon. gentleman has asked for a pretty far-reaching statement in regard to plans and expenditures. These amendments were rendered necessary by the proposed insurance company projects, but I am not prepared to make a statement as to just how we are going to use this money or when we are going to use it. When I introduced the housing act in August, 1944, I made a statement. The amounts have been selected possibly not exactly arbitrarily but by the exercise of judgment rather than by estimating, and all I can say is that we shall try very greatly to improve the administration of the National Housing Act, as I said when I introduced the bill setting up the central housing and mortgage corporation; to get as able a board of directors as we possibly can; to get as able a president, vice-president and other officials as we can, and to try to do what the hon. gentleman urged in one of his speeches, when I think he said that we should "put some drive" into it. , If we do so, we shall

National Housing
need this money sooner or later. It will last ns for a while. Apart from that, I am not now prepared to make a comprehensive
statement.	'


Donald Methuen Fleming: Would the minister indicate to the committee over what period he is planning this programme? A substantial amount of money is involved, $275,000,000 instead of the present $50,000,000, and up to October 5 only $1,500,000 had been actually used out of the $50,000,000 provided. This substantial amount of money has not just been selected from thin air; surely some plans have been prepared.


James Lorimer Ilsley: Plans were prepared last
spring. After canvassing the material situation we felt there would be enough material and labour to build fifty thousand houses in a year, and that is all; that is as far as we have gone. We are stepping up the production of materials; it is increasing. When we speak of there being a shortage of materials, in most cases more materials are being produced now than for a long, long time. The shortage is in relation to the terrific demand, and we have to concentrate on getting those materials. Until the material situation improves to a marked extent, we cannot make any definite plans as to when we are going to build houses under the National Housing Act, and to what extent. A great many are, of course, now being built.


Donald Methuen Fleming: The minister did not touch on the last point. Over that period of time is it expected that this $275,000,000 programme is to extend?


James Lorimer Ilsley: Does the hon. gentleman say that theye is a $275,000,000 programme?


Donald Methuen Fleming: I was putting the minister's two figures together. It is true one is investment and the other is provision for loans and payment of losses. These are substantial amounts, and one would have thought some plans must have been prepared. There must be some programme that has led the minister to ask the house to appropriate this substantial amount of money.


James Lorimer Ilsley: The $125,000,000 is the theoretical limit of the possible life insurance company investments, that is all; it is five per cent of their assets in Canada. That is just put there for that purpose. I do not think they >will spend that much; certainly they have not made plans to spend anything like that. The $150,000,000 is the amount of the loans we can make under part II of the act. The hon. gentleman asks within what time we expect to make this $150,000,000 in loans; is that it?


Donald Methuen Fleming: You are asking for a guarantee against losses and provision for the making of loans up to $150,000,000 under section 26, and provision for principal amount of investments up to $125,000,000 under section 25. There must be some programme back of these amounts that have been asked for.


James Lorimer Ilsley: I cannot be definite about it at all.


Mr. ADAMSON:: Is there anything in the life insurance act which established five per cent as the limit of their investment in any one type of security?


James Lorimer Ilsley: No; that is in the housing act.


Agar Rodney Adamson: You just took the five per cent as an empirical figure?


James Lorimer Ilsley: That is right; just took five per cent.


Wilfrid Garfield Case: The National Housing Act now has been in effect for some time, and I should like to ask the minister what has been the general experience in regard to it. That is to say, you have guaranteed certain loans, and so on. Have you had many defaulters, or has the enterprise been generally worth while, 'in the main? Has it prompted building; are people meeting their obligations, and has the government been called upon to make good any of its guarantees? Could the minister say that?


James Lorimer Ilsley: We have lost less than $1,000 since the beginning of operations of the National Housing Act.


Alexander Malcolm Nicholson: We have been short of technical personnel in Canada. Although the act has been in force for some time, I understand that very little has been done in this field. Could the minister state what has been spent under part V, and what are the plans for the future? I think it is unreasonable to expect each of the provinces to supply the necessary technical staff in the field of town planning and housing. However, that is one service the federal government should give, and at this time we should be picking up some people who are leaving the army and, in this way, we could build up a staff in Ottawa.


James Lorimer Ilsley: Nothing has been spent because we have not had the appropriation until now.


Donald Methuen Fleming: How does the minister propose to use it?


James Lorimer Ilsley: We shall have to get the recommendations of our corporation. It was
National Housing

one of the powers given to the central housing and mortgage corporation. It was to carry on this kind of research.


Donald Methuen Fleming: What programme has the minister under way in connection with planning research, community planning, or housing research?


James Lorimer Ilsley: We have not yet a programme for the spending of this money, although there are many purposes for which it can be spent. For instance, I would refer particularly to sections 25 and 26, and particularly section 26 where it is stated that we may enter into contracts for the production or development of materials, equipment, or component parts for houses through the pilot-plant stage of production or development and for the testing of such materials, equipment, or component parts.
That is just one of the purposes, and there are a number of them. If they are gone into at all seriously it will require the expenditure of a considerable amount of money.


[Stage Direction]
Section agreed to.
On section 30-coming into force.
John Ritchie MacNicol: I should like to ask the
minister a question as the result of an answer he made to the hon. member for Mackenzie. The minister referred to cartels, and I believe the committee got the impression that there must be a combine, or something of that kind in connection with plumbing supplies. In reply the minister intimated that he was aware of certain conditions which perhaps would have to be handled in some way or another. .


James Lorimer Ilsley: Shortages.


John Ritchie MacNicol: The minister had no
reference to any misdealings?


James Lorimer Ilsley: No.


John Ritchie MacNicol: Or misconduct by these
companies?	[DOT]


James Lorimer Ilsley: No, not at all.


John Ritchie MacNicol: No suggestion of any
combination from Halifax to Vancouver?


James Lorimer Ilsley: No.


John Ritchie MacNicol: I am glad to hear that.


James Lorimer Ilsley: I did not mean that at all.


John Ritchie MacNicol: I thought the minister
was falling in line with what had been said by the hon. member for Regina City. Knowing as I do, many of these companies from Halifax to Vancouver I can say that they are not

composed of that type of men, or men who would enter into cartels for the prevention of business.


James Lorimer Ilsley: Correct.


Clarence Gillis: I am sure the minister has
eased the anxiety of the hon. member for Davenport. With the insurance companies he is doing a good job under the National Housing Act. Might I point out that under the old act there was provision for a home improvement plan. That provision appeared in the new act, but remained inoperative until a couple of months ago. Is it the intention to restore that feature of the National Housing Act?


James Lorimer Ilsley: There is provision for it in
part IV of the act, but that part has not yet been proclaimed. We intend shortly to proclaim that part of it which relates to home extension. This will give more shelter and more accommodation, but it will not apply to the home improvement feature. That will have to wait awhile, because we consider it does not involve the best use to which materials could be put.


[Stage Direction]
Section agreed to.
On section 16-life insurance companies may form institutional holding company or housing corporation.
James Lorimer Ilsley: I have an amendment to
this section which I shall ask to have moved.


Ian Alistair Mackenzie: I move that section 16 be amended by substituting therefor the following:
16. Section 11 of the said act is amended by adding thereto immediately after subsection 1, the following subsection:
"(1A) Notwithstanding any restrictions or limitations on its powers contained in any other statute or law, any life insurance company subject to the jurisdiction of parliament may cause to be formed one or more institutional holding companies and one or more institutional housing corporations and may invest its funds in shares or debentures of the said companies or in shares of the said corporations to an aggregate amount, which, when added to -the aggregate amount invested by the said life -insurance company under subsection 1 of this section does not exceed five per centum of its total assets in Canada allowed by the superintendent of insurance under section 73 of - the Canadian and British Insurance -Companies Act, 19.32.


James Lorimer Ilsley: I do not know just what to do about this amendment. The section as drafted has been shown to the life insurance companies, and the tentative agreement is based on the section exactly as drafted. I do not know whether we are spoiling it by offering this amendment. Perhaps I had better withdraw the amendment and ask the committee to put it through in its original form.

Eleven O'Cl'ock Rule


Donald Methuen Fleming: What objection could
there be to the suggested amendment on the part of the insurance companies? The minister is simply broadening their powers and *obviously he is carrying out his own understanding of the intent of the section. If the section stands in its original form I consider it means that a life insurance company may *cause to be formed either an institutional holding company or an institutional housing *corporation, but not both,.and not more than one of each. With respect, I do not see what [DOT]objection there can be to the amendment as proposed by the minister. I believe it meets the needs of the situation, and simply 'broadens the powers of the life insurance companies. They could have no possible objection to this amendment.


James Lorimer Ilsley: Well, I shall leave the amendment, then.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
Donald Methuen Fleming: May I offer a suggestion to the minister, in the hope that he may think it constructive. On October 25, introducing certain legislation in respect of housing, the minister said something about the present freezing of tenancies. We know the freezing is necessary in the present situation, but we also know that the drastic freezing [DOT]order has had the effect of discouraging many people from renting surplus accommodation. [DOT]One can find many cases, some even in the [DOT]city of Ottawa where, to meet the needs of the situation, people would be prepared to rent some of their own housing space, if they did not feel that if they brought someone in they might not be able to get him out, no matter whether he proved difficult or not.


John Ritchie MacNicol: There are thousands of [DOT]cases like that.


Donald Methuen Fleming: Yes, many of them. It was one thing to freeze existing tenancies, but it is another thing to freeze tenancies of people who become tenants from that time forward. I offer that suggestion to the minister as one that I hope he will find worthy [DOT]of consideration. I believe that harm rather than good will be done by extending the freezing provisions to tenancies hereafter *created. Will the minister give that consideration?


James Lorimer Ilsley: I will give consideration to that suggestion.
Bill reported, read the third time and
passed.



BUSINESS OF THE HOUSE


Ian Alistair Mackenzie: Mr. Speaker, with the consent of the house may I say that I have had consultations with the leaders of the various parties, and we thought that possibly we might sit for one hour after eleven o'clock. If there is no objection I would move that the house be not adjourned at eleven o'elock p.m. this day.


John Bracken: We will offer no objection to sitting until twelve o'clock.


Mr. CASTLEDEN:: I should like to have some idea of what the government will try to put through in that extra hour.


Ian Alistair Mackenzie: Only supply.


George Hugh Castleden: One department only?


Ian Alistair Mackenzie: It will depend on the progress we are able to make. First of all, justice, then mines and resources, and then fisheries.


John Ritchie MacNicol: So long as you do not make a farce of voting supply.


George Hugh Castleden: It seems to me that this motion is an indication of the need for a revision of the conduct of the business of this house. Early in the session we sit for twenty-four hours in the week and have a prolonged debate on the speech from the throne. Then in the dying days of the session important legislation is brought down; millions of dollars of supply has to be voted, and we are asked to sit from eleven o'clock in the morning until twelve o'clock at night and to do. that six days in the week. It is just "a little bit too much.


John Ritchie MacNicol: It is a farce.


George Hugh Castleden: Farce is right. But if the government will indicate that no more than two departments will be taken in supply, and indicate which two departments they will be, so that members who have matters to raise in connection with other departments will not need to remain after eleven o'clock I shall raise no further objection. I agree on the understanding that not more than two departments will be taken up between eleven o'clock and the adjournment.


Ian Alistair Mackenzie: Might I inform the house that it can only be done by unanimous consent? I got in touch this afternoon with the leader of my hon. friend's group and with the leaders of the other groups and got their
Supply-Justice

consent. I am following exactly the programme I indicated last night and there will be no departure from the programme as outlined. We are only trying to get through, by cooperation if possible, on Saturday night.


[Stage Direction]
Motion agreed to.

[Stage Direction]
Seventh report of the standing committee on banking and commerce.-Mr. Cleaver.
[Stage Direction]
The house in. committee of supply, Mr. Macdonald (Brantford City) in the chair.

[Stage Direction]
91. Departmental administration, $170,499.
Mr. KNIGHT:: We were on this item the other day when the minister was called away from the chamber while I was on my feet, and I think what I have to say I might say now on this item. I wish to say a word or two about the use of the Royal Canadian Mounted Police on certain occasions. Practically all the members of this group have gone on record at various times in maintaining that the police are too readily used by the government, in the case of the strike, for instance, at Windsor. I object strongly to the use of the Royal Canadian Mounted Police at Windsor and-
Hon. L. S. ST. LAURENT (Minister of Justice): Mr. Chairman, I think the hon. member will have to wait until we reach the vote for the Royal Canadian Mounted Police. While the Minister of Justice is responsible to the house for the administration of the Royal Canadian Mounted Police, the Department of Justice has nothing to do with it. It is something that is quite separate and for which there are separate estimates, which will be called in their turn.


Mr. COTE (Matapedia-Matane):: Would the Minister of Justice say why James Franceschini, a wealthy contractor of Toronto, after being interned when Italy became our enemy was released before the end of the war?
Mr. ST. LAURENT: The hon. member informed me that he was going to ask some question about the internment and release of James Franceschini. I think the information has already been made public. I wrote a letter to his solicitor on May 24, 1943, of which copious extracts were published in. the Montreal Daily Star of June 15, 1943. This letter, as I say, was addressed to the solicitor. He wrote me on May 25 thanking me for the letter, and then wrote me again on May 31, asking me if he would be free to give" reason-
able publicity to the terms of my letter. I wrote him back that I had his letter of May 31, and that "the letter I wrote you on May 24 was not intended to be a personal communication to you but a letter in the ordinary course of business correspondence addressed to you as Mr. Franceschini's solicitor." After receiving that letter of June 10, the solicitor evidently communicated a portion of the letter of May 24 to the Montreal Daily Star, which published it, and the following is an extract:
In the case of James Franceschini I have no objection to stating to you now that Mr. Justice Hyndman, after full inquiry into all the circumstances which had prompted the internment of this man and careful consideration of the case as a whole, had reported he was satisfied and convinced that he (Franceschini) was not disloyal to Canada and would not act in any manner prejudicial to the public safety or the safety of the state,' and that it would be quite safe and proper to order his release from internment.
My predecessor . . . still had this report before him for his final' decision when he was informed that Mr. James Franceschini had become seriously ill; he then came to the conclusion that, in view of this _ illness, it was necessary that he make a decision immediately and his decision was that the releasing of Mr. James Franceschini at that time would not be likely to involve any danger to tlhe state, and he therefore ordered his unconditional release.
I have myself examined the files, and I am satisfied that that was a proper conclusion to reach.
That. is the opinion I gave the solicitor for Mr. Franceschini after making a personal examination of the file, and I do not think there is anything more that I can add to it.


John Ritchie MacNicol: Would he be entitled to compensation for having been interned without any reason?	.
Mr. ST. LAURENT: Certainly not. He was not interned without any reason. The reason he was interned was that this country was at war with Italy and there were regulations in force which empowered the then minister of justice, my predecessor, to order the internment of such people as he felt might be a danger to the state. He had at that time information of a confidential nature that an organization had been prepared to carry out sabotage in this country, and from the information he had he was not convinced that this man had done anything wrong but he was fearful that he might do something which would be injurious to the safety of the state; and because we were at war, and because, when we are at war, it is necessary to do some things which may be injurious to individuals for the safety of the whole community, he had him interned.

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The hon. member has done what I have done bn a good many occasions; he has taken an umbrella out in the morning because it looked like rain, and he has not come to the conclusion that he was wrong because it did not rain. This man was interned because, to the then minister of justice, it looked as if he might be dangerous. After the facts were fully investigated he came to the conclusion that he would not be dangerous and ordered his unconditional release.
I do not think that under these conditions there is any reason for compensation. It is unfortunate for the individual, but a very large number have been interned. Internment is not punishment, it is merely a precaution which is taken under extraordinary conditions.


John Ritchie MacNicol: I am not rising to defend the gentleman in any way. I do know that after war broke out, in the city in which I live, many Italians were interned, and one of them was the gentleman referred to, whom I had known, I suppose, from twenty to twenty-five years. The late minister of justice of course, had his reasons for interning him. It is not for me to find fault with his judgment, whether in interning him or in releasing him; I merely rise td express my feeling that many Italians whom I have known for years in that end of the city of Toronto, merely because we were at war with Italy, were interned, although they were men who in the previous war had supported our cause, and maybe James Franceschini had in the Great War done his part in supporting the allies. I know some, living where he lived-for quite a long time he resided on Dufferin street, Toronto-who did their part in the first great war,-but who, on account of the scare when the recent war broke out and we became involved with Italy, were unjustly interned; and I have often said to myself, if it is now found out that any of them were interned unjustly the least we can do is, perhaps, to apologize to them for having done so. I am not saying for a moment that this man was interned unjustly; I do not know. I have read, of course, that many of our own people were interned in Italy. They, too, may have been interned unjustly, and if we apologize to those Italians here, perhaps our nationals should be apologized to in Italy. All I wish to point out is that many things have been done which should have not been done.
Mr. ST. LAURENT:	The hon. member
remembers, of course, that what happened during the first great war as to the conduct of Italians would not have any effect upon what they might be likely to do in the second great war. The first time they were on our side.


Donald Methuen Fleming: What progress, if any, is being made in the department with reference to the matter of petitions of right? It has been such a sore point for so long, and I think the courts and the bar are looking for some leadership in this matter. I know the Minister of Justice has had this matter brought actively before him for a long time. When may we look for some action in the direction of elimination of petitions of right in actions against the crown?
Mr. ST. LAURENT: Not while I am Minister of Justice.


Donald Methuen Fleming: Does the Minister of
Justice not contemplate any relaxation of the present requirements? Is the crown, in an era like this, when the activities of government are expanding farther and farther into almost every realm of business and industry, going just to hide under the protection which it enjoys at the present time?
Mr. gT. LAURENT:	No, the crown does
not hide under the protection it enjoys at the present time. I do not know of any refusal of a petition of right in the four years that I have been in the department, and I think I have arranged to have the petitions considered with due expedition. They are granted, and when they are granted the case goes to the court. What would be involved in abandoning that position would be an acceptance of the jurisdiction of the provincial courts in claims against the crown.
This matter was seriously considered when the Exchequer Court Act was amended to make the position here better than it is, from the information I have, in the United States or in any other British dominion. We have now stated that the crown is responsible for the acts of its servants and that men in the armed forces are to be regarded as servants of the crown. I do not think you will find that paralleled in any other British dominion. The question whether or not there should be an abandonment of the Exchequer Court Act and acceptance of the jurisdiction of the provincial courts in claims against the crown was considered, and it was decided after full consideration that it would not be done, that it was desirable to have claims against the people of Canada-because the crown, after all, is nothing but the representative of the people of Canada-whether those claims arose in one province or another, decided according to some uniform system and on the same basis, and that it would not be desirable to have motor accidents, for example, dealt with
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by the local courts in the several provinces and in the several jurisdictions of each province.
That was gone into fully. A decision was arrived at and I accepted it. I will not raise the question again with my colleagues.


Donald Methuen Fleming: It ought to be possible to confine jurisdiction in claims against the crown to the exchequer court without maintaining the position of the crown with respect to petition of right. It is one thing to confine jurisdiction to the exchequer court and another matter to insist that claimants against the crown first obtain permission to sue the crown.
Mr. ST. LAURENT: It may be humiliating to claimants to have to' ask for permission, but they do get it and go before the court and have their cases tried. That has been going on for a very long time, and I do not see that the fact of having to resort to that form is any serious impediment in the obtaining of justice. It would be otherwise if hon. members were asserting that petitions filed were improperly dealt with, that fiats were improperly withheld, but I do not think any hon. member would suggest that that is being done.


John Ritchie MacNicol: Perhaps I am wrong in asking the minister this question but when I was home last, a young man who had been released from a prison in Ontario came to my house. He had been out for two weeks and everywhere he went he would be asked, when he made application for employment, "Were you in the army?" He had not been in the army becase he had been in gaol for two years or more; I do not know how long. I am wondering how society will take care of such a young man, and there are many like him. They had nothing. They will not be able to show a registration card because the card is taken from them when they go to gaol. Now they are out they cannot say they were in the army and they have no card. What will society do for them?
Mr. ST. LAURENT: Their registration cards are returned to them when they are released from penitentiaries. I cannot say what is done in the administration of provincial gaols. If they go to a penitentiary, however, their registration card is returned upon their release. There is nothing that we can do to wash out the fact that they have been convicted and have undergone sentence. It is perhaps unfortunate that there are a good many employers who do not wish to take 
someone who has been in gaol, but we cannot pass a law to force them to do so. That would not be within the federal jurisdiction.


John Ritchie MacNicol: I heartily agree.
Mr. ST. LAURENT: I think that all we can do is to try to foster throughout the country the spirit that those who have had the misfortune to have done something wrong and who may have reformed should be assisted in getting back into the ordinary channels of our social life. That, I think, is a matter of education and moral viewpoint that we should all endeavour to foster, because I believe there are a great many who do fall by the wayside and who can come back. Whenever anyone does something to help such an unfortunate person to come back he is doing a service not only to that person but to society at large.


John Ritchie MacNicol: Is there not an association of chiefs of police, or some such body, that tries to provide something for these men? One day I met the chief of police of Toronto, Brigadier-General Draper, in Ottawa, and he told me that he had been to. the justice department and had been in consultation with other chiefs of police and departmental officials in an effort to place such young men. Personally I think that is a very good programme, and I have been wondering if such a programme would not come under the new set-up the minister has in his reclamation service.
Mr. ST. LAURENT: I hope it wall develop from that, but I must point out to the committee that this would be something along the lines of the Borstal societies that look after those who - have had the training of Borstal institutions. It was urged the other day very forcibly that we should institute a Borstal system in Canada; but I am sure the hon. member for Weyburn, who urged that, did sb for the purpose of having the matter before the public and not because he felt it could- be done here, although he did say he deplored the fact that there was nothing in these estimates for a Borstal system. He wished to see a commission set up clothed with sufficient powers to implement all the recommendations of * the Archambault commission. That may be very desirable, but this parliament could not do it. This parliament would not have the jurisdiction to do it. The Archambault report clearly sets out that the Borstal system cannot be worked out under our penitentiary system or with the jurisdiction we at present have. Members of that comnlission well knew what was the constitutional distribution of powers under our system of provinces and . central authority,

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and they recommended, at page 354 of their report, centralized control. They state that a' Canadian penal system should be centralized under the control of the government of Canada, with the federal authorities taking charge of all the prisons in Canada, the provinces retaining only a sufficient number to provide for offenders against provincial statutes, prisoners on remand and those serving short sentences.
That is a matter which I hope will be developed in the course of this present dominion-provincial conference, but it will require a constitutional amendment. The federal authority has jurisdiction only over penitentiaries, and the commission pointed out expressly on pages 199, 200 and 209, that the Borstal system could not be adopted without centralized control of our penal institutions. I quote from page 199:
Your commissioners are of the opinion that -any satisfactory adaptation of the Borstal sye-te-m is impossible in penitentiary institutions, either in its essential features or in its principles.
And on page 200 they said:
Although you-r commissioners are of the opinion that -the English Borstal system cannot successfully be introduced into the penitentiaries or reformatories of 'Canada, their inspection of institutions for the treatment of young offenders
That caused them to report that it is a very good system. They finally recommended that the necessary changes be made to make it possible to have a system along the lines of the Borstal system. The Borstal system is a system of education, and education is the responsibility of the provinces. It is one of the things which I think the provinces would be reluctant to have subjected to any federal interference. It may be possible to arrive at a line of demarcation between what would be educational and what might be done to relieve them of the responsibility and burden of taking care of offenders who are not condemned to a penitentiary sentence.
That is something that I hope will be gone into at the dominion-provincial conference, although I do not expect that anything final will be decided at once. When the Penitentiary Act was amended the other day I told the, house that I hoped to be able to find someone who could take all these recommendations and go about and interview separately the representatives of the provinces and see what could be done to bring about the kind of change which would enable some authority-I am not anxious to have it done by a centralized authority; I am not anxious to have the federal government dealing with things which perhaps can be better dealt with
locally-to handle this. It may be that something desirable can be achieved through cooperative action. It may be possible to -have the necessary things done, but I do not anticipate that at any early day when the estimates of the Department of Justice are before the committee there will be any substantial sum in them for the administration of a Borstal system. There may be some contribution to some joint action by the federal and provincial authorities along those lines.
I hope that even -before that may be achieved there will be a possibility of segregating in the penitentiaries the young offenders from the hardened criminals, but that is not sufficient. It is not so much in the penitentiaries as in the provincial gaols that these contacts take place between young offenders who have received sentences of three or six months and the hardened criminals. That is something which under our system cannot be dealt with by one authority alone; there will have to be cooperative action between the federal and provincial authorities in that regard.


John Ritchie MacNicol: I welcome what the minister has said, and this whole committee should support him in whatever he finds necessary to do to bring about the reclamation of our offenders in cooperation with the provinces. I said the other night that I had made quite an investigation into the operation of the Borstal system in the old country, and if anyone else has done the same thing I am sure he will corroborate what I say. It was started in a small place called Borstal, and' that is how it got its name. It was instituted, I believe, by Sir Samuel Hoare. I listened to him make an address in the British house, and I then went to Leeds where the school was located.
My hon. friend here spoke about Borstal schools, but as far as I can find out there was just the one at that time, although there may be more now. That was in Wakefield' prison, just outside Leeds. They sent me from there to Barlinnie prison outside Glasgow to continue my studies.
I was in that prison for a day ,so that I could survey the operations of the Borstal programme. The guards and prisoners are dressed alike; no one wears a uniform, not even the warden. They were all dressed just as I am. I went out into the prison with a guard who might have been one of the prisoners for all I knew. I went from one part of the prison to the other to study the different trades that were taught. Contrary to what my hon. friend has said, they had not only first offenders but prisoners who had
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been sentenced to death, but not in the same wing. I was taken into a chapel in the prison where I heard a man who had been sentenced to death playing the most beautiful music I have ever heard played on an organ; he was playing "Nearer my God to Thee". The guard or warden, or whoever it was with me said, "That is good music, because he is going to die shortly," I think it would occur after three Sundays had passed. It appeared to me to be good reclamation when they had got him that far in so. short a time. I hope the minister will use every effort to intro* duce into our prisons a system similar to the Borstal system in England.


Mr. DIEFENBAKER:: Can the minister say anything further with regard to the remission of- the sentences of the navy and army personnel who were convicted as a result of their activities at Halifax?
Mr. ST. LAURENT: I am not in a position to say exactly how many are left. There were several who received relatively long sentences who will be dealt with in the Christmas releases. Those who received short sentences have already been released. Those who had no previous criminal record will have their cases considered in the Christmas releases. I could not tell the hon. member whether or not notifications have gone out, but a distribution has been made as between those who could be dealt with for Christmas and those who could not. Some who had previous criminal records and who were not armed forces personnel were involved in the disturbance, and their records make it appear that they are not deserving of any special consideration. Those regarded as deserving of special consideration have been or will be dealt with in the Christmas releases. As the hon. member knows, at Christmas and Easter the releases are much more numerous than at any other season of the year. I can repeat to the hon. member the assurance I gave previously that they are being dealt with as special cases; and I do not think there will be any who had no criminal records who will not be home for Christmas.


Clarence Gillis: I wish to ask the Minister of Justice a question ahd this might be as good a time as any for it. I am glad the Minister of Transport is in his seat, because it also involves his department. It has to do with Canadian nationals serving during the war on British merchant ships registered in the United Kingdom. In this case, which I have tried to iron out with the Minister of Transport, a man lost his life when his ship was torpedoed and he left some small estate con-

sisting of back wages, personal belongings and so forth. It is necessary for the next of kin in Canada to go through a great many legal formalities in the old country, to the extent of- hiring a lawyer and so on, and I was wondering if in the legal machinery of the government, which comes within the purview of the Minister of Justice, there is not some way we in this country could settle the estates of Canadian nationals who gave their lives for us, without waiting for a year or two years and spending in legal fees practically the entire amount of the estate in the old country.
I took up the matter with the Minister of Transport, who passed it back to me. He was quite prepared to do anything he could, but evidently within his department there is no legal machinery to handle the matter. This case has. been in the slings for more than two years, and is still unsettled. It has gone through the probate court, but the next of kin still has to go to the old country and hire a lawyer in order to settle up the estate, and in doing so the legal fees will almost amount to the value- of the estate.


Mr. CHEVRIER:: I do not think the case raised by the hon. member is any different from that of a Canadian citizen who died and left property in the United States of America.


Clarence Gillis: All the difference in the
world.


Lionel Chevrier: 
Clarence Gillis: This man died on the ocean.


Lionel Chevrier: That may be.


Clarence Gillis: He was domiciled1 in Canada.


Lionel Chevrier: He was not domiciled in Canada. He was on a British ship, registered in Britain; and in accordance with the merchant shipping act of the United Kingdom his estate must be wound up in- accordance with the law of the United Kingdom. We cannot change that. All we can do in the Department of Transport is to assist the heirs in this country in filing a claim, and that we are prepared to do.


Clarence Gillis: I am not a lawyer, and I am not going to argue with the minister, who is; but I heard this matter of domicile argued pretty thoroughly in the veterans affairs committee. The case of a man- leaving an estate in the United States is not analogous at all to the question we are discussing. This man lived in Canada all his life. He shipped out through a Canadian shipping office. He went on the ship in Canada, and his ship was torpedoed -in the Atlantic ocean. The estate under discussion consists merely of the wages and personal belongings of that individual. He was domiciled in this country, according to the definition of "domicile" I heard given by the legal adviser of the Department of Veterans Affairs. He had no domicile in Britain; he lost his life in the Atlantic ocean; he was a Canadian citizen; he signed up through a Canadian shipping office and sailed from a Canadian port. So that the point at issue is that the next of kin in this country have conformed to all the Canadian laws, has gone through Canadian probate, and now finds it necessary to spend practically the amount of the estate for legal fees in the old country. He consulted a lawyer in Canada and was advised to hire another lawyer in the old country, that the solicitor in Canada could not go farther.
I think it is an obligation the Canadian government owes to the next of kin of merchant seamen who gave their lives for this country at least to accept the responsibility of dealing with the British authorities in settling these estates, without expense to the next of kin in this country. I am not blaming the Minister of Transport, who is hemmed
in by red tape. I am now asking the Minister of Justice, who presides over the administration of justice in this country, to be kind enough to confer with some of the legal fraternity who surround government departments, to see if he cannot work out some means of settling these matters with the least possible expense and anxiety to the next of kin of those who made the supreme sacrifice during this war. After all, there are only a few of these cases, but an injustice is being done.
Mr. ST. LAURENT: Under ordinary circumstances the Department of Justice would have nothing whatever to do with property and civil rights. It may be that the Department of Transport, because of its control of merchant shipping, under the particular circumstances to which the hon. member refers should assume the responsibility of retaining -this English solicitor; but that is quite outside anything the Department of Justice has jurisdiction to deal with. The Department of Transport can attempt to help a merchant seaman, or the Department of External Affairs can attempt to help a Canadian citizen. The Department of Justice has absolutely nothing to do with it. If the hon. member were to ask if the Department of Justice would make some of its officials .available to conduct correspondence, such could no doubt be attempted under the special circumstances mentioned by the hon. member. But it would be doing something not at all within our jurisdiction, no more than if I, personally, as a practicing lawyer, attempted to do it as a favour to a fellow Canadian. There should not be the idea-and it does exist quite broadly -that the Minister of Justice should attempt -to deal with anything that anybody considers is unjust. Fortunately for the Minister of Justice, that is not the role which has been provided for him by the constitution or by parliament.


John George Diefenbaker: I believe the hon. member for Cape Breton South has brought up a matter which could be settled in a simple manner. Overseas to-day, so far as the army is concerned, there is an estates branch to which a number of lawyers are attached. Possibly the Minister of Transport could see his way clear to have an order in council passed. I do not think he would be averse to one more. Such order in council could provide that soldiers overseas would look after this matter, in order to assure relatives of men who have given their lives for their country that at least a reasonable share of the estate would be paid to them. That would be a simple matter, and it would be appreciated.
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Clarence Gillis: But you would run into another technicality.


[Stage Direction]
Item agreed to.
95. Annual contribution to the Canadian law library, Condon, England, $500.
John George Diefenbaker: What I have to say at this time applies to the judicial committee of the privy council. A judgment has been held back during the period of the war with respect to the question as to whether or not the Canadian parliament has the authority or the legislative capacity to abolish appeals to the privy council. When may that judgment be expected?
Then, I would ask the minister a question arising from a press dispatch by Mr. J. A. Hume, writing for the Ottawa Citizen, who, referring to ,the abolition of appeals to the privy council, said, in part, that certain provinces are desirous of retaining the right of certain types of civil case appeals being taken to the privy council. What provinces are desirous of retaining the right of appeal? I shall not ask the minister what attitude he takes in the matter.
Mr. ST. LAURENT: There was an attempt made this autumn to have the case put on the autumn list. I believe there are three provinces which have appeared' in support of the appeal, and they were not ready to proceed. The dominion government is anxious to have the case put on the list for hearing at the earliest possible moment. However, this is one of the matters where we do not wish to force the issue. Counsel for the department, Mr. Aime Geoffrion, has instructions to bring it on as soon as possible, and he has been told by the others that they would be ready for the next summer sitting. I am still hopeful that he may persuade them to have it placed on the Easier list.


John George Diefenbaker: What are the three provinces which are joining in support of the power of the dominion?
Mr. ST. LAURENT: I should not like to answer that, from memory. The case was dealt with in the supreme court before I became minister. I shall find out the names of the provinces which have filed appearances, but I am not in a position to make the statement at the present time.


John George Diefenbaker: What provinces are opposed?
Mr. ST. LAURENT:	This matter was
discussed in very general terms at the last meeting of the coordinating committee of the dominion-provincial conference, attended by the premiers of the provinces; there the state-

ment was made that it would not be looked upon as proper for us to try to force the issue, and that it was hoped that a date could be selected or fixed which would be acceptable to all. There were no views expressed by the premiers generally at that meeting as to their attitude with respect to the issue. The issue is one as to whether parliament alone can abolish appeals, or whether it would require as well the action of the provincial legislatures. One of the premiers stated that his province wished to retain the appeal but, in view of the fact that the meeting was held in camera, I do not think it would be fair to say which province it was.


Donald Methuen Fleming: The subject of judges'
salaries is by no means a new one in this chamber.


William Ross Macdonald: We are considering
vote 95, which deals with the annual contribution to the Canadian law library in London.


Donald Methuen Fleming: The statutory items
follow; we have just discussed one of them. I thought this would be the proper time to mention this subject, because it relates to three or four of the statutory items appearing in the minister's estimates.
This morning a first step was taken to provide increased indemnities for those who are serving the public in one important realm, namely parliament. I wonder if the time has not come to extend a similar measure of -justice to those who are serving the public in another equally important realm, namely those connected with the administration of justice in the superior courts of our country. I speak not only of the two federal courts, namely the Supreme Court of Canada and the Exchequer Court, but of the superior courts . the provinces.
Notwithstanding the relatively low salaries paid to judges in the superior courts of this country, we have been exceedingly fortunate in attracting able men to the bench. This is a matter, however, which I think requires attention. As I have said, it is not a new question, because I am sure it has been discussed at every session but surely the time has now come for action. When one compares the salaries paid to judges of the superior courts of this country with those paid in the United Kingdom and the United States, the comparison reflects most unfavourably on this country.
The independence of the bench is the most vitally important factor in the administration of justice. Nothing is more important, and in that I believe the Minister of Justice will support me. If we are to attract to the bench

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the most capable persons practising at the bar, and if we are to accord to our judges that measure of independence so necessary to the administration of justice, then I urge upon the minister that the time has come when some action should be taken in respect of the scale of salaries paid to members of the superior courts of the dominion and the provinces.
Mr. ST. LAURENT: The hon. member will know that until there has been some indication that the ceiling on salaries and wages can be further loosened or removed, it would be difficult to make any general move toward adjusting salaries in the public service..


Donald Methuen Fleming: I quite agree.
Mr. ST. LAURENT: I hope to have a bill dealing with that matter at the next session, to come into force at a later day, not upon adoption. I hope to have it for consideration of parliament at the next session, with the proviso in it that it will come into operation on a day that would appear to be a reasonable one to fix, hoping that the ceilings on salaries would by then have been greatly loosened' or removed.


Donald Methuen Fleming: I thank the minister for his statement.


[Stage Direction]
Item agreed to.
99.	Payments of gratuities to the widows or other dependents of judges who die while in office, $15,000.
John George Diefenbaker: Is the minister in a position to say to what extent judges have taken advantage of the legislation passed last session enabling them to assign or transfer one-third of their annuities on retirement to their widows?
Mr. ST. LAURENT: Very generally. There are a few, but very few, who did not take the option within the time that had been fixed. I think that over ninety-five per cent have availed themselves of the provision that parliament made.


[Stage Direction]
Item agreed to.
Penitentiaries branch-
100.	Branch administration, $122,344.
Mr. BRYCE:: Mr. Chairman, I wished to speak at some length on this item, but to comply with the wishes of the rest of the house I shall take only a few minutes. As I happen to come from a constituency that has a penitentiary and a lot of my constituents are officers in the penitentiary, I am naturally quite interested in this vote.
I would draw the minister's attention to order in council P.C. 8/1751. In the operation
of that order it has been found that the guard who had reached his old maximum salary, instead of receiving the new maximum at once, * approached it only by annual increases of $60, or $5 a month, so that he reaches the new maximum only at the end of three years, while the officer recently engaged goes in at the new maximum right away.
I would suggest to the minister that all grades of penitentiary officers be granted an increase of $240 per annum. I consider that an increase in salary is justified in order to bring the salaries of penitentiary officers more in line with salaries that are paid to officers employed by other law-enforcement agencies throughout the dominion. The recent increase in salaries granted to penitentiary officers did little to improve their financial position, because the officer who was receiving the old maximum for his position has to wait for a period of years before being eligible to receive the maximum of the new salary range, which he reaches by annual increases, in most cases, of $60 a year. In that connection I should like to quote from the report of the royal commission investigating the penal system of Canada. The commission say in their report:
It is -also imperative that the pay of officers should be raised somewhat comparable to the rates prevailing in other similar services. It is hopeless to expect to get competent penitentiary officers at salaries that are considerably less than the wages paid to street cleaners in the large cities of Canada.
I wish to speak about the housing at Stony Mountain. Stony Mountain is a congested area and the housing is in bad shape. The houses on the reserve, with the exception of two, were condemned years ago. If the staff is to be enlarged, houses will have to be provided. The housing situation should have been remedied long ago. It cannot be expected that the morale of the staff can be maintained at a high level when they are compelled to live in houses that would not be tolerated in any urban centre. To back up that statement I shall quote again from the report of the royal commission investigating the penal system. The commission have this to say at page 317:
The 'accommodation for the staff is inadequate. It is unreasonable and unnecessarily humiliating to ask the members of the staff to live under the conditions that now exist in -the officers' tenements belonging to the institution. These houses were built fifty years ago; they are without sanitary conveniences, and prisoners themselves are much more comfortably housed in their cells than the officers in the penitentiary *tenements.
Your commissioners are of the opinion that this state of affairs is destructive of the morale of the officers and that immediate steps should be taken to provide the staff and their families

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with respectable .accommodation. In a large metropolitan centre the homes which are provided for the staff would, indeed, be condemned by the medical authorities.
A great many of the penitentiary officers live in Winnipeg because of lack of accommodation at the penitentiary. At Headingley provincial gaol a bus service is provided for the transportation of the officers, and I would ask that a bus service be provided for the officers at Stony Mountain. I think that is a reasonable and feasible suggestion. Because of the deplorable condition of the houses in which they have to live some provision of that kind is an immediate and urgent necessity. It is recognized that security demands that a proportion of the staff reside within call of the institution, so that it would be the wise and economic course to establish a reasonable means of transportation for the officers between the penitentiary and Winnipeg. A bus should be put on to take these men back and forth. That would help to solve the problem until proper housing accommodation is provided.
I have visited Stony Mountain penitentiary and Kingston penitentiary, and I find that at both the officers are allotted according to the number of convicts. There is something wrong with that system because a penitentiary is something like a huge liner, something like the Queen Elizabeth, and requires a full crew to operate it efficiently. But by the officers being allotted on a quota basis, so many officers to so many convicts, if one of the officers is taken sick another officer has to work that extra time, and at Stony Mountain it is some time before he gets that time repaid. I do not think any man should be asked to work for more than forty-four hours a week, and if he works overtime he should be allowed time off at some time in the future or be paid overtime, whichever you like, but I know that the government does not like to pay overtime.
At both Stony Mountain and Kingston penitentiaries the officers are compelled to take their food in the prison, food which is cooked by convicts in the cookhouse. I am sure the minister must realize that the whole prison could be put out of commission by the food being poisoned. In the report on penitentiary reform it is recommended that an officer be employed to cook for the officers in the institution. As matters are, you are playing with dynamite. Men going out to work in the fields can pick up poison and bring it in and drop it in the food. It may be that a trusty is doing the cooking and that pressure would be brought to bear on him, with the result that forty or fifty officers may be made very sick.

I also suggest to the minister that vacancies in any penitentiary should be open to staff applicants all over Canada; that is, if there should be a vacancy at Kingston or at Stony Mountain it should be advertised in every penitentiary in the dominion. This would give an opportunity to men experienced in the work to secure transfers to other locations, with advantage not only to themselves but to the system at large.
My final suggestion to the minister is that the rate of superannuation should be based on the average of the last five years of service, not the last ten years.
I had a number of other things to say, but to help things along I will reserve them for some other time.
Mr. ST. LAURENT: The situation with respect to housing at Stony Mountain has been investigated', and plans and specifications have been submitted to the Department of Reconstruction for fifteen new houses there just as soon as the Department of Reconstruction will allow them to be proceeded with.
With respect to the other remarks made by the hon. member, I can assure him that these matters are under active consideration and that it is hoped that, now that the man-power situation in Canada is changing, there will be considerable improvement.


William Scottie Bryce: I thank the minister.


[Stage Direction]
Item agreed to.
Penitentiaries branch-
101. Operation and maintenance of penitentiaries, including administration, construction, purchase of land, supplies, equipment and live stock; maintenance, discharge and transfer of convicts; compensation ,to discharged convicts permanently disabled while in penitentiaries, $3,5X2,683.
Gordon Knapman Fraser: I should like to ask the minister about medical examinations of the men in these different penitentiaries. I understand that they have penitentiary physicians who are medical men, but are any specialists in mental diseases or any psychiatrists employed to check on the men in these penitentiaries?
Mr. ST. LAURENT: Psychiatrists are called in as and when required, and at Kingston there is a part-time psychiatrist who is regularly retained and regularly visits the institution.


Mr. FULTON:: Could the minister give us some information, perhaps by way of a general statement, to cover the particular points I have in mind which are of interest to those who are concerned with conditions

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affecting members of the armed forces serving terms of penal servitude as a result of sentences which have been imposed on them? In particular, could the minister state how many persons in the armed forces are serving in penitentiaries, and whether any are serving in civil penal institutions overseas, in England or on the continent; and, when such persons are discharged, is any distinction made in the terms of their discharge; is there anything they can show when they go back to civil life by way of making a distinction between purely military offences and the civil offences for which other prisoners have served in penitentiaries, so that they can show that their confinement to a penitentiary was the result of their service in the armed forces as distinct from a purely civil offence?
Mr. ST. LAURENT: The Minister of Justice does not in practice advise with respeet to sentences imposed by courts martial. That is not something which in the practice of the departments is dealt with by the Minister of Justice or by the Solicitor-General; it is dealt with in t-he Department of National Defence or in one other of the service departments.
On March 31, 1945, there were about 400 persons who had been convicted while in the .service and sentenced to terms in the penitentiaries. They are treated as though they had been ordinary civilians convicted by the ordinary courts of justice, and are dealt with just like any other convict convicted in the ordinary courts of justice.
As to those convicted by courts martial the situation is quite different. I am informed that there are about eighty members of the forces convicted by courts martial overseas who have been returned to Canada and who are serving in penitentiaries the terms imposed on them by these courts.


Edmund Davie Fulton: And no distinction is made when they are discharged or have completed their terms, no document given to them by which they 'can, show that their penitentiary service was the result of some military offence rather than a civil offence? What I have in mind is that certain offences which carry sentences of penal servitude may be purely military.
Mr. ST. LAURENT: I would assume they could easily obtain from the service departments a copy of the sentence imposed by a court martial. All we have is a commitment from the court martial, but I would imagine that it would be possible for them to get some kind of certificate from the warden that they had served the sentence imposed upon them by a court martial on such a date.


Edmund Davie Fulton: Will the minister give consideration to seeing that that will be done as a matter of course?
Mr. ST. LAURENT: Yes, I will see if it would not be possible to arrange that, with respect to those who are confined under commitments issued by courts martial, upon discharge they be given a certificate that they have served such a term as a result of the sentence imposed by that kind of court.


Angus MacInnis: May I ask for some information on the details of judges' pensions and the other benefits set out in the details on pages 94 and 95? I notice that under the heading of "judges' pensions" there is the name of the judge and then the name of a woman who appears to be the judge's wife. How does that happen?
Mr. ST. LAURENT: Under an amendment to the Judges' Act made by the last parliament it was provided that a judge might make an option of getting, instead of the pension provided by the act in his favour, two-thirds of it in his own name and one-third in the name of his wife. Most of the jpdges made that option, so thati it now happens that some have retired and have been given in their own name two-thirds of the pension to which they would otherwise have been entitled, the other third being granted to the wife.


Angus MacInnis: Does that pension continue for the last survivor?
Mr. ST. LAURENT: They are life pensions.


John George Diefenbaker: When a judge retires and takes on some other position in the pay of the government, does he continue to receive his pension as well as the salary of the new position?
Mr. ST. LAURENT: No. The Judges' Act provides that if he is in receipt of a salary from the crown the pension shall be abated by the amount of the salary or vice versa. Whichever is the larger is paid and the other is not.


Alfred Johnson Brooks: Are widows of judges entitled to a gratuity as of right, or is a means test applied?
Mr. ST. LAURENT: They are paid under a vote that goes back a great many years. The amount is equal to two months' salary.


Alfred Johnson Brooks: That is, all widows?
Mr. ST. LAURENT: All widows of judges receive two months' salary from the date of the judge's death.


John Ritchie MacNicol: Annually?
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Mr. ST. LAURENT: No. Once and for all.


[Stage Direction]
Item agreed to.
Royal Canadian Mounted Police-
312. General administration, $264,261.
John George Diefenbaker: There are a number of questions I should like to ask the minister in regard to the Royal Canadian Mounted Police, and in doing so I know I speak for all hon. members in complimenting the force on the magnificent work done during the war under Commissioner Wood. It has been one of the most creditable records of any department in that no sabotage took place in Canada in that period. What I have in mind particularly has reference to the men who enlisted from the force after their discharge. There was quite a large number of men who, instead of signing on for a further period, decided at the expiry of their terms to join the armed forces. They are now returning from overseas, and they find they are denied an opportunity of joining the mounted police except after medical examination, and subject to not being placed in the same position in which they were at the time of enlistment. I could refer to a number of cases where men who had been in the force for a period of years and had1 attained the rank of corporal or sergeant decided that their services would be more valuable in the armed forces. They joined up and are now returning, and if they were incapacitated in any way they have no opportunity of joining the mounted police to-day. I suggest in the first place 'that there should be available to these men clerical po.sjtiohs and the like which they might be able to fill so that their service may be continued; and, second, that, when- they rejoin, the period of time they were in the armed forces be taken into account as far as pension is concerned. I consider that there would be no serious disagreement if they were permitted to have the period served in the armed forces reckoned as part of the pension period.
Another point has to do with the question of service stars. My information is that by an amendment to a rule, passed in April of this year and published in the Canada Gazette, members of the force are entitled to wear stars only when they have had continuous, unbroken service. In other words, when- they are reengaged they are entitled to no stars at all. I have before me the names and records of men who gave distinguished service in the mounted police. If they are now fit for reengagement, they are being reengaged in lower ranks and are denied continuity of pension and also their service rights. These are matters that should be given consideration.
[Mr. MacNicol.l
I believe that it would meet with general approval if the necessary changes were made .to enable the carrying into effect of the suggestions I have offered in this regard.
Mr. ST. LAURENT: I thank the hon. member for the congratulations he has offered the Royal Canadian Mounted Police on the efficient work they did, which, to say the least, coincides with there having been no sabotage in Canada during the war. I think that is due to the efficient work which they performed. At the outbreak of the war there was a feeling of anxiety and unrest and an appeal was made to the members of the force to stay with the force. It was pointed out to them that their services in the force would be of exceedingly great value to the nation. As to those who wished to go overseas, an opportunity would be afforded them to go as members of the provost corps, which almost at once proceeded with the troops. There were some who preferred at the expiry of their engagement to take positions in the- armed forces where there were greater advantages in the ranks or pay or allowances they obtained. Now it is felt that they should not be treated, when they come back, on the same footing as those who heeded the appeal and stayed with the force on conditions that were less favourable to them than they could have obtained by joining the armed- forces. It is considered that these men, having exercised their right, terminated their connection with the R.C.M.P. at the expiry of their engagement and should not be on a par with those who heeded the appeal, remained with the force and served with it in Canada or in the provost corps overseas.
That is a matter which has been seriously considered, and- the decision has been made by the commissioner and- his advisers that it would not be fair to allow those who chose to take the advantages that they were able to have during that period to come back and be on absolute equality with persons who did not do so but stayed with the force.
I think that covers the various matters the hon. member has mentioned. They have been offered reengagement, but they do not get the same seniority rights as those who remained with the force. The matter of whether time spent with the armed forces should count for pension purposes with respect to those who are reengaged is under consideration. This has always been done for time served with some other branch. While the matter has not been settled finally, it is under consideration, and from what has been done in the past I think it is fair to assume that the decision will be that those years will be counted. With respect

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to the other matters we consider that we must give preference to those who stayed with us;
I do not mean necessarily those who stayed in Canada, but who stayed with the R.C.M.P., either in Canada or with the provost corps that went overseas.


John George Diefenbaker: 
Alfred Johnson Brooks: I was glad to hear the hon. member for Lake Centre pay a tribute to the R.C.M.P., particularly in connection with the work of the provost corps in the different military centres. They carried out a very difficult task. In recruiting for the R.C.M.P. is preference being given to men who have returned from overseas?
Mr. ST. LAURENT: The commissioner informs me that he is recruiting only those who have returned from overseas.


James Arthur Ross: I should like to
support the statement made by the hon. member for Lake Centre, and I must say I was surprised at the statement by the Minister of Justice. Our banks and other institutions have been severely criticized at times, but they have set a good example in the tribute they have paid to their employees who enlisted. When they come back they receive their seniority rights and all increases in pay to which they are entitled. I would think a member of the R.C.M.P. who enlisted should be entitled to the same recognition. I should like to ask about pensions paid by the R.C.M.P. A man who retires is entitled to a pension, but no provision is made for his widow or family. Has any consideration been given to that phase of the matter?
Mr. ST. LAURENT:	The matter of pensions to the R.C.M.P. and the military forces has been under consideration for some time by an interdepartmental committee. That committee is preparing a statute which will provide substantially the same system of pensions for the militia and the Royal Canadian Mounted Police. The hon. member made a comparison between the banks and the R.C.M.P. Rightly or wrongly, we consider that the war service of the R.C.M.P. in Canada or in the provost corps was of a different character to service in the banks. It was something that was as essential to the war effort, to the fighting effort of the Canadian people as was service in other branches of the armed forces. It was because the appeal was made along those lines that we feel in duty bound to give some preference now as to seniority to those who heeded the appeal over those who chose to go to another branch of the armed services.


Howard Charles Green: Has consideration been
given to providing that men who have retired from the mounted police can obtain treatment in the hospitals of the Department of Veterans Affairs. I know of several of these men in Vancouver, and I believe that at the present time there is no such regulation, that they have no treatment privileges in the hospitals of the other department. I think
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it would be a very fair move if some such provision could be made. In any event I would ask that the two ministers give some consideration to providing treatment of that kind.
The second question I should like to ask has to- do with the security guards. Quite a few men, getting on in years, were recruited as security guards serving under the mounted police, and I believe they rendered excellent service. Would it be possible to provide that they should get some badge or something to show that they had rendered this service to the country during the war? Perhaps the Minister of National Defence would have to come into this picture, but I believe something should be done to accord these men that recognition. It may be that something has already been done, but as far as I know they are not eligible for any badge or medal or any sort of award.
Mr. ST. LAURENT: They get a certficate of service, and consideration will be given to the suggestion that they be given some form of decoration which they can wear on their tunics or coats.
With respect to treatment in the hospitals of the Department of Veterans Affairs, of course that is available to those who served in the provost corps overseas, but as yet no arrangement has been made to provide for the medical care of personnel discharged after service here in Canada.


Howard Charles Green: It was the latter group to
which I was referring.


Mr. ISNOR:: I wish to support the views
that have been expressed by the hon. member for Vancouver South in regard to the men who served in the security branch of the R.C.M.P. I came in contact with them on the waterfront, and know what they went through. I could make this a long story, but I have placed their case before the Minister of Veterans Affairs with a view to having them enjoy the benefits enjoyed by others who endured hardships, because certainly they carried out their duties in an efficient manner during the war.


Ian Alistair Mackenzie: That is a question
which might well be considered by the committee on veterans affairs when we meet again, I hope at the end of February or early in March.


Howard Charles Green: Thank you very much.


George Hugh Castleden: On the general matter of the mounted police, according to what I see on page 7 of the report notice is given of amendments to the Royal Canadian Mounted Police Act having to do with part TV. Under

that act there seems to be a fund for payment of pensions to widows of non-commissioned officers and constables, and I understand that this is a fund which has been established since 1934. The commissioned officers of the mounted police also contribute to a pension fund, but to that fund assistance is given by the government. I quote what appears on page 7 of the annual report:
The only pensions available for widows of non-commissioned officers and constables at the present time are those provided by part 4 of the Royal Canadian- Mounted Police Act, and which are purchased by them on a monthly contributory basis. The fund to which they contribute was opened in 1934, and is On- a selfsupporting basis. Contributions are compulsory for men who entered the force afteT the passing of the statute, but those men who were already in the force at that time were given an option in the matter.
In the opinion of the writer, part 4 of the Royal Canadian Mounted Police Act as it stands to-day was only a beginning in the direction indicated, and he sees no valid reason why the non-commissioned officers and constables of this force should not receive -assistance from the government in this matter, in -the same way aa commissioned officers in the force do, -and practically all civil servants throughout the country.
There seems to be a bit of discrimination here for which I can see no reason. If the minister will indicate that he intends to bring in an amendment to the act shortly, or intends to take up this matter, I shall be satisfied with that. If not, I should like a statement from him.	,
Mr. ST. LAURENT: This is one of the things being considered by the interdepartmental committee, which is endeavouring to arrange a pension system that will be somewhat uniform for the R.C.M.P. and the permanent army, navy and air force.


George Hugh Castleden: In the meantime, then, I understand that the fund as far as constables and non-commissioned officers are concerned is entirely contributory and has to be selfsupporting, while on the other hand the fund for widows of commissioned officers receives contributions from the government. In other words, widows of commissioned officers will receive special treatment as compared with widows of constables and non-commissioned officers.
Mr. ST. LAURENT: That was one of the things which necessitated the establishment of this interdepartmental committee. It was considered that there were discriminatory features in these superannuation provisions which the federal government makes for its civil servants, and the interdepartmental committee was set up to endeavour to bring about some condition which would not leave anyone feeling that he was being discriminated against

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as compared with the treatment accorded to others. It is to try to bring about some degree of uniformity that this interdepartmental committee has been constituted.


George Hugh Castleden: How long has it been functioning?
Mr. ST. LAURENT: For several months now.


George Hugh Castleden: It is not more than a year, then?
Mr. ST. LAURENT:	No. It commenced
its work some time last summer and has been at it now for several months, investigating the situation with respect to all these various branches, trying to arrive at something which would not be discriminatory as against anyone concerned, and trying to harmonize the whole thing.


David Arnold Croll: Some time ago I asked the
minister a question with respect to marriage regulations in the R.C.M.P. and was informed that prior to April of this year a man had to serve for seven years before he was permitted to marry, and that in April this was modified to five years. I wish to thank the minister for modifying that Jacobean principle of having to work for seven years for a wife; but now in view of the fine things that have been said here about what a splendid corps of men they are, and how vigorous and virile they are, is the minister justified in keeping them out of circulation for five years?
Mr. ST. LAURENT: The duties which fall upon the Royal Canadian Mounted Police are such that there must be a certain proportion of the personnel unmarried. I am told that 'at present sixty-nine per cent of the members are married, and that is considered to be as high as the force can go and remain efficient and sufficiently mobile. There is the necessity of having a substantial portion of the force that can be- moved about without regard to domestic obligations, and at present that is as high a proportion as the commissioner considers he can allow it to go and still have an efficient and mobile force.


John George Diefenbaker: Is free discharge,
or discharge by purchase now reinstated?
Mr. ST. LAURENT:	Discharge by purchase has been reinstated, but not free discharge, because it was considered that that is contrary to the maintenance of proper discipline.


John George Diefenbaker: During recent
months have there been a large number of applications for discharge by purchase from recruits who joined during war time? What is 47696-219
the position to-day, generally, as far as the Royal Canadian Mounted Police is concerned? Does the minister intend to expand the numbers in order to meet the current crime wave, and what is the shortage that is to be filled by men coming back from overseas?
Mr. ST. LAURENT: The strength is now about 200 below establishment, and it may be necessary to increase the establishment for the development of this coast service, and of the air service contemplated.


Alfred Johnson Brooks: What is the establishment?
Mr. ST. LAURENT: It is 2,500.


John George Diefenbaker: Is it a fact that there have been quite a large number of applications for discharge by purchase by recruits who joined during the war? I speak particularly about the western provinces. I understand that this is causing a serious situation.
Mr. ST. LAURENT: The commissioner informs me that there has been no greater than average number of applications for discharge by purchase.


John George Diefenbaker: How many have there been since V-E day?
Mr. ST. LAURENT: I shall have to get that information, but the commissioner tells me that it has not been larger than average.


Agar Rodney Adamson: May I speak to a question which I have discussed before? There are large numbers of these highly trained and specially skilled men doing guard duty in dominion government buildings. When I raised the point at the last session the minister said that some consideration might be given to having the guards for dominion government buildings arranged through some service other than from among the highly skilled members of the Royal Canadian Mounted Police. Inasmuch as the force is small, and as the Royal Canadian Mounted Police has tremendous responsibilities, I am wondering whether the minister might consider that some other force could be given the job, one which, while probably not ceremonial, is perhaps routine in nature.
Mr. ST. LAURENT: I do not remember having made that declaration, but I do remember saying that the Royal Canadian Mounted Police had absorbed the dominion police force.


Agar Rodney Adamson: The old dominion police?
Mr. ST. LAURENT: Yes, and that it was found it would be convenient to have the two forces under one administration, because it afforded1 opportunities for employing men who for one reason or another had become

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unfit for more strenuous duties. I am not suggesting that many of those who are doing guard work are not fit for more strenuous duties, but it has given some elasticity to the administration of the force, and the commissioner does not feel that it would be desirable to have the administration of those doing guard duty, and others, separated.
Item agreed to.
515.	Land services-arising out of the Royal Canadian Mounted Police Aet, enforcement of federal statutes generally, and other incidental expenses, $6,984,147.40.


Frederick Samuel Zaplitny: What are the rates of pay for the various ranks in the Royal Canadian Mounted Police?
Mr. ST. LAURENT: The third-class constable, holding the lowest rank, receives 81,003.75 per annum. The secondi-class constable receives $1,095; the thirdKdass, $1,277.50. Corporals receive $1,460; sergeants, $1,733.75; staff sergeants and sergeant-majors, from $1,825 to $2,007.50; surgeons, $4,056.25; subinspectors, $2,456.25; inspectors, from $2,596 to $2,996; superintendents, from $3,176 to $3,576; assistant commissioners, $4,056.25; deputy commissioners, $4,956.25.


Frederick Samuel Zaplitny: Does that $1,003.75 for
the third-class constable include the cost of living bonus?
Mr. ST. LAURENT: Yes.


Julian Harcourt Ferguson: Is a member of the Royal Canadian Mounted Police permitted to marry when he joins the force?


Ian Alistair Mackenzie: That was covered1 half an hour ago.
Item agreed' to.
516.	Pensions .to families of members of the mounted police who have lost their lives while on duty:
Mrs. Mary Bossange, $456.25.
Mrs. Margaret Johnson Brooke, $821.25.
Mrs. Margaret 'Cox, $410.63.
Mrs. Georgina Harrison, $676.50.
Mrs. Letitia Kennedy, $423.50.
Mrs. Nora Jean Massan, $300.
Mrs. Mary Miller, $667.38.
Mrs. Margaret Nicholson, $547.50.
Mrs. Catherine Mildred Ralls, $675.25.
Mrs. Vera M. Ryder, $907.50.
Mrs. Doris Freda Sampson, $816.
Mrs, Amy Lillian Searle, $406.98.
Mrs. Madelaine Mary Shoebotham, $810.
Mrs. Eunice Wainwright. $602.50.


Alfred Johnson Brooks: I notice that while in 194445 the compensation paid to Mrs. Vera M. Ryder was $1,993.01, this year it is reduced to $907.50. This lady is in my constituency. Why has there been this reduction of over

$1,000? If the minister has not the information readily available I shall not insist upon holding up the item.
Mr. ST. LAURENT: The former amount voted in the supplementary estimates' was from the period January 20, 1943, to March 31, 1945, and the amount voted was $1,993.01. The amount provided this year is $847.50 for Mrs. Ryder and1 $60 for one child.


[Stage Direction]
Item agreed to.
Ian Alistair Mackenzie: I wish to thank the committee for its courtesy and graciousness in sitting until twelve o'clock.
Progress reported.
On motion of Mr. Mackenzie the house adjourned at 12.05 a.m.
Friday, December 14, 1945.